ANNUAL
REPORT
2024
INDEX
4
Company Profile
5
Consolidated Management Report
5
Performance Indicators
7
Operating and Financial Review and Prospects
14
Research and Development
15
Outlook and Next Steps
16
Corporate Governance
18
Risks Factors
43
Alternative Performance Measures
45
Consolidated Financial Statements
145
Audited Annual Accounts of Ternium S.A. Société Anonyme
Ternium S.A. is a Luxembourg company (société anonyme) and its American Depositary
Shares, or ADSs, are listed on the New York Stock Exchange (NYSE: TX).
The financial and operational information contained in this annual report is based on
Ternium’s operational data and on the company’s consolidated financial statements,
which were prepared in accordance with IFRS as issued by the IASB and adopted by the
European Union and presented in U.S. dollars ($) and metric tons.
This annual report and any other oral or written statements made by us to the public
may contain “forward-looking statements” within the meaning of applicable securities
laws, including with respect to certain of our plans and current goals and expectations
relating to Ternium’s future financial condition and performance. Forward looking
statements are provided to allow potential investors the opportunity to understand
management’s beliefs and opinions in respect of the future so that they may use such
beliefs and opinions as one factor in evaluating an investment in Ternium’s securities.
All forward-looking statements are based on management’s present expectations of
future events and are subject to a number of factors and uncertainties that 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 relating to
the steel industry and mining activities, risks relating to countries in which we operate,
risks relating to our business, including uncertainties as to gross domestic product,
related market demand, global production capacity, tariffs, cyclicality in the industries
that purchase steel products, price and availability of raw materials, risks relating to
the Company’s structure and regulatory and litigation risks, as well as other factors
beyond Ternium’s control.
For a detailed description of Ternium’s main risks and uncertainties, please see the
section “Risk Factors” included in this annual report. By their nature, certain
disclosures relating to these and other risks are only estimates and could be materially
different from what actually occurs in the future. As a result, actual future gains or
losses that may affect Ternium’s financial condition and results of operations could
differ materially from those that have been estimated. You should not place undue
reliance on the forward-looking statements, which speak only as of the date of this
annual report. Except as required by law, we are not under any obligation, and
expressly disclaim any obligation, to update or alter any forward-looking statements,
whether as a result of changes of circumstances or management’s estimates or
opinions, new information, future events or otherwise.
TERNIUM S.A.
Annual Report 2024
2
Certain Defined Terms
In this annual report, unless otherwise specified or if the context so requires:
- References to “Adjusted EBITDA”, “Adjusted Net Income”, “Adjusted Owners of the Parent’s Net Income”, “Adjusted
Earnings per ADS”, “Net Cash (Debt)” and “Free Cash Flow” correspond to non-IFRS alternative performance measures.
The reconciliation of non-IFRS alternative performance measures to the most directly comparable IFRS measures is included
in section “Alternative Performance Measures” of this annual report;
- References to “ADSs” are to the American Depositary Shares, which are evidenced by American Depositary Receipts;
- References to “billions” are to thousands of millions, or 1,000,000,000;
- References to “finished steel products” are to steel products other than steel slabs;
- References to “San Faustin” are to San Faustin S.A., a Luxembourg société anonyme and Ternium S.A.’s controlling
shareholder;
- References to “Techgen” are to Techgen S.A. de C.V., a Mexican corporation, 48% owned by Ternium, 22% owned by
Tenaris, and 30% owned by Tecpetrol International S.A., a wholly owned subsidiary of San Faustin;
- References to “Tenaris” are to Tenaris S.A., a Luxembourg société anonyme and a shareholder of Ternium S.A.;
- References to “Tenigal” are to Tenigal S.R.L. de C.V., a Mexican company, 51% owned by Ternium and 49% owned by
Nippon Steel Corporation, or NSC;
- References to “Ternium”, the “company”, “we,” “us” or “our” are to Ternium S.A. and its consolidated subsidiaries;
- References to “Ternium Investments” are to Ternium Investments S.à r.l., a Luxembourg société à responsabilité limitée,
and a wholly owned subsidiary of Ternium S.A.;
- References to “Ternium S.A.” are exclusively to Ternium S.A., a Luxembourg société anonyme;
- References to “tons” are to metric tons; one metric ton is equal to 1,000 kilograms, 2,204.62 pounds or 1.102 U.S. (short)
tons; and
- References to “Usiminas” are to Usinas Siderúrgicas de Minas Gerais S.A. – USIMINAS, a listed Brazilian corporation
controlled by Usiminas control group, which is composed by Ternium Investments, Ternium Argentina, and Tenaris’s
subsidiary, Confab Industrial S.A. (all of which conform the T/T Group), NSC, Metal One Corporation and Mitsubishi
Corporation (all of which conform the NSC Group) and Usiminas’ pension fund Previdência Usiminas.
TERNIUM S.A.
Annual Report 2024
3
The Company
Ternium is a leading steel producer in the Americas. The
company provides advanced steel products to a wide
range of manufacturing industries and the construction
sector. The quality of our products, services, and
processes, and the professionalism of our people are
among our main competitive advantages. We focus on the
continuous improvement of our plants and processes, as
well as on the development of new technologies and
products.
We are committed to achieving excellence in the
environmental and energy performance of our operations
and becoming a model for our communities in terms of
environmental care. We have an energy efficiency
program
aimed
at
continuously
improving
our
operational performance. Additionally, we collaborate
with our value chain in the analysis and implementation
of various alternatives to reduce the carbon footprint of
all operations.
For Ternium, nothing is more important than the health
and safety of the people who work at the company. Our
priority is to provide a safe workplace and promote well-
being and a healthy lifestyle. We have standardized
systems for managing occupational health, safety and our
impact in the environment (EHS), and we allocate
significant resources to projects in these areas. Our risk
assessment and EHS management are integrated into our
business processes and reflect our policies. We strive to
train our own employees, as well as the employees of our
service providers, ensuring alignment with our safety
vision and objectives.
We aim to provide employees with opportunities to
develop and realize their potential, and promote diversity,
equity, and inclusion by rejecting any form of
discrimination based on gender, sexual orientation,
ethnic origin, color, age, religion, or political beliefs.
Through Ternium University, we offer a wide variety of
training programs to support our teams’ efforts in the
pursuit of innovation, continuous improvement, and
excellence.
We understand that the success of our industrial project is
linked to the inclusive development and growth of the
communities near our operations. Under this premise,
Ternium has carried on long-standing community
programs. Our activities focus on supporting education
and creating merit-based opportunities, with a strong
emphasis on technical education as a driver for growth,
transformation and social mobility. We offer scholarships
and internships for students, as well as training activities
for teachers. Additionally, we are committed to
enhancing school infrastructure though financial support
and the organization of volunteering events. We also
sponsor a variety of artistic, social, and sports events to
further enrich the community.
Ternium has various policies, codes, and procedures
aimed at ensuring transparency and ethical behavior of
employees and third parties performing services for or on
behalf of the company. We have mandatory training
programs on the company’s Policy on Business Conduct
and promote the use of a Compliance Line to report any
alleged violation thereto. Transparency in management
and communication is a fundamental value in our
relationship with employees, customers, suppliers, and
neighboring communities. We are dedicated to fostering a
culture of openness and honesty in all our actions.
Our Sustainability Agenda
Ternium has formally committed to supporting and
advancing the development goals outlined by the United
Nations Global Compact. We report on our progress
toward achieving our sustainability goals through
frameworks such as the Global Reporting Initiative and
the
Sustainability
Accounting
Standards
Board.
Additionally, we follow the guidelines set by The World
Steel Association and incorporate the recommendations
of the Task Force on Climate-related Financial
Disclosures to ensure comprehensive climate change
reporting. We annually review the economic, social, and
environmental
issues
identified
as
key
by
our
management and stakeholders. To this end, we rely on
regular
communication
channels
with
employees,
customers, suppliers, neighboring communities, investors
and industrial associations. Among other activities, senior
management lead open talks involving employees,
customers, suppliers and community leaders. We also
organize a Safety Day for employees and executives to
discuss safety issues aimed at improving the performance
of our operations. Assessments of our performance on
business sustainability issues are available on platforms
like CDP and EcoVadis. In addition, through the
ProPymes program, we work closely with our customers
and suppliers to strengthen the steel value chain.
We target a 15% reduction in our emissions intensity by
2030 compared to a 2023 baseline, including Scope 1, 2,
and 3 Category 1 (Purchased Goods and Services) and
Category 10 (Processing of Sold Products) calculated
using the GHG Protocol methodology. Beyond this
target, we partner with other companies and institutions
to research and develop new technologies as part of our
ambition to achieve carbon neutrality. Furthermore,
Usiminas has an emissions intensity reduction target in its
Ipatinga unit’s steelmaking operations of 15% by 2030,
compared to a 2019 baseline (scopes 1 and 2).
TERNIUM S.A.
Company Profile
4
Performance Indicators
2024
2023(1)
2022
2021
2020
STEEL AND MINING SHIPMENTS (000 tons)
Mexico
8,200
8,355
6,843
6,534
5,913
Brazil
3,941
2,014
723
1,160
861
Southern Region (2)
1,806
2,271
2,362
2,503
1,924
Other Markets
1,674
1,573
1,968
1,868
2,662
Total steel products
15,622
14,213
11,896
12,065
11,360
Mining products
6,426
4,128
0
262
508
ECONOMIC AND FINANCIAL INDICATORS ($ million)
Net sales
17,649
17,610
16,414
16,091
8,735
Operating income
1,263
2,198
2,700
5,271
1,079
Adjusted EBITDA (3)
2,038
2,740
3,415
5,863
1,525
Net income
174
986
2,093
4,367
868
Owners of the parent’s net (loss) income
(54)
676
1,768
3,825
778
Adjusted net income (3)
584
2,092
2,093
4,367
868
Adjusted Owners of the Parent’s Net Income (3)
316
1,686
1,768
3,825
778
Cash provided by operating activities
1,906
2,501
2,753
2,677
1,761
Capital expenditures (4)
1,865
1,461
581
524
560
Free cash flow (3)
41
1,040
2,172
2,154
1,201
BALANCE SHEET ($ million)
Total assets
23,129
24,179
17,492
17,098
12,856
Total liabilities
6,997
7,367
3,723
4,863
4,413
Capital and reserves attributable to the owners of the parent
11,968
12,419
11,846
10,535
7,286
Non-controlling interest
4,163
4,393
1,922
1,700
1,157
Borrowings
2,230
2,146
1,032
1,479
1,723
Net cash (debt) (3)
1,644
1,886
2,597
1,155
(371)
STOCK DATA ($ per share/ADS) (5)
Basic (losses) earnings per share
(0.03)
0.34
0.90
1.95
0.40
Basic (losses) earnings per ADS
(0.27)
3.44
9.00
19.49
3.97
Adjusted earnings per ADS (3)
1.61
8.59
9.00
19.49
3.97
Dividend per ADS (6)
2.70
3.30
2.70
2.60
2.10
Weighted average number of shares outstanding (7)
(million shares)
1,963
1,963
1,963
1,963
1,963
(1) Ternium started to fully consolidate Usiminas’ balance sheet and results of operations in July 2023.
(2) Sales in the Southern Region encompass those made to customers located in Argentina, Bolivia, Chile, Paraguay and Uruguay.
(3) The reconciliation of Adjusted Net Results, Adjusted Owners of the Parent’s Net Results, Adjusted Earnings per ADS, Adjusted EBITDA, Net Cash and
Free Cash Flow to the most directly comparable IFRS measures is included in section “Alternative Performance Measures” of this annual report.
(4) Capital expenditures in 2023 and 2024 include advance payments to equipment suppliers.
(5) Each ADS represents 10 shares.
(6) Ternium S.A.’s board of directors proposed that an annual dividend of $2.70 per ADS ($0.27 per share), or $530 million, be approved at Ternium S.A.’s
annual general shareholders’ meeting, scheduled to be held on May 6, 2025. For further details see section “Operating and Financial Review and
Prospects” of this annual report.
(7) Ternium S.A. has an authorized share capital of a single class of 3.5 billion shares having a nominal value of $1.00 per share. As of December 31, 2024,
there were 2,004,743,442 shares issued. All issued shares are fully paid. In addition, as of December 31, 2024, Ternium held 41,666,666 shares as treasury
shares, representing 2% of the subscribed capital.
TERNIUM S.A.
Consolidated Management Report
5
Lost Time Injuries Frequency Rate
Quantity of day-loss injuries per million hours worked
2020
2021
2022
2023
2024
0.0
0.2
0.4
0.6
0.8
1.0
Emission Intensity (Scopes 1 and 2)
Tons of CO2 emitted per ton of crude steel produced. Year-end
2020
2021
2022
2023
2024
0.0
0.5
1.0
1.5
2.0
2.5
Co-Products
Million tons
2020
2021
2022
2023
2024
0.0
1.2
2.4
3.6
4.8
6.0
Refer to materials produced in parallel to or, as a consequence of, the
production of primary products or recovered for reuse and/or recycling,
and poses potential value as defined by the worldsteel ME indicator.
Injuries Frequency Rate
Total quantity of injuries per million hours worked
2020
2021
2022
2023
2024
0.0
0.7
1.4
2.1
2.8
3.5
Energy Intensity
Gigajoules consumed per ton of crude steel produced. Year-end
2020
2021
2022
2023
2024
0
5
10
15
20
25
Investment in Research and Development
$ million
2020
2021
2022
2023
2024
0
5
10
15
20
25
Note: These indicators do not include Usiminas, except for the Investment in Research and Development category, which incorporates data from Usiminas
starting in July 2023.
TERNIUM S.A.
Consolidated Management Report
6
This review of Ternium’s financial condition and results of operations is based on, and should be read in conjunction with,
the company’s consolidated financial statements as of December 31, 2024 and 2023 and for the years ended December 31,
2024, 2023 and 2022 (including the notes thereto), which are included elsewhere in this annual report. The ompany’s
operational data and consolidated financial statements have been prepared in accordance with IFRS Accounting Standards
(International Financial Reporting Standards) as issued by the International Accounting Standards Board and in conformity
with IFRS Accounting Standards as adopted by the European Union. The information is presented in U.S. dollars ($) and
metric tons, except otherwise indicated. This review includes certain non-IFRS alternative performance measures such as
Adjusted EBITDA, Cash Operating Income, Net Cash (Debt), Free Cash Flow, Adjusted Net Income, Adjusted Owners of
the Parent’s Net Income and Adjusted Earnings per ADS. The reconciliation of these figures to the most directly comparable
IFRS measures is included in the “Alternative Performance Measures” section of this annual report. For a detailed
description of Ternium's main risks, see section “Risk Factors” of this annual report. For information related to the holding
of Ternium S.A.'s own shares, see section “Performance Indicators”.
Operating and Financial Review
and Prospects
In 2024, Ternium continued making progress in its
expansion program at its industrial center in Pesquería,
Mexico. The company commenced the construction of
the new steelmaking and direct reduction plants,
advanced the development of the new cold-rolling and
galvanizing facilities, and started the ramp-up of the new
push-pull pickling line and new finishing facilities.
Additionally, Ternium began building port facilities for
raw material handling in Brownsville, Texas, which will
enhance the new steel mill’s logistics. In Argentina, we
successfully commissioned our new wind farm by the end
of the year. Meanwhile, in Brazil, Usiminas successfully
ramped-up the main blast furnace at its Ipatinga facility,
following its relining in 2023.
These achievements have further strengthened Ternium’s
competitive position in Latin America. The new push-
pull pickling line has broadened the product offering for
our Mexican industrial customers, and the downstream
lines under construction will further enhance our
positioning in the region. In Argentina, the new wind
farm complements the company’s power plant, which
utilizes recycled gases from its steelmaking operations.
Together, these facilities generate nearly all the electricity
required for the company’s operations in the country. In
Brazil, Usiminas improved its cost structure, enhanced its
operational efficiency and increased steel production
following the blast furnace relining.
Shipments increased by 10% year-over-year in 2024,
primarily due to the full consolidation of Usiminas’
results partially offset by lower sales volumes in the
Southern Region.
In Mexico, steel shipments remained relatively stable
following a 22% expansion in 2023. Throughout the year,
the weakness in the commercial market was largely offset
by the continued growth of Ternium’s steel shipments to
industrial customers. Among the various industrial
Steel Shipments by Region in 2024
Mexico, 52%
Brazil, 25%
Southern
Region, 12%
Other Markets, 11%
sectors, vehicle manufacturing stood out with a 6% year-
over-year increase in 2024, achieving a new record-high
production of 4.0 million units. Conversely, by the end of
the year, the Mexican commercial market was negatively
influenced by uncertainties arising from an increase in
trade frictions with the U.S. In addition, construction
activity faced a decline reflecting weak government
infrastructure investment. This decline was partially
mitigated by stronger residential construction activity.
In Brazil, apparent steel demand for flat steel products
grew by 10% year-over-year in 2024. Usiminas
successfully capitalized on this favorable scenario despite
facing substantial steel imports into the country, aided by
an improved operating performance. Shipments to the
automotive sector were bolstered by a 10% year-over-
year expansion in vehicle manufacturing, which reached
2.6 million vehicles in 2024. Steel shipments to industrial
customers and the commercial market also grew. With
Ternium fully consolidating Usiminas’ results from July
2023 onwards, reported steel shipments for 2024 saw a
significant increase compared to those of 2023.
In the Southern Region, the company experienced a 20%
year-over-year decrease in steel shipments in 2024. This
TERNIUM S.A.
Consolidated Management Report
7
decline was primarily due to the impact of the Argentine
government’s economic stabilization measures on local
activity, which had a significant impact on shipments in
the first quarter followed by a gradual recovery
throughout the year.
In Other Markets, steel sales volumes improved across
the board, following a relatively weak performance in
2023.
In 2024, Ternium recorded a net $410 million provision
for ongoing litigation related to the acquisition of a
participation in Usiminas in 2012. During the year, the
Brazilian Superior Court of Justice ordered Ternium’s
subsidiaries
Ternium
Investments
and
Ternium
Argentina, together with Tenaris’s subsidiary Confab (all
of which compose the T/T Group under the Usiminas
shareholders agreement), to pay Companhia Siderúrgica
Nacional, or CSN, an indemnification in connection with
their 2012 acquisition of a participation in Usiminas. For
more information on this topic, see note 25(i)(a)
“Provision for ongoing litigation related to the
acquisition of a participation in Usiminas” to our
consolidated financial statements included in this annual
report.
Ternium’s net income totaled $174 million in 2024,
including the net provision from the aforementioned
litigation. Excluding this provision, Adjusted Net Income
in 2024 amounted to $584 million, with an operating
income of $1.3 billion, deferred tax losses of $231 million
and a financial result loss of $194 million. Adjusted
Owners of the Parent’s Net Income was $316 million in
the year, or $1.61 per ADS.
In 2024, dividends paid to Ternium S.A.’s shareholders
amounted to $609 million. Capital expenditures for the
year reached $1.9 billion, showcasing Ternium’s progress
in expanding its industrial center in Pesquería and the
construction of the new wind farm in Argentina. Despite
these significant cash disbursements, the company’s net
cash position at the end of 2024 was $1.6 billion. Strong
operating cash flow of $1.9 billion and a $457 million
increase in the fair value of financial instruments helped
maintain this solid financial position.
On February 18, 2025, Ternium S.A.’s board of directors
proposed that an annual dividend of $2.70 per ADS be
approved at its annual general shareholders meeting,
which is scheduled to be held on May 6, 2025.
Summary Results
2024
2023
Dif.
Steel shipments (thousand tons)
15,622
14,213
10 %
Mining shipments (thousand tons)
6,426
4,128
56 %
Net sales ($ million)
17,649
17,610
0 %
Operating income ($ million)
1,263
2,198
-43 %
Adjusted EBITDA ($ million)
2,038
2,740
-26 %
Adjusted EBITDA margin (% of net sales)
12 %
16 %
Net income ($ million)
174
986
Owners of the parent’s net (loss) income ($ million)
(54)
676
Basic earnings per ADS ($)
(0.27)
3.44
Adjusted net income ($ million)
584
2,092
Adjusted Owners of the Parent’s Net Income ($ million)
316
1,686
Adjusted earnings per ADS ($)
1.61
8.59
Steel Segment Net Sales and Shipments
The Steel Segment’s net sales experienced a slight year-
over-year decline in 2024, as lower realized steel prices
and lower sales volumes in the Southern Region were
largely offset by the full consolidation of Usiminas’
results, which Ternium started to consolidate from July
2023 onward.
Mining Segment Net Sales and Shipments
The Mining Segment’s net sales increased by 21% year-
over-year in 2024, driven by an increase in iron ore
shipments partially offset by a decline in realized iron ore
prices. The year-over-year increase in iron ore shipments
primarily reflected the full consolidation of Usiminas’
results, partially offset by lower production levels in our
Mexican and Brazilian operations.
TERNIUM S.A.
Consolidated Management Report
8
Segment Information
Net Sales ($ million)
Shipments (thousand tons)
Revenue/Ton ($/ton)
2024
2023
Dif.
2024
2023
Dif.
2024
2023
Dif.
Mexico
8,527
9,311
-8 %
8,200
8,355
-2 %
1,040
1,114
-7 %
Brazil
4,005
2,279
76 %
3,941
2,014
96 %
1,016
1,132
-10 %
Southern Region
2,401
3,569
-33 %
1,806
2,271
-20 %
1,329
1,572
-15 %
Other Markets
1,958
1,853
6 %
1,674
1,573
6 %
1,170
1,178
-1 %
Total steel products
16,892 17,013
-1 % 15,622 14,213
10 %
1,081
1,197
-10 %
Other products
329
268
23 %
Total Steel Segment
17,220 17,281
0 %
Total Mining Segment
429
329
29 %
6,426
4,128
56 %
67
80
-16 %
Net sales
17,649 17,610
0 %
Note: “Other products” include mainly electricity sales in Mexico and Brazil.
Operating Income
Ternium’s operating income decreased year-over-year in
2024. Steel revenue per ton decreased by $116 compared
to the prior year. This decline was partially offset by the
full consolidation of Usiminas’ results and a decrease in
cost per ton of steel, which, however, continued to lag
behind the reduction in raw material and slab market
prices. The year-over-year decrease in cost per ton of steel
also reflected the incremental efficiency gains achieved at
Usiminas’ blast furnace operations.
In $ million
2024
2023
Operating income
1,263
2,198
Net sales
17,649
17,610
Cost of sales
(14,760)
(14,051)
SG&A expenses
(1,651)
(1,472)
Other operating income (loss)
25
110
Net Financial Results
Net financial results showed a loss of $194 million in
2024. This result included a loss of $121 million due to
Ternium’s divestment of Argentine government bond
holdings, which triggered the recycling of changes in the
fair
value
of
financial
instruments
from
Other
Comprehensive Income to Financial Results.
Additionally, net financial results showed a $104 million
net foreign exchange loss in 2024, primarily due to the
adverse effects of the Brazilian Real’s depreciation against
the US dollar on Usiminas’ U.S. dollar denominated
financial debt, given that Usiminas utilizes the Brazilian
Real as its functional currency.
In $ million
2024
2023
Net interest results
102
130
Net foreign exchange result
(104)
98
Change in fair value of financial assets
(133)
(58)
Other financial expense, net
(58)
(46)
Net financial results
(194)
123
TERNIUM S.A.
Consolidated Management Report
9
Equity in Results of Non-Consolidated Companies
The equity in the results of non-consolidated companies
was a gain of $69 million in 2024, mainly related to
Ternium’s equity in the results of MRS Logística S.A.,
Unigal Usiminas Ltda. and Techgen.
Provision for Ongoing Litigation Related to the
Acquisition of a Participation in Usiminas
In 2024, the company recorded a net $410 million
provision for ongoing litigation related to the acquisition
of a participation in Usiminas in 2012. For more
information on this topic, see note 25(i)(a) “Provision for
ongoing litigation related to the acquisition of a
participation in Usiminas” to our consolidated financial
statements included in this annual report.
Income Tax Expense
Ternium Mexico, Ternium Argentina and Ternium Brasil
use the U.S. dollar as their functional currency and are,
therefore, affected by deferred tax results. These results
account for the impact of local currency fluctuations
against the U.S. dollar, as well as for the effect of local
inflation. In addition, the effective tax rate in 2024 was
influenced by the aforementioned provision and, in 2023,
by certain non-cash effects related to the increase in
Ternium’s participation in Usiminas.
In $ million
2024
2023
Current income tax expense
(323)
(565)
Deferred tax (loss) gain
(231)
231
Income tax expense
(554)
(334)
Result before income tax
728
1,321
Effective tax rate
76 %
25 %
Excluding provision for ongoing litigation related to the acquisition of a participation in Usiminas in 2012
410
—
Excluding non-cash effects related to the increase in the participation in Usiminas
—
1,106
Result before income tax excluding provision and non-cash effects
1,138
2,427
Effective tax rate excluding provision and non-cash effects
49 %
14 %
Net Income
In 2024, net income was $174 million, which included the
$410 million aforementioned provision regarding the
ongoing litigation related to the acquisition of a
participation in Usiminas in 2012. Excluding this
provision, Adjusted Net Income amounted to $584
million, with an operating income of $1.3 billion,
deferred tax losses of $231 million and a financial result
loss of $194 million. Adjusted Owners of the Parent’s Net
Income was $316 million in the year, or $1.61 per ADS,
mainly after accounting for the participation of a 76.7%
non-controlling interest in Usiminas and a 37.4% non-
controlling interest in Ternium Argentina.
In $ million
2024
2023
Owners of the parent
(54)
676
Non-controlling interest
227
310
Net income
174
986
Excluding provision for ongoing litigation related to the acquisition of a participation in Usiminas in 2012
410
Excluding non-cash effects related to the increase in the participation in Usiminas
1,106
Adjusted net income
584
2,092
In $ per ADS
2024
2023
Earnings (losses) per ADS
(0.27)
3.44
Adjusted earnings per ADS
1.61
8.59
TERNIUM S.A.
Consolidated Management Report
10
Liquidity and Capital Resources
In 2024, cash from operations reached $1.9 billion, with
working capital remaining relatively unchanged year-
over-year. Capital expenditures amounted to $1.9 billion
in 2024. Throughout the year, the company progressed
with the construction of the new downstream and
upstream facilities in its industrial center in Pesquería,
Mexico, including the start-up of a new push-pull
pickling line and finishing facilities, and built a new wind
farm in Argentina. Furthermore, the company moved
forward with several projects aimed at improving
environmental and safety conditions throughout its main
facilities.
In 2024, alongside the development of its capital
expenditure program, Ternium S.A. paid dividends
totaling $609 million to its shareholders and $54 million
to the company’s minority interest. Despite these
significant cash disbursements, Ternium maintained a
robust Net Cash position of $1.6 billion as of year-end
2024. This was supported by the aforementioned cash
generated from operating activities and a $457 million
increase in the fair value of financial instruments.
Ternium’s net cash position as of December 31, 2024
included Ternium Argentina’s total position of cash and
cash equivalents and other investments of $1.3 billion.
For information on exchange controls in Argentina, see
note 30 “Foreign exchange restrictions in Argentina” to
our consolidated financial statements included in this
annual report
The following table shows the changes in our cash and
cash equivalents for each of the periods indicated:
In $ million
2024
2023
Net cash provided by operating activities
1,906
2,501
Net cash used in investing activities
(1,375)
(1,470)
Net cash used in financing activities
(488)
(766)
Increase in cash and cash equivalents
43
264
Effect of exchange rate changes
(197)
(72)
Cash and cash equivalents at the beginning of the year
1,846
1,653
Cash and cash equivalents at the end of the year
1,691
1,846
In addition to cash and cash equivalents, as of December
31, 2024, we held other investments with maturity of
more than three months for a total amount of $2.2
billion. We hold money market investments, time
deposits and variable-rate or fixed-rate securities.
Operating Activities
Net cash provided by operating activities in 2024 included
an increase in inventories of $109 million, as higher steel
and raw material inventory volumes were partially offset
by lower inventory costs. In addition, trade payables and
other liabilities recorded a net decrease of $35 million in
2024. These working capital increases were largely offset
by a net decrease in trade and other receivables of $128
million amid lower realized steel prices.
Investing Activities
Net cash used in investing activities in 2024 was $1.4
billion, primarily attributable to capital expenditures of
$1.9 billion partially offset by a $462 million decrease in
financial investments with maturities of more than three
months.
Financing Activities
Net cash used in financing activities was $488 million in
2024, attributable to dividends paid in cash to Ternium
S.A.’s shareholders of $609 million and to the company’s
non-controlling interest of $54 million, and to finance
lease payments of $61 million, partially offset by net
proceeds from borrowings of $236 million.
Principal Sources of Funding
Funding Policy
Management’s policy is to ensure a high degree of
flexibility in operating and investment activities by
maintaining adequate liquidity levels and securing access
to readily available sources of financing. When possible,
management makes its financing decisions, including the
choice of currency, term and type of the facility, based on
the intended use of proceeds for the proposed financing
and based on costs. For information on our financial risk
TERNIUM S.A.
Consolidated Management Report
11
management, see note 29 “Financial risk management” to
our consolidated financial statements included in this
annual report.
Ternium maintains non-committed credit facilities and
management is confident that Ternium has adequate
access to the credit markets. Considering our financial
position and the funds provided by operating activities,
management believes that we have sufficient resources to
satisfy our current working capital needs, service our debt
and pay dividends. Management also believes that our
liquidity and capital resources give us adequate flexibility
to manage our planned capital spending programs and to
address short-term changes in business conditions.
Financial Liabilities
Total financial debt (inclusive of principal and interest
accrued thereon) was $2.2 billion as of December 31,
2024. Our financial liabilities consist mainly of loans with
financial institutions, bonds and debentures. As of
December 31, 2024, these facilities were mainly
denominated in U.S. dollars and Brazilian reais (65% and
29% of total financial liabilities, respectively). Current
borrowings were 30% of total borrowings, none of which
corresponded to borrowings with related parties. With
cash and cash equivalents of $1.7 billion, other
investments of $2.2 billion and total financial debt of $2.2
billion, Ternium achieved a net cash position of $1.6
billion as of December 31, 2024.
This compares to a net cash position of $1.9 billion as of
December 31, 2023.
As of December 31, 2024, the cost of bank borrowings
was 7.15%, while the cost of indebtedness represented by
bonds was 5.88% and the cost of debentures was 13.50%.
Bank borrowings, bonds and debentures represented
51%, 20% and 29% of our total borrowings, respectively.
Accordingly, the weighted average cost of debt was
8.83%.These rates were calculated using the rates set for
each instrument in its corresponding currency and
weighted using the U.S. dollar-equivalent outstanding
principal amount of each instrument as of December 31,
2024. Such rates do not include the effect of derivative
financial instruments, nor fluctuations in the exchange
rate between the instrument’s currencies and the U.S.
dollar.
Most Significant Borrowings and Financial Commitments
Our most significant borrowings as of December 31,
2024, were those outstanding under Ternium Brasil’s
2024 bilateral credit line, in order to finance export
activities, and Usiminas’ bonds and debentures, issued in
order to refinance its financial debt.
The main covenants on these loan agreements, bonds and
debentures are limitations on liens and encumbrances,
restrictions to the sale of certain assets and compliance
with financial ratios (e.g., leverage ratio). As of
December 31, 2024, Ternium was in compliance with all
covenants under its financial instruments.
$ million
Date
Borrower
Type
Original principal
amount
Outstanding principal
amount as of
December 31, 2024
Maturity
May 2024
Ternium Brasil
Bilateral credit lines
600
600
October 2027
July 2019
Usiminas
Bonds
750
430
July 2026
August 2024
Usiminas
Debentures
320
287
September 2031
December 2022
Usiminas
Debentures
310
242
December 2032
May 2022
Usiminas
Debentures
145
113
November 2029
Ternium has various off-balance sheet commitments,
including financial commitments, and commitments to
purchase raw materials, energy (natural gas and
electricity), supplies (air, oxygen, hydrogen, nitrogen and
argon), production equipment and logistic services. Off-
balance sheet commitments are discussed in note 25(ii) to
our consolidated financial statements included in this
annual report. For further information on our derivative
financial instruments, lease liabilities, borrowings,
contingencies, commitments and restrictions in the
distribution of profits, and financial risk management,
see notes 22, 23, 24, 25 and 29 to our consolidated
financial statements included in this annual report.
TERNIUM S.A.
Consolidated Management Report
12
Annual Dividend Proposal
On February 18, 2025, Ternium S.A.’s board of directors
proposed that an annual dividend of $2.70 per ADS
($0.27 per share), or $530 million based on total shares
outstanding net of treasury shares, be approved at its
annual general shareholders’ meeting, which is scheduled
to be held on May 6, 2025. Based on the market price of
Ternium S.A.’s ADS on February 18, 2025, the proposed
annual dividend was equivalent to a dividend yield of
9%.
The annual dividend would include the interim dividend
of $0.90 per ADS ($0.09 per share), or $177 million, paid
in November 2024. If the board of directors’ proposal is
approved at the shareholders’ meeting, a net dividend of
$1.80 per ADS ($0.18 per share), or $353 million, will be
paid on May 14, 2025, with record-date on May 9, 2025.
Annual Dividend
$ per ADS
2.1
2.6
2.7
3.3
2.7
0.8
0.9
1.1
0.9
1.8
1.8
2.2
1.8
Interim dividends
2020
2021
2022
2023
2024*
0.0
0.7
1.4
2.1
2.8
3.5
*Board of directors’ proposal.
TERNIUM S.A.
Consolidated Management Report
13
Research and Development
Activities
Our research and development efforts are dedicated to
expand our portfolio of advanced steel products,
collaborating with customers to design and develop
manufactured components incorporating steel, and
exploring as well as testing innovative technologies aimed
at decarbonizing our operations.
Our research and development activities along with our
capital expenditures program are designed to achieve
steel products with increasingly complex functional
properties and lower carbon footprint. We have
shortened the development cycle for new products to
promptly make use of the advanced technologies
integrated into our facilities. We have also leveraged our
research and development capabilities to deliver solutions
to our customers for their day-to-day operations.
Ternium Lab, our research and development center in
Mexico, features physical modeling, industrial process
simulation, robotic testing, full-scale welding processes
and advanced characterization. In addition, Usiminas’
research and development center carries out product
development, steel product performance testing, applied
engineering support and customer technical assistance.
We also operate other research facilities with laboratories
in Brazil and Argentina, where we carry out product
performance tests and production process simulations.
Ternium Lab’s facilities are accredited to certify steel
products according to the ISO 17025 international
standard
and
industrial
customer
specifications,
providing reliable services to Ternium’s customers and
shortening the product development cycle to accelerate
market introduction. Since its inauguration, Ternium Lab
has approved over 100 steel products tailored for
industrial
applications,
facilitating
the
seamless
integration of the hot-rolling mill at the Pesquería
Industrial Center, which commenced operations in 2021,
into Ternium’s product processing workflow.
Ternium Lab has close interactions with many of our
automotive customers’ development centers. Vehicle
designers have access to our steel products’ performance
parameters through their design software, including
weldability,
deformation
and
energy
absorption
capabilities. In addition, we developed a battery pack for
electric vehicles, which we have shared with selected
customers.
In 2024, we developed a component design laboratory,
featuring the digital simulation of stamping and welding
tests. In addition, we incorporated a new state-of-the-art
continuous galvanizing simulator into Ternium Lab,
which allows us to evaluate new coatings performance
and simulate the integral galvanizing process. With this
simulator, we plan to enhance the development of
advanced hot-rolled galvanized steel products, to be
processed in the new galvanizing line being built at the
industrial center in Pesquería. The line is expected to
produce high-strength, high-gauge products for the
automotive and renewable energy markets.
Usiminas’ customer technical support is focused on
advising and assisting users on issues concerning the final
application of the product engineering, including the
stamping process, welding, fatigue, corrosion resistance,
wear resistance, zinc and post treatment coatings and
structural integrity.
Ternium is working with its affiliated companies Tenova
and Tecpetrol to develop new process technologies aimed
at reducing the carbon footprint of steel products. To this
end, we are building pilot equipment and have enhanced
our computing capabilities to simulate and study fuel
injection mechanisms in a blast furnace and in a direct
reduction unit, aimed at injecting renewable fuels to
substitute natural gas. These fuels are obtained from raw
materials or energy sources that are restored or
regenerated at a pace similar to their consumption rate. In
addition, we are developing processes aimed at improving
the performance of steelmaking raw materials.
Ternium’s in-house research activities are enhanced by
our participation in a global network of industry
consortia, universities, and research centers. As part of
the Steel E-Motive initiative, in 2024 we engaged in
dissemination activities aimed at fostering the adoption
and integration of parts and design concepts developed
under this initiative and to position the industry as the
most efficient in the construction of autonomous cars.
Sponsored by WorldAutoSteel, this project focused on the
design of cost-effective, safe, and sustainable autonomous
and
connected
electric
vehicles
using
advanced
engineering and high-strength steel technologies.
We continue to assist manufacturers of heavy transport
equipment in designing high-performance components
and developing their associated manufacturing processes,
leveraging on the improved capabilities of new high-
strength steel products. In 2024, we initiated the patenting
procedure for Ternium’s high abrasion-resistant solution
in Mexico.
Furthermore, in 2024 we organized a contest on vehicle
interior design, aligned with the Steel E-Motive concept,
at the Instituto Tecnológico de Monterrey. We also
conducted a chassis design competition for heavy
vehicles, emphasizing adaptability enhancement for both
electric
and
internal
combustion
engines
while
minimizing component variations.
TERNIUM S.A.
Consolidated Management Report
14
Outlook and Next Steps
The recent surge in U.S. trade actions has created
significant uncertainty in global markets. Notably,
exports from Mexico and Canada to the United States
could be subject to accross-the-board tariffs. In addition,
steel has been specifically targeted, as the United States
revoked all country-specific exemptions to the 25% tariff
on steel imports under Section 232. These developments
have been adversely impacting customer demand in the
Mexican commercial steel market, a situation that we
expect will continue until a definitive understanding of
the final measures is achieved.
In 2025, the company will continue strengthening its
competitive position in Mexico, supported by its
expansion program. The new pickling line at the
industrial center in Pesquería has enhanced our capacity
to serve automotive manufacturers and other industrial
customers and the new finishing center has expanded our
value added offering capabilities. In addition, by year-
end, we expect to start-up the new galvanizing line and
the new cold-rolling mill.
We will also continue advancing the construction of the
new steel slab mill in Pesquería as well as new port
infrastructure for raw material handling in Brownsville,
Texas. These new facilities will enable Ternium to
integrate its operations with existing downstream
facilities, and reinforce its position as a leading steel
supplier in the region. The new EAF-based steel shop,
expected to start-up in 2026, will accelerate our progress
toward achieving our decarbonization target and increase
Ternium’s production of finished products with steel
melted and poured in the USMCA region. The new DRI
module will also include carbon capture capabilities and
readiness to switch from natural gas to hydrogen use.
In Argentina, although steel demand has been recovering
throughout 2024, it started from a low base and has yet to
return to historic sales volumes. The Argentine
government is advancing the transformation of the local
economy through a process of deregulation, reducing
public spending and taxes, and opening up trade.
However, an uneven progress in these areas could
increase the risk of higher imports of unfairly traded
products in the steel value chain. In this context, Ternium
Argentina will focus on enhancing productivity and
reducing costs.
In Brazil, economic activity and steel consumption has
been healthy. Although the surge of flat steel imports,
primarily from China, continues to exert pressure on
sales volumes and margins in the local steel industry, the
Brazilian
government
is
currently
conducting
investigations into steel imports from this country. An
imposition of antidumping measures could help defend
the Brazilian flat steel market from these unfair trade
practices.
In 2025, Usiminas will continue to move forward with
several projects focused on efficiency. Among them, it
will advance with the revamping of a coke battery, and it
is expected to start-up a new pulverized carbon injection
system at its main blast furnace. Usiminas’ agenda will
remain focused on achieving operational excellence and
strengthening competitiveness and customer service. In
January 2025, Usiminas took another step towards
decarbonization by replacing conventional energy sources
with 30 megawatts of solar energy from the Jaíba solar
plant.
As part of Ternium’s broader agenda to foster
community growth through youth education, the Roberto
Rocca Technical School in Santa Cruz, located near
Ternium Brasil facility, began its first classes. This is the
second technical school that Ternium built and operates,
with the first one active since 2016 in Mexico. The school
will provide high-quality technical education to its initial
cohort of 192 students in the community and will
accommodate close to 600 students over the next three
years.
TERNIUM S.A.
Consolidated Management Report
15
Corporate Governance
Board of Directors
Ternium S.A.’s corporate governance practices are
governed by the Luxembourg law of August 10, 1915 on
commercial companies, as amended, its articles of
association
and
applicable
securities
laws
and
regulations. Management of the company is vested on a
board of directors with the broadest power to act on
behalf of the company and to accomplish or authorize all
acts and transactions of management and disposal that
are within its corporate purpose and not specifically
reserved in the articles of association or by applicable law
to the general shareholders’ meeting. Ternium S.A.’s
articles of association provide for a board of directors
consisting of a minimum of three and a maximum of
fifteen directors; however, for as long as its shares are
listed on at least one regulated market, the minimum
number of directors must be five. Ternium S.A.’s current
board of directors is composed of eight directors. The
board of directors is required to meet as often as required
by the interests of Ternium S.A. and at least four times
per year. In 2024, the board of directors met six times.
A majority of the members of the board of directors in
office present or represented at the board of directors’
meeting constitutes a quorum, and resolutions of the
board of directors may be adopted by the vote of a
majority of the directors present or represented therein.
In case of a tie, the chairman is entitled to cast the
deciding vote. Directors are elected at the annual
ordinary general shareholders’ meeting to serve one-year
renewable
terms,
as
determined
by
the
general
shareholders’ meeting. The general shareholders’ meeting
may dismiss all or any member of the board of directors
at any time, with or without cause, by resolution passed
by a simple majority vote.
On April 30, 2024, Ternium S.A.’s annual general
shareholders’ meeting approved the re-election of Mr.
Roberto Bonatti, Mr. Carlos Alberto Condorelli, Mr.
Vincent Robert Gilles Decalf, Ms. Gioia Maria Ghezzi,
Mr. Daniel Agustín Novegil, Mr. Gianfelice Mario
Rocca, Mr. Paolo Rocca and Ms. Lorenza Martinez
Trigueros as board members, to hold office until the
meeting that will be convened to decide on the 2024
accounts. The board of directors subsequently re-
appointed Mr. Paolo Rocca as its chairman, Mr. Daniel
Agustín Novegil as vice-chairman and Mr. Máximo
Vedoya as the company’s chief executive officer.
Audit Committee
Pursuant to its articles of association, as supplemented by
the audit committee’s charter, for as long as Ternium
S.A.’s shares are listed on at least one regulated market, it
must have an audit committee composed of at least three
members, the majority of whom must qualify as
independent directors, provided, however, that the
composition and membership of the audit committee
shall satisfy such requirements as are applicable to, and
mandatory for, audit committees of issuers such as
Ternium S.A. under any applicable law, rule or
regulation (including, without limitation, the applicable
laws, rules and regulations of such regulated market or
markets).
The audit committee currently consists of three members,
Mr. Vincent Robert Gilles Decalf, Ms. Gioia Maria
Ghezzi and Ms. Lorenza Martinez Trigueros. The current
members of the audit committee were appointed by the
board of directors on April 30, 2024. All of them qualify
as independent directors for purposes of the U.S.
Securities Exchange Act Rule 10A-3(b)(1) and under
Ternium S.A.’s articles of association. Mr. Decalf serves
as chairperson of the audit committee.
The audit committee operates under a charter that was
amended and restated by the board of directors on
November 2, 2021. The audit committee assists the board
of directors in fulfilling its oversight responsibilities with
respect to the integrity of the company’s financial
statements, including periodically reporting to the board
of directors on its activity; and the adequacy of the
company’s systems of internal control over financial
reporting. The audit committee is also responsible for
making recommendations regarding the appointment,
compensation, retention and oversight of, and for
assessing the independence of, the company’s external
auditors. In addition, the audit committee is required by
Ternium S.A.’s articles of association and audit
committee’s charter to review and, where applicable,
approve material transactions between Ternium S.A. or
its subsidiaries and related parties, as provided in its
articles of association and in the audit committee’s
charter, or as may be required by any applicable law, rule
or regulation, in order to determine whether their terms
are consistent with the interests of Ternium S.A. and all
its shareholders and are consistent with market
conditions or are otherwise fair to Ternium S.A. and its
subsidiaries. The company has adopted a Related Party
Transactions
Policy
and
Procedure
setting
forth
consolidated
guidelines
and
procedures
for
the
identification, review, approval and management of
related party transactions, seeking to assure transparency
and substantial and procedural fairness of such
transactions, as well as compliance with the provisions of
Ternium S.A.’s articles of association and the audit
committee’s charter regarding transactions with related
parties, as well as applicable Luxembourg rules and
TERNIUM S.A.
Consolidated Management Report
16
securities regulations relating to the approval and
disclosure of material related party transactions.
The audit committee is also in charge of the
interpretation, implementation, control and enforcement
of the company’s Clawback Policy, which sets forth the
principles for the prompt recovery of erroneously
awarded incentive-based compensation granted to certain
officers of the company in the event of a restatement of
the company’s financial statements.
The audit committee performs other duties imposed by
applicable laws, rules and regulations of the regulated
market or markets on which Ternium S.A.’s shares are
listed, as well as any other duty entrusted to it by
Ternium S.A.’s board of directors.
The audit committee has the authority to conduct any
investigation appropriate to the fulfillment of its
responsibilities and has direct access to the external
auditors as well as anyone in the company and, subject to
applicable laws and regulations, its subsidiaries. In
addition, the audit committee may engage, at the
company’s expense, independent counsel and other
internal or external advisors to review, investigate or
otherwise advise on, any matter as the committee may
determine to be necessary to carry out its purposes and
responsibilities.
Auditors
Ternium S.A.’s articles of association require the
appointment of an independent audit firm in accordance
with applicable law. Auditors are appointed by the
general shareholders’ meeting, upon recommendation
from the audit committee, through a resolution passed by
a simple majority vote. The primary responsibility of the
auditor is to audit Ternium S.A.’s annual accounts and
consolidated financial statements and to submit a report
on each set of accounts to shareholders at the annual
shareholders’ meeting. In accordance with applicable law,
statutory auditors (réviseur d'entreprises) must meet
certain conditions of professional qualification and good
reputation verified by the Luxembourg Financial Sector
Supervisory Commission (Commission de Surveillance du
Secteur Financier) and be registered as members of the
Luxembourg Institute of Independent Auditors (Institut
des réviseurs d’entreprises).
The annual shareholders’ meeting held on April 30, 2024,
re-appointed PwC Luxembourg as Ternium S.A.’s
statutory auditor for the fiscal year ended December 31,
2024. At the next annual general shareholders’ meeting
scheduled to be held on May 6, 2025, it will be proposed
that PwC Luxembourg be re-appointed as statutory
auditor for the fiscal year ending December 31, 2025.
Code of Ethics
The company has adopted a general code of conduct
incorporating guidelines and standards of integrity and
transparency applicable to all directors, officers and
employees. As far as the nature of each relation permits,
all principles detailed in the code of conduct also apply to
relations with our contractors, subcontractors, suppliers
and associated persons. In addition, the company has
adopted
certain
policies
which
are
intended
to
supplement the company’s Code of Conduct, such as a
Policy on Business Conduct prohibiting bribery and
corruption to all directors, officers, employees and any
person or entity representing or acting for or on behalf of
Ternium, and a Code of Ethics for Financial Officers,
which applies specifically to the principal executive
officer, the principal financial officer, the principal
accounting officer or controller, or persons performing
similar functions.
TERNIUM S.A.
Consolidated Management Report
17
Risk Factors
You should carefully consider the risks and uncertainties
described below, together with all other information
contained in this annual report, before making any
investment decision. Any of these risks and uncertainties
could have a material adverse effect on Ternium’s
business, financial condition and results of operations,
which could in turn affect the price of Ternium S.A.’s
shares and ADSs.
Risks Relating to the Steel Industry
A downturn in global or regional economic activity
would cause a reduction in worldwide or regional
demand for steel, which would have a material adverse
effect on the steel industry and Ternium.
Steel demand is sensitive to trends in cyclical industries,
such as the construction, automotive, appliance and
machinery industries, which are significant markets for
Ternium’s products and are also affected by national,
regional or global economic conditions. A downturn in
economic activity would reduce demand for steel
products, which would have a negative effect on the steel
industry generally and specifically on our business and
results of operations. In 2020, governmental measures
adopted in response to the COVID-19 resulted in a severe
contraction in gross domestic product and steel
consumption globally, affecting Ternium’s main steel
markets. In 2022, the Russian invasion of Ukraine led to
higher commodity and energy prices, contributing to a
global decrease in steel consumption. During 2022, 2023
and 2024, high inflation rates and tighter monetary
conditions in the United States and Europe contributed to
a weaker demand for steel products in these markets.
Uncertainty regarding global or regional economic
activity remains high. The recent surge in U.S. trade
action is creating significant uncertainty in global
markets and is expected to affect Mexico’s apparent steel
demand until a definitive understanding of the final
measures is achieved. For more information on the
imposition of tariffs on steel imports into the United
States, see “Certain Regulatory Risks And Litigation
Risks - International trade actions or regulations and
trade-related legal proceedings could adversely affect
Ternium’s sales and revenues and the overall business”
and for further information on the investment climate
and economic activity in Mexico, see “Risks Relating to
the Countries in Which Ternium Operates – Mexico -
Changes in, or the termination of, current trade
agreements
between
Mexico
and
the
U.S.,
and
controversies and disputes between the United States-
Mexico-Canada Agreement (USMCA) member countries
could adversely impact Ternium’s results of operations
and net results”.
A protracted fall in steel prices or price volatility would
have a material adverse effect on the results of Ternium.
Steel prices are volatile and are sensitive to trends in steel
demand and raw material costs, such as steel scrap, iron
ore and metallurgical coal costs. Historically, the length
and nature of business cycles affecting steel demand and
raw material costs have been unpredictable. Steel prices
have been significantly fluctuating in response to market
trends, costs of raw materials and world events
(including, in recent years, the COVID-19 pandemic and
international armed conflicts, such as the Russia-Ukraine
war). For instance, U.S. prices of hot-rolled coils
bottomed in 2020 to $485 per ton, peaked at $2,135 per
ton in 2021, and then showed significant volatility during
2022, 2023 and 2024. A protracted fall in steel prices
could result in lower revenues, adversely affecting
Ternium’s operating results.
Furthermore, if raw material costs decline, the resulting
reduction in steel production costs would not be
immediately reflected in Ternium’s operating results as
we would first consume existing inventories acquired
prior to such raw material cost decrease (First In - First
Out accounting methodology). Similarly, we may be
unable to recover, in whole or in part, increased costs of
raw materials and energy through increased selling prices
on steel products, or it may take much time to do so.
Regional or worldwide excess steel production capacity
may lead to unfair trade practices in the international
steel markets and/or to intense competition, hampering
Ternium’s ability to sustain adequate profitability.
The steel industry is affected by economic cycles, as well
as by regional or worldwide production overcapacity.
Historically, the steel industry has suffered, especially on
downturn cycles, from substantial overcapacity. In the
last decade, overcapacity has been particularly severe in
China. More recently, there have been several new steel
making and steel processing facilities under construction
or ramping-up in the United States and Mexico, which
could contribute to an excess of steel production capacity
in the region.
Excess steel production capacity may require several
years to be absorbed by demand and, consequently, may
contribute to an extended period of depressed margins
and industry weakness. International trade of steel
products conducted under unfair conditions increases
particularly during downturn cycles and as a result of
production overcapacity. Unfair trade practices may
result in the imposition by some countries (that are
significant producers and consumers of steel) of tariffs,
TERNIUM S.A.
Consolidated Management Report
18
antidumping and countervailing duties, or other trade
measures and may cause fluctuations in international
steel trade. The imposition of such trade remedies or
temporary tariffs on major steel exporters in significant
steel producing countries could in turn exacerbate
pressures in other markets, including those to which
Ternium is exposed as exporters target such other
markets to compensate, at least partially, for the loss of
business resulting from the imposition of trade remedies
or tariffs.
China is the largest steel producing country in the world,
accounting for more than half of worldwide crude steel
production, and Chinese exports of steel products to
many countries, including exports to Europe, the United
States and Mexico, have been subject to the imposition of
antidumping and countervailing duties and other trade
measures. A decrease in steel consumption or an increase
in steel production in China, could cause aggressive
Chinese steel export offers, exerting downward pressure
on sales and margins of steel companies operating in
other markets and regions, including those to which we
are exposed. For example, in 2023 there was a surge of
flat steel product imports in Brazil of approximately 42%
compared to 2022, mainly consisting of low-priced steel
imports from China, adversely affecting Brazilian
domestic steel production. In June 2024, the Brazilian
government implemented a one-year quota system under
which steel imports above certain quota are subject to a
25% tariff. Despite such measures, imports of flat steel
products in Brazil grew an additional 11% in 2024,
mainly consisting of low-priced steel imports from China.
During 2024, the Brazilian government initiated anti-
dumping investigations on imports of cold rolled and
coated steel products from China, which are still ongoing.
Similarly, a downturn in global or regional economic
activity could encourage unfair steel trade practices
adversely affecting the steel industry and Ternium’s
business and results of operations.
Sales may fall as a result of fluctuations in industry
inventory levels or disruptions in Ternium customers’
supply chains.
Inventory levels of steel products held by our customers
can vary significantly from period to period, as they
either draw from existing inventory or accumulate further
inventory in response to market conditions and prospects.
As a result, purchased volumes may be irregular. In
addition, supply chain disruptions could reduce customer
demand for steel products. For example, in 2021, a global
disruption in the automotive industry supply chain
severely affected vehicle production and, in turn, affected
our steel sales due to a global shortage of semiconductors;
and in 2023, disruptions in the supply chain of the
Argentine industry, due to constraints in the import of
raw materials and intermediate goods in a context of
tight foreign exchange restrictions, negatively impacted
manufacturing activity and, as a result, steel demand in
the country. Fluctuations in steel inventory levels and
disruptions in customers’ supply chains can temporarily
affect the demand for, and price of, steel products and,
accordingly, Ternium may not be able to increase or
maintain its levels of sales volume or prices.
Intense competition could cause Ternium to lose its
market share and adversely affect its revenues.
The market for steel products is highly competitive,
particularly with respect to price, quality and service. In
both global and regional markets, Ternium competes
against other global and local producers of steel products,
which in some cases have greater financial and operating
resources or direct and indirect governmental support.
Competition could result in declining margins and
reduced shipments. Competitors could use their resources
in a variety of ways that may affect Ternium negatively,
including
by
making
additional
acquisitions,
implementing modernization programs, expanding their
production capacity or investing more aggressively in
product development among others. To the extent that
competitors become more efficient, our sales could suffer
as operations confront stronger competition and could
fail to preserve their current share of the relevant
geographic or product markets. In addition, there has
been a trend toward steel industry consolidation among
competitors, and current competitors in the steel market
could become larger competitors in the future.
Moreover, Ternium and other steel makers compete
against suppliers of alternative materials, including
aluminum, wood, concrete, plastic and ceramics. In
particular, certain customers, such as the automotive
industry, are increasing their consumption of lighter-
weight materials, such as high-pressure aluminum
obtained through die casting, composites and carbon
fiber, sometimes as a result of regulatory requirements or
government initiatives aimed at transitioning to a lower-
carbon economy. Competition from these alternative
materials could adversely affect the demand for, and
consequently the market prices of, certain steel products
and, accordingly, could affect our sales volumes and
revenues.
Price fluctuations, shortages or disruptions in the supply
of raw materials, slabs, energy and other inputs could
adversely affect Ternium’s profitability.
The manufacture of steel products requires substantial
amounts of steelmaking raw materials, slabs, energy and
other inputs from domestic and foreign suppliers.
Ternium’s raw materials and inputs include large
TERNIUM S.A.
Consolidated Management Report
19
quantities of slabs, iron ore, metallurgical coal,
pulverized
coal
for
injection,
scrap,
ferroalloys,
refractories, natural gas, electricity, oxygen and other
gases consumed in operating blast and electric arc
furnaces, as well as downstream facilities. The
availability and pricing of raw materials, slabs, energy
and other inputs used in our operations are subject to
multiple
factors,
including
market
conditions,
government regulations or intervention, including import
controls and international sanctions, allocation by
suppliers, interruptions in production, or other events
that can affect continuity of supply and prices, such as
wars, natural disasters, chronic climate changes,
accidents and epidemics.
Purchased slabs are a key component of Ternium’s
production
process.
Industry
consolidation
and
integration of slab making facilities into finished steel
products have been reducing the availability of slabs in
the global market. For example, in 2023 ArcelorMittal
acquired Companhia Siderúrgica do Pecém (CSP), a
Brazilian slab maker that used to be a significant supplier
of slabs in the international markets. In addition,
ArcelorMittal gradually integrated its slab facility in
Lázaro Cárdenas, Mexico, with its steel processing
facilities in other locations. Furthermore, in 2021
ArcelorMittal started-up a new hot-rolling mill in Lázaro
Cárdenas that led to a further integration of its slab
facility in that site. Additionally, the wave of trade
sanctions imposed by the United States, the United
Kingdom, and the European Union, among other
countries, following the Russian invasion of Ukraine,
against certain Russian institutions, companies and
citizens, resulted in a disruption to the global supply of
slabs and other inputs consumed in the steel production
process. The resolution of the Russian-Ukraine armed
conflict and its consequences in the global markets is still
uncertain. New international sanctions against Russian
steel companies or citizens could result in slab scarcity
and/or increases in slab prices in the market, which
would have a material adverse effect on Ternium’s
business and results of operations.
We have usually been able to procure sufficient supplies
of raw materials, slabs, energy and other inputs to meet
our production needs; however, we could be unable to
procure adequate supplies in the future. Any protracted
interruption, discontinuation or other disruption of the
supply of main inputs used in our operations (including
as a result of strikes, lockouts, sanctions and other trade
restrictions, accidents or natural disasters, armed
conflicts, worldwide price fluctuations, the availability
and cost of transportation, global epidemics or other
factors) would result in lost sales and/or lower margins,
and would have a material adverse effect on our business
and results of operations. For further information related
to effects of global events see “- A downturn in global or
regional economic activity would cause a reduction in
worldwide or regional demand for steel, which would
have a material adverse effect on the steel industry and
Ternium”.
Ternium depends on a limited number of key suppliers.
We depend on a limited number of key suppliers for the
provision of certain key inputs. For example, Ternium
Argentina and Ternium Brasil purchase iron ore mainly
from Vale, a Brazilian company. There is a trend in the
industry towards consolidation among suppliers of raw
materials, slabs and other inputs. We have entered into
long-term contracts for the supply of some (but not all) of
our principal inputs and expect that such agreements will
be maintained and, depending on the circumstances,
renewed. However, if any key supplier fails to deliver, or
if existing contracts cannot be renewed in the future, or if
applicable regulations or sanctions limit or prohibit
purchases from certain suppliers, we could face limited
access to certain raw materials, slabs, energy or other
inputs, or could be subject to higher costs and delays
resulting from the need to obtain our input requirements
from other suppliers.
Risks Relating To Ternium’s Business and Growth
Strategy
Past
or
future
acquisitions
or
other
significant
investments could have an adverse impact on Ternium’s
operations or profits, and Ternium may not realize the
benefits it expects from these business decisions.
A key element of Ternium’s business strategy is to
identify and pursue growth-enhancing opportunities. As
part of that strategy, Ternium regularly considers
acquisitions, greenfield and brownfield projects and other
significant investments. Since its formation, Ternium has
acquired
and
made
significant
investments
in
steelmaking and steel processing assets and businesses in
Argentina,
Brazil,
Colombia,
Venezuela,
Central
America, Mexico and the United States, including the
acquisition of Mexican steel companies Hylsamex and
Grupo Imsa (now Ternium Mexico), the acquisition of
the then main integrated producer of flat steel in
Argentina, Aceros Paraná (which then merged with
Propulsora Siderúrgica and other three steel industry
companies and is now Ternium Argentina); the purchase
of Brazilian steel slab producer CSA, and the acquisition
of a participation in the control group of Usiminas,
Brazil’s largest flat steel producer. In addition, the
company built a new industrial center in Pesquería,
Mexico, and is currently advancing with a new expansion
plan, the largest in the company’s history, consisting of
TERNIUM S.A.
Consolidated Management Report
20
new steelmaking and new steel processing facilities in this
industrial center and new port facilities for raw material
handling in Brownsville, Texas.
Each acquisition, investment and growth project depends
on market and financing conditions. We must necessarily
base any assessment of potential acquisitions or organic
investments on assumptions with respect to operations,
profitability and other matters that may subsequently
prove to be incorrect. Our acquisitions or other
investments may not perform in accordance with
expectations and could have an adverse impact on our
operations and profits. For information on additional
risks related to significant investments, see “Ternium’s
strategic growth projects could be delayed, the cost of
those
projects
could
increase,
or
Ternium’s
competitiveness could be affected, if the operations of
certain suppliers of heavy equipment are disrupted by
geopolitical risk, adversely affecting Ternium’s growth
opportunities and profitability”.
In addition, we may fail to find suitable acquisition
targets, or to consummate our acquisitions under
favorable conditions, or to successfully integrate any
acquired businesses into our operations, realize expected
synergies or accomplish the business objectives that were
foreseen at the time of deciding any such investment.
Moreover, Ternium may also acquire, as part of future
acquisitions, assets unrelated to its business, and we may
not be able to integrate them or sell them under favorable
terms and conditions. Integration of any acquired
businesses would require a significant amount of time
and resources from management and employees. Finally,
the existence of other minority shareholders at any
acquired
company,
including
Usiminas
and
its
subsidiaries, could delay or prevent us from completing
our strategy or fully maximizing our combined
competitive strengths. For further information, see “Risks
Relating to the Structure of Ternium S.A. - Existence of
other shareholders in Ternium S.A.’s subsidiaries and
associates could delay or prevent us from completing our
strategy.” These risks could have an adverse impact on
the ongoing business and a material adverse effect on our
financial condition and results of operations.
Acquisitions
may
be
subject
to
challenges
or
investigations by governmental authorities, including
antitrust and consumer-protection authorities. The costs
of complying with authorization or investigation
procedures may be significant. Also, antitrust authorities
are looking very closely at the effects of acquisitions and
may deny authorizations, impose conditions that may
result in significant costs or deprive Ternium from the
advantages and expected synergies of acquisitions, or
initiate investigations upon challenges brought by third
parties. Challenges to acquisitions or other investments,
and failure to obtain, or conditions imposed for the
granting of, authorizations may block or delay
transactions, which could have an adverse effect on our
financial condition and results of operations.
The construction of Ternium’s new steel slab facility in
Mexico could be delayed and its cost could increase, if
the operations of certain suppliers of heavy equipment
are disrupted by geopolitical risk or our commercial
relationship with them is otherwise affected, adversely
impacting
Ternium’s
growth
opportunities
and
profitability.
We are building new steel making facilities in our
industrial center in Pesqueria and new port facilities for
raw material handling in Brownsville, Texas, as part of
our plan to advance the continued integration of our
industrial system and reinforce our position as a leading
steel supplier in the region, in a market that demands
differentiated
products,
focusing
on
operational
efficiencies and long-term opportunities in North
America.
The project is expected to be completed in 2026. The
proper execution of this project relies, among other
factors,
on
timely
manufacturing,
delivery
and
commissioning of the equipment ordered, or to be
ordered, for these new facilities. The imposition of
government requirements, sanctions or tariffs as a result
of trade or other geopolitical conflicts may prevent some
of our suppliers of heavy equipment from shipping the
equipment, or may result in shipping delays, or may limit
our purchases or payments of products to such suppliers,
and we may not be able to promptly procure such
equipment from an alternative facility of such supplier or
from other suppliers, or we may be required to purchase
equipment at increased prices, which could result in
increased expenses and/or a delayed execution of our
growth plans, adversely affecting Ternium’s profitability
and net worth.
Ternium may be required to record a significant charge to
earnings if it must reassess its goodwill, other amortizable
intangible
assets,
investments
in
non-consolidated
companies, property, plant and equipment and other
long-lived assets.
In accordance with IFRS, management must test our
assets for impairment whenever events or changes in
circumstances indicate that the carrying amount may not
be recoverable. Assets subject to testing include goodwill,
intangible
assets,
investments
in
non-consolidated
companies, property, plant and equipment and other
long-lived assets. In addition, management must test for
impairment goodwill at least once a year, whether or not
there are indicators of impairment. IFRS requires
TERNIUM S.A.
Consolidated Management Report
21
Ternium to recognize a charge in an amount equal to any
impairment.
We review periodically the recoverability of our
investments. As of December 31, 2024, goodwill in
connection with our Mexican subsidiaries amounted to
$662.3 million and the carrying value of our investment in
non-consolidated companies amounted to $468.5 million.
If Ternium’s management determines in the future that
the goodwill from its acquisitions, its investments in non-
consolidated companies or the carrying value of its
property, plant and equipment and other long-lived assets
are impaired, Ternium will be required to recognize a
charge against earnings, which could materially adversely
affect our results of operations and net worth. In the past,
Ternium recorded impairment charges several times. For
example, as of December 31, 2012, September 30, 2014,
December 31, 2015, and September 30, 2022, we wrote
down our investment in Usiminas by $275.3 million,
$739.8 million, $191.9 million and $120.4 million,
respectively. In the fourth quarter of 2024, we recorded a
$32.4 million impairment charge of certain mining assets
from Las Encinas. See note 4(e)(2) “Accounting Policies –
Intangible Assets – Mining Assets” to our consolidated
financial statements included in this annual report, and
for information on impairments recorded by Ternium,
see note 4(f) “Accounting Policies – Impairment” of our
audited consolidated financial statements included in this
annual report.
In addition, in July 2023, Ternium increased its
participation in Usiminas control group and began to
consolidate Usiminas. As a result of this transaction,
Ternium recorded a $1.1 billion non-cash net loss
composed of (i) a loss of $935 million corresponding to
items recognized as of the acquisition date, in “Other
Comprehensive Income” related to Ternium’s previous
stake in Usiminas. This negative reserve was mainly
related to CTA losses due to the impact on Usiminas
valuation of the depreciation, over the years, of the
Brazilian Real versus the U.S. dollar, as Usiminas uses the
Brazilian Real as its functional currency. As a result of the
increase in the participation in Usiminas, items
recognized in Other Comprehensive Income related to
Ternium’s previous stake in Usiminas were recycled to
the results of the period. The resulting $935 million loss
was non-cash, had no income tax effects and did not
change the value of Ternium’s equity; and (ii) a net loss of
$171 million as a result of the purchase price allocation
related to the business combination performed in the
third quarter of 2023 and the remeasurement of
Ternium’s previous stake in Usiminas. For further
information, see note 3 “Acquisition of Business—
Increase of the participation in Usiminas control group
and new governance structure of Usiminas”, to our
consolidated financial statements included in this annual
report.
Any further write-downs to or revaluation of Ternium’s
assets or investments could have a material adverse effect
on Ternium’s results of operations or net worth.
If Ternium does not comply with laws and regulations
designed to combat corruption in countries in which it
sells its products, it could become subject to fines,
penalties or other sanctions and to private lawsuits and
Ternium’s sales and profitability could suffer.
We conduct our business in certain countries known to
experience governmental corruption. Although Ternium
is committed to conducting business in a legal and ethical
manner in compliance with local and international
statutory requirements and standards applicable to its
business, there is a risk that employees, representatives,
associates or other persons may take actions that violate
applicable laws and regulations that generally prohibit
the offering or making of improper payments to any
individual, including government officials, for the
purpose of obtaining an undue benefit or undue
advantage or keeping business, including laws relating to
the 1997 Organization For Economic Co-operation and
Development (OECD) Convention on Combating Bribery
of Foreign Public Officials in International Business
Transactions such as the U.S. Foreign Corrupt Practices
Act and other anti-corruption laws adopted by the main
countries in which we operate (including Mexico,
Argentina, the United States, Brazil and Colombia),
which impose strict criminal liability on companies for
corrupt practices undertaken by their employees or
representatives. In addition, we cannot give any assurance
that we will detect all illegal activity that may have been
conducted before the acquisition at any acquired
business.
Labor disputes could result in work stoppages and
disruptions to Ternium’s operations negatively impacting
our results.
A substantial majority of Ternium’s employees at its
manufacturing subsidiaries are represented by labor
unions and are covered by collective bargaining or similar
agreements, which are subject to periodic renegotiation.
Strikes or work stoppages could occur prior to or during
the negotiations leading to new collective bargaining
agreements, during wage and benefits negotiations or,
occasionally, during other periods for other reasons.
Ternium’s subsidiaries could also suffer plant stoppages
or strikes if they were to implement cost reduction plans.
From time to time, we take measures to increase
competitiveness; none of the measures taken in the past
have resulted in significant labor unrest. However, we
cannot assure that this situation will remain stable or that
TERNIUM S.A.
Consolidated Management Report
22
future measures will not result in labor actions against
Ternium companies.
Labor conflicts in Mexican mining companies remain a
concern, in some cases stemming from disputes over
profit-sharing, known as PTU (Participación de los
Trabajadores en las Utilidades), after the introduction in
recent years of certain regulatory reforms. While
Ternium’s mining companies have not been subject to
strikes, we cannot rule out the possibility of labor
conflicts if profitability were to decrease and PTU-related
payments to weaken.
Any future stoppage, strike, disruption of operations or
new collective bargaining agreements could result in lost
sales and could increase our costs, thereby affecting our
results of operations.
Changes in exchange rates or any limitation in Ternium’s
ability to hedge against exchange rate fluctuations could
adversely affect Ternium’s business and results.
Our operations expose us to the effects of changes in
foreign currency exchange rates and changes in foreign
exchange regulations. A significant portion of Ternium’s
transactions is carried out in currencies other than the
U.S. dollar. As a result of this foreign currency exposure,
exchange rate fluctuations impact Ternium companies’
results as reported in their income statements and
statements of financial position. In the ordinary course of
business, Ternium companies may see fit to enter into
exchange rate derivatives agreements to manage exposure
to exchange rate changes. Future regulatory or financial
restrictions in the countries where we operate may reduce
our ability to manage our exposure to exchange rate
fluctuations, and thus could cause an adverse impact on
our results, financial condition or cash flows.
In addition, Usiminas uses the Brazilian real as its
functional currency. Accordingly, any fluctuation of the
BRL exchange rate will impact non-BRL balances’
exposure in Usiminas’ balance sheet and, therefore,
impact Ternium’s balance sheet and results of operations.
Additionally, as our participation in Usiminas is
denominated in Brazilian reais, any fluctuation in the
BRL/$ exchange rate will affect Ternium's balance sheet
with impact in the statement of comprehensive income as
currency translation adjustment.
Cyberattacks could have a material adverse impact on
Ternium’s business and results of operations.
For purposes of carrying out its operations, Ternium
relies heavily on information systems; and digital
technologies have an increasingly significant role across
the business. Although we devote significant resources to
protect our systems and data, and continually monitor
external developments and available information on
threats and security incidents, we have experienced and
we expect to continue to experience varying degrees of
cyber incidents in the normal conduct of business, and
also occasionally experience sophisticated cybersecurity
threats including actual or potential unauthorized access
to data and systems, loss or destruction of data, computer
viruses or other malicious code, phishing, spoofing and/or
other cyberattacks. Cybersecurity threats and incidents
often arise from numerous sources, many of which fall
beyond our control, such as fraud or malice from third
parties, including fraud involving business email, failures
of computer servers or other accidental technological
failure, electrical or telecommunication outages or other
damage to its property or assets.
Cybersecurity threats and incidents, such as phishing
attacks, attempts to compromise user credentials,
attempts to compromise firewall infrastructure, fake
websites, impersonation and whaling, continued to
increase throughout 2024. The sophistication of these
attacks also grew at a fast pace. Microsoft has informed
that the manufacturing sector was the industry most
subject to ransomware attacks in 2024. Experts agree that
cyberattacks are increasing in sophistication and
frequency and call for a global response to cybersecurity
threats, and regulators are placing increased focus on
cybersecurity and its effects.
Cyber ecosystem risk is becoming more problematic.
According to the World Economic Forum’s 2024 Global
Cybersecurity Outlook, the gap between organizations
that are cyber resilient and those that are not is widening,
which is concerning in light of the interconnected nature
of the cyber ecosystem. According to data set forth in
such report, 41% of the organizations that suffered a
material incident in the past 12 months attributed the
incidents to a third party, and 54% of the organizations
have insufficient visibility into the vulnerabilities of their
supply chain. This raises a significant concern as even
resilient companies may be exposed to the vulnerabilities
of third-party suppliers, service providers or clients.
In addition, emerging technologies, like generative
artificial intelligence (AI), which are becoming available
more widely and faster, are expected to exacerbate cyber
resilience challenges. Approximately half of executives
surveyed at the 2024 World Economic Forum’s annual
meeting on cybersecurity stated that advances in
adversarial capabilities (phishing, malware, deepfakes)
present the most concerning impact of generative AI on
cybersecurity concerns.
During 2024, we have not experienced any incidents
impacting business-critical IT systems.
TERNIUM S.A.
Consolidated Management Report
23
In this context, we continue to seek to improve
cybersecurity controls, processes and procedures to
monitor, detect, evaluate and respond to hacking,
malware infection, cybersecurity compromise and other
risks. In addition, we carry out cybersecurity awareness
and ethical phishing campaigns aimed at protecting us
against cyberthreats. Given the rapidly evolving nature of
cyber threats, there can be no assurance that the systems
and measures that we have put in place to prevent or limit
the effects of cyber incidents or attacks and the mitigation
actions adopted in connection with such attacks will be
sufficient to prevent or detect such incidents or attacks, to
avoid a material adverse impact on our systems. While we
continue to attempt to mitigate these risks, there remains
the risk of additional known or unknown threats,
including
theft,
misplacement
or
loss
of
data,
programming errors, employee errors and/or dishonest
behavior that could potentially lead to the compromising
of sensitive information, improper use of our systems or
networks, as well as unauthorized access, use, disclosure,
modification or destruction of such information, systems
and/or networks.
If Ternium’s systems and measures for protecting against
cybersecurity risks are circumvented or breached, this
could result in disruptions to its business and operations
(including but not limited to, defective products,
production downtimes or loss of productivity), access to
financial reporting systems, the loss of access to critical
data or systems, misuse or corruption of critical data and
proprietary information (including intellectual property
and customer data), as well as damage to our reputation
with customers and the market, failure to meet customer
requirements, customer dissatisfaction and/or regulatory
fines and penalties (including for inadequate protection of
personal data and/or failure to notify the competent
authorities for such breach) or other financial costs and
losses. In addition, failure to adequately and timely
monitor and evaluate our hardware and software systems
and applications to prevent or manage technology
obsolescence risks may result in increased costs,
operational risk of service failure, and the loss of
technology competitiveness and reputation.
In addition, given that cybersecurity threats continue to
evolve, we may be required to devote additional resources
in the future to enhance its protective measures or to
investigate
and/or
remediate
any
cybersecurity
vulnerabilities. Ternium does not currently maintain
cybersecurity insurance and the insurance it carries for
property damage and general liability may not protect
Ternium from damages derived from cyber events.
Moreover, any investigation of a cyberattack would take
time before completion, during which Ternium would
not necessarily know the extent of the actual or potential
harm or how best to remediate it, and certain errors or
actions could be repeated or compounded before duly
discovered and remediated (all or any of which could
further increase the costs and consequences arising out of
any cyberattack).
Furthermore, in response to the increase in the number
and sophistication of ransomware attacks, U.S. and other
regulatory agencies have implemented regulations to
prevent victims from making ransomware payments and
to deter third parties from facilitating or processing such
payments to cyber actors. This would constrain our
ability to deal with ransomware attacks, should they
occur.
The physical risks resulting from climate change,
including extreme weather conditions and shifts in
weather patterns may adversely impact Ternium’s
business, results of operations and net worth.
Ternium’s business has been, and in the future could be,
affected by severe weather conditions in areas where
operations are carried out, which could materially
damage
our
production
facilities
and
general
infrastructure or affect the normal course of business, and
result in a material adverse effect on Ternium’s financial
results. Extreme weather events and natural disasters,
such as hurricanes, cyclones, droughts, floods and fires
could affect businesses’ operations, workforce, markets,
infrastructure, raw materials and assets. For example, in
2024, a power outage caused by a supercell storm
disrupted operations at Ternium’s San Nicolás unit in the
Buenos Aires province, Argentina. In addition, in the last
few years, low water levels at the Paraguay and Paraná
waterways disrupted on several occasions the supply of
iron ore from Brazil’s iron ore mines in the Pantanal
Region (Mato Grosso do Sul state) to Ternium
Argentina, requiring from time to time the procurement
of higher-cost iron ore from alternative sources and an
increase of iron ore inventories.
The communities surrounding our main operation sites in
Argentina, Brazil and Mexico are vulnerable to flooding
due to extreme weather events. In the past, certain
operations in Brazil and Argentina experienced intense
rainfall affecting personnel’s access to the facilities. In
addition, as Ternium Mexico’s facilities are located at
water stressed areas, its operations in the country could
be affected by water shortages and/or increased water
costs, including as a result of measures taken by local
governments to prevent or deal with critical situations
caused by severe draughts. For example, in response to
severe draughts affecting the metropolitan area of
Monterrey in the state of Nuevo León, Mexico, in 2022
the national water authority suspended new freshwater
use concessions in the Monterrey area and such
concessions remain suspended. In addition, a new bill on
TERNIUM S.A.
Consolidated Management Report
24
management and distribution of water is being discussed
in the Mexican Congress as part of a broader effort by
the Mexican government to ensure access to water as a
human right and improve water sustainability. The
Mexican government has also launched a national plan to
tackle water scarcity which, among other initiatives, is
reviewing water concessions. Although these events did
not have a significant impact on Ternium’s operations in
the region, we cannot predict future implications of the
new water regime to Ternium’s operations in Mexico, or
the impact of future similar events, in Mexico or
elsewhere, on Ternium’s operations and financial
condition.
Extreme weather conditions can also disrupt Ternium’s
supply chain. For example, in 2024, Hurricane Beryl
disrupted vessel traffic at the Port of Brownsville by
diminishing the port’s draught. This negatively affected
the supply of slabs to Ternium’s processing facilities in
Mexico for approximately two months, which in turn
impacted our shipments of finished steel products.
Extreme weather events and natural disasters could result
in damage to property, delays in production or shipments
and, in extreme cases, death or injury to persons. Any of
the foregoing could create liability for Ternium.
Also, chronic climate changes, such as changes in
precipitation patterns and rising temperatures and sea
levels may result in increased operating costs or capital
expenditures, due to supply shortages or damage to
facilities, personnel evacuation, increased insurance
premiums or reduced availability of insurance, decreases
in revenue derived from lower sales, disruption of
operations or lower production levels, negative impact on
workforce and write-offs and/or early retirement of
assets, all of which could adversely affect our financial
condition, results of operations and cash flows.
Ternium does not carry business interruption insurance,
and the insurance that Ternium maintains for property
damage and general liability may not be adequate or
available to protect us under such events, its coverage
may be limited, or the amount of insurance may be less
than the related loss.
Risks Relating to the Mining Activities
Ternium has equity interests in two iron ore mining
companies: a 100% interest in Las Encinas and a 50%
interest in Consorcio Peña Colorada. Ternium’s mining
activities are located in Mexico. In addition, Usiminas
holds a 70% equity interest in Mineração Usiminas, a
mining company located in Brazil. For information
related to the risks of doing business in Brazil and Mexico
see “Risks Relating to the Countries in Which Ternium
Operates”. In addition, Ternium’s mining activities are
subject to the following risks:
Operational
accidents
and
unexpected
natural
catastrophes may damage the environment, destroy
properties and affect production or cause injuries and
death,
which
would
adversely
impact
Ternium’s
operations and profitability, and result in material
liabilities.
Las Encinas, Consorcio Peña Colorada and Mineração
Usiminas carry out extractive, processing and logistical
operations. Liabilities associated with such mining
activities include those resulting from tailings and sludge
disposal, effluent management, iron ore pulp and fines
transportation, and rehabilitation of land disturbed
during the mining processes. The operations involve the
use, handling, storage, discharge and disposal of
hazardous substances and bulk material, and the use of
natural resources. The iron ore mining industry is
generally subject to significant risks and hazards,
including environmental pollution, such as spilling or
emissions of polluting substances or other hazardous
materials; operational incidents, such as open-cut pit wall
failures, rock falls, tailings dam breaches or incidents
from the storage, transportation or use of explosives;
transportation incidents, involving mobile equipment or
machinery, slurry pipes and cable transportation; and
may also be subject to unexpected natural catastrophes
including heavy rain and hurricanes, and high seismic
activity affecting our operations in Mexico. This could
result in environmental damage, damage to or destruction
of properties and facilities, personal injury or death, and
delays in production. For example, in January 2022,
unusually heavy rains damaged internal roads and
drainage systems, affecting Mineração Usiminas’ iron ore
production and shipments during that month. By March
2022, Mineração Usiminas was able to fully normalize its
operations.
Las Encinas’ and Consorcio Peña Colorada’s tailings
dams meet the strictest international seismic standards,
but for a tailings dam in which new reinforcements are
expected to be completed by Consorcio Peña Colorada by
year-end 2025 in order to reduce risks of collapse under a
severe earthquake. This reinforcement project follows
recommendations arising from stability studies conducted
with the assistance of independent consultants. Although
Ternium believes that, once completed, Consorcio Peña
Colorada’s investment project will further mitigate the
risk of incidents or failures at its tailings dam, failures or
breaches may still occur prior to, or after, completion of
reinforcement works. Furthermore, we cannot guarantee
that failures or breaches will not occur in any tailings
TERNIUM S.A.
Consolidated Management Report
25
dam even when meeting the strictest international seismic
standards.
Mineração Usiminas, Las Encinas and Consorcio Peña
Colorada may also be subject to claims under federal and
local laws and regulations for air pollution, toxic torts,
natural resource damages and other damages, as well as
for the investigation and clean-up of soil, surface water,
sediments, groundwater and other natural resources.
Claims for damages and reclamation may arise out of
current or former conditions at sites that Ternium owns,
leases or operates or at inactive sites that it currently
owns, leased-land sites and third-party waste disposal
sites. We may be held responsible for other sites in the
future. It also could be subject to litigation for alleged
bodily injuries arising from claimed exposure to
hazardous substances allegedly used, released, or
disposed of by Ternium. Environmental damages caused
by mining operations may result in costs and liabilities
that could materially and adversely affect Ternium’s
margins, cash flow and profitability. Third-party claims
based on environmental or physical damages may exceed
the limit of liability of the insurance policies that
Ternium may have in place.
Required governmental concessions could be subject to
prior consultation with native communities in Mexico or
local communities in Brazil, changes or termination,
permits and rights of use and occupancy could be difficult
to obtain or maintain and taxes or royalties applicable to
the mining industry could increase, all of which could
adversely
affect
Ternium’s
mining
activities
and
operating costs.
Mining activities are subject to specific regulations and
depend on concessions and authorizations granted by
governmental
authorities.
Increased
government
intervention or amendments to applicable laws and
regulations as well as claims or legal actions from native
or local communities or other third parties, may alter the
terms pursuant to which mining companies are required
to pursue exploration, mining and ore processing
activities. Selected mining technologies, additional
infrastructure requirements, new taxes and/or royalties
may be imposed on mining activities, leading to
unexpected capital expenditures, higher costs or a
reduction in mineral reserves and/or resources. For
example, in 2011, the state of Minas Gerais imposed a
rate for the controlling, monitoring and supervision of
exploration and mining activities of mineral resources,
which determines a fix value per ton sold. In addition, in
2019, the Brazilian federal and state governments issued
dam licensing regulations and imposed new conditions in
connection with population in the self-rescue zones,
including guarantee of stability, expropriation or
relocation of the population and de-characterization of
dams, which resulted in increased operating costs.
In April 2023, Mexico approved a significant reform to its
mining laws. Among other changes, new mining activities
were prohibited in certain areas with superficial bodies of
water -which are of federal jurisdiction-, and areas
declared as natural reserves by federal or local
governments. In addition, governmental authorities are
authorized to order the removal of existing tailings
deposits under certain location or risk circumstances. The
new legislation prohibits the use of national waters for
the transportation of certain materials, grants to the
Mexican geological service exclusive rights to conduct
exploration activities, and requires mandatory bidding
processes
for
new
exploration
and
exploitation
concessions, limiting concessions to a 30-year duration
with 25-year automatic extension and a further 25-year
extension following a prior bidding process. Concessions
may be revoked on certain grounds, including for failure
to initiate or interrupt operations within a specified
timeframe or to file a mine closing plan, and accidents
may be punished with increased fines and other penalties.
In addition, new permits entailing an increase in water
consumption in the regions where Las Encinas and Peña
Colorada operate are subject to new conditions on water
availability. Granting of new mining rights by the federal
government are also subject to new water consumption
permits based on such new conditions. The reform also
regulates royalties and profit sharing with local
communities, and mandates consultation processes with
native and Afro-Mexican communities. The Supreme
Court is reviewing the constitutionality of the new
legislation.
For further information on risks, including regulatory
risk, relating to our operations in Mexico, see “Risks
Relating to the Countries in Which Ternium Operates -
Mexico.”
Iron ore exploration and exploitation concessions in
Brazil and Mexico as well as water concessions in Mexico
may be revoked if the competent government authorities
determine that mining companies do not comply with
their obligations under the respective concession terms
and agreements. Ternium may fail to comply with its
commitments regarding certain concessions in Mexico if
the
security
situation
in
those
areas
worsens.
Furthermore, the exploration and exploitation of mines
require the obtention of a right of use and occupancy of
the land where the mines are situated. Even though
government regulations frequently establish provisions
intended to facilitate the granting of such rights, in some
cases it may be difficult to reach and maintain agreements
with the native or local communities or landowners, or
such agreements may be excessively onerous.
TERNIUM S.A.
Consolidated Management Report
26
If Las Encinas, Consorcio Peña Colorada or Mineração
Usiminas cannot secure use and occupancy rights on
acceptable terms, their mining activities may be
compromised. In addition, Las Encinas, Consorcio Peña
Colorada or Mineração Usiminas must obtain, in the
normal course of their business, permits to operate new
iron ore bodies at the mines and permits for the
expansion of Las Encinas’ and Peña Colorada’s tailings
deposit capacity and the use of areas for Mineração
Usiminas’ stocking piles and filtered waste. If Las
Encinas, Consorcio Peña Colorada or Mineração
Usiminas are unable to timely obtain required permits or
fail with a timely completion of their ongoing projects
related to tailings deposit capacity, they may need to alter
their mining and/or production plans, which could lead
to unexpected capital expenditures, higher costs and/or a
disruption of mining activities.
Ternium’s reserve and resource estimates may differ
materially from actually recoverable mineral quantities,
or its estimates of mine life may prove inaccurate; and
market price fluctuations and changes in operating and
capital costs may render certain ore reserves and
resources uneconomical to mine or cause Ternium to
revise its reserve or resource estimates.
Mineral reserves and resources are estimated quantities of
ore that Ternium has determined can be economically
mined and processed under present and anticipated
conditions to extract their mineral content. There are
numerous uncertainties inherent in estimating quantities
of reserves and resources and in projecting potential
future rates of mineral production, including factors
beyond our control. Reserve and resource calculations
involve estimating deposits of minerals that cannot be
measured in an exact manner, and the accuracy of any
reserve and resource estimate is a function of the quality
of available data and engineering and geological
interpretation and judgment. Reserve and resource
estimates also depend on assumptions relating to the
economic viability of extraction, which are established
through the application of a life of mine plan for each
operation or project providing a positive net present
value on a forward-looking basis, using forecasts of
operating
and
capital
costs
based
on
historical
performance, with forward adjustments based on
planned process improvements, changes in production
volumes and in fixed and variable proportions of costs,
and forecasted fluctuations in costs of raw material,
supplies, energy and wages. These forecasts and
projections involve assumptions and estimations that,
although Ternium believes are reasonable at the time of
estimating its reserves and resources, may change in the
future
and
may
fail
to
anticipate
geological,
environmental or other factors or events that could make
it difficult or unprofitable to mine certain ore deposits.
In addition, our reserve and resource estimates are of in-
place material after adjustments for mining depletion and
mining losses and recoveries, with no adjustments made
for metal losses due to processing. As a result, no
assurance can be given that the indicated amount of ore
will be recovered from our reserves and resources, or that
it will be recovered at the anticipated rates, or that
extracted ore will be converted into saleable production
over the mine life at levels consistent with its reserve and
resource estimates. Reserve or resource estimates may
vary in the future, and results of mining and production
subsequent to the date of an estimate may lead to future
revisions of estimates. Estimates of mine life may require
revisions based on actual production figures, changes in
reserve and resource estimates and other factors. For
example, fluctuations in the market prices of minerals,
reduced recovery rates or increased operating and capital
costs due to inflation, exchange rates, mining duties or
other factors may affect Ternium’s mine life projections.
Certain reserves and resources may have a low level of
projected profitability. If market price fluctuations or
changes in operating and capital costs increase the cost to
explore, locate, extract and process iron ore, making it
uneconomical to mine, we may be required to lower our
reserve or resource estimates. In addition, the mining of
certain reserves and resources depend on our ability to
reach agreements with local communities, the failure of
which could result in a decrease in reserve and resource
estimates.
Exploration activities are subject to uncertainties as to the
results of such exploration; even if the exploration
activities result in the discovery of ore deposits, the
effective exploitation of such deposits remains subject to
several risks.
Exploration activities are highly speculative, involve
substantial risks and may be unproductive. Ternium may
incur substantial exploration costs which may not yield
the expected results. Failure to find sufficient and
adequate ore resources could adversely affect our
business. In addition, even if ore deposits are discovered,
exploitation activities may be delayed for a long time
during which market conditions may vary. Significant
resources and time must be invested to establish ore
resources through exploration, define the appropriate
processes, obtain environmental licenses, concessions and
permits (including water usage permits), acquire land,
build the necessary facilities and infrastructure for
greenfield projects and obtain the ore or extract the
metals from the ore. If a project is not economically
feasible by the time it can be exploited, we may incur
substantial write-offs.
Inability to complete activities required to maintain iron
ore and pellets production rates over time could increase
TERNIUM S.A.
Consolidated Management Report
27
Ternium’s steel production cost.
Mining requires continuous investment and activities to
sustain production rates such as the design of mining
projects, the granting of environmental permits, the
development of iron ore reserves and/or tailings dams,
and the successful execution of civil works. A large share
of Mineração Usiminas’ iron ore reserves and resources
are made of an iron ore quality called “Compactos”,
which cannot be processed in its current facilities or may
be processed at substantially lower rates. Processing
“Compactos” iron ore at a rate similar or higher than
current processing rates, would require significant capital
expenditures in new equipment and facilities. If
Mineração Usiminas does not approve or fails to timely
develop the project, or fails to obtain the required
governmental approvals or to secure key supply
agreements on reasonable terms, including for logistics
and energy services, Mineração Usiminas’ iron ore
shipments will stop once the reserves of other iron ore
qualities are depleted, negatively affecting Ternium’s net
sales and operating results. On the other hand, if
Ternium’s mining companies in Mexico fail to timely
carry out the activities required to maintain iron ore and
pellet production rates over time, Ternium may be
required to substitute self-produced lower-cost iron ore
with third-party iron ore to supply its steel operations,
with a consequent increase in steel production costs.
Expected costs and capital expenditure requirements for
exploration, exploitation or restoration activities may
vary
significantly
and
affect
Ternium’s
financial
condition and expected results of operations.
Ternium may be subject to increased costs or delays
relating to the acquisition of equipment for the
exploration and exploitation of ore deposits, or
restoration of exhausted mines. Moreover, we may face
increasing costs or capital expenditure requirements
related
to
several
factors,
including
changes
in
environmental regulations, diminished iron ore reserve
grades, deeper pits and operational sections of our mines,
iron ore deposits within the pit area that are more
difficult to locate or extract, additional maintenance
works in dams, tailings and waste piles, and ponds, and
increased energy supply requirements that may be
difficult to obtain. Adverse mining conditions and other
factors related to the operation of the mine and mining
facilities during their life cycle, whether permanent or
temporary, may lead to a significant increase in projected
capital expenditures and costs and may affect our ability
to produce the expected quantities of mineral, negatively
affecting our financial condition and expected results of
operations.
Difficulties or disturbances in the relationship with local
communities may adversely affect Ternium’s mining
activities and results of operations, and increasing
violence and crime in Mexico could result in temporary
or even permanent shut down of our Mexican mining
operations.
Local communities, groups or individuals living or
owning land near the areas where we operate may take
actions to oppose or interfere with our mining activities.
Even if a community has an agreement in place with
Ternium, internal disputes within that community could
result in blockades to disrupt our mining operations or
iron ore transportation, or in legal proceedings to
suspend mining activity. Although we make significant
efforts
to
maintain
good
relationships
with
all
communities, actions taken by them (or by interest
groups within those communities), including requesting
the authorities to revoke or cancel concessions or permits,
may hamper our ability to conduct mining activities as
planned, prevent us from complying with agreements or
commitments with the government, or significantly
increase the cost of exploring and/or exploiting the mines,
thereby adversely affecting our business and results of
operations.
Mexico
In the past, Ternium’s mining operations in Mexico faced
actions by certain native or local communities demanding
higher compensation or other benefits, or seeking to stop
mining activities. Although attempted legal actions have
not
succeeded,
under
Mexican
law
judges
can
preemptively suspend environmental or other permits or
concessions and take certain other measures to protect
the “ejidos” (land jointly owned by native communities)
until the claim is resolved. An adverse court decision
suspending or revoking permits, or a blockade or
occupation of our facilities, could adversely impact
Ternium’s mining activities and results of operations.
In recent years, the security situation in Aquila, where
Las Encinas has its main mining operation, worsened,
with growing violence in the region being caused by
criminal groups seeking territorial control and the
exploitation of economic resources. In addition, a long-
standing internal dispute between two differentiated
groups of a native community prevented the election of
community representatives and stirred a great deal of
turmoil. In January 2023, two main community leaders
went missing, which triggered an investigation by the
Attorney General’s office that resulted in the arrest of
three suspects. The ensuing crisis forced Las Encinas to
keep its main mining operation idled during the first half
of 2023. Similarly, the Jalisco area, where Consorcio Peña
Colorada operates, is not exempt from the presence of
criminal groups and, consequently, security has also
TERNIUM S.A.
Consolidated Management Report
28
deteriorated in such region.
If violence and conflict persist or escalate in the regions
where Ternium has its mining operations, Ternium’s
mining activities in Mexico may be partially or totally
suspended, or even permanently shut down.
Risks Relating To The Structure Of Ternium S.A.
Changes in applicable tax regulations and resolutions of
tax disputes could negatively affect our financial results.
Ternium is subject to tax laws in numerous foreign
jurisdictions where it operates. The integrated nature of
Ternium’s worldwide operations can produce conflicting
claims from revenue authorities in different countries as
to the profits to be taxed in the individual countries,
including disputes relating to transfer pricing. Most of the
jurisdictions in which Ternium operates have double tax
treaties with foreign jurisdictions, which provide a
framework for mitigating the risk of double taxation on
Ternium’s results. However, in case double taxation
persists, dispute resolution mechanisms developed to
resolve such potential conflicting claims are largely
untried and can be expected to be very lengthy.
In recent years, tax authorities around the world have
increased their scrutiny of companies’ tax filings and have
become more rigid in exercising any discretion they may
have. In 2015, the OECD proposed a number of tax law
changes under its Base Erosion and Profit Shifting (BEPS)
Action Plans to address issues of base erosion
transparency, coherence and substance. Most of the
countries in which Ternium operates have already
implemented at least some of those changes within their
own domestic tax legislations.
In 2019, the OECD launched a new initiative on behalf of
the G20 under the format of a two pillars solution
targeting to minimize profit shifting by working towards
a global tax framework that ensures that corporate
income taxes are paid where consumption takes place
(Pillar 1) and targeting to introduce a global standard on
minimum taxation (Pillar 2) both combined with new tax
dispute resolution processes. This project achieved
OECD political consensus in October 2021. Pillar 2
applies to Ternium as from 2024; Pillar 1 is still under
discussion.
On January 20, 2025, the United States announced that it
would withdraw from the OECD Global Tax Deal and
that any prior commitments made by the United States
will no longer have any force or effect. The memorandum
announcing the withdrawal also directed the U.S.
Secretary of the Treasury to develop and deliver to
President Trump, within 60 days, a list of protective
measures or other options towards foreign countries that
are either not in compliance with any tax treaty with the
United States or have, or are likely to have, tax rules that
are extraterritorial or disproportionately affect U.S.
companies.
At the EU level, the European Commission adopted in
2016 its Anti-Tax Avoidance Directive, or ATAD, later
on expanded by ATAD 2, which seeks to prevent tax
avoidance by companies and to ensure that companies
pay appropriate taxes in the markets where profits are
effectively made and business is effectively performed. In
addition, the European Commission drafted a directive
aiming to avoid the use of shell entities (ATAD 3), which
is still under discussion. Also, the European Commission
adopted in December 2022 another directive to impose a
global minimum taxation for multinational companies in
the E.U., following Pillar 2’s initiative. This new directive
became effective in 2024.
Ternium’s interpretation and application of the tax laws
could differ from that of the relevant governmental
taxing authority, which could result in the payment of
additional taxes, penalties or interest, negatively affecting
our profitability and financial condition. Significant
uncertainties remain in relation to the potential adoption
of the new regulations that might result from evolving
initiatives like those launched by the OECD and the EU
in relation to international taxation that could impact
negatively our financial condition, results of operations
and cash flows.
Dividend payments depend on the results of operations
and financial condition of its subsidiaries and could be
affected by legal, contractual or other limitations or tax
changes.
Ternium S.A. is a holding company and conducts all its
operations through subsidiaries. Dividends or other
intercompany transfers of funds from those subsidiaries
are Ternium S.A.’s primary source of funds to pay its
expenses, debt service and dividends and to repurchase
shares or ADSs.
The ability of our subsidiaries to pay dividends and make
other payments to their shareholders will depend on their
results of operations and financial condition. If earnings
and cash flows of our operating subsidiaries are
substantially reduced, Ternium S.A. may not be in a
position to meet its operational needs or to pay dividends.
In addition, such dividends and other payments could be
restricted by applicable corporate and other laws and
regulations, including those imposing foreign exchange
controls or restrictions on the transfer of money to
foreign accounts or the payment of dividends, and
TERNIUM S.A.
Consolidated Management Report
29
agreements and commitments of such subsidiaries. For
example, in recent years, Argentine regulations have
significantly impaired Ternium Argentina’s ability to
transfer dividends abroad and, therefore, Ternium
Argentina resorted to the payment of dividends in kind
using U.S. dollar-denominated Argentine sovereign
bonds. For information on exchange controls in
Argentina, see note 30 “Foreign exchange restrictions in
Argentina” of Ternium’s audited consolidated financial
statements included in this annual report; and “—Risks
Relating to the Countries in Which Ternium Operates –
Argentina: Exchange controls in Argentina could
negatively impact Ternium Argentina’s operations,
preventing Ternium from importing raw materials,
paying dividends or transferring cash surpluses abroad, as
a result of its inability to access the foreign exchange
market”.
Ternium S.A.’s ability to pay dividends to shareholders is
subject to legal and other requirements and restrictions in
effect at the holding company level. For example,
Ternium S.A. may only pay dividends out of net profits,
retained
earnings
and
distributable
reserves
and
premiums, each as defined and calculated in accordance
with Luxembourg law and regulations. In addition,
dividend distributions (which are currently imputed to a
special tax reserve and are therefore not subject to
Luxembourg withholding tax) may be subject to
Luxembourg withholding tax if current Luxembourg tax
law were to change or if the special tax reserve were to be
exhausted.
Ternium S.A.’s controlling shareholder may be able to
take actions that do not reflect the will or best interests of
other shareholders.
As of February 28, 2025, San Faustin beneficially owned
65.03% of Ternium S.A.’s share capital and Tenaris,
which is also controlled by San Faustin, held 11.46% of
Ternium S.A.’s shares and voting rights. Rocca &
Partners Stichting Administratiekantoor Aandelen San
Faustin, or RP STAK, holds voting rights in San Faustin
sufficient in number to control San Faustin. As a result,
RP STAK is indirectly able to elect a substantial majority
of the members of Ternium S.A.’s board of directors and
has the power to determine the outcome of most actions
requiring shareholder approval, including, subject to the
requirements of Luxembourg law, the payment of
dividends. The decisions of the controlling shareholder
may not reflect the will or best interest of other
shareholders. In addition, Ternium S.A.’s articles of
association permit its board of directors to waive, limit or
suppress preemptive rights in certain cases. Accordingly,
Ternium S.A.’s controlling shareholder may cause its
board of directors to approve in certain cases an issuance
of shares for consideration without preemptive rights,
thereby diluting the minority interest. See “Risks Relating
to Ternium S.A.’s ADSs – Holders of shares and ADSs in
the United States may not be able to exercise preemptive
rights in certain cases”.
Existence of other shareholders in Ternium S.A.’s
subsidiaries and associates could delay or prevent us from
completing our strategy.
Ternium S.A. does not own 100% of the interests in
certain of its subsidiaries. As of February 28, 2025, 26.0%
of Ternium Argentina was held by the Administración
Nacional de la Seguridad Social, or ANSeS, Argentina’s
governmental social security agency, and 11.4% was
publicly held. In addition, 22.7% of Usiminas’ ordinary
shares were held by the NSC Group, 4.9% by Previdência
Usiminas and 22.9% were publicly held, and 0.6% of
Usiminas’ preferred shares were held by the NSC Group
and 97.5% were publicly held. Furthermore, Ternium
holds a 51% ownership interest in Tenigal (with NSC
holding the remaining 49%); a 50% equity interest in
Consorcio Peña Colorada (with ArcelorMittal holding
the remaining 50%); and a 48% equity interest in
Techgen. The existence of other shareholders in these
companies could prevent Ternium from taking actions
that, while beneficial to the company, might not be
beneficial to each relevant subsidiary or associate
considered separately. As a result, Ternium could be
delayed or prevented from completing its strategy or fully
maximizing its competitive strengths.
Risks Relating to the Countries in Which Ternium
Operates
Negative economic, political, social and regulatory
developments in certain markets where a significant
portion of Ternium’s operations and assets are located
could disrupt its manufacturing activity, hurt Ternium’s
shipment volumes or prices, or increase its costs, thereby
adversely affecting its results of operations and financial
condition.
Ternium’s results of operations are subject to the risks of
doing business in emerging markets, principally in
Mexico, Brazil and Argentina, and have been, and could
in the future be, affected from time to time to varying
degrees by economic, political, social, regulatory and
legal
developments,
such
as
nationalization,
expropriation or forced divestiture of assets; restrictions
on production, domestic sales, imports and exports;
travel or trade bans; interruptions in the supply of
essential energy inputs; restrictions on the exchange or
transfer of currency; inability or increasing difficulties to
repatriate income or capital or to make contract
payments; inflation; devaluation; or other events,
including wars and other international conflicts, natural
TERNIUM S.A.
Consolidated Management Report
30
disasters, chronic climate changes and public health
epidemics; civil unrest and local security concerns that
threaten the safe operation of its facilities and operations;
direct and indirect price controls; tax increases and
changes (including retroactive) in the interpretation,
application or enforcement of tax laws and other claims
or challenges; cancellation of contract rights; and delays
or denial of governmental approvals. Both the likelihood
of such occurrences and their overall effect upon Ternium
vary greatly from country to country and are not
predictable. Realization of these risks could have an
adverse impact on the results of operations and financial
condition of Ternium’s subsidiaries located in the
affected countries and, depending on their materiality, on
the results of operations and financial condition of
Ternium as a whole.
Mexico
Ternium has significant manufacturing operations and
assets in Mexico and a significant share of its sales are
made to customers in this country. In addition, a
significant portion of Ternium’s sales in Mexico are
directed to the Mexican manufacturing industry, which in
turn exports a large share of its production to the U.S.
market. Our business could be materially and adversely
affected by economic, political, social and regulatory
developments in Mexico.
Political, economic and social conditions and government
policies in Mexico could negatively impact Ternium’s
business and results of operations.
In the past, Mexico has experienced several periods of
slow or negative economic growth, high inflation, high
interest rates, currency devaluation and other economic
problems. Furthermore, the Mexican economy tends to
be affected by changes in the economic environment in
the United States, including changes to trade conditions.
In addition, actions and policies adopted by the Mexican
government could have a significant impact on the
economy and market conditions affecting Ternium’s
operations in Mexico. During 2024, the Mexican
Congress approved several constitutional reforms aimed
at restructuring the judicial system and increasing state
control
over
key
sectors,
including
energy,
telecommunications,
and
natural
resources.
This
increased regulatory oversight has led to a more
unpredictable business environment. A deterioration in
Mexico’s economy, a re-emergence of social instability,
political unrest, reduction in government spending,
increased government intervention, exchange rate and
financial market volatility, or other adverse political,
economic or social development, could adversely affect
our business, results of operations, financial condition or
liquidity. Adverse economic conditions in Mexico could
also result in higher inflation and interest rates coupled
with reduced opportunities for funding or refinancing,
reduced
domestic
consumption
of
our
products,
decreased operating results and delays in the completion
of ongoing and future capital expenditures.
Energy reforms and the evolving regulatory landscape in
Mexico could adversely impact Ternium’s results of
operations and net results.
In the last few years, the Mexican government has made
various attempts to amend energy rules and regulations
impacting the supply and cost of energy.
Since December 2018, the Mexican government has been
introducing changes to electricity regulations, including
amendments to the Energy Industry Law, or LIE, and a
bill to reform the Constitution, which was rejected by the
Mexican Congress in 2021. These changes aimed to grant
priority
to
Mexico’s
state-owned
electric
power
generation and distribution company, or CFE, over
private generators in the supply of electric power to the
Mexican market and mandated a revision of power
generation and transaction agreements between CFE and
independent electric power suppliers. The intended
reforms were challenged in court and, in January 2024,
the Supreme Court ruled against the constitutionality of
certain provisions of the LIE reform.
In response, the Mexican President announced a new
proposal for an ambitious constitutional reform covering
a wide range of topics, including energy matters. For
example,
changes
have
been
introduced
to
the
constitutional status of CFE and Pemex, resulting in
increased government intervention in their policies at the
expense of their boards’ independence.
The energy reform has introduced significant regulatory
and legal uncertainties for energy companies, affecting
their operations, financial performance, and strategic
planning. Companies have had to navigate a complex and
evolving regulatory landscape, invest in compliance
programs, and reassess their investment strategies to
mitigate the risks associated with these reforms.
Uncertainty remains as to whether the Mexican
government or any of its decentralized bodies will
introduce new reforms to the energy market or adopt any
measure that may further affect the energy supply or
increase its cost. Any such new changes or measures
could negatively affect our operations or those of
Techgen, where Ternium holds a 48% equity interest and
which supplies electricity for most of our Mexican
operations. At this stage, we cannot assess the potential
effects of any new governmental initiative on Ternium’s
operations and the Mexican economy in general and,
TERNIUM S.A.
Consolidated Management Report
31
consequently, on the results of operations and financial
conditions of our businesses in Mexico.
Violence and crime in Mexico could negatively impact
Ternium’s business and operations.
Mexico is subject to significant levels of violent crimes
and, notably, the regions where Ternium’s mining
operations are located are subject to an increasing level of
criminality, which resulted in an alarming deterioration
of security conditions in the region. For more information
on the events affecting our mining operations in Mexico,
see “– Risks Relating to Ternium’s Mining Activities –
Difficulties in relationships with local communities may
adversely affect Ternium’s mining activities and results of
operations, and increasing violence and crime in Mexico
could result in temporary or even permanent shut down
of Ternium’s Mexican mining operations.” Security
issues could affect our day-to-day operations and could
also result in an economic slowdown, reducing domestic
demand for its products and thereby having an adverse
effect on our business. A deterioration of the security
situation or a surge in violence could result in significant
obstacles or additional costs to the implementation of
growth plans in Mexico, including delays in the
completion of capital expenditures.
Changes in existing trade arrangements between Mexico
and the U.S. and controversies or disputes between
USMCA member countries could adversely impact
Ternium’s results of operations and net results.
The USMCA became effective in July 2020 replacing the
North American Free Trade Agreement (NAFTA).
Previously, in 2019, Mexico and the United States had
agreed to waive a 25% tariff on steel products exported
to the United States (which had been imposed in 2018)
subject to continuous monitoring for surges in steel
imports and transshipment into the United States of
material that was not imported from Mexico or Canada.
Early in 2024, the United States expressed concerns
regarding unfair practices in the U.S. market from steel
produced in third countries that was allegedly being
circumvented through Mexico. In response to such
concerns, Mexico implemented additional measures
aimed at improving information and transparency as well
as preventing circumvention practices in connection with
steel imports into the Mexican market from countries
with which Mexico lacks a formal trade agreement. In
addition, in July 2024, Mexican and Canadian exports to
the United States of steel products melted and poured
outside the USMCA region became subject to a 25%
tariff under Section 232 of the Trade Expansion Act of
1962. Finally, early in 2025, the U.S. government imposed
a 25% tariff on virtually all imports of steel and on
certain steel derivatives, revoking previously negotiated
country-specific exemptions and quota arrangements.
In addition, on February 1, 2025, the U.S. government
announced the imposition, through the International
Emergency Economic Powers Act (IEEPA), of across-the-
board tariffs applicable to all products imported from
Mexico, Canada and China. As of the date of this annual
report, Mexican and Canadian products that comply
with USMCA preferential rules of origin, are exempt
from this tariff. Further, the Trump administration
announced that the U.S. would implement reciprocal
tariffs with trading partners by April 2025.
This new set of tariffs and other potential commercial
measures could affect market prices and dynamics, supply
chains, and cost structures, and result in a prolonged or
escalated trade war.
Moreover, the USMCA is scheduled for its first joint
review on July 1, 2026, allowing the three member
countries to assess the agreement and propose revisions.
The review signals the beginning of a 10-year countdown
to the USMCA’s expiration in 2036, unless the parties
agree to extend the agreement. Amendments to, or the
termination of, current trade agreements between Mexico
and the U.S. could materially and adversely affect
Ternium’s shipments, results of operations and net
worth.
The introduction of new tariffs could further increase
costs for Mexican exporters and, consequently, reduce
Mexico’s competitiveness in the U.S. market. Particularly,
new tariffs on imports of Mexican manufactured
products to the U.S. market could negatively affect
several of Ternium’s customers in Mexico and, thus,
Ternium’s operations in the country. In addition, the
uncertainty surrounding trade rules could deter foreign
investment in Mexico, as companies might hesitate to
invest in new projects or expand existing ones without
the stability provided by the USMCA.
Other countries have announced retaliatory tariffs
against U.S. exports. It is also anticipated that parties
may bring litigation regarding the timeliness and
appropriateness of the Trump administration’s actions.
In light of the foregoing uncertainties, Ternium is unable
at this time to predict the evolution or ultimate outcome
of these developments or to quantify the impact that the
new tariffs and measures would have on its business or
financial condition.
Argentina
A significant portion of Ternium’s sales are made in
Argentina mainly through its subsidiary, Ternium
TERNIUM S.A.
Consolidated Management Report
32
Argentina. Ternium Argentina’s business could be
materially affected by economic, political, social, fiscal
and regulatory developments in Argentina.
Economic and political instability in Argentina, which on
several occasions resulted in economic uncertainties and
recession, may adversely affect Ternium’s business,
financial condition and results.
Ternium’s business and results of operations in Argentina
depend on local macroeconomic conditions, among other
factors. Over the past years, the Argentine economy and
capital investment have been affected by political,
economic and financial uncertainties as well as
government intervention in, or limitations to, the conduct
of business in the private sector and other government
measures affecting investors’ confidence. Steel shipments
to the Argentine domestic market were severely affected
in different opportunities over the last decades. For
instance, during 2018 and 2019 the economy was affected
by a severe downturn resulting from financial market
volatility, high interest rates and heightened political
uncertainty during the presidential election process and,
in 2020, the economy was affected by the COVID-19
outbreak.
In 2023, the Argentine economy suffered as a result of a
severe drought, foreign exchange restrictions, high
inflation rates and heightened political and economic
uncertainty during the presidential election process. In
December 2023, the new administration, led by Mr.
Javier Milei, announced a series of emergency measures
to address the critical economic situation, including high
inflation rates and public deficit. Some of those measures
included deregulation efforts, cuts in public spending,
including subsidies on public services, cut down on
monetary issuance, increase of certain taxes, labor
reforms, and the lifting of certain import restrictions and
foreign exchange controls. In 2024, Ternium experienced
a 20% decrease in steel shipments in the Southern Region
primarily in connection with the Argentine government's
economic stabilization measures, which had a significant
impact in the first quarter followed by a gradual
improvement throughout the year. It is uncertain as to
what extent the Argentine government will be able to
continue implementing its economic program and adopt
major structural reforms. While Congress approved some
of the reforms submitted by the Milei administration in
2024, it is unclear whether Congress will endorse other
major reforms, including labor and tax reforms. While
the deregulation of the economy and intended reforms
aim to create a more competitive and investment-friendly
environment, the associated uncertainties and potential
for abrupt policy changes pose substantial risks for
companies operating in the country. While the
deregulation of the economy and intended reforms aim to
create a more competitive and investment-friendly
environment, the associated uncertainties and potential
for abrupt policy changes pose substantial risks for
companies operating in the country. In addition, conflicts
between the federal and local governments may arise,
court decisions may challenge governmental measures,
and social tensions or public protests could arise.
Furthermore, Argentina is negotiating a new agreement
with the International Monetary Fund, or IMF. Although
Argentina has achieved most of the targets set under the
Extended Fund Facility, or EFF arrangement for 2024,
failure to implement or comply with a program with the
IMF could adversely affect the country’s economy and
lessened financial sources could impair Argentina’s ability
to foster economic growth.
This context of volatility and uncertainty remains in
place as of the date of this annual report. Ternium
continues to monitor closely the evolution of the main
variables affecting its business, identifying the potential
impact thereof on its financial and economic situation
and determining the appropriate course of action in each
case. Ternium’s business and results of operations in
Argentina could be adversely affected by rapidly changing
economic, political and social conditions in Argentina, or
by the Argentine government’s policy response to such
conditions.
Inflation may undermine economic growth in Argentina
and impact Ternium’s costs, thereby adversely affecting
its results of operations and financial position.
In the past, inflation has undermined the Argentine
economy and the government’s ability to stimulate
economic growth. Consumer price inflation in Argentina,
as reported by INDEC, the Argentine statistics and census
bureau, was 118% in 2024, 211% in 2023 and 95% in
2022. In 2024, the Argentine peso depreciated by 22%, a
rate that was far below the rate of inflation. Such
mismatch negatively impacted our results of operations,
as ARS-denominated costs (mainly labor-related costs) at
Ternium Argentina increased, thereby affecting cost-
competitiveness and margins. A high inflation economy
has undermined and could continue to undermine
Argentina’s foreign competitiveness in international
markets and negatively affect economic activity and
employment levels. Argentine inflation rate volatility
makes it impossible to estimate with reasonable certainty
the extent to which activity levels and results of
operations of Ternium Argentina could be affected in the
future.
Taxes on Argentine companies have been increasing over
time; a further increase of the tax burden could adversely
affect Ternium’s results of operations, net results and
TERNIUM S.A.
Consolidated Management Report
33
financial condition.
In the past, the sustained and significant devaluation of
the Argentine peso against the U.S. dollar coupled with
high inflation rates resulted in a material reduction of the
real value that Ternium Argentina could deduct as cost of
sales or cost of financial investments for tax purposes,
thus creating artificial gains that were subject to income
tax. Inflation adjustment for tax purposes is limited and
subject to significant restrictions. For example, inflation
adjustment of inventories and other current assets is
permitted only if the consumer price inflation rate
surpasses 100% in a 36-month period up to the close of
the relevant fiscal year and, in the past, inflation
adjustment has been further limited. If inflation rates
remain high and limitations to inflation adjustment are
reinstated, Ternium Argentina could be subject to
increased tax burden. Furthermore, because inflation
adjustment of cash positions generated during the current
fiscal year is not permitted, high nominal interest rates,
which are normally expected in high inflation scenarios,
materially overstate the financial income of such cash
positions for tax purposes.
In
addition,
during
2024
Ternium
Argentina
systematically accumulated value added and income tax
credits, which amounted to $154 million as of December
31, 2024, mainly due to the impact of a 2023 federal tax
agency resolution limiting several taxpayers’ ability from
requesting tax credit refunds. Such resolution was
recently repealed, and, therefore, Ternium Argentina
expects to gradually reduce its accumulated tax credits.
However, we cannot ensure that the federal tax agency
will not adopt similar resolutions or measures in the
future having the effect of collecting taxes in excess of
applicable tax rates, thus increasing Ternium Argentina’s
tax burden.
Other federal, provincial and municipal taxes on
Ternium Argentina’s operations have been imposed or
increased over the last years, including the introduction
of a tax on dividend distributions and a tax on the
purchase of foreign currency for the payment of imports
of certain raw materials and intermediate goods, which
was lifted in December 2024, but could be reintroduced in
the future.
The Argentine government has announced plans to
introduce a tax reform in 2025. Ternium cannot predict
whether future legislation, or any new tax regime or
reform could result in a further increase of the tax burden
on its operations in Argentina, which would adversely
affect Ternium’s results of operations, net results and
financial condition.
Exchange controls in Argentina could negatively impact
Ternium Argentina’s operations, preventing Ternium
from importing raw materials, paying dividends or
transferring cash surpluses abroad, as a result of its
inability to access the foreign exchange market.
From time to time, the Argentine authorities have taken
measures to reduce the volatility of the ARS/$ exchange
rate and have implemented formal and informal
restrictions on capital inflows and outflows. Between
September 2019 and December 2023, the Argentine
government imposed significant restrictions on foreign
exchange
transactions.
Although
after
the
new
administration took office in December 2023 certain
restrictions were eased or lifted and further deregulation
is expected, at the date of this annual report the scope
and timing of upcoming changes remain unknown. For
more information on our foreign exchange restrictions in
Argentina, see note 30 “Foreign exchange restrictions in
Argentina” to our consolidated financial statements
included in this annual report.
Foreign exchange controls currently limit the purchase
and transfer abroad of foreign currency for saving
purposes, restricting Ternium Argentina’s ability to hold
excess
cash
reserves
in
foreign
bank
accounts.
Accordingly, Ternium Argentina holds its cash and
financial investments in the Argentine financial system.
As of December 31, 2024, Ternium Argentina’s cash and
cash equivalents and other investments amounted to
approximately $1.3 billion, a large portion of which
consisted of U.S. dollar-denominated sovereign bonds
issued by the Argentine government and payable in U.S.
dollars, and Argentine Treasury bonds linked to the
official exchange rate. The U.S. dollar value of these
instruments recorded in Ternium’s consolidated financial
statements is based on their Argentine peso local market
price, converted to the U.S. dollar at the ARS/$ official
exchange rate. Therefore, the valuation of such
investments is subject to the volatility of the Argentine
financial market and currency exchange rates, leading to
a potential significant reduction of such value in our
consolidated financial statements. For example, during
the fourth quarter of 2023 and first quarter of 2024,
Ternium’s divestment of Argentine sovereign bonds
resulted in a loss of $164 million due to the recycling of
changes in the fair value of financial instruments from
Other Comprehensive Income to Financial Results.
Although the balance of Ternium’s Other Comprehensive
Income in connection with its Argentine sovereign bond
holdings turned positive as of December 31, 2024, this
balance could turn negative again in the future if
conditions in the Argentine financial market deteriorate
and, consequently, the market value of such holdings
decreases.
TERNIUM S.A.
Consolidated Management Report
34
In the past few years, the Argentine authorities limited
the import of goods and services by Argentine companies,
including Ternium Argentina and other companies in the
steel value chain, by controlling access to the foreign
exchange market. In the context of high, but decelerating,
inflation during 2024, restrictions of access to the foreign
exchange market to pay for imports of goods remain, but
have been gradually made more flexible. However,
Ternium cannot predict future conditions for the imports
of goods and services by Argentine companies, which
would adversely affect Ternium’s results and financial
condition.
Access to the official exchange market to make dividend
payments continue to require prior Argentine Central
Bank approval, which is rarely, if ever, granted.
If control systems are maintained or are tightened, local
demand for steel products and/or Ternium Argentina’s
operations or sales could be adversely affected, Ternium
Argentina could be exposed to the risk of losses arising
from fluctuations in the ARS/$ exchange rate, and
Ternium Argentina’s ability to make payments to foreign
suppliers or creditors (which could disrupt Ternium
Argentina’s operations), pay dividends or royalties
abroad, or fund investments or other activities offshore
could be impaired.
Brazil
Ternium has significant manufacturing operations and
assets located in Brazil. Ternium has a participation in
the control group of Usiminas, a large Brazilian
steelmaker, and began consolidating Usiminas in July
2023. Ternium also owns Ternium Brasil, a company that
has a slab making facility in Rio de Janeiro and exports
most of its production. Ternium’s results and net worth
could be materially and adversely affected by economic,
political, social, fiscal and regulatory developments, as
well as security concerns in Brazil.
Changing economic policies and political conditions in
Brazil, which on several occasions in the past resulted in
economic uncertainties, recession and political instability,
may occur in the future, thereby adversely affecting
Ternium’s business results and financial condition.
The Brazilian economy has been characterized by
frequent and occasionally extensive intervention by the
Brazilian government, including changed monetary,
taxation, credit, tariff and other policies to influence the
course of the country’s economy. The Brazilian
government’s actions to control inflation and implement
other policies have involved hikes in interest rates, wage
and price controls, foreign exchange controls and
devaluation, freezing of bank accounts, capital controls
and restrictions on imports. Such policies may adversely
affect our results and net worth. The Brazilian
government’s policies may also result in increases in tax
payments or tariffs, which could adversely affect industry
profitability. Changes in tax laws, such as the ongoing
tax reform debates, can result in increased tax liabilities
and
compliance
costs,
creating
uncertainties
for
businesses. In addition, tax disputes can result in
substantial financial liabilities and require extensive legal
resources to resolve. We cannot predict whether the new
tax regime would result in a net tax burden increase for
our operations in Brazil. Any increase in the applicable
tax burden or tariffs would affect our consolidated cash
flow and profitability. Also, tax disputes are a common
source of legal uncertainty for Brazilian companies. The
interpretation of tax laws by authorities can vary, leading
to disputes over tax liabilities. In the past, Ternium’s
Brazilian subsidiaries faced several tax-related legal
challenges, including disputes over the collection of
federal, state and municipal taxes, transfer pricing, and
the deductibility of certain expenses.
The Brazilian economy has been affected by inflation,
energy shortages, illiquid lending markets and other
political, diplomatic, social and economic developments.
Brazil’s political environment has historically influenced,
and continues to influence, the performance of the
country’s economy. Political crises have affected public
and investor confidence, which resulted in economic
deceleration. For example, Brazil has experienced
heightened economic and political instability derived
from various investigations into allegations of money
laundering and corruption being conducted by the Office
of the Brazilian Federal Prosecutor, including the Lava
Jato investigation, which negatively impacted the
Brazilian economy and political environment and
contributed to a decline in market confidence in Brazil. In
addition, operational risks in Brazil include challenges
related to infrastructure, supply chain disruptions, and
labor disputes. Companies also face risks related to
strikes and labor disputes, which can disrupt operations
and lead to financial losses.
The Brazilian judicial system is known for its procedural
delays and the unpredictability of outcomes. Companies
often face lengthy judicial, arbitral, and administrative
proceedings, which can be further complicated by the
possibility of appeals and the need for judicial guarantees;
and the enforcement of judicial decisions may be
challenging.
Uncertainty over whether the Brazilian government will
change policies or regulations affecting economic,
political or social factors may contribute to economic
instability in Brazil. We cannot predict whether political
instability will arise in the future nor its effect on the
Brazilian economy and, consequently, on the results of
TERNIUM S.A.
Consolidated Management Report
35
operations and financial conditions of our businesses in
Brazil.
Inflation may undermine economic growth in Brazil and
impact Ternium’s costs, thereby adversely affecting its
results of operations and financial position.
High levels of inflation have in the past undermined the
Brazilian economy and the government’s ability to
stimulate economic growth. Our results of operations and
financial position could be negatively impacted, as BRL-
denominated costs (mainly labor-related costs) may
increase,
thereby
affecting
cost-competitiveness.
Inflationary pressures may also lead to the imposition of
additional government policies to combat inflation and
hinder access to Brazilian capital markets, which could
adversely affect the business and the ability to finance
operations and capital expenditures, making it impossible
to estimate with reasonable certainty our future results of
operations.
Certain Regulatory Risks And Litigation Risks
Ternium faces a significant loss contingency in Brazil in
connection with its acquisition of a participation in the
control group of Usiminas.
In 2013, Ternium was notified of a lawsuit filed in Brazil
by Companhia Siderúrgica Nacional, or CSN, and
various entities affiliated with CSN against Ternium
Investments,
Ternium
Argentina,
and
Tenaris’s
subsidiary, Confab, all of which compose the T/T Group
under the Usiminas shareholders agreement. The entities
named in the CSN lawsuit had acquired a participation in
Usiminas in January 2012. The CSN lawsuit alleges that,
under applicable Brazilian laws and rules, the acquirers
were required to launch a tag-along tender offer to all
non-controlling holders of Usiminas ordinary shares for a
price per share equal to 80% of the price per share paid in
such acquisition or BRL28.8 and seeks an order to compel
the acquirers to launch an offer at that price plus interest.
If so ordered, the offer would need to be made to
182,609,851 ordinary shares of Usiminas not belonging to
Usiminas’ control group. Ternium Investments and
Ternium Argentina’s respective shares in the offer would
be 60.6% and 21.5%.
On September 23, 2013, the first instance court dismissed
the CSN lawsuit, and on February 8, 2017, the court of
appeals maintained the understanding of the first instance
court. On August 18, 2017, CSN filed an appeal to the
Superior Court of Justice (SCJ) seeking the review and
reversal of the decision issued by the Court of Appeals.
On September 10, 2019, the SCJ declared CSN’s appeal
admissible. On March 7, 2023, the SCJ, by majority vote,
rejected CSN’s appeal. CSN made several submissions in
connection with the SCJ decision, including a motion for
clarification that challenged the merits of the SCJ
decision. Decisions at the SCJ are adopted by majority
vote. At an October 17, 2023 session, two justices of the
SCJ voted in favor of remanding the case to the first
instance for it to be retried following production and
assessment of the new evidence, and two justices of the
SCJ voted, without requiring any further evidence, in
favor of granting CSN’s motion for clarification and
reversing the March 7, 2023 decision that rejected CSN’s
appeal; because the fifth member of SCJ excused himself
from voting, a justice from another panel at the SCJ was
summoned to produce the tie-breaking vote.
On June 18, 2024, the SCJ completed its voting on CSN’s
motion for clarification and reversed, by majority vote,
its March 7, 2023 decision, and resolved that Ternium
Investments, its subsidiary Ternium Argentina and
Tenaris’s subsidiary Confab should pay CSN an
indemnification in connection with the acquisition by the
T/T Group of a participation in Usiminas in January
2012, with CSN being allowed to retain ownership of the
Usiminas ordinary shares it currently owns. On August 1,
2024, Ternium Investments, Ternium Argentina and the
other T/T Group entities filed a motion for clarification
against the SCJ decision and, subsequently, CSN filed its
reply. On December 6, 2024, the SCJ rejected this motion
for clarification, confirming the obligation of the T/T
Group entities to pay an indemnification in connection
with the 2012 acquisition of the participations in
Usiminas. Notwithstanding the foregoing, the SCJ
unanimously resolved to modify the applicable monetary
adjustment mechanism and to cap the applicable
attorney’s fees, thereby lowering the aggregate amount
that would be payable if CSN ultimately prevails in this
claim. Based on such SCJ decision, assuming monetary
adjustment thorough December 31, 2024, and attorney’s
fees in the amount of BRL5 million, the revised aggregate
amount potentially payable by Ternium Investments and
Ternium Argentina if CSN finally prevails on its claims
would
be
of
approximately
BRL1,875.9
million
(approximately $302.9 million at the BRL/$ rate as of
such date) and BRL664.1 million (approximately $107.3
million at the BRL/$ rate as of such date), respectively.
On February 10, 2025, Ternium filed an extraordinary
appeal against the SCJ decisions that ordered an
indemnification payment, seeking their review and
reversal by the Supreme Federal Tribunal. The Company,
however, cannot predict the ultimate resolution on the
matter.
For
further
information
see
note
25
“Contingencies, Commitments and Restrictions on the
Distribution
of
Profits—Tax
claims
and
other
contingencies (a) Provision for ongoing litigation related
to the acquisition of a participation in Usiminas”, to our
consolidated financial statements included in this annual
report.
TERNIUM S.A.
Consolidated Management Report
36
International trade actions or regulations and trade-
related legal proceedings could adversely affect Ternium’s
sales and revenues and the overall business.
International trade-related administrative proceedings,
legal actions and restrictions pose a constant risk for
international operations and sales throughout the world.
Our steel processing activities require steel products,
including significant quantities of steel slabs, from
different foreign steel suppliers for its operations in
Mexico, Colombia, Argentina and Brazil. The Mexican,
Colombian, Argentine or Brazilian governments may
impose or increase duties on steel products imports. On
the other hand, trade liberalization, mainly through free
trade agreements, can reduce certain input costs and
increase access to foreign markets. However, greater
trade liberalization in the domestic markets in which we
participate increases competition. For example, during
2024, the Argentine government took several measures to
streamline the import of goods, which could increase the
risk of unfairly traded imports affecting the local market.
For information concerning competition in the domestic
steel markets, see “Intense competition could cause
Ternium to lose its market share and adversely affect its
revenues.”
During the last decade, steel exports from China surged
as a consequence of an economic slowdown in this
country, and the number of antidumping, countervailing,
safeguard measures and other trade restrictive actions
increased substantially. Accordingly, producers that were
restricted from certain markets sought alternative
markets for their products. In the last two years, there
was a surge of steel exports from China resulting in an
increase to export volumes of approximately 38% year-
over-year in 2023, and an additional 25% year-over-year
in 2024. Consequently, flat steel imports in Brazil surged
approximately 42% in 2023 and a further 11% in 2024,
mainly due to the import of low-priced Chinese steel
products. Continued increase in steel imports under
unfair trade conditions could erode our sales in domestic
markets, and such market share losses may not be
completely offset by increased exports to foreign markets.
Countries or regional blocs may impose restrictive import
duties and other restrictions on imports under various
trade
related
laws,
such
as
national
security,
environmental and intellectual property regulations. For
example, Ternium is affected by tariffs on steel imports
imposed by the United States under Section 232 of the
Trade Expansion Act of 1962. For more information on
tariffs see, “Risks Relating to the Countries in Which
Ternium Operates – Mexico - Changes in existing trade
arrangements between Mexico and the U.S., and
controversies or disputes between USMCA member
countries could adversely impact Ternium’s results
of operations and net results.”
The timing and nature of the imposition of trade-related
restrictions potentially affecting Ternium’s sales and that
of Ternium’s customers are unpredictable. Tariffs and
trade restrictions on exports could adversely impact our
or our customers’ ability to sell products and, as a result,
the overall business and our profit margins and financial
condition could suffer. One significant source of trade
restrictions is the imposition of “antidumping” and
“countervailing” duties, as well as “safeguard measures”.
These duties can severely limit or altogether prevent
exports to relevant markets. In several export destination
that are relevant to Ternium, such as the United States,
safeguard duties and other protective measures have been
imposed against a large number of steel imports. For
further information, see “Risks Relating to the Countries
in Which Ternium Operates – Mexico - Changes in
existing trade arrangements between Mexico and the
U.S., and controversies or disputes between USMCA
member countries could adversely impact Ternium’s
results of operations and net results.”
Certain domestic producers have filed antidumping and/
or countervailing duty actions against certain steel
imports. Some of these actions have led, or may lead, to
restrictions on our sales of steel products in certain steel
markets and result in lower profit margins. For example,
on September 26, 2024, the U.S. Department of
Commerce announced the initiation of antidumping duty
investigations from corrosion-resistant steel products
from Australia, Brazil, Canada, Mexico, the Netherlands,
South Africa, Taiwan, the Republic of Turkey, the United
Arab Emirates, and the Socialist Republic of Vietnam,
and countervailing duty investigations of such products
from Brazil, Canada, Mexico, and Vietnam.
Antidumping and/or countervailing duty actions and
other government actions are largely unpredictable and
additional duties or restrictions could be imposed in the
future, limiting our sales to and potential growth in those
markets, and increasing costs.
The cost of complying with environmental regulations,
potential product and environmental liabilities in a
context of increasing environmental awareness, as well as
government measures driven by social pressure to address
environmental concerns, may affect Ternium’s steel
production or processing operations, or may increase
Ternium’s
operating
costs,
negatively
impacting
Ternium’s business, financial condition, results of
operations and prospects.
Steelmaking and mining activities are subject to a wide
range of local, provincial and national laws, regulations,
permit requirements and decrees relating to the
TERNIUM S.A.
Consolidated Management Report
37
protection of human health and the environment,
including laws and regulations relating to hazardous
materials and radioactive materials and environmental
protection governing air emissions, water discharges and
waste management due to the risks inherent in the steel
and mining industries. Laws and regulations protecting
the environment have become increasingly complex and
more stringent in recent years, leading to higher
compliance costs.
We are required to obtain certain permits, licenses and
authorizations
from
local,
provincial
or
federal
authorities for purposes of carrying out certain
operations. Failure to obtain or renew such permits,
licenses or authorizations, or to comply with their terms,
may result in delays, fines, closure orders or requirements
to halt or curtail our operations, negatively affecting our
results.
Furthermore, environmental laws and regulations may, in
some cases, impose strict liability for damages to natural
resources or threats to public health and safety without
regard to negligence or fault. Some environmental laws
provide for joint and several strict liability for
remediation of spills and releases of hazardous
substances. Such laws and regulations may expose
Ternium to liability for the conduct of, or conditions
caused by, third parties or for actions that complied with
applicable laws at the time they were performed adversely
affecting our business, financial condition, results of
operations and prospects.
Our steel operations may also be subject to claims under
federal and local laws and regulations on liability arising
from damages to natural resources, release of toxic
substances or other environmental damages, as well as
for the investigation and clean-up of soil, surface water,
sediments, groundwater and other natural resources.
Claims for damages may arise with respect to current or
former conditions at active or inactive sites that Ternium
currently owns, leases or operates or at leased-land sites
and third-party waste disposal sites. We may also be
subject to litigation for alleged bodily injuries arising
from claimed exposure to hazardous substances allegedly
used, released, or disposed of by Ternium. Environmental
damages caused by steel and mining operations may
result in costs and liabilities that could materially and
adversely affect Ternium’s margins, cash flow and
profitability. Third-party claims based on environmental
or physical damages may exceed the limit of liability of
the insurance policies that Ternium may have in place.
In
addition,
increasing
public
awareness
on
environmental matters put pressure on governmental
authorities to adopt measures or take initiatives that
show concern for such matters, including by inspecting,
monitoring or sanctioning local industries. We face risks
from litigation and government enforcement proceedings
alleging non-compliance with applicable laws or
regulations. These actions can be driven by public policy
agendas addressing environmental concerns. The use of
state power and the legal system to promote such agendas
can result in significant financial liabilities and
operational disruptions. Even if we comply with
environmental regulations, we cannot assure that
governmental authorities will not request Ternium to
suspend or close its operations, which would disrupt
production, adversely affecting Ternium’s business and
results of operations.
For example, the city and metropolitan area of
Monterrey
in
Nuevo
León,
Mexico,
evidence
unsatisfactory air quality indexes most days of the year,
mainly because of human factors and an arid surrounding
soil enclosed by hills. From time to time, particularly
when the quality of the air is below acceptable rates,
public opinion focuses on this matter and Ternium’s local
operations become subject to further scrutiny. In January
2024, in response to media’s intense coverage of air
quality issues in Monterrey and public opinion focus on
the matter, the local authority inspected our Guerrero
steelmaking facility. Although authorities concluded that
the plant was in compliance with air emissions standards,
air pollution remains a subject of local concern. More
recently, the Mexican Federal Environmental Protection
Office (Profepa) National Water Commission (Conagua)
ordered a temporary closure of the wastewater discharge
of
Ternium
Mexico’s
plant
in
Puebla
alleging
incompliance with water discharge permits and made
certain unfounded allegations against Ternium Mexico.
While Ternium Mexico complies with all applicable
environmental and regulatory requirements and this
measure has not had a material adverse impact on
Ternium Mexico’s operations, this situation evidences the
risk of disruption to our operations arising from
increased governmental intervention and the adoption of
groundless sanctioning measures influenced by social and
political pressures.
While we incur and will continue to incur expenditures to
comply with applicable laws and regulations, there
always remains a risk that environmental incidents or
accidents may occur that may negatively affect our
operations or reputation, trigger investigations or
litigation resulting in an obligation to pay damages or
incur remediation costs, or that governmental authorities
or a court order request Ternium to suspend or close its
operations.
Some of the activities for which Ternium supplies
products, such as production of food cans, construction
and the automotive industry, are subject to inherent risks
TERNIUM S.A.
Consolidated Management Report
38
that could result in death, personal injury, property
damage or environmental pollution, and result in product
liability risks that could extend to liability for damages
caused by such products. Furthermore, products are also
sold to, and used in, certain safety-critical appliances.
Actual or claimed defects in such products may give rise
to claims for losses suffered by customers and expose
Ternium to financial losses from claims for damages. The
insurance we maintain will not be available in cases of
gross negligence or willful misconduct; in other cases,
insurance may not be adequate or available to protect us
in the event of a claim, its coverage may be limited,
canceled or otherwise terminated, or the amount of
insurance may be less than the related impact on the
enterprise value after a loss.
Climate change legislation and increasing climate
regulatory requirements aimed at transitioning to a
lower-carbon
economy,
together
with
increasing
stakeholder expectations for reduced carbon emissions,
could result in unexpected capital expenditures and costs,
negatively affect Ternium’s competitiveness, reducing its
market share and results of operations, and hampering its
ability to access adequate financial resources.
There has been a growing awareness on greenhouse gas
(GHG) emissions and climate change across different
sectors of society over the last few years. The Paris
Agreement, adopted at the 2015 United Nations Climate
Conference, sets out the global framework to limit the
planet’s rising temperature and to strengthen the
countries’ ability to deal with the effects of climate
change. The EU Emissions Trading System (ETS)
signaled a major EU energy policy to combat global
warming based on a “cap & trade” program, and the
European Green Deal, launched in 2019, focuses on
adopting the required policies and measures aimed at
achieving zero GHG emissions in Europe by 2050. The
EU Taxonomy Regulation establishes a classification
system
for
environmentally
sustainable
economic
activities,
laying
out
definitions
to
businesses,
stakeholders and policymakers on which economic
undertakings
can
be
considered
environmentally
sustainable and requiring companies to disclose, in the
annual reports, how environmentally sustainable their
economic activities are. In addition, as part of the
European Green Deal, the EU adopted the Corporate
Sustainability
Reporting
Directive
(CSRD),
which
requires European large companies and listed issuers to
disclose information on their risks and opportunities
arising from social and environmental issues, and on the
impacts of their activities on people and the environment,
and the Corporate Sustainability Due Diligence Directive
(CSDDD), which mandates that companies operating
within the European Union identify, prevent, mitigate,
and account for adverse human rights and environmental
impacts in their operations and supply chains. Similarly,
EU’s Carbon Border Adjustment Mechanism (CBAM),
which was adopted on May 17, 2023, aims at promoting
the reduction of emissions worldwide by subjecting the
import of certain products, including steel, from
countries outside of the European Union to a carbon levy
linked to the carbon price payable for goods produced in
EU countries. However, in response to the need to
strengthen the EU’s competitiveness and make the EU
economy more prosperous, the European Commission
has recently proposed to simplify sustainability reporting
rules. The package proposes amendments to the
Corporate Sustainability Reporting Directive (CSRD), the
EU Taxonomy, the Corporate Sustainability Due
Diligence Directive (CSDDD), the EU’s Carbon Border
Adjustment Mechanism (CBAM) and current investment
programs. If the package is approved, Ternium will be
required to comply with the Corporate Sustainability
Reporting Directive (CSRD) and the EU Taxonomy, with
respect to Ternium S.A.’s 2027 annual report, and with
the Corporate Sustainability Due Diligence Directive
(CSDDD) starting on July 2028, but its sustainability
reporting and due diligence burdens will be reduced and
simplified.
Similarly, in response to an increasing investor focus and
reliance on climate and ESG-related disclosure and
investment, the Securities and Exchange Commission
(SEC) announced in March 2021 the creation of a Climate
and ESG Task Force to identify ESG-related misconduct
and potential violations, and in March 2022, the SEC
released a proposal to amend its disclosure rules. In
March 2024, the SEC adopted the final rule on climate-
related
disclosures,
which
would
have
required
registrants, including Ternium S.A., to significantly
expand the climate-related disclosures in their periodic
reports, including information about climate-related risks
that are reasonably likely to have a material impact on
their business, results of operations, or financial
condition, and certain climate-related financial statement
metrics in a note to their audited financial statements.
The implementation of this rule has been voluntarily
stayed by the SEC in April 2024, pending judicial review
due to legal challenges. Other countries are introducing
or considering similar measures or regulations with the
aim at lowering emissions as well as government
initiatives to promote the use of alternative energy
sources and substitute existing products and services with
lower emissions alternatives (with many jurisdictions
implementing tax advantages and other subsidies to
promote the development of renewable energy sources, or
even requiring minimum thresholds for power generation
from renewable sources).
Ternium’s
industrial
system
includes
two
main
technological routes to produce steel: the blast furnace /
TERNIUM S.A.
Consolidated Management Report
39
basic oxygen furnace route (BF/BOF) and the direct
reduction / electric arc furnace route (DRI/EAF). The BF/
BOF route has a significantly higher carbon emission
intensity than the DRI/EAF route. Although several new
initiatives and pilot projects under development seek to
significantly reduce the BF/BOF route carbon emission
intensity, no technology has yet achieved sufficient
technology readiness level, nor is any technology
available at scale or economically feasible, and there is no
certainty that any such technology will be available in the
near future. Ternium is developing several projects aimed
at reducing carbon emission intensity. These projects
could experience delays or higher-than-anticipated costs,
or may not yield the expected results. In addition, the
adoption of any new technology could require significant
investments and could potentially lead to a reduction in
the useful life of current equipment and the recognition of
impairment charges. These issues affect most steel
companies, as the BF/BOF route currently represents
approximately 72% of global steelmaking production
capacity.
Government and international organization’s initiatives
to promote the reduction of GHG emissions, such as the
introduction of a carbon tax or carbon-pricing systems,
the adoption of “cap-and-trade” systems or measures to
avoid carbon leakage or promote the use of renewable
energy sources could affect Ternium’s steel production
costs.
In Argentina, the 2017 tax reform introduced a tax on
certain fossil fuels, which did not include natural gas.
Metallurgical
coal
and
petrochemical
coke
were
exempted as long as they are used as part of an industrial
process, other than for energy generation. Effective since
March 2018, the tax on fossil fuels is set to increase 10%
every year until 2028, when it is expected to reach an
average $10 per ton of carbon dioxide equivalent emitted.
Similarly, in 2013, Mexico approved carbon taxing rules
applicable to fossil fuels (setting a zero tax on natural
gas) and in 2019 the government implemented a pilot
program for the adoption of an Emissions Trading
System aimed at reducing GHG emissions, by setting a
cap on emissions and allowing for the trade of emission
certificates. For the time being, there is no regulation for
setting such system nor to determine allowances.
Although existing carbon pricing mechanisms in Mexico
and Argentina do not materially limit or penalize
Ternium’s
GHG
emissions,
new
carbon
pricing
mechanisms could increase Ternium’s production costs.
Particularly in Mexico, the state governments could set
carbon taxes on top of the federal tax regime and the
Emission Trading System. In addition, the Brazilian
Congress has recently approved an initiative to introduce
an emissions trading scheme for industry processes and
power generation facilities, which, if applicable to
Ternium Brasil’s and Usiminas’ operations, would result
in incremental costs in the future. Such increases in costs
could affect, in turn, Ternium’s profitability and net
results.
If there is not enough progress in significantly reducing
emissions in the coming years, or emerging technologies
for the reduction of carbon emission intensity of the BF/
BOF route are not commercially available or are not
economically viable, there is an increased likelihood of
abrupt policy interventions as governments attempt to
meet their environmental goals by adopting policy, legal,
technology and market changes in the transition to a low-
carbon global economy. In addition to incremental
production costs, the adoption of new climate change
legislation in the countries in which we operate could
result in incremental compliance costs and unexpected
capital expenditures, affect our competitiveness and
reduce our market share and results of operations.
Furthermore, shifts in customer preferences and failure to
respond to stakeholders’ demand for climate-related
measures and environmental standards could adversely
affect the ability or willingness of our customers or
suppliers to do business with us, harm our reputation,
erode stakeholder support and restrict or reduce access to
financial resources.
Risks Relating To Ternium S.A.’s ADS
The market price for Ternium S.A.’s ADS could be highly
volatile.
Volatility in the price of Ternium S.A.’s ADS may be
caused by factors within or outside of its control and may
be unrelated or disproportionate to Ternium’s operating
results. In particular, the announcement of potentially
adverse developments, such as proposed regulatory
changes,
new
government
investigations
or
the
commencement or threat of litigation against Ternium, as
well as the announcement of transactions, investments, or
changes in strategies or business plans of Ternium or its
competitors, could adversely affect the trading price of
Ternium S.A.’s ADS, regardless of the likely outcome of
those developments. Broad market and industry factors
could adversely affect the market price of Ternium S.A.’s
ADS, regardless of their actual effect on operating
performance. The trading price of Ternium S.A.’s ADSs
could also suffer as a result of developments in emerging
markets. Although Ternium S.A. is organized as a
Luxembourg corporation, it has substantial assets with
operations in Mexico, Brazil, Argentina and Colombia.
Financial and securities markets for companies with a
substantial portion of their assets and exposure in Latin
America are, to varying degrees, influenced by political,
economic and market conditions in emerging market
TERNIUM S.A.
Consolidated Management Report
40
countries. Although market conditions are different in
each country, investor reaction to developments in one
country can have significant effects on the securities of
issuers with assets and exposure in other emerging
markets, including Mexico, Brazil, Argentina and
Colombia. See “Risks Relating to the Countries in Which
Ternium Operates.”
Holders of shares or ADSs may not have access to as
much information about Ternium S.A. as they would in
the case of a U.S. domestic issuer.
There may be less publicly available information about
Ternium S.A. than is regularly published by or about U.S.
domestic
issuers.
Also,
corporate
and
securities
regulations governing Luxembourg companies may not
be as extensive as those in effect in other jurisdictions,
and U.S. securities regulations applicable to foreign
private issuers, such as Ternium S.A., differ in certain
respects from those applicable to U.S. domestic issuers.
Furthermore,
IFRS,
the
accounting
standards
in
accordance with which Ternium S.A. prepares its
consolidated financial statements, differ in certain
material aspects from U.S. GAAP.
Holders of ADSs may not be able to exercise, or may
encounter difficulties in the exercise of, certain rights
afforded to shareholders.
Certain shareholders’ rights under Luxembourg law,
including the right to participate and vote at general
meetings of shareholders, to include items on the agenda
for the general meetings of shareholders, to receive
dividends and distributions, to bring actions, to examine
books and records and to exercise appraisal rights may
not be available to holders of ADSs, or may be subject to
restrictions and special procedures for their exercise, as
holders of ADSs only have those rights that are expressly
granted to them in the deposit agreement. The Bank of
New York Mellon, or BNY Mellon, as depositary under
the ADS deposit agreement, through its custodian agent,
is the registered shareholder of the deposited shares
underlying the ADSs and therefore only the Depositary
can exercise the shareholders’ rights in connection with
the deposited shares. For example, if Ternium S.A. makes
a distribution in the form of securities, the Depositary is
allowed, at its discretion, to sell the right to acquire those
securities on your behalf and to instead distribute the net
proceeds to you. Also, under certain circumstances, such
as Ternium S.A.’s failure to provide the Depositary with
voting materials on a timely basis, you may not be able to
vote at general meetings of shareholders by giving
instructions to the Depositary. If the Depositary does not
receive voting instructions from the holder of ADSs by
the prescribed deadline, or the instructions are not in
proper form, then the Depositary shall deem such holder
of ADSs to have instructed the Depositary to vote the
underlying shares represented by ADSs in favor of any
proposals
or
recommendations
of
Ternium
S.A.
(including any recommendation by it to vote such
underlying shares on any given issue in accordance with
the majority shareholder vote on that issue) for which
purposes the depositary shall issue a proxy to a person
appointed by Ternium S.A. to vote such underlying
shares represented by ADSs in favor of any proposals or
recommendations of Ternium S.A. Under the ADS
deposit agreement, no instruction shall be deemed given
and no proxy shall be given with respect to any matter as
to which Ternium S.A. informs the Depositary that (x) it
does not wish such proxy given, (y) substantial
opposition exists, or (z) the matter materially and
adversely affects the rights of the holders of ADSs.
Holders of shares and ADSs in the United States may not
be able to exercise preemptive rights in certain cases.
Pursuant to Luxembourg corporate law, existing
shareholders of Ternium S.A. are generally entitled to
preferential subscription rights (preemptive rights) in the
event of capital increases and issues of shares against cash
contributions.
Under
Ternium
S.A.’s
articles
of
association, the board of directors has been authorized
for a five-year period to waive, limit or suppress such
preemptive subscription rights. Although the validity
period of such authorization will expire in June 2025, the
board of directors has convened an extraordinary
meeting of shareholders to be held on May 6, 2025, which
will consider the renewal of such authorization for an
additional five-year period
Notwithstanding
the
waiver
of
any
preemptive
subscription rights, for as long as the shares of Ternium
S.A. are listed on a regulated market, any issuance of
shares for cash within the limits of the authorized share
capital shall be subject to the preemptive subscription
rights of existing shareholders, except (i) any issuance of
shares for, within, in conjunction with or related to, an
initial public offering of the shares of Ternium S.A. on
one or more regulated markets (in one or more instances);
(ii) any issuance of shares against a contribution other
than in cash; (iii) any issuance of shares upon conversion
of convertible bonds or other instruments convertible into
shares of Ternium S.A.; provided, however, that the
preemptive subscription rights of the then-existing
shareholders shall apply in connection with any issuance
of convertible bonds or other instruments convertible into
shares of Ternium S.A. for cash; and (iv) any issuance of
shares (including by way of free shares or at discount), up
to an amount of 1.5% of the issued share capital of
Ternium S.A., to its directors, officers, agents, employees,
its direct or indirect subsidiaries or its affiliates
(collectively the "Beneficiaries"), including without
limitation, the direct issuance of shares or upon the
TERNIUM S.A.
Consolidated Management Report
41
exercise of options, rights convertible into shares or
similar instruments convertible or exchangeable into
shares, issued for the purpose of compensation or
incentive of the Beneficiaries or in relation thereto (which
the board of directors shall be authorized to issue upon
such terms and conditions as it deems fit).
Holders of ADSs in the United States may, in any event,
not be able to exercise any preemptive rights, if granted,
for shares underlying their ADSs unless additional shares
and ADSs are registered under the U.S. Securities Act of
1933, as amended, or the Securities Act, with respect to
those rights or an exemption from registration
requirements of the Securities Act is available. Ternium
S.A. intends to evaluate, at the time of any rights offering,
the costs and potential liabilities associated with the
exercise by holders of shares and ADSs of the preemptive
rights for shares, and any other factors it considers
appropriate at the time, and then to make a decision as to
whether to register additional shares. Ternium S.A. may
decide not to register any additional shares, requiring a
sale by the Depositary of the holders’ rights and a
distribution of the proceeds thereof. Should the
Depositary not be permitted or otherwise be unable to
sell preemptive rights, the rights may be allowed to lapse
with no consideration to be received by the holders of the
ADSs.
It may be difficult to obtain or enforce judgments against
Ternium S.A. outside Luxembourg.
Ternium S.A. is a société anonyme organized under the
laws of the Grand Duchy of Luxembourg, and most of its
assets are located in other jurisdictions. Furthermore,
most of its directors and officers reside in other
jurisdictions. As a result, investors may not be able to
effect service of process upon Ternium S.A. or its
directors or officers. Investors may also not be able to
enforce against Ternium S.A. or its directors or officers in
the investors’ domestic courts, judgments predicated
upon the civil liability provisions of the domestic laws of
the investors’ home countries. Likewise, it may be
difficult for investors not domiciled in Luxembourg to
bring an original action in a Luxembourg court
predicated upon the civil liability provisions of other
securities laws, including U.S. federal securities laws,
against Ternium S.A., its directors or its officers. There is
also uncertainty with regard to the enforceability of
original actions of civil liabilities predicated upon the civil
liability provisions of securities laws, including U.S.
federal securities laws, outside the jurisdiction where such
judgments have been rendered; and enforceability will be
subject to compliance with procedural requirements
under applicable local law, including the condition that
the judgment does not violate the public policy of the
applicable jurisdiction.
TERNIUM S.A.
Consolidated Management Report
42
Alternative performance measures
These non-IFRS measures should not be considered in isolation of, or as a substitute for, measures of performance prepared
in accordance with IFRS. These non-IFRS measures do not have a standardized meaning under IFRS and, therefore, may not
correspond to similar non-IFRS financial measures reported by other companies.
Adjusted EBITDA
$ million
2024
2023
Net result
174
986
Adjusted to exclude:
Depreciation and amortization
743
658
Income tax results
554
334
Net financial result
194
(123)
Equity in earnings of non-consolidated companies
(69)
(105)
Provision charge for ongoing litigation related to the acquisition of a participation in Usiminas
410
—
Impairment of Las Encinas’ mining assets
32
42
Reversal of other Usiminas contingencies recognized as part of the PPA
(34)
(63)
Non-cash effects related to the increase in the participation of Usiminas
—
1,106
Reversal of Usiminas’ post-retirement liabilities
—
(109)
Adjusted to include:
Proportional EBITDA in Unigal (70% participation)
33
14
Adjusted EBITDA
2,038
2,740
Divided by: net sales
17,649
17,610
Adjusted EBITDA margin (%)
12 %
16 %
Adjusted net income
$ million
2024
2023
Net income
174
986
Excluding provision charge for ongoing litigation related to the acquisition of a participation in Usiminas
410
—
Excluding non-cash effects related to the increase in the participation in Usiminas
—
1,106
Adjusted net income
584
2,092
TERNIUM S.A.
Consolidated Management Report
43
Adjusted Owners of the Parents's Net Income and Adjusted Earnings per ADS
$ million
2024
2023
Owners of the parent’s net (loss) income
(54)
676
Excluding provision charge for ongoing litigation related to the acquisition of a participation in Usiminas
370
—
Excluding non-cash effects related to the increase in the participation in Usiminas
—
1,010
Adjusted Owners of the Parent’s Net Income
316
1,686
Divided by: the outstanding shares of common stock, net of treasury shares (expressed in ADS equivalent)
196
196
Adjusted Earnings per ADS ($)
1.61
8.59
Free cash flow
$ million
2024
2023
Net cash provided by operating activities
1,906
2,501
Less: capital expenditures
(1,865)
(1,461)
Free cash flow
41
1,040
Net cash
For the year ended December 31,
$ billion
2024
2023
Cash and cash equivalents
1.7
1.8
Plus: other investments (current and non-current)
2.2
2.2
Less: borrowings (current and non-current)
(2.2)
(2.1)
Net cash
1.6
1.9
Note: Ternium Argentina’s consolidated position of cash and cash equivalents and other investments amounted to $1.3 billion as of December 31, 2024 and $1.1 billion as of
December 31, 2023, respectively.
44
TERNIUM S.A.
Consolidated Financial Statements
as of December 31, 2024 and 2023 and
for the years ended on December 31, 2024, 2023 and 2022
26 Boulevard Royal, 4th floor
L – 2449 Luxembourg
R.C.S. Luxembourg: B 98 668
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm
47
Consolidated Income Statements for the years ended December 31, 2024, 2023 and 2022
51
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022
52
Consolidated Statements of Financial Position as of December 31, 2024 and 2023
53
Consolidated Statements of Changes in Equity for the years ended December 31, 2024, 2023 and 2022
54
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
57
Index to the Notes to the Consolidated Financial Statements
58
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
46
Consolidated Income Statements
Year ended December 31,
Notes
2024
2023
2022
Net sales
5
17,649,060
17,610,092
16,414,466
Cost of sales
6
(14,760,224)
(14,050,737)
(12,487,282)
Gross profit
2,888,836
3,559,355
3,927,184
Selling, general and administrative expenses
7
(1,650,759)
(1,471,678)
(1,143,646)
Other operating (expense) income, net
9
25,234
110,337
(84,019)
Operating income
1,263,311
2,198,014
2,699,519
Finance expense
10
(196,175)
(125,376)
(46,737)
Finance income
10
297,820
255,009
75,145
Other financial (expenses) income, net
10
(295,859)
(6,179)
(98,541)
Equity in earnings of non-consolidated companies
14
69,108
105,305
37,114
Provision for ongoing litigation related to the acquisition of a
participation in Usiminas
25
(410,200)
—
—
Effect related to the increase of the participation in Usiminas
3
—
(171,045)
—
Recycling of other comprehensive income related to Usiminas
3
—
(934,946)
—
Profit before income tax expense
728,005
1,320,782
2,666,500
Income tax expense
11
(554,224)
(334,408)
(573,728)
Profit for the year
173,781
986,374
2,092,772
Attributable to:
Owners of the parent
(53,672)
676,043
1,767,516
Non-controlling interest
227,453
310,331
325,256
Profit for the year
173,781
986,374
2,092,772
Weighted average number of shares outstanding
1,963,076,776 1,963,076,776 1,963,076,776
Basic and diluted earnings per share for profit attributable to
the owners of the parent (expressed in $ per share)
(0.03)
0.34
0.90
The accompanying notes are an integral part of these consolidated financial statements.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
(All amounts in $ thousands)
51
Consolidated Statements of Comprehensive Income
Year ended December 31,
2024
2023
2022
Profit for the year
173,781
986,374
2,092,772
Items that may be reclassified subsequently to profit or loss:
Currency translation adjustment
(732,673)
(9,108)
1,253
Currency translation adjustment from participation in non-consolidated
companies (1)
(91,110)
980,884
41,455
Changes in the fair value of financial instruments at fair value through other
comprehensive income (2)
602,889
(554,737)
29,121
Income tax related to financial instruments at fair value
28,968
(46,859)
(11,045)
Changes in the fair value of derivatives classified as cash flow hedges (3)
(76,039)
22,721
60
Income tax relating to cash flow hedges
22,847
(6,824)
(20)
Other
(875)
(300)
1,705
Other comprehensive income items from participation in non-consolidated
companies
—
—
159
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of post employment benefit obligations
775
(52,127)
24,567
Income tax relating to remeasurement of post employment benefit obligations
6,052
4,829
(6,994)
Remeasurement of post employment benefit obligations from participation in
non-consolidated companies
284
6,013
6,862
Other comprehensive (loss) income for the year, net of tax
(238,882)
344,492
87,123
Total comprehensive (loss) income for the year
(65,101)
1,330,866
2,179,895
Attributable to:
Owners of the parent
158,145
1,141,928
1,841,194
Non-controlling interest
(223,246)
188,938
338,701
Total comprehensive (loss) income for the year
(65,101)
1,330,866
2,179,895
(1) See note 3 (c).
(2) See note 18.
(3) See note 22.
The accompanying notes are an integral part of these consolidated financial statements.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
(All amounts in $ thousands)
52
Consolidated Statements of Financial Position
Balances as of
Notes
December 31, 2024
December 31, 2023
ASSETS
Non-current assets
Property, plant and equipment, net
12
8,381,155
7,637,687
Intangible assets, net
13
1,022,111
996,048
Investments in non-consolidated companies
14
468,516
517,265
Other investments
18
22,979
210,930
Deferred tax assets
20
1,194,398
1,713,385
Receivables, net
15
961,298
12,050,457
1,073,245
12,148,560
Current assets
Receivables, net
15
772,726
686,394
Current income tax assets
15
129,713
486,470
Derivative financial instruments
22
4,483
15,406
Inventories, net
17
4,750,511
4,948,376
Trade receivables, net
16
1,562,058
2,065,499
Other investments
18
2,160,051
1,975,646
Cash and cash equivalents
18
1,691,263
11,070,805
1,846,013
12,023,804
Assets classified as held for sale
7,285
6,740
11,078,090
12,030,544
Total Assets
23,128,547
24,179,104
EQUITY
Capital and reserves attributable to the owners
of the parent
11,968,186
12,418,595
Non-controlling interest
4,163,383
4,393,264
Total Equity
16,131,569
16,811,859
LIABILITIES
Non-current liabilities
Provisions
19
552,600
839,921
Deferred tax liabilities
20
88,707
170,820
Non current tax liabilities
11
21,436
—
Other liabilities
21
765,961
1,148,998
Trade payables
5,402
12,030
Lease liabilities
23
163,666
188,913
Borrowings
24
1,560,047
3,157,819
1,205,961
3,566,643
Current liabilities
Provision for ongoing litigation related to the
acquisition of a participation in Usiminas
25
410,200
—
Current income tax liabilities
106,883
137,388
Other liabilities
21
629,678
429,713
Trade payables
1,925,526
2,232,654
Derivative financial instruments
22
50,342
8,220
Lease liabilities
23
46,458
52,174
Borrowings
24
670,072
3,839,159
940,453
3,800,602
Total Liabilities
6,996,978
7,367,245
Total Equity and Liabilities
23,128,547
24,179,104
The accompanying notes are an integral part of these consolidated financial statements.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
(All amounts in $ thousands)
53
Consolidated Statements of Changes in Equity
Attributable to the owners of the parent
Capital
stock
(1)
Treasury
shares
(1)
Initial
public
offering
expenses
Reserves
(2)
Capital
stock issue
discount
(3)
Currency
translation
adjustment
Retained
earnings
Total
Non-
controlling
interest
Total
Equity
Balance as of January 1, 2024
2,004,743 (150,000)
(23,295)
965,212 (2,324,866) (1,963,827) 13,910,629 12,418,595
4,393,264 16,811,859
Profit for the year
(53,672)
(53,672)
227,453 173,781
Other comprehensive income (loss) for the period
Currency translation adjustment
(165,724)
(165,724)
(658,059) (823,783)
Remeasurement of post employment benefit obligations
(12,933)
(12,933)
20,044
7,111
Cash flow hedges and others, net of tax
(47,051)
(47,051)
(6,141)
(53,192)
Others (4)
437,525
437,525
193,457 630,982
Total comprehensive income (loss) for the year
—
—
—
377,541
—
(165,724)
(53,672)
158,145
(223,246)
(65,101)
Dividends paid in cash (5)
(608,554) (608,554)
— (608,554)
Dividends paid in cash to non-controlling interest
—
(6,635)
(6,635)
Balance as of December 31, 2024
2,004,743 (150,000)
(23,295) 1,342,753 (2,324,866) (2,129,551) 13,248,403 11,968,186
4,163,383 16,131,569
(1) The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of $ 1.00 per share. As of December 31, 2024, there were 2,004,743,442 shares issued. All issued
shares are fully paid. Also, as of December 31, 2024, the Company held 41,666,666 shares as treasury shares.
(2) Include mainly legal reserve under Luxembourg law for $ 200.5 million, undistributable reserves under Luxembourg law for $ 1.4 billion and reserves related to the acquisition of non-controlling interest in
subsidiaries for $ (72.4) million.
(3) Represents the difference between book value of non-monetary contributions received from shareholders under Luxembourg GAAP and IFRS.
(4) Includes mainly the changes of the fair value of financial instruments at fair value through other comprehensive income, net of tax. See note 18.
(5) Represents $ 0.31 per share ($ 3.10 per ADS). Related to the dividends distributed on May 8 and on November 21, 2024, and as 41,666,666 shares are held as treasury shares by Ternium, the dividends
attributable to these treasury shares amounting to $ 12.9 million were included in equity as deduction of dividend paid.
Dividends may be paid by Ternium to the extent distributable retained earnings calculated in accordance with Luxembourg law and regulations exist. Therefore, retained earnings included in these consolidated
financial statements may not be wholly distributable. See Note 25 (iii). The accompanying notes are an integral part of these consolidated financial statements.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
(All amounts in $ thousands)
54
Consolidated Statements of Changes in Equity
Attributable to the owners of the parent
Capital
stock
(1)
Treasury
shares
(1)
Initial
public
offering
expenses
Reserves
(2)
Capital
stock issue
discount
(3)
Currency
translation
adjustment
Retained
earnings
Total
Non-
controlling
interest
Total
Equity
Balance as of January 1, 2023
2,004,743 (150,000)
(23,295) 1,394,567 (2,324,866) (2,859,068) 13,803,878 11,845,959
1,922,434 13,768,393
Profit for the year
676,043
676,043
310,331
986,374
Other comprehensive income (loss) for the period
Currency translation adjustment (4)
895,241
895,241
76,535
971,776
Remeasurement of post employment benefit
obligations
(24,904)
(24,904)
(16,381)
(41,285)
Cash flow hedges and others, net of tax
14,188
14,188
1,709
15,897
Others (5)
(418,640)
(418,640)
(183,256)
(601,896)
Total comprehensive income (loss) for the year
—
—
— (429,356)
—
895,241
676,043 1,141,928
188,938 1,330,866
Dividends paid in cash (6)
(569,292)
(569,292)
—
(569,292)
Dividends paid in cash and in kind to non-controlling
interest
—
(294,003)
(294,003)
Effects related to the increase of the participation in
Usiminas (7)
—
2,575,895
2,575,895
Balance as of December 31, 2023
2,004,743 (150,000)
(23,295)
965,212 (2,324,866) (1,963,827) 13,910,629 12,418,595
4,393,264 16,811,859
(1) The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of $ 1.00 per share. As of December 31, 2023, there were 2,004,743,442 shares issued. All issued
shares are fully paid. Also, as of December 31, 2023, the Company held 41,666,666 shares as treasury shares.
(2) Include mainly legal reserve under Luxembourg law for $ 200.5 million, undistributable reserves under Luxembourg law for $ 1.4 billion and reserves related to the acquisition of non-controlling interest in
subsidiaries for $ (72.4) million.
(3) Represents the difference between book value of non-monetary contributions received from shareholders under Luxembourg GAAP and IFRS.
(4) See note 3 (c).
(5) Includes mainly the changes of the fair value of financial instruments at fair value through other comprehensive income, net of tax. See note 18.
(6) Represents $ 0.29 per share ($ 2.90 per ADS). Related to the dividends distributed on May 2 and on October 31, 2023, and as 41,666,666 shares are held as treasury shares by Ternium, the dividends
attributable to these treasury shares amounting to $ 12.1 million were included in equity as deduction of dividend paid.
(7) See note 3 (f).
Dividends may be paid by Ternium to the extent distributable retained earnings calculated in accordance with Luxembourg law and regulations exist. Therefore, retained earnings included in these consolidated
financial statements may not be wholly distributable. See Note 25 (iii). The accompanying notes are an integral part of these consolidated financial statements.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
(All amounts in $ thousands)
55
Consolidated Statements of Changes in Equity
Attributable to the owners of the parent
Capital
stock
(1)
Treasury
shares
(1)
Initial
public
offering
expenses
Reserves
(2)
Capital
stock issue
discount
(3)
Currency
translation
adjustment
Retained
earnings
Total
Non-
controlling
interest
Total
Equity
Balance as of January 1, 2022
2,004,743 (150,000)
(23,295) 1,360,637 (2,324,866) (2,898,593) 12,566,393 10,535,019 1,700,019 12,235,038
Profit for the year
1,767,516 1,767,516
325,256 2,092,772
Other comprehensive income (loss) for the period
Currency translation adjustment
39,525
39,525
3,183
42,708
Remeasurement of post employment benefit obligations
21,864
21,864
2,571
24,435
Cash flow hedges and others, net of tax
20
20
20
40
Others (4)
12,269
12,269
7,671
19,940
Total comprehensive income (loss) for the year
—
—
—
34,153
—
39,525 1,767,516 1,841,194
338,701 2,179,895
Dividends paid in cash (5)
(530,031) (530,031)
— (530,031)
Dividends paid in kind to non-controlling interest
—
(112,293) (112,293)
Acquisition of non-controlling interest (6)
(223)
(223)
(3,993)
(4,216)
Balance as of December 31, 2022
2,004,743 (150,000)
(23,295) 1,394,567 (2,324,866) (2,859,068) 13,803,878 11,845,959 1,922,434 13,768,393
(1) The Company has an authorized share capital of a single class of 3.5 billion shares having a nominal value of $ 1.00 per share. As of December 31, 2022, there were 2,004,743,442 shares issued. All issued
shares are fully paid. Also, as of December 31, 2022, the Company held 41,666,666 shares as treasury shares.
(2) Include mainly legal reserve under Luxembourg law for $200.5 million, undistributable reserves under Luxembourg law for $1.4 billion and reserves related to the acquisition of non-controlling interest in
subsidiaries for $ (72.4) million.
(3) Represents the difference between book value of non-monetary contributions received from shareholders under Luxembourg GAAP and IFRS.
(4) Includes mainly the changes of the fair value of financial instruments at fair value through other comprehensive income, net of tax.
(5) Represents $ 0.27 per share ($ 2.70 per ADS). Related to the dividends distributed on May 3 and on November 2, 2022, and as 41,666,666 shares are held as treasury shares by Ternium, the dividends
attributable to these treasury shares amounting to $ 11.2 million were included in equity as deduction of dividend paid.
(6) Corresponds to the acquisition of non-controlling interest participation of Ternium Argentina S.A.
Dividends may be paid by Ternium to the extent distributable retained earnings calculated in accordance with Luxembourg law and regulations exist. Therefore, retained earnings included in these consolidated
financial statements may not be wholly distributable. See Note 25 (iii). The accompanying notes are an integral part of these consolidated financial statements.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
(All amounts in $ thousands)
56
Consolidated Statements of Cash Flows
Year ended December 31,
Notes
2024
2023
2022
Cash flows from operating activities
Profit for the year
173,781
986,374
2,092,772
Adjustments for:
Depreciation and amortization
12 & 13
743,277
657,692
616,492
Impairment charge
4 (e)(2), 4 (f),
32,435
42,316
99,000
Income tax accruals less payments
27 (b)
497,697
(160,940)
(1,195,561)
Equity in earnings of non-consolidated companies
14
(69,108)
(105,305)
(37,114)
Interest accruals less payments/receipts, net
27 (b)
(16,331)
(45,139)
(24,795)
Changes in provisions
19
(60,469)
(64,447)
(1,069)
Changes in working capital (1)
27 (b)
(15,880)
321,081
1,152,498
Net foreign exchange results and others
210,555
(236,499)
50,720
Non-cash effects related to the provision for ongoing litigation related to
the acquisition of a participation in Usiminas
25
410,200
—
—
Non-cash effects related to the increase of the participation in Usiminas
3
—
1,105,991
—
Net cash provided by operating activities
1,906,157
2,501,124
2,752,943
Cash flows from investing activities
Capital expenditures and advances to suppliers for PP&E (2)
12 & 13
(1,865,419)
(1,460,677)
(580,553)
Decrease (Increase) in other investments
18
462,128
(717,534)
(770,638)
Proceeds from the sale of property, plant and equipment
2,388
2,477
1,912
Dividends received from non-consolidated companies
25,582
43,075
28,884
Acquisition of business
Purchase consideration
3
—
(118,686)
—
Cash acquired
3
—
781,072
—
Acquisition of non-controlling interest
—
—
(4,216)
Net cash used in investing activities
(1,375,321)
(1,470,273)
(1,324,611)
Cash flows from financing activities
Dividends paid in cash to company’s shareholders
(608,554)
(569,292)
(530,031)
Dividends paid in cash to non-controlling interest
(54,335)
—
—
Lease payments
23
(61,194)
(58,900)
(49,410)
Proceeds from borrowings
1,558,501
354,946
285,908
Repayments of borrowings
(1,322,803)
(493,111)
(722,644)
Net cash used in financing activities
(488,385)
(766,357)
(1,016,177)
Increase in cash and cash equivalents
42,451
264,494
412,155
Movement in cash and cash equivalents
At January 1,
1,846,013
1,653,355
1,276,605
Effect of exchange rate changes
(197,201)
(71,836)
(35,405)
Increase in cash and cash equivalents
42,451
264,494
412,155
Cash and cash equivalents at December 31, (3)
1,691,263
1,846,013
1,653,355
Non-cash transactions:
Dividends paid in kind to non-controlling interest
—
(233,538)
(112,293)
Acquisition of PP&E under lease contract agreements
13,850
16,061
13,961
Adjustments related to post-retirement benefits and contingencies
—
171,987
—
(1) The working capital is calculated net of non-cash movements of $ (389.8) million as of December 31, 2024 ($ 129.3 million and $ 24.9
million as of December 31, 2023 and 2022, respectively) due to the variations in the exchange rates used by subsidiaries with functional
currencies different from the U.S. dollar.
(2) It includes capital expenditures of $ 1,821,111 and advances to suppliers for property, plant and equipment of $ 44,308.
(3) It includes restricted cash of $ 2,746, $ 3,129 and $ 30 as of December 31, 2024, 2023 and 2022, respectively. In addition, the Company
had other investments with a maturity of more than three months for $ 2,182,874, $ 2,186,420 and $ 1,975,490 as of December 31, 2024,
2023 and 2022, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
(All amounts in $ thousands)
57
INDEX TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Page
1 General information
59
2 Basis of presentation
60
3
Acquisition of business – Increase of the participation in Usiminas Control Group and new
governance structure of Usiminas
63
4 Accounting policies
68
5 Segment information
93
6 Cost of sales
96
7 Selling, general and administrative expenses
96
8 Labor costs (included in cost of sales and selling, general and administrative expenses)
97
9 Other operating income (expenses), net
97
10 Other financial income (expenses), net
98
11 Income tax expense
98
12 Property, plant and equipment, net
100
13 Intangible assets, net
102
14 Investments in non-consolidated companies
103
15 Receivables, net - non-current and current
105
16 Trade receivables, net - non-current and current
106
17 Inventories, net
106
18 Cash, cash equivalents and other investments
107
19 Allowances and provisions - non-current and current
108
20 Deferred income tax
109
21 Other liabilities - non-current and current
110
22 Derivative financial instruments
113
23 Lease liabilities
116
24 Borrowings
117
25 Contingencies, commitments and restrictions on the distribution of profits
119
26 Related party transactions
129
27 Other required disclosures
130
28 Recently issued accounting pronouncements
132
29 Financial risk management
134
30 Foreign exchange restrictions in Argentina
142
31 Subsequent events
144
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
58
Notes to the Consolidated Financial Statements
1.
GENERAL INFORMATION
Ternium S.A. (the “Company” or “Ternium”), was incorporated on December 22, 2003 to hold investments in
flat and long steel manufacturing and distributing companies. The Company has an authorized share capital of a
single class of 3.5 billion shares having a nominal value of $ 1.00 per share. As of December 31, 2024, there were
2,004,743,442 shares issued. All issued shares are fully paid.
Ternium’s American Depositary Shares (“ADSs”) trade on the New York Stock Exchange under the symbol
“TX”.
The Company was initially established as a public limited liability company (société anonyme) under
Luxembourg’s 1929 holding company regime. Until termination of such regime on December 31, 2010, holding
companies incorporated under the 1929 regime (including the Company) were exempt from Luxembourg
corporate and withholding tax over dividends distributed to shareholders.
On January 1, 2011, the Company became an ordinary public limited liability company (société anonyme) and,
effective as from that date, the Company is subject to all applicable Luxembourg taxes (including, among others,
corporate income tax on its worldwide income) and its dividend distributions will generally be subject to
Luxembourg withholding tax. However, dividends received by the Company from subsidiaries in high income
tax jurisdictions, as defined under Luxembourg law, will continue to be exempt from corporate income tax in
Luxembourg under Luxembourg’s participation exemption.
As part of the Company’s corporate reorganization in connection with the termination of Luxembourg’s 1929
holding company regime, on December 6, 2010, the Company contributed its equity holdings in all its
subsidiaries and all its financial assets to its Luxembourg wholly-owned subsidiary Ternium Investments S.à r.l.,
or Ternium Investments, in exchange for newly issued corporate units of Ternium Investments. As the assets
contributed were recorded at their historical carrying amount in accordance with Luxembourg GAAP, the
Company’s December 2010 contribution of such assets to Ternium Investments resulted in a non-taxable
revaluation of the accounting value of the Company’s assets under Luxembourg GAAP. The amount of the
December 2010 revaluation was equal to the difference between the historical carrying amounts of the assets
contributed and the value at which such assets were contributed and amounted to $ 4.0 billion. However, for the
purpose of these consolidated financial statements, the assets contributed by Ternium to its wholly-owned
subsidiary Ternium Investments were recorded based on their historical carrying amounts in accordance with
IFRS, with no impact on the financial statements.
Following the completion of the corporate reorganization, and upon its conversion into an ordinary Luxembourg
holding company, the Company voluntarily recorded a special reserve exclusively for tax-basis purposes. As of
December 31, 2024 and 2023, this special tax reserve amounted to $ 4.1 billion and $ 4.7 billion, respectively. The
Company expects that, as a result of its corporate reorganization, its current overall tax burden will not increase,
as all or substantially all of its dividend income will come from high income tax jurisdictions.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
59
2.
BASIS OF PRESENTATION
a)
Basis of presentation
These consolidated financial statements have been prepared in accordance with IFRS Accounting Standards
(International Financial Reporting Standards) issued and effective or issued and early adopted as at the time of
preparing these statements (February 2025), as issued by the International Accounting Standards Board and in
conformity with IFRS Accounting Standards as adopted by the European Union (“EU”). These consolidated
financial statements are presented in thousands of United States dollars (“$”), except otherwise indicated.
These Consolidated financial statements fairly present the consolidated financial position of Ternium as of
December 31, 2024 and 2023, and the consolidated income statement, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash
flows for the years ended December 31, 2024, 2023 and 2022.
Elimination of all material intercompany transactions and balances between the Company and its respective
subsidiaries has been made in consolidation.
These consolidated financial statements have been prepared under the historical cost convention and certain
financial assets and financial liabilities (including derivative instruments) are at fair value through profit or loss.
These consolidated financial statements have been approved for issue by the Board of Directors on February 18,
2025. The Directors have the power to amend and reissue the consolidated financial statements.
Detailed below are the companies whose financial statements have been consolidated and accounted for interest
in these consolidated financial statements.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
60
2.
BASIS OF PRESENTATION (continued)
Company
Country of
Organization
Main activity
Percentage of ownership
at December 31,
2024
2023
2022
Ternium S.A.
Luxembourg
Holding
100.00 %
100.00 %
100.00 %
Ternium Investments S.à.r.l.
Luxembourg
Holding, financial services
and agency trading activities
100.00 %
100.00 %
100.00 %
Ternium Internacional España S.L. (1)
Spain
Holding and marketing of
steel products
100.00 %
100.00 %
100.00 %
Ternium Solutions S.A. (1)
Uruguay
Other services
100.00 %
100.00 %
100.00 %
Ternium Internationaal B.V. (1)
Netherlands
Marketing of steel products
100.00 %
100.00 %
100.00 %
Ternium USA Inc. (2)
USA
Manufacturing and selling
of steel products
100.00 %
100.00 %
100.00 %
Ternium Argentina S.A. (3)
Argentina
Manufacturing and selling
of flat steel products
62.57 %
62.57 %
62.57 %
Prosid Investments S.A. (4)
Uruguay
Holding
62.58 %
62.58 %
62.58 %
Ternium Mexico S.A. de C.V. (5)
Mexico
Manufacturing and selling
of steel products
89.25 %
89.25 %
89.25 %
Las Encinas S.A. de C.V. (6)
Mexico
Exploration, exploitation
and pelletizing of iron ore
89.25 %
89.25 %
89.25 %
Ferropak Comercial S.A. de C.V. (6)
Mexico
Scrap services company
89.25 %
89.25 %
89.25 %
Transamerica E. & I. Trading Corp. (6)
USA
Scrap services company
89.25 %
89.25 %
89.25 %
Galvacer Chile S.A. (6)
Chile
Distributing company
89.25 %
89.25 %
89.25 %
Ternium Gas México S.A. de C.V. (7)
Mexico
Energy services company
89.25 %
89.25 %
89.25 %
Consorcio Minero Benito Juarez Peña Colorada S.A.de
C.V. (8)
Mexico
Exploration, exploitation
and pelletizing of iron ore
44.62 %
44.62 %
44.62 %
Exiros B.V. (8)
Netherlands
Procurement and trading
services
50.00 %
50.00 %
50.00 %
Servicios Integrales Nova de Monterrey S.A. de C.V. (9)
Mexico
Medical and Social Services
66.49 %
66.49 %
66.49 %
Ternium Internacional Nicaragua S.A.
Nicaragua
Manufacturing and selling
of steel products
99.38 %
99.38 %
99.38 %
Ternium Internacional Honduras S.A. de C.V.
Honduras
Manufacturing and selling
of steel products
99.18 %
99.18 %
99.18 %
Ternium Internacional El Salvador S.A. de C.V.
El Salvador
Manufacturing and selling
of steel products
99.92 %
99.92 %
99.92 %
Ternium Internacional Costa Rica S.A.
Costa Rica
Manufacturing and selling
of steel products
99.98 %
99.98 %
99.98 %
Ternium Internacional Guatemala S.A. (10)
Guatemala
Manufacturing and selling
of steel products
99.98 %
99.98 %
99.98 %
Ternium Colombia S.A.S. (11)
Colombia
Manufacturing and selling
of steel products
100.00 %
100.00 %
100.00 %
Ternium del Cauca S.A.S. (11)
Colombia
Manufacturing and selling
of steel products
100.00 %
100.00 %
100.00 %
Ternium del Atlántico S.A.S (11)
Colombia
Manufacturing and selling
of steel products
100.00 %
100.00 %
100.00 %
Ternium Procurement S.A. (11)
Uruguay
Marketing of steel products
and procurement services
100.00 %
100.00 %
100.00 %
Technology & Engineering Services S.A. (11)
Uruguay
Engineering and other
services
100.00 %
100.00 %
100.00 %
Ternium Brasil Ltda. (12)
Brazil
Manufacturing and selling
of steel products
100.00 %
100.00 %
100.00 %
Tenigal S. de R.L. de C.V. (13)
Mexico
Manufacturing and selling
of steel products
51.00 %
51.00 %
51.00 %
Soluciones Integrales de Gestión S.A. (14)
Argentina
Other services
100.00 %
100.00 %
100.00 %
Vientos de Olavarría S.A. (15)
Argentina
Renewable energy projects.
62.57 %
62.57 %
62.57 %
Usinas Siderúrgicas de Minas Gerais S.A. (16)
Brazil
Manufacturing and selling
of steel products
23.30 %
23.30 %
—
Mineração Usiminas S.A. (17)
Brazil
Exploration, exploitation
and pelletizing of iron ore
16.31 %
16.31 %
—
Soluções Em Aço Usiminas S.A. (18)
Brazil
Manufacturing and selling
of steel products
16.05 %
16.05 %
—
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
61
2.
BASIS OF PRESENTATION (continued)
Company
Country of
Organization
Main activity
Percentage of ownership
at December 31,
2024
2023
2022
Usiminas Mecânica S.A. (19)
Brazil
Engineering and other services
23.30 %
23.30 %
—
Rios Unidos logistica e transporte de açõ Ltda. (20)
Brazil
Logistics and distribution of
steel-derived products
—
23.30 %
—
Usiminas International S.À R.L. (21)
Luxembourg
Holding
23.30 %
23.30 %
—
Usiminas Participações E Logística S.A. (22)
Brazil
Logistics and distribution of
steel-derived products
17.48 %
17.48 %
—
Metalcentro Ltda. (23)
Brazil
Other services
23.30 %
23.30 %
—
Ternium Participaçoes S.A.em liquidaçao (24)
Brazil
Holding
—
—
100.00 %
(1) Indirectly through Ternium Investments S.à.r.l. Total voting rights held: 100.00%.
(2) Since the second quarter of 2021, indirectly through Ternium Internacional España S.L. Total voting rights held 100.00%. Before that, indirectly through
Ternium Investments S.à.r.l. total voting rights was 100.00% in 2020.
(3) Indirectly through Ternium Internacional España S.L. Total voting rights held 62.57%.
(4) Indirectly through Ternium Argentina S.A. and Ternium Procurement S.A. Total voting rights held 100.00%.
(5) Indirectly through Ternium Argentina S.A. and Ternium Internacional España S.L. Total voting rights held 100.00%.
(6) Indirectly through Ternium Mexico S.A. de C.V. Total voting rights held: 100.00%.
(7) Indirectly through Ternium Mexico S.A. de C.V. and Tenigal S. de R.L. de C.V. Total voting rights held: 100.00%.
(8) Total voting rights held: 50.00%. The Company recognizes the assets, liabilities, revenue and expenses in relation to its interest in the joint operation.
(9) Indirectly through Ternium Mexico S.A. de C.V. Total voting rights held: 74.50%.
(10) Indirectly through Ternium Internacional España S.L. and Ternium Mexico S.A. de C.V. Total voting rights held: 100.00%.
(11) Indirectly through Ternium Internacional España S.L. Total voting rights held: 100.00%.
(12) Indirectly through Ternium Internacional España S.L. Total voting rights held: 100.00%.
(13) Indirectly through Ternium Internacional España S.L. Total voting rights held: 51.00%.
(14) Indirectly through Ternium Investments S.à r.l. and Ternium Internacional España S.L. Total voting rights held 100.00%.
(15) Indirectly through Ternium Argentina S.A. Total voting rights held: 100.00%.
(16) Indirectly through Ternium Investments S.à r.l.. Prosid Investments S.A. and Ternium Argentina S.A. Total voting rights held 42.57%.
(17) Indirectly through Usinas Siderúrgicas de Minas Gerais S.A. Total voting rights held 29.80%.
(18) Indirectly through Usinas Siderúrgicas de Minas Gerais S.A. Total voting rights held 29.32%.
(19) Indirectly through Usinas Siderúrgicas de Minas Gerais S.A. Total voting rights held 42.57%.
(20) This company was merged into Usinas Siderúrgicas de Minas Gerais S.A. as of April 25, 2024.
(21) Indirectly through Usinas Siderúrgicas de Minas Gerais S.A. Total voting rights held 42.57%.
(22) Indirectly through Usinas Siderúrgicas de Minas Gerais S.A. and Mineração Usiminas S.A. Total voting rights held 36.20%.
(23) Indirectly through Usinas Siderúrgicas de Minas Gerais S.A. and Usiminas Mecânica S.A. Total voting rights held 42.57%.
(24) This company was dissolved as of January 2. 2023.
The most material non-controlling interest is related to the investment in Ternium Argentina S.A. (“Ternium
Argentina”) and Usinas Siderúrgicas de Minas Gerais S.A. (“Usiminas”), being both listed companies in the
Buenos Aires Stock Exchange and in the B3 Brazilian Stock Exchange, respectively.
For more information about Ternium Argentina, see note 30 and information publicly available in the Buenos
Aires Stock Exchange webpage.
Under Usiminas’ annual accounts as of December 31, 2024, and for the year then ended, revenues amounted to $
4,803 million (2023: $ 5,534 million), net profit from continuing operations to $ 1 million (2023: $ 328 million),
net profit attributable to non-controlling interest to $ 28 million (2023: $ 50 million), total assets to $ 6,439
million (2023: $ 8,296 million), total liabilities to $ 2,130 million (2023: $ 2,812 million), shareholders’ equity to $
4,309 million (2023: $ 5,484 million) and non-controlling interest to $ 452 million (2023: $ 556 million).
Information publicly available related to Usiminas could be found in the Usiminas Investor Relations webpage.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
62
3.
ACQUISITION OF BUSINESS– INCREASE OF THE PARTICIPATION IN USIMINAS
CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS
(a) The participation in Usiminas as of June 30, 2023
On January 16, 2012, the Company’s subsidiaries, Ternium Investments and Ternium Argentina (together with
its wholly-owned subsidiary Prosid Investments S.A., or "Prosid", and the Company’s affiliate, Confab Industrial
S.A., a subsidiary of Tenaris, or TenarisConfab), joined the existing control group of Usiminas, a leading steel
company in the Brazilian flat steel market, through the acquisition of 84.7, 30.0, and 25.0 million ordinary shares,
respectively, and formed the so-called Ternium/Tenaris (T/T) Group.
On October 30, 2014, Ternium Investments acquired 51.4 million additional ordinary shares of Usiminas. On
April 20, 2016, Ternium Investments subscribed to 7.0 million preferred shares of Usiminas and Ternium
Argentina, together with Prosid, subscribed to an aggregate 1.5 million preferred shares of Usiminas. On July 19,
2016, Usiminas’ extraordinary general shareholders’ meeting homologated a capital increase, and Ternium
Investments acquired 62.6 million additional ordinary shares, and Ternium Argentina and Prosid acquired an
aggregate 13.8 million additional ordinary shares. As a result of these transactions, Ternium, through its
subsidiaries Ternium Investments, Ternium Argentina and Prosid, owned as of June 30, 2023, 242.6 million
ordinary shares of Usiminas (representing 34.4% of Usiminas’ ordinary shares) and 8.5 million of Usiminas’
preferred shares (representing 1.6% of Usiminas’ preferred shares), representing, in the aggregate, 20.4% of
Usiminas’ share capital.
As of June 30, 2023, the Usiminas control group held, in the aggregate, 483.6 million ordinary shares bound to
the Usiminas shareholders’ agreement, representing approximately 68.6% of Usiminas’ voting capital. The
Usiminas control group, which was bound by a long-term shareholders’ agreement that governs the rights and
obligations of Usiminas’ control group members, was composed as of such date of three sub-groups: the T/T
Group; the NSC Group, comprising Nippon Steel Corporation (“NSC”), Metal One Corporation and Mitsubishi
Corporation; and Usiminas’ pension fund Previdência Usiminas. The T/T Group held approximately 47.1% of
the total shares held by the control group (39.5% corresponding to the Ternium entities and the other 7.6%
corresponding to TenarisConfab); the NSC Group held approximately 45.9% of the total shares held by the
control group; and Previdência Usiminas held the remaining 7%. The corporate governance rules reflected in the
Usiminas shareholders agreement provided, among other things, that Usiminas’ executive board was composed
of six members, including the chief executive officer and five vice-presidents, with Ternium and NSC nominating
three members each. The right to nominate Usiminas’ chief executive officer alternated between Ternium and
NSC at every 4-year interval, with the party that did not nominate the chief executive officer having the right to
nominate the chairman of Usiminas’ board of directors for the same 4-year period. The Usiminas shareholders
agreement also provided for an exit mechanism consisting of a buy-and-sell procedure—exercisable at any time
after November 16, 2022, and applicable with respect to shares held by NSC and the T/T Group—, which would
allow either Ternium or NSC to purchase all or a majority of the Usiminas shares held by the other shareholder.
(b) The acquisition of the additional participation
On March 30, 2023, Ternium S.A. announced that its subsidiaries Ternium Investments and Ternium Argentina,
together with Confab, a subsidiary of its affiliate Tenaris S.A., all of which compose the T/T group within
Usiminas control group, entered into a share purchase agreement to acquire from Nippon Steel Corporation,
Mitsubishi and MetalOne (the “NSC group”), pro rata to their current participations in the T/T group, 68.7
million ordinary shares of Usinas Siderúrgicas de Minas Gerais S.A. – USIMINAS (“Usiminas”) at a price of
BRL10 per ordinary share.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
63
3.
ACQUISITION OF BUSINESS– INCREASE OF THE PARTICIPATION IN USIMINAS
CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS (continued)
On July 3, 2023, the Company announced the completion of the acquisition of this additional participation.
Pursuant to the transaction, Ternium paid $ 118.7 million in cash for 57.7 million ordinary shares, increasing its
participation in the Usiminas control group to 51.5%.
The Usiminas control group holds the majority of Usiminas’ voting rights. Following the completion of the
transaction, the T/T group holds an aggregate participation of 61.3% in the control group, with the NSC group
and Previdência Usiminas (Usiminas employees’ pension fund) holding 31.7% and 7.1%, respectively. The
Usiminas control group members also agreed a new governance structure, as a result of which the T/T group
nominated a majority of the Usiminas board of directors, the CEO and four other members of Usiminas board of
officers, and ordinary decisions are approved with a 55% majority of the control group shares.
Pursuant to the Usiminas shareholders agreement, as supplemented by the T/T Group shareholders’ agreement,
Ternium started fully consolidating Usiminas balance sheet and results of operations in its consolidated financial
statements beginning in July 2023.
(c) Remeasurement of the previously held interest
As of July 3, 2023, Ternium remeasured its former participation (20.4%) at its fair value as of such date.
Consequently, Ternium valued its previously held interest by means of the market quotation of Usiminas share in
the Brazilian stock market. Such value as of July 3, 2023, was of 7.36 BRL per share, amounting to a total of $
385.9 million. This valuation results in the recognition of a loss of $ 441.4 million, which is included along with
the gain related to the bargain purchase amounting to $ 270.4 million (see note 3 (d)) in the “Effect related to the
increase of the participation in Usiminas” in the income statement for a total of $ 171.0 million.
In addition, IFRS 3, paragraph 42, establishes that the previous interest must be remeasured, and necessary
adjustments made as if it were a disposal of the investment. In this case, items previously recognized in other
comprehensive income, mainly the CTA (currency translation adjustment) should be recycled to results of the
period. The accumulated loss in “Other comprehensive income” as of the acquisition date was $ 934.9 million.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
64
3.
ACQUISITION OF BUSINESS– INCREASE OF THE PARTICIPATION IN USIMINAS
CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS (continued)
(d) Fair value of net assets acquired
The fair values determined for the assets acquired and liabilities assumed arising from the acquisition are as
follows:
Fair value of acquired assets and assumed liabilities:
in $ thousands
Property, plant and equipment (note 12)
904,780
Investments in non-consolidated companies
400,037
Inventories
1,707,311
Cash and cash equivalents
781,072
Other investments
247,005
Trade receivables
764,257
Allowance for doubtful accounts
(44,626)
Other receivables
854,917
Deferred tax assets
1,327,232
Borrowings
(1,224,399)
Provisions
(856,153)
Trade payables
(758,687)
Other assets and liabilities, net
(509,486)
Net assets acquired
3,593,260
Non-controlling interest
(2,818,358)
Remeasurement of previously held interest in Usiminas
(385,851)
Total Purchase consideration
(118,686)
Bargain purchase gain
270,365
Loss on the remeasurement of previously held interest in Usiminas
(441,410)
Net loss effect related to the increase of the participation in Usiminas
(171,045)
The purchase price allocation disclosed above was prepared with the assistance of a third-party expert.
Management applied significant judgment in estimating the fair value of assets acquired and liabilities assumed,
which involved the use of significant estimates and assumptions in particular with respect to the estimation of the
loss probability for the contingencies, including revenue forecasts, EBITDA margins, capital expenditures and
discount rate for the cash flow projections. According to the purchase price allocation, the transaction led to the
recognition of a bargain purchase of $ 270.4 million.
(e) Put and call option
In addition to the share purchase and the new governance structure, a “put” and “call” mechanism was
established according to the following scheme:
–
NSC group will have the right, at any time after the closing of the transaction, to withdraw its remaining
shares from the control group and sell them in the open market after giving the T/T group the opportunity to
buy them at the equivalent in U.S. dollars of the 40-trading day average price per share immediately prior to
the NSC group’s notice of withdrawal, as well as the right, at any time after the second anniversary of the
closing, to sell such shares to the T/T group at $ 2.0584 per share.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
65
3.
ACQUISITION OF BUSINESS– INCREASE OF THE PARTICIPATION IN USIMINAS
CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS (continued)
–
At any time after the second anniversary of the closing of the transaction, the T/T group will have the right to
buy the NSC group’s remaining interest in the Usiminas control group (153.1 million ordinary shares) at the
higher of $ 2.0584 per share and the equivalent in U.S. dollars of the 40-trading day average price per share
immediately prior to the date of exercising the option.
–
In the case of the T/T Group, Ternium will decide at its own discretion the execution of the call option,
having Confab and Ternium Argentina the option to acquire the shares owned by NSC pro rata to their
participation.
IAS 32 requires a liability to be recognized for written puts over non-controlling interests. The liability reflects
the entity’s obligation to deliver cash or a financial asset. The financial liability is recognized at present value of
the redemption amount and accreted through finance charges in the income statement over the contract period
up to the final redemption amount. Ternium has recognized a liability associated with the put option of $ 242.5
million ($ 263.2 million as of December 31, 2024), accounted for in the statement of financial position under
Other liabilities, with the corresponding debit in the statement of changes in equity under Non-controlling
interest.
(f) Recognition of non-controlling interest
Ternium recognizes non-controlling interests in an acquired entity either at fair value or at the non-controlling
interest’s proportionate share of the acquired entity’s net identifiable assets. This decision is made on an
acquisition-by-acquisition basis. For the non-controlling interests in Usiminas, the Company elected to recognize
the non-controlling interests at its proportionate share of the acquired net identifiable assets, which led to a non-
controlling interest of $ 2,575.9 million, as of the acquisition date.
(g) Main contingencies associated with the acquired business
Contrary to the recognition principles in IAS 37 Provisions, Contingent Liabilities and Contingent Assets, IFRS 3
Business Combinations requires an acquirer of a business to recognize contingent liabilities assumed in a business
acquisition at the acquisition date even if it is not probable that an outflow of resources will be required to settle
the obligation.
in $ thousands
Provisions for contingencies recognized by Usiminas before business
combination
(199,677)
Provisions for contingencies recognized as part of the business
combination:
Tax related contingencies
(432,488)
Civil and other related contingencies
(174,333)
Labour related contingencies
(49,655)
Total Provision for contingencies
(856,153)
Contingencies estimated by Management were related to possible losses arising from administrative proceedings
and litigation related to tax, civil and labor matters and based on the advice and assessment of internal and
external legal advisors.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
66
3.
ACQUISITION OF BUSINESS– INCREASE OF THE PARTICIPATION IN USIMINAS
CONTROL GROUP AND NEW GOVERNANCE STRUCTURE OF USIMINAS (continued)
The main contingencies recognized in the consolidated financial statements pursuant to IFRS 3 Business
Combinations in connection with the acquisition of the additional participation in Usiminas and the full
consolidation of Usiminas include the following:
Description
Status
As of the
acquisition date
(in $ thousands)
As of December
31, 2024
(in $ thousands)
Labor lawsuits filed by employees, former employees and
outsourced personnel of the Cubatão Plant, claiming
severance pay and social security rights.
Pending judgment by the Labor Court
and administrative bodies, at different
levels.
57,343
33,387
Tax proceeding in which the tax authorities seek the
reversal of ICMS/SP credits on materials considered as
consumables (refractory items and others).
The Tax Debt was included in the
Amnesty Program instituted by São
Paulo State Law n. 17.843/23.
29,772
—
Labor lawsuits filed by employees, former employees and
outsourced personnel of the Ipatinga Plant, claiming
severance pay and social security rights.
Pending judgment by the Labor Court
and administrative bodies, at different
levels.
15,112
10,062
Labor lawsuits filed by former employees challenging the
amount of compensation paid on dismissals.
Pending judgment.
10,837
6,442
Other contingencies
86,613
47,982
Provisions for contingencies recognized by Usiminas before business combination
199,677
97,873
Description
Status
As of the
acquisition date
(in $ thousands)
As of December
31, 2024
(in $ thousands)
Objection filed against the decision that recognized only
partially the credit rights established in a final and
unappealable court decision that determined the exclusion
of ICMS amounts from the calculation basis of PIS/
COFINS-Imports.
Pending judgment at administrative
level.
94,792
73,772
Tax collection proceedings related to the collection of
ICMS/SP on goods shipped to other countries without
effective proof of export.
Pending judgment by the trial court.
51,546
40,116
Tax proceedings seeking the reversal of ICMS/SP credits
on materials considered as consumables (refractory items
and others).
Several case records, declaratory
actions and tax collection proceedings,
suspended or pending decision by
higher courts.
38,640
27,968
ICMS – Action for annulment of the tax debt claimed by
the State of Rio Grande do Sul due to failure to make the
advance payment of the tax at the entry of goods coming
from other States (rate differential ).
Pending judgment by the trial court.
28,789
22,405
Tax assessment notice issued by the State of Minas Gerais
concerning alleged reversal of ICMS credits on sale of
electrical energy.
Pending judgment at administrative
level.
12,386
9,640
Other tax contingencies
206,335
131,463
Provisions for tax contingencies recognized as part of the business combination
432,488
305,364
Public Civil Action seeking the reimbursement of the
amounts increased by means of a term of amendment to
the Contractor's Agreement, due to alleged overbilling in
the construction of a bridge in Brasília/DF.
As of July 3, 2023, the claim was
deemed groundless and was pending
judgment of appeal. As of December
31, 2023, the action was dismissed as
unfounded and the case was archived.
64,315
—
Public Civil Action seeking compensation for alleged
damages caused to the State of Santa Catarina's Treasury
related to improper expenditures incurred in the
construction of a bridge.
Pending conclusion of the expert
evidence
21,113
16,431
Other civil and other contingencies (1)
88,905
36,604
Provisions for civil and other contingencies recognized as part of the business combination
174,333
53,035
Labor lawsuits filed by employees, former employees and
outsourced personnel of the Cubatão Plant, claiming
severance pay and social security rights.
Pending judgment by the Labor Court
and administrative bodies, at different
levels.
27,123
15,754
Other labour contingencies (1)
22,532
12,234
Provisions for labour contingencies recognized as part of the business combination
49,655
27,988
(1) Composed of individually non-significative contingencies
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
67
4.
ACCOUNTING POLICIES
The following is a summary of the principal accounting policies followed in the preparation of these
Consolidated Financial Statements:
(a) Group accounting
(1) Subsidiary companies and transactions with non-controlling interests
Subsidiaries are all entities over which the Company has control. The Company controls an entity when the
Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Company. They are deconsolidated from the date that control ceases.
The Company uses the acquisition method of accounting to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the
liabilities incurred and the equity interests issued by the Company. The consideration transferred includes the fair
value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs
are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at the fair values at the acquisition date. Indemnification assets are
recognized at the same time that the Company recognizes the indemnified item and measures them on the same
basis as the indemnified item, subject to the need for a valuation allowance for uncollectible amounts. The
Company measures the value of a reacquired right recognized as an intangible asset on the basis of the remaining
contractual term of the related contract regardless of whether market participants would consider potential
contractual renewals in determining its fair value.
The Company recognizes any non-controlling interest in the acquiree at the non-controlling interest's
proportionate share of the acquiree's net identifiable assets. The recognition of business combinations requires
the acquirer to measure at the acquisition date components of non-controlling interests in the acquiree that are
present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event
of liquidation at either (a) fair value; or (b) the present ownership instruments’ proportionate share in the
recognized amounts of the acquiree’s identifiable net assets. The Company opted for the proportional share in
the recognized amounts of the identifiable net assets for the recognition described in note 3 related to Usiminas.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Company's
share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the
income statement.
The measurement period is the earlier of the date that the acquirer receives the information that it is looking for
or cannot obtain the information and one year after the acquisition date. Where the accounting for a business
combination is not complete by the end of the reporting period in which the business combination occurred
provisional amounts are reported.
The Company treats transactions with non-controlling interests as transactions with equity owners of the
Company. For purchases from non-controlling interests, the difference between any consideration paid and the
relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses
on disposals to non-controlling interests are also recorded in equity.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
68
4. ACCOUNTING POLICIES (continued)
When the Company ceases to have control or significant influence, any retained interest in the entity is
remeasured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value is the
initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint
venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in
respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities.
This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or
loss.
Inter-company transactions, balances and unrealized gains on transactions between group companies are
eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the
transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the group. However, the fact that the functional currency of some subsidiaries is
their respective local currency, generates some financial gains (losses) arising from intercompany transactions,
that are included in the consolidated income statement under Other financial expenses, net.
(2) Investments in non-consolidated companies
Associated companies are those entities in which Ternium has significant influence, but which it does not
control.
Joint arrangements are understood as combinations in which there are contractual agreements by virtue of which
two or more companies hold an interest in companies that undertake operations or hold assets in such a way that
any financial or operating decision is subject to the unanimous consent of the partners. A joint arrangement is
classed as a joint operation if the parties hold rights to its assets and have obligations in respect of its liabilities or
as a joint venture if the venturers hold rights only to the investee's net assets.
Investments in non-consolidated companies (associated companies and joint ventures) are accounted for using
the equity method of accounting. Under this method, interests in joint ventures and associates are initially
recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the
Company’s share of the post-acquisition profits or losses in the income statement, and its share of post-
acquisition changes in reserves recognized in reserves and in other comprehensive income in the income
statement. Unrealized gains on transactions among the Company and its non-consolidated companies are
eliminated to the extent of the Company’s interest in such non-consolidated companies; unrealized losses are also
eliminated unless the transaction provides evidence of an impairment of the transferred asset. When the
Company’s share of losses in a non-consolidated company equals or exceeds its interest in such non-consolidated
company, the Company does not recognize further losses unless it has incurred obligations or made payments on
behalf of such non-consolidated company. Accounting policies of non-consolidated companies have been
changed where necessary to ensure consistency with the policies adopted by the Company.
The Company’s investment in associates and joint ventures includes notional goodwill identified on acquisition.
The Company determines at each reporting date whether there is any objective evidence that the investment is
impaired. If this is the case, the group calculates the amount of impairment as the difference between the
recoverable amount of the investment and its carrying value and recognizes the amount within “Equity on
earnings (losses) of non-consolidated companies”.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
69
4.
ACCOUNTING POLICIES (continued)
(b) Foreign currency translation
(1) Functional and presentation currency
Items included in the financial statements of each of the Company's subsidiaries and associated companies are
measured using the currency of the primary economic environment in which the entity operates (the "functional
currency"). Except for Usiminas and the non-consolidated companies whose functional currencies are their local
currencies, Ternium determined that the functional currency of its subsidiaries is the U.S. dollar. Although
Ternium is located in Luxembourg, it operates in several countries with different currencies. The $ is the
currency that best reflects the economic substance of the underlying events and circumstances relevant to
Ternium as a whole.
(2) Subsidiary companies
The results and financial position of all the group entities (except for the ones which operated in a
hyperinflationary economy, if any) that have a functional currency different from the presentation currency, are
translated into the presentation currency as follows:
(i) assets and liabilities are translated at the closing rate of each statement of financial position;
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the rate on the dates of the transactions); and
(iii) all resulting translation differences are recognized within other comprehensive income.
In the case of a sale or other disposition of any such subsidiary, any accumulated translation differences would be
recognized in the income statement as part of the gain or loss on sale.
(3) Transactions in currencies other than the functional currency
Transactions in currencies other than the functional currency are translated into the functional currency using
the exchange rates prevailing at the date of the transactions or valuation where items are re-measured.
At the end of each reporting period: (i) monetary items denominated in currencies other than the functional
currency are translated using the closing rates, (ii) non-monetary items that are measured in terms of historical
cost in a currency other than the functional currency are translated using the exchange rates prevailing at the date
of the transactions; and (iii) non-monetary items that are measured at fair value in a currency other than the
functional currency are translated using the exchange rates prevailing at the date when the fair value was
determined.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in currencies other than the functional
currency are recorded as gains and losses from foreign exchange and included in "Other financial income
(expenses), net" in the consolidated income statement, except when deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges. Translation differences on non-monetary financial assets and
liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the
"fair value gain or loss," while translation differences on non-monetary financial assets such as equities classified
as fair value through other comprehensive income are included in other gains/(losses).
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
70
4.
ACCOUNTING POLICIES (continued)
(c) Financial instruments
Non derivative financial instruments
Non derivative financial instruments comprise investments in equity and debt securities, trade and other
receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
The Company classifies its financial instruments in the following measurement categories:
–
Amortized cost: instruments that are held for collection or repayment of contractual cash flows where
those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest
income and expenses from these financial instruments are included in finance income or expense using the
effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and
presented in finance income or expense, together with foreign exchange gains and losses. Impairment losses are
presented as separate line items in the statement of profit or loss.
–
Fair value through other comprehensive income (“FVOCI”): financial instruments that are held for
collection of contractual cash flows and for selling the financial instruments, where the instruments’ cash flows
represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount
are taken through OCI, except for the recognition of impairment gains or losses, interest revenue or expense, and
foreign exchange gains and losses which are recognized in profit or loss. When the financial instrument is
derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss
and recognized in other gains/(losses), except for equity instruments, for which there is no reclassification from
OCI to profit or loss. Interest income or expense from these financial instruments is included in finance income
using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses)
and impairment expenses are presented as separate line item in the statement of profit or loss.
–
Fair value through profit or loss (“FVPL”): financial instruments that do not meet the criteria for
amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently
measured at FVPL is recognized in profit or loss and presented net within other gains/(losses) in the period in
which it arises.
The classification depends on the Company’s business model for managing the financial instruments and the
contractual terms of the cash flows.
For financial instruments measured at fair value, gains and losses will either be recorded in profit or loss or OCI.
For investments in equity instruments that are not held for trading, this will depend on whether the group has
made an irrevocable election at the time of initial recognition to account for the equity investment at FVOCI.
At initial recognition, the Company measures a financial instrument at its fair value plus, in the case of a
financial instrument not at FVPL, transaction costs that are directly attributable to the acquisition of the
financial instrument. Transaction costs of financial instruments carried at FVPL are expensed in profit or loss.
Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset
and the cash flow characteristics of the asset.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
71
4.
ACCOUNTING POLICIES (continued)
The classification depended on the nature and purpose of the financial assets and was determined at the time of
initial recognition.
Financial assets and liabilities were recognized and derecognized on the settlement date.
Financial assets were initially measured at fair value, net of transaction costs, except for those financial assets
classified as financial assets at fair value through profit or loss.
Financial liabilities, including borrowings, were initially measured at fair value, net of transaction costs and
subsequently measured at amortized cost using the effective interest method, with interest expense recognized on
an effective yield basis.
Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit losses associated with its debt instruments
carried at amortized cost and FVOCI. The impairment methodology applied depends on whether there has been
a significant increase in credit risk.
For trade receivables, the Company applies the simplified approach permitted by IFRS 9, which requires expected
lifetime losses to be recognized from initial recognition of the receivables, see note 4 (i) for further details.
For loans and receivables category and for held-to-maturity investments, the amount of the loss was measured as
the difference between the asset's carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred) discounted at the financial asset's original effective
interest rate. The carrying amount of the asset was reduced and the amount of the loss was recognized in the
consolidated income statement.
If, in a subsequent period, the amount of the impairment loss decreased and the decrease could be related
objectively to an event occurring after the impairment was recognized, the reversal of the previously recognized
impairment loss was recognized in the consolidated income statement.
Derivative financial instruments
Information about accounting for derivative financial instruments and hedging activities is included in Note 29
"Financial Risk management" and Note 4 (y).
Put option valuation method
IFRS presents the following options to recognize the value of a put option:
- Under IFRS 10, the terms of the forward and option contracts should be analyzed to assess whether they
provide the parent or the non-controlling interest with access to the risks and rewards associated with the actual
ownership of the shares. The non-controlling interest should be recognized if risks and rewards associated with
ownership have been retained by the non-controlling interest. A financial liability (recognized at the present value
of the redemption amount) is recorded to reflect the forward or put option.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
72
4.
ACCOUNTING POLICIES (continued)
- Under IAS 32, a liability is recognized for written puts over non-controlling interests. The liability reflects the
entity’s obligation to deliver cash or a financial asset. The financial liability is recognized at present value of the
redemption amount and accreted through finance charges in the income statement over the contract period up to
the final redemption amount.
(d) Property, plant and equipment
(1) Property, plant and equipment
Land and buildings comprise mainly factories and offices. All property, plant and equipment are recognized at
historical acquisition or construction cost less accumulated depreciation and accumulated impairment (if
applicable), except for land, which is carried at acquisition cost less accumulated impairment (if applicable).
There are no material residual values for property, plant and equipment items.
Major overhaul and rebuilding expenditures are recognized as a separate asset when future economic benefits are
expected from the item, and the cost can be measured reliably.
Ordinary maintenance expenses on manufacturing properties are recorded as cost of products sold in the period
in which they are incurred.
Where a tangible fixed asset comprises major components having different useful lives, these components are
accounted for as separate items. Spare parts are included in property, plant and equipment.
Depreciation method is reviewed at each year end. Depreciation is calculated using the straight-line method to
amortize the cost of each asset to its residual value over its estimated useful life as follows:
Land
No depreciation
Buildings and improvements
10-50 years
Production equipment
5-40 years
Vehicles, furniture and fixtures and other equipment
3-20 years
Property, plant and equipment used in mining activities are depreciated over its useful life or over the remaining
life of the mine if shorter and there is no alternative use possible.
The assets' useful lives are reviewed, and adjusted if appropriate, at each year end. The re-estimation of assets
useful lives by the Company did not materially affect depreciation charges in 2024, 2023 and 2022.
Gains and losses on disposals are determined by comparing the proceeds with the corresponding carrying
amounts and are included in the income statement.
If the carrying amount of an asset were greater than its estimated recoverable amount, it would be written down
to its recoverable amount (see Note 4 (f) "Impairment").
Amortization charges are included in cost of sales, selling, general and administrative expenses.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
73
4.
ACCOUNTING POLICIES (continued)
(2) Right-of-use assets
The Company is a party to lease contracts for:
- Land
- Plants and equipment for the production of industrial gases and other production materials.
- Transportation and maintenance equipment.
- Warehouses and office spaces.
These leases are recognized, measured and presented in accordance to IFRS 16 “Leases”, following the guidelines
described below.
Accounting by the lessee
The Company recognizes a right-of-use asset and a lease liability at the commencement date of each lease
contract that grants the right to control the use of an identified asset during a period of time. The commencement
date is the date in which the lessor makes an underlying asset available for use by the lessee.
The Company applied exemptions for leases with a duration lower than 12 months, with a value lower than
thirty thousand U.S. dollars and/or with clauses related to variable payments. These leases have been considered
as short-term leases and, accordingly, no right-of-use asset or lease liability have been recognized.
At initial recognition, the right-of-use asset is measured considering:
- The value of the initial measurement of the lease liability;
- Any lease payments made at or before the commencement date, less any lease incentives; and
- Any initial direct costs incurred by the lessee.
After initial recognition, the right-of-use assets are measured at cost, less any accumulated depreciation and/or
impairment losses, and adjusted for any re-measurement of the lease liability.
Depreciation of the right-of-use asset is calculated using the straight-line method over the estimated duration of
the lease contract, as follows:
Land
1-30 years
Buildings and facilities
1-25 years
Machinery
1-13 years
If the lease transfers ownership of the underlying asset to the Company by the end of the lease term, or if the cost
of the right-of-use asset reflects that the Company will exercise a purchase option, the Company depreciates the
right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise,
the Company depreciates the right-of-use asset from the commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term.
Accounting by the lessor
When the Company is acting as a lessor, each of its leases is classified as either operating or finance lease:
- Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified
as operating leases.
- Leases where all substantial risks and rewards of ownership are transferred by the lessor to the lessee are
classified as finance leases.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
74
4.
ACCOUNTING POLICIES (continued)
(e) Intangible assets
(1) Information system projects
Generally, costs associated with developing or maintaining computer software programs are recognized as an
expense as incurred. However, costs directly related to the acquisition and implementation of information
systems are recognized as intangible assets if they have a probable economic benefit exceeding the cost beyond
one year and comply with the recognition criteria of IAS 38.
Information system projects recognized as assets are amortized using the straight-line method over their useful
lives, not exceeding a period of 3 years. Amortization charges are included in cost of sales, selling, general and
administrative expenses.
(2) Mining assets
Mining assets include:
(a) Mining licenses acquired;
(b) Capitalized exploration and evaluation costs, reclassified from exploration and evaluation costs (see note 4
(e) 3); and
(c) Capitalized developmental stripping costs (see note 4 (u)).
Mining licenses were recognized as separate intangible assets upon the acquisition of the investment in Mexico
and in Usiminas and comprise the right to exploit the mines and are recognized at its fair value at acquisition date
less accumulated amortization.
Mexico’s mining concessions were granted for a 50-year period; following the expiration of the initial concession
term, the concessions are renewable for an additional 50-year term in accordance with, and subject to the
procedures set forth in, applicable Mexican mining law.
Usiminas’ mining concessions were granted for an indefinite period and until complete depletion of mineral
reserves and are subject to the procedures set forth in applicable Brazilian mining law.
Amortization charge is calculated by using the unit-of-production method, on the basis of actual mineral
extracted in each period compared to the estimated mineral reserves, and is included in cost of sales. Any change
in the estimation of reserves is accounted for prospectively. The resulting amortization rate for the years ended
December 31, 2024, 2023 and 2022, is approximately 19%, 13% and 12% per year, respectively.
Considering that there are no concrete development plans in the short term and for production feasibility in
certain areas of the mining concessions held by Las Encinas S.A. de C.V., the Company decided to recognize an
impairment charge over these assets of $ 32.4 million as of December 31, 2024. As of December 31, 2023, the
Company has already recognized an impairment charge over these assets held by Las Encinas S.A. de C.V. for an
amount of $ 42.3 million.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
75
4.
ACCOUNTING POLICIES (continued)
(3) Exploration and evaluation costs
Exploration and evaluation activities involve the search for iron ore resources, the determination of technical
feasibility and the assessment of commercial viability of an identified resource.
Exploration and evaluation costs are measured at cost. Costs directly associated with exploration and evaluation
activities are capitalized as intangible assets until the determination of reserves is evaluated. The costs associated
to the acquisition of machinery and equipment are recognized as property, plant and equipment. If it is
determined that commercial discovery has been achieved, costs incurred are reclassified into Mining assets and
amortization starts once production begins.
Exploration costs are tested for impairment whenever there are indicators that impairment exists. Indicators of
impairment include, but are not limited to:
•
Rights to explore in an area have expired or will expire in the near future without renewal;
•
No further exploration and evaluation is planned or budgeted;
•
A decision to discontinue exploration and evaluation in an area because of the absence of commercial
reserves; and
•
Sufficient data exists to indicate that the book value will not be fully recovered from future development and
production.
When analyzing the existence of impairment indicators, the exploration and evaluation areas from the mining
units will be evaluated.
(4) Goodwill
Goodwill represents the excess of the acquisition cost over the fair value of Ternium's participation in acquired
companies' net assets at the acquisition date. Under IAS 36, goodwill is considered to have an indefinite life and
not amortized, but is subject to annual impairment testing.
Goodwill is allocated to Cash-generating units ("CGU") for the purpose of impairment testing. The allocation is
made to those cash-generating units expected to benefit from the business combination which generated the
goodwill being tested. The impairment losses on goodwill cannot be reversed.
As of December 31, 2024 and 2023, the carrying amount of goodwill allocated to the Mexico CGUs was $ 662.3
million, of which $ 619.8 million corresponds to Steel Mexico CGU and $ 42.5 million to Mining Mexico CGU.
(5) Research and development
Research expenditures are recognized as expenses as incurred. Development costs are recorded as cost of sales in
the income statement as incurred because they do not fulfill the criteria for capitalization. Research and
development expenditures for the years ended December 31, 2024, 2023 and 2022 totaled $ 23.8 million, $ 19.0
million and $ 16.3 million, respectively.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
76
4.
ACCOUNTING POLICIES (continued)
(6) Customer relationships acquired in a business combination
As of December 31, 2024, Ternium has no customer relationships acquired in a business combination recognized
in its consolidated financial statements.
(7) Trademarks acquired in a business combination
Trademarks are amortized using the straight-line method over a useful life of between 5 to 10 years.
(f) Impairment
Assets that have an indefinite useful life (including goodwill) are not subject to amortization and are tested
annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. Assets that are subject to amortization and investments in affiliates are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair value less cost to sell and the value in
use.
To carry out these tests, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (each, a CGU). When evaluating long-lived assets for potential impairment, the Company estimates the
recoverable amount based on the higher of the CGU’s fair value less costs to sell and its value in use. The value in
use of each CGU is determined on the basis of the present value of net future cash flows which will be generated
by the assets tested.
Determining the present value of future cash flows involves highly sensitive estimates and assumptions specific to
the nature of each CGU's activities, including estimates and assumptions relating to amount and timing of
projected future cash flows. Application of the discounted cash flow (DCF) method to determine the value in use
of a CGU begins with a forecast of all expected future net cash flows. Significant assumptions considered in
forecasts include the gross domestic product (GDP) growth rates of the country under study and their correlation
with steel demand, changes in the growth rate for the perpetuity rate, changes in steel prices, changes in certain
significant raw material costs and changes in discount rates.
Ternium uses, for the steel segment impairment tests, cash flow projections over a five-year period based on past
performance and expectations of market development; for the subsequent years beyond the five-year period, a
terminal value was calculated based on perpetuity. The growth rate used for the perpetuity rate is of 2.19%. This
rate does not exceed the average long-term growth rate for the relevant markets. In the case of the mining
segment and the mining activity developed by Usiminas, cash flow projections are prepared until the mines are
fully depleted and are based on past performance and expectations of market development.
Cash flows are discounted at rates that reflect specific country and currency risks associated with the cash flow
projections. The discount rates used are based on the weighted average cost of capital (WACC), which is
considered to be a good indicator of cost of capital.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
77
4.
ACCOUNTING POLICIES (continued)
Considering the uncertainty of the future evolution of the macroeconomic and financial situation in Argentina
and the reduction of the operating margin as of December 31, 2024, the Company decided to assess the
recoverability of its investments in Argentina, resulting in no impairment charges to be recognized. As of
December 31, 2024, the post-tax discount rate used to test the investment in Argentine subsidiaries for
impairment was 14.0%. The recoverable value of CGU Argentina amounted to $1.7 billion as of December 31,
2024. The Company estimates that an increase higher than of 0.5% in the discount rate or a decrease of higher
than 5.0% in the operating income before amortization and depreciation per ton may result in the recognition of
an impairment charge in the CGU Argentina.
As of December 31, 2022, the Company recognized an impairment charge of $ 99.0 million over the property,
plant and equipment in the Brazil CGU. As of December 31, 2023, Management assessed the business situation as
of such date and concluded that the recovery of impairment indicators was not significantly enough and that
there were no significant positive events to proceed with a reversal of previously recognized impairment charges.
Considering the uncertainty of the future evolution of the macroeconomic situation in Brazil, mainly the
devaluation of the Brazilian reais, and the reduction of the volume of sales and operating margin as of December
31, 2024, the Company decided to assess the recoverability of its investments in Brazil, resulting in no impairment
charges to be recognized. As of December 31, 2024, the post-tax discount rate used to test the investment in
Brazilian subsidiaries for impairment was 10.3%.
As of September 30, 2022, the Company recognized an impairment charge of $ 120.4 million over the investment
in Usiminas. On July 3, 2023, the Company acquired an additional participation in Usiminas and started the full
consolidation of assets and liabilities of Usiminas (see note 3). As of December 31, 2023, no impairment triggers
were detected and, consequently, no impairment test was prepared. Considering the uncertainty of the future
evolution of the macroeconomic situation in Brazil, mainly the devaluation of the Brazilian reais, and the
decrease of the market value of the shares as of December 31, 2024, the Company decided to assess the
recoverability of its investments in Usiminas, resulting in no impairment charges to be recognized. As of
December 31, 2024, the post-tax discount rate used to test the investment in Brazilian subsidiaries for impairment
was 10.3%.
In the case of the Steel Mexico CGU, considering that there is a value registered for goodwill, the Company
performed the mandatory impairment test over goodwill, resulting in no impairment charges to be recognized.
Also, in the case of the Mining Mexico CGU and considering the registered goodwill, the Company performed
the mandatory impairment test over goodwill, resulting in no impairment charges to be recognized. As of
December 31, 2024, the post-tax discount rate used to test the recoverability of the goodwill in the Steel and
Mining Mexico CGUs for impairment was 12.4% (as of December 31, 2023, 12.1%).
During the years 2024, 2023 and 2022, no impairment provisions were recorded in connection with assets that
have an indefinite useful life (including goodwill) in the Company’s CGUs.
(g) Other investments
Other investments consist primarily of investments in financial debt instruments and equity investments where
the Company holds a minor equity interest and does not exert significant influence.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
78
4.
ACCOUNTING POLICIES (continued)
All purchases and sales of investments are recognized on the settlement date, which is not significantly different
from the trade date, which is the date that Ternium commits to purchase or sell the investment.
Income from financial instruments at fair value through profit or loss is recognized in Other financial income
(expenses), net in the consolidated income statement. The fair value of quoted investments is based on current
bid prices. If the market for a financial investment is not active or the securities are not listed, the Company
estimates the fair value by using standard valuation techniques. Dividends from investments in equity
instruments are recognized in the income statement when the Company's right to receive payments is established.
Certain fixed income financial instruments purchased by the Company have been categorized as at fair value
through other comprehensive income. The results of these financial investments are recognized in Finance
Income in the Consolidated Income Statement using the effective interest method. Unrealized gains and losses
other than impairment and foreign exchange results are recognized in Other comprehensive income. On maturity
or disposal, net gain and losses previously deferred in Other comprehensive income are recognized in Finance
Income in the Consolidated Income Statement.
(h) Inventories
Inventories are stated at the lower of cost (calculated using the first-in-first-out "FIFO" method) or net realizable
value. The cost of finished goods and goods in process comprises raw materials, direct labor, depreciation, other
direct costs and related production overhead costs. It excludes borrowing costs. Goods acquired in transit at
year end are valued at supplier's invoice cost.
The cost of iron ore produced in our mines comprises all direct costs necessary to extract and convert stockpiled
inventories into raw materials, including production stripping costs, depreciation of fixed assets related to the
mining activity and amortization of mining assets for those mines under production.
The Company assesses the recoverability of its inventories considering their selling prices, if the inventories are
damaged, or if they have become wholly or partially obsolete.
(i) Trade receivables and other receivables
Trade and other receivables are recognized initially at fair value, generally the original invoice amount. The
Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables are
grouped based on shared credit risk characteristics and the days past due. The Company keeps an allowance for
trade receivables, recorded in an asset account to offset the trade receivables in an amount estimated sufficient to
cover the losses resulting from the impossibility for the debtors to cancel the amounts owed. This allowance for
trade receivables is recorded with a charge to selling expenses.
Judicial deposits are those made in a bank account, in connection with legal proceedings, in Brazilian currency
and monetarily restated to ensure the settlement of potential future liabilities. Some judicial deposits that are
linked to taxes payable in installments are presented at their net amount.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
79
4.
ACCOUNTING POLICIES (continued)
(j) Cash and cash equivalents
Cash and cash equivalents and highly liquid short-term securities are carried at fair market value or at a
historical cost which approximates fair market value.
For purposes of the cash flow statement, cash and cash equivalents comprise cash, bank current accounts and
short-term highly liquid investments (original maturity of three months or less at date of acquisition) and
overdrafts.
In the consolidated statement of financial position, bank overdrafts are included in borrowings within current
liabilities.
(k) Assets (disposal groups) classified as held for sale
Assets (disposal groups) are classified as assets held for sale, complying with the recognition criteria of IFRS 5,
and stated at the lower of carrying amount and fair value less cost to sell if their carrying amount is recovered
principally through a sale transaction rather than through continuing use.
The carrying value of assets classified as held for sale, as of December 31, 2024 and 2023 totals $ 7.3 million and
$ 6.7 million, respectively, which corresponds principally to land and other real estate items. Sale is expected to
be completed within a one-year period.
(l) Borrowings
Borrowings, including bonds and debentures issued by Usiminas, are recognized initially for an amount equal to
the net proceeds received. In subsequent periods, borrowings, including bonds and debentures, are stated at
amortized cost following the effective interest method.
(m) Lease liabilities
The lease liability is initially measured at the present value of the lease payments that are not paid at such date,
including the following concepts:
– Fixed payments, less any lease incentives receivable;
– Variable lease payments that depend on an index or rate, initially measured using the index or rate as of the
commencement date;
– Amounts expected to be payable by the lessee under residual value guarantees;
– The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
– Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to
terminate the lease.
Variable lease liabilities with payments dependent on external factors, such as minimum volumes sold or used,
are not included in the initial measurement of the lease liabilities and such payments are recognized directly in
profit and loss.
Lease payments are discounted using incremental borrowing rates for the location and currency of each lease
contract or, if available, the rate implicit in the lease contract.
The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest
on the remaining balance of the liability for each period.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
80
4.
ACCOUNTING POLICIES (continued)
The lease term determined by the Company comprises:
– Non-cancelable period of lease contracts;
– Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and
– Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that
option.
After the commencement date, the Company measures the lease liability by:
– Increasing the carrying amount to reflect interest on the lease liability;
– Reducing the carrying amount to reflect lease payments made; and
– Re-measuring the carrying amount to reflect any reassessment or lease modifications.
(n) Income taxes - current and deferred
The current income tax charge is calculated on the basis of the tax laws in force in the countries in which
Ternium and its subsidiaries operate. Management evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation could be subject to interpretation. A liability is recorded for tax
benefits that were taken in the applicable tax return but have not been recognized for financial reporting.
Deferred income taxes are calculated using the liability method on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting, nor taxable profit or loss. The
principal temporary differences arise on fixed assets, intangible assets, inventories valuation and provisions for
pensions. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or
substantially enacted at year end. Under IFRS, deferred income tax assets (liabilities) are classified as non-current
assets (liabilities).
Deferred tax assets are recognized to the extent it is probable that future taxable income will be available to
offset temporary differences.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associated
companies, except where the timing of the reversal of the temporary difference is controlled by the Company and
it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are re-estimated if tax rates change. These amounts are charged or credited to
the consolidated income statement or to the item “Other comprehensive income for the year” in the consolidated
statement of comprehensive income, depending on the account to which the original amount was charged or
credited.
(o) Employee liabilities
(1) Post-employment obligations
The Company has defined benefit and defined contribution plans.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
81
4.
ACCOUNTING POLICIES (continued)
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive
on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the statement of financial position in respect of defined benefit pension plans is the
present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets.
The defined benefit obligation is calculated annually (at year end) by independent actuaries using the projected
unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in
which the benefits will be paid, and that have terms to maturity approximating to the terms of the related
pension obligation. In countries where there is no deep market in such bonds, the market rates on government
bonds are used.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged
or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are
recognized immediately in income. For defined benefit plans, net defined benefit liability/asset is calculated based
on the surplus or deficit derived by the difference between the defined benefit obligations less plan assets.
For defined contribution plans, the Company pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment
obligations once the contributions have been paid. The contributions are recognized as employee benefit expense
when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a
reduction in the future payments is available.
Mexico
Ternium Mexico has defined benefit and defined contribution plans.
The valuation of the liabilities for the defined benefit employee retirement plans (pensions and seniority
premiums) covers all employees and is based primarily on their years of service, their present age and their
remuneration at the date of retirement. The cost of the employee retirement plans (pension, health-care expenses
and seniority premiums) is recognized as an expense in the year in which services are rendered in accordance with
actuarial studies made by independent actuaries. The formal retirement plans are congruent with and
complementary to the retirement benefits established by the Mexican Institute of Social Security. Additionally,
the Company has established a plan to cover health-care expenses of retired employees. The Company has
established a commitment for the payment of pensions and seniority premiums, as well as for health-care
expenses.
The defined contribution plans provide a benefit equivalent to the capital accumulated with the company's
contributions, which are provided as a match of employees' contributions to the plan. The plan provides vested
rights according to the years of service and the cause of retirement.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
82
4.
ACCOUNTING POLICIES (continued)
Argentina
Ternium Argentina implemented an unfunded defined benefit employee retirement plan for certain senior
officers. The plan is designed to provide certain benefits to those officers (additional to those contemplated under
applicable Argentine labor laws) in case of termination of the employment relationship due to certain specified
events, including retirement. This unfunded plan provides defined benefits based on years of service and final
average salary.
Brazil
Usiminas operates various post-employment schemes, including defined benefit pension plans, defined/variable
contribution pension plans and a post-retirement healthcare plan. The retirement plans offer to employees’
supplementary retirement and pension benefits and are managed by Previdência Usiminas, which in line with the
applicable legislation, has as its main purpose the management and running of private pension plans.
Usiminas has different defined benefit pension plans:
1) Benefit plan 1 (PB1), defined benefit plan, closed for new enrolments since November 1996.
2) Defined benefit plan (PBD), defined benefit plan, closed for new enrolments since December 2000; the
beneficiaries of this plan are also entitled to self-funded retirement plan, vesting, redemption, and portability.
The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the
defined benefit obligation at the balance sheet date minus the market value of plan assets, adjusted for: (i)
actuarial gains and losses; (ii) rules to determine the asset ceiling; and (iii) minimum funding requirements.
Usiminas has taken out debts in connection with the minimum requirements for payment of contributions, for
the purpose of covering the gap in relation to the services already received. In the event of non-recoverable
surplus, the debts taken are recognized as an additional liability in the computation of net actuarial liabilities.
The PBD plan debit balance is determined at the end of each year, based on a direct actuarial revaluation. During
the subsequent year, the liability is adjusted by the monthly surplus or deficit determined in the PBD plan and by
the amount of payments falling due in the period. The debt balance should be repaid in 148 installments.
Also, Usiminas has different defined contribution pension plans:
3) Benefit plan 2 (USIPREV), variable contribution benefit plan, operating since August 1998, provides post-
employment benefits to the employees of the sponsor companies. Currently, this is the only plan accepting new
enrolments.
4) COSIPREV, defined contribution plan has been closed for new enrolments since April 30, 2009. For this
defined contribution plan (COSIPREV), Usiminas pays contributions to a private pension entity on compulsory,
contractual or voluntary bases. The contributions are recognized as finance costs in the period in which they are
due. The entity has no further payment obligations once the contributions have been paid.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
83
4.
ACCOUNTING POLICIES (continued)
USIPREV and COSIPREV plans have a Pension Fund formed from members’ account balances not used in
benefit payouts. As provided for in the plans’ regulations, this Fund may be used to cover the cost of these plans
in the future.
In addition, Usiminas has in place a post-retirement healthcare plan:
(a) CoSaúde, post-retirement healthcare benefits discontinued on November 30, 2021, with the subsequent
restructuring of group plans to be offered to former beneficiaries, in compliance with the legal clauses and
conditions.
(b) Saúde Usiminas, healthcare plan, which opened for enrolments to all employees and retirees in 2010 and was
extinguished as of December 31, 2023, being replaced with two new plans: Usiexato and Usiflex. These two new
plans provide with two different methods of payment to the members of the plans: a mixed method, with the
Company offering the option of bearing 100% of the monthly fee for active employees until the termination of
the labor contracts, or a contributory method, which allows the continuation of the healthcare services after
resignation or retirement of the employees.
(2) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or
whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes
termination benefits when it is demonstrably committed to either: (i) terminating the employment of current
employees according to a detailed formal plan without possibility of withdrawal or (ii) providing termination
benefits as a result of an offer made to encourage voluntary redundancy.
(3) Other compensation obligations
Employee entitlements to annual leave and long-service leave are accrued as earned.
During 2007, Ternium launched an incentive retention program (the "Program") applicable to certain senior
officers and employees of the Company, who will be granted a number of Units throughout the duration of the
Program. The value of each of these Units is based on Ternium's shareholders' equity (excluding non-controlling
interest). Also, the beneficiaries of the Program are entitled to receive cash amounts based on (i) the amount of
dividend payments made by Ternium to its shareholders, and (ii) the number of Units held by each beneficiary to
the Program. Units vest ratably over a period of four years and will be redeemed by the Company ten years after
grant date, with the option of an early redemption at seven years after grant date. From 2018 units were vest
ratably over the same period and will be mandatorily redeemed by the Company seven years after grant date. As
the cash payment of the benefit is tied to the book value of the shares, and not to their market value, Ternium
valued this long-term incentive program as a long term benefit plan as classified in IAS 19.
As of December 31, 2024 and 2023, the outstanding liability corresponding to the Program amounts to $ 86.0
million and $ 90.1 million, respectively. The total value of the units granted to date under the program,
considering the number of units and the book value per share as of December 31, 2024 and 2023, is $ 94.0 million
and $ 96.6 million, respectively.
Under Mexican law, Ternium's subsidiaries are required to pay their employees an annual benefit which is
determined as a percentage of taxable profit for the year.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
84
4.
ACCOUNTING POLICIES (continued)
(4) Social security contributions
Social security laws in force in the countries in which the Company operates provide for pension benefits to be
paid to retired employees from government pension plans and/or private fund managed plans to which employees
may elect to contribute. As stipulated by the respective laws, Ternium Argentina and Ternium Mexico make
monthly contributions calculated based on each employee's salary to fund such plans. The related amounts are
expensed as incurred. No additional liabilities exist once the contributions are paid.
(p) Provisions
Ternium has certain contingencies with respect to existing or potential claims, lawsuits and other proceedings.
Unless otherwise specified, provisions are recognized when Ternium has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of resources will be required to settle the
obligation, and the amount can be reliable estimated. Generally, accruals are based on developments to date,
Ternium's estimates of the outcomes of these matters and the advice of Ternium's legal advisors. The Company
also discloses the contingency in circumstances where management concludes no loss is probable or reasonably
estimable but it is reasonably possible that a loss may be incurred.
(q) Trade payables
Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the
effective interest method.
(r) Revenue recognition and other income
Revenue is recognized at a point of time from sales to direct customers upon the satisfaction of performance
obligations, which occurs when control of the goods transfers to the customer and the customer obtains the
benefits from the goods, the potential cash flows and the transaction price can be measured reliably, and it is
probable that the Company will collect the consideration in connection with the exchange of the goods. The
control over the goods is obtained by the customer depending on when the goods are made available to the
shipper or the customer takes possession of the goods, depending on the delivery terms. The Company considers
that it has completed its performance obligations when the goods are delivered to its customers or to a shipper
who will transport the goods to its customers. The revenue recognized by the Company is measured at the
transaction price of the consideration received or receivable to which the Company is entitled to, reduced by
estimated returns and other customer credits, such as discounts and volume rebates, based on the expected value
to be realized and after eliminating sales within the group.
Usiminas Mecánica S.A., one of Usiminas’ subsidiaries, uses the percentage-of-completion (POC) method to
account for the revenue from orders in progress sold at fixed prices. The use of the POC method requires
Management to estimate the services performed up to the balance sheet date as a proportion of the total services
to be performed.
Interest income is recognized on an effective yield basis.
(s) Borrowing Costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production
of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset
for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get
ready for their intended use or sale.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
85
4.
ACCOUNTING POLICIES (continued)
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
Other borrowing costs are expensed in the period in which they are incurred.
The amount of borrowing costs that Ternium capitalized during a period will not exceed the amount of
borrowing costs incurred during that period. As of December 31, 2024, 2023 and 2022, the capitalized borrowing
costs were nil, nil and $ 0.4 million, respectively.
(t) Cost of sales, selling, general and administrative expenses
Cost of sales and expenses are recognized in the income statement on the accrual basis of accounting.
Commissions, freight and other selling expenses, including shipping and handling costs, are recorded in Selling,
general and administrative expenses in the Consolidated Income Statement.
(u) Stripping costs
Stripping costs are the costs associated with the removal of overburden and other waste materials and can be
incurred before the mining production commences (“development stripping”) or during the production stage
(“production stripping”).
Development stripping costs that contribute to the future economic benefits of mining operations are capitalized
as intangible assets (Mining assets). Production stripping costs which are part of on-going activities are included
in the cost of the inventory produced (that is extracted) at each mine during the period in which they are
incurred.
Capitalization of development stripping costs finishes when the commercial production of the mine commences.
At that time, all development stripping costs are presented within Mining assets and depreciated on a unit-of-
production basis. It is considered that commercial production begins when the production stage of mining
operations begins and continues throughout the life of a mine.
(v) Mining development costs
Mining development costs are the costs associated to the activities related to the establishment of access to the
mineral reserve and other preparations for commercial production. These activities often continue during
production.
Development expenditures are capitalized and classified as Work in progress. On completion of development, all
assets included in Work in progress are individually reclassified to the appropriate category of property, plant
and equipment and depreciated accordingly.
(w) Asset retirement obligations
Ternium records asset retirement obligations (“ARO”) initially at the fair value of the legal or constructive
obligation in the period in which it is incurred and capitalizes the ARO by increasing the carrying amount of
property, plant and equipment. The fair value of the obligation is determined as the discounted value of the
expected future cash flows and is included in Provisions. The liability is accreted to its present value through net
financing cost and the capitalized cost is depreciated based in the unit of production method.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
86
4.
ACCOUNTING POLICIES (continued)
(x) Earnings per share
Earnings per share are calculated by dividing the net income attributable to shareholders by the daily weighted
average number of ordinary shares issued during the year, excluding the average number of shares of the parent
Company held by the Group. There are no dilutive securities for the periods presented.
(y) Derivative financial instruments and hedging activities
Ternium designates certain derivatives as hedges of a particular risk associated with a recognized asset or liability
or a highly probable forecast transaction. These transactions are classified as cash flow hedges (mainly interest
rate swaps, collars, currency forward contracts on highly probable forecast transactions and commodities
contracts). The effective portion of the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in OCI. Amounts accumulated in OCI are recognized in the income statement in the same
period as any offsetting losses and gains on the hedged item. The gain or loss relating to the ineffective portion is
recognized immediately in the income statement. The fair value of Ternium derivative financial instruments
(asset or liability) continues to be reflected in the statement of financial position.
For transactions designated and qualifying for hedge accounting, Ternium documents the relationship between
hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking
various hedge transactions. As of December 31, 2024 and 2023, the effective portion of designated cash flow
hedges (net of taxes) amounted to $ (37.3) million and $ 15.9 million, respectively, and were included under
"changes in the fair value of derivatives classified as cash flow hedges" line item in the statement of
comprehensive income (see Note 27 (a)).
More information about accounting for derivative financial instruments and hedging activities is included in
Note 29 "Financial risk management".
(z) Treasury shares
Acquisitions of treasury shares are recorded at acquisition cost, deducted from equity until disposal. The gains
and losses on disposal of treasury shares are recognized under "Reserves" in the consolidated statement of
financial position.
(aa) Cash flow
The consolidated statements of cash flows have been prepared using the indirect method and contain the use of
the following expressions and their respective meanings:
a) Operating activities: activities that constitute ordinary Group revenues, as well as other activities that cannot
be qualified as investing or financing.
b) Investing activities: acquisition, sale or disposal by other means of assets in the long-term and other
investments not included in cash and cash equivalents.
c) Financing activities: activities that generate changes in the size and composition of net equity and liabilities
that do not form part of operating activities.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
87
4.
ACCOUNTING POLICIES (continued)
(bb) Critical Accounting Estimates
The preparation of financial statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and
liabilities. Estimates and judgments are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
Management makes estimates and assumptions concerning the future. Actual results may differ significantly
from these estimates under different assumptions or conditions.
The principal estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are addressed below.
(1) Goodwill impairment test
Assessment of the recoverability of the carrying value of goodwill requires significant judgment. Management
evaluates goodwill allocated to the operating units for impairment on an annual basis or whenever there is an
impairment indicator.
Goodwill is tested at the level of the CGUs. Impairment testing of the CGUs is carried out and the value in use
determined in accordance with the accounting policy stated in Note 4(f). The discount rates used for these tests
are based on Ternium's weighted average cost of capital adjusted for specific country and currency risks
associated with the cash flow projections.The post-tax discount rate used as of December 31, 2024 was 12.38%
and no impairment charge resulted from the impairment test performed. See notes 4(f) and 4(e)(4).
(2) Income taxes
Management calculates current and deferred income taxes according to the tax laws applicable to each subsidiary
in the countries in which such subsidiaries operate. However, due to uncertain tax positions, certain adjustments
necessary to determine the income tax provision are finalized only after the balance sheet is issued. In cases in
which the final tax outcome is different from the amounts that were initially recorded, such differences will
impact the income tax and deferred tax provisions in the period in which such determination is made.
Also, when assessing the recoverability of tax assets, management considers the scheduled reversal of deferred
tax liabilities, projected future taxable income and tax planning strategies.
(3) Loss contingencies
Ternium is subject to various claims, lawsuits and other legal proceedings that arise in the ordinary course of
business, including customer claims in which a third party is seeking reimbursement or indemnity. The
Company's liability with respect to such claims, uncertain tax positions, lawsuits and other legal proceedings
cannot be estimated with certainty. Periodically, management reviews the status of each significant matter and
assesses potential financial exposure. If the potential loss from the claim or proceeding is considered probable
and the amount can be reasonably estimated, a liability is recorded. Management estimates the amount of such
liability based on the information available and the assumptions and methods it has concluded are appropriate,
in accordance with the provisions of IFRS. Accruals for such contingencies reflect a reasonable estimate of the
losses to be incurred based on information available, including the relevant litigation or settlement strategy, as of
the date of preparation of these financial statements.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
88
4.
ACCOUNTING POLICIES (continued)
As additional information becomes available, management will reassess its evaluation of the pending claims,
lawsuits and other proceedings and revise its estimates. The loss contingencies provision amounts to $ 962.8
million and $ 839.9 million as of December 31, 2024 and 2023, respectively.
(4) Useful Lives and Impairment of Property, Plant and Equipment and Other Long-lived Assets
In determining useful lives, management considered, among others, the following factors: age, operating
condition and level of usage and maintenance. Management conducted visual inspections for the purpose of (i)
determining whether the current conditions of such assets are consistent with normal conditions of assets of
similar age; (ii) confirming that the operating conditions and levels of usage of such assets are adequate and
consistent with their design; (iii) establishing obsolescence levels and (iv) estimating life expectancy, all of which
were used in determining useful lives. Management believes, however, that it is possible that the periods of
economic utilization of property, plant and equipment may be different than the useful lives so determined.
Furthermore, management believes that this accounting policy involves a critical accounting estimate because it is
subject to change from period to period as a result of variations in economic conditions and business
performance.
When assessing whether an impairment indicator may exist, the Company evaluates both internal and external
sources of information, such as the following:
• whether significant changes with an adverse effect on the entity have taken place during the period, or will take
place in the near future, in the technological, market, economic or legal environment in which the entity
operates or in the market to which an asset is dedicated;
• whether market interest rates or other market rates of return on investments have increased during the period,
and those increases are likely to affect the discount rate used in calculating an asset's value in use and decrease
the asset's recoverable amount materially;
• whether the carrying amount of the net assets of the entity is more than its market capitalization;
• whether evidence is available of obsolescence or physical damage of an asset.
• whether significant changes with an adverse effect on the entity have taken place during the period, or are
expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is
expected to be used. These changes include the asset becoming idle, plans to discontinue or restructure the
operation to which an asset belongs, plans to dispose of an asset before the previously expected date, and
reassessing the useful life of an asset as finite rather than indefinite; and
• whether evidence is available from internal reporting that indicates that the economic performance of an asset
is, or will be, worse than expected.
(5) Post-employment obligation estimates
The Company estimates at each year-end the provision necessary to meet its post-employment obligations in
accordance with the advice from independent actuaries. The calculation of post-employment and other employee
obligations requires the application of various assumptions. The main assumptions for post-employment and
other employee obligations include discount rates, compensation growth rates, pension growth rates and life
expectancy. Changes in the assumptions could give rise to adjustments in the results and liabilities recorded and
might have an impact on the post-employment and other employee obligations recognized in the future.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
89
4.
ACCOUNTING POLICIES (continued)
(6) Business combinations
The recognition of business combinations requires the excess of the purchase price of acquisitions over the net
book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. The Company
makes judgments and estimates in relation to the fair value of assets acquired and liabilities assumed, including
estimation of cash flow projections with significant assumptions related to revenue forecasts, EBITDA margins,
capital expenditures, discount rate and estimation of loss probability for the contingencies assumed. If any
unallocated portion is positive, it is recognized as goodwill, and if negative, it is recognized in the income
statement. See further information in note 3.
(7) Taxation
At year end, the Company assesses the sufficiency of future taxable income to utilize the recognized deferred tax
assets. The Company uses projections of future taxable income to assess the probability that the deferred tax
assets will be realized. Management applied significant judgment in assessing the recoverability of deferred tax
assets predicting historical profitability, projected future taxable profit, including assumptions related to revenue
forecast and EBITDA margins.
(cc) General sustainability matters and climate change
Ternium subscribed to the United Nations Global Compact in October 2019 and has been reporting its
contribution to the Sustainable Development Goals since then. The Company has established policies,
procedures, and plans that cover various ESG topics, including climate change, environmental management,
health and safety management, human resources management, community relations, supply chain management,
and principles of behavior and corporate governance.
Climate Change
The Company has established a governance system to address climate change at various levels. The Vice-
Chairman of the Board was appointed to report on the evolution of Ternium's climate change strategy to the
Board of Directors on a quarterly basis. At the management level, a decarbonization committee, chaired by the
CEO, periodically reviews performance indicators, progress on decarbonization projects, and updates on the
context, such as regulatory changes, market shifts, and trends.
The Company has also incorporated climate-related risks into its risk management policy and reviews both
transition risks and physical risks. For example, during 2021 and 2022, the Company engaged an external
consultant to assess the exposure of its assets and provide a conclusion on the level of risk, considering the
established preventive measures. The analysis examined exposure and vulnerability to five types of events: pluvial
flooding, tropical cyclones, landslides, forest fires, and droughts. The analysis concluded that Ternium's facilities
do not present significant risk, given the level of exposure and the mitigation measures implemented by the
Company under the scenarios and time periods analyzed. Management assessed that there have been no changes
since this analysis was performed.
In 2024, the Company updated its decarbonization target. The new target aims for a 15% reduction in the
emission intensity rate per ton of hot-rolled steel equivalent by 2030, compared to a 2023 baseline. This target
includes Scope 1, 2, and 3 (Categories 1 and 10) and is measured using the GHG Protocol methodology.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
90
4.
ACCOUNTING POLICIES (continued)
The Company’s strategy to achieve this 2030 reduction target includes prioritizing low-emission production
technologies, increasing the use of renewable sources in the energy mix, improving industrial performance,
executing energy efficiency initiatives, expanding carbon capture and usage capacity, and increasing the
participation of scrap in the metallic mix. Since these projects take several years to execute and complete, the
Company anticipates improvements in its intensity rate after 2025. The Company is also considering several
initiatives to continue its journey after 2030, including the possibility of carbon storage, the use of biofuels, and
hydrogen as reducing agents, as it aims for carbon neutrality, if and when economically and technologically
feasible.
In general, the decarbonization of the steel industry will require significant long-term investments, conditioned
by technological innovation, government regulations, capital availability for decarbonization projects, and
cooperation within the value chain. Factors such as access to abundant and affordable clean energy, appropriate
energy infrastructure, local and global regulations that ensure fair trade and carbon capture storage, access to
sustainable finance for low-emission steel-making technologies, and changes in consumer behavior will be key to
the development of solutions and outcomes in the coming decades.
Given that Ternium’s climate-change-related decarbonization plans span many years and are subject to
significant uncertainty, as described above, they have not been included as part of the assumptions used to
calculate future cash flows of the recoverable amount of the company’s CGUs, except for those plans that are
already approved or in process. Estimates and assumptions related to the impairment test for long-lived assets
and goodwill, useful lives of assets, capital and research and development expenditures, inventory valuation,
recovery of deferred tax assets and provisions, and contingent liabilities are based on available information and
government regulations in place as of December 31, 2024, as well as the companies already approved or in-
process investment plans.
Environmental Management
Given the strong relationship between industrial activity and environmental performance, the Company unified
the areas of environment and health and safety in 2021. Currently, these topics fall under the responsibility of the
Chief Environment, Health, and Safety Officer, appointed in 2023. Environmental performance is analyzed
monthly in Environmental, Health, and Safety meetings with executive officers. Furthermore, environmental
issues are included in regular meetings on industrial and business performance reviews held both locally and at a
corporate level. Finally, the Board of Directors is informed of events related to environmental issues that could
impact nearby communities or Ternium’s reputation and operations. In 2023, Ternium's CEO approved an
update to Ternium’s environmental and energy policy, which provides the framework to which the entire
company is expected to adhere. The main updates were: inclusion of a decarbonization roadmap and the
ambition of achieving carbon neutrality, subject to technological feasibility and market conditions; introduction
of the concept of the circular economy, expanding the scope of efficient use of natural resources; specific mention
of minimizing air emissions at the sites where we operate, optimizing water use, and maximizing its reuse;
inclusion of biodiversity protection in the areas where we operate and compensation for impacts; application of a
life cycle perspective and risk management in our continuous improvement processes; and encouragement of
purchasing sustainable and energy-efficient products, technologies, and services.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
91
4.
ACCOUNTING POLICIES (continued)
Health and Safety Management
Health and safety incidents undergo monthly reviews at the local level and at the corporate level. The Board of
Directors receives quarterly reports on recent events and the progress of the Health and Safety Strategy, alongside
the quarterly financial results.
The Company has local EHS teams, hygiene and medical departments. In 2023, the Company strengthened its
health and safety management organization by appointing a Chief Environment, Health and Safety (EHS)
Officer. The responsibility for ensuring the occupational safety of all individuals within their assigned areas falls
on the local managers of every production unit.
Workforce management
People’s management is structured at both local and corporate levels. The local Human Resources teams oversee
general working conditions, such as working hours, leave policies, payroll processing, and union relations, which
are closely tied to labor regulations. These matters are presented to Regional Presidents and Industrial Directors
as necessary.
Compensation policies and procedures, including employee benefits and mobility schemes, are established at the
corporate level. Annually, they undergo review in a dedicated meeting attended by the Global Compensation &
HR Shared Service Senior Director and team, alongside the Chief Human Resources Officer and the CEO.
Furthermore, as part of the annual performance review process, career committees convene within each division
to analyze performance and succession planning. This process is scaled up until a uniform curve and a general
plan is developed for the entire company.
Topics related to work-life balance, diversity and inclusion, employee training, as well as talent attraction and
retention, fall under the oversight of the Vice President of Global Talent Management. Subsequently, proposals
are presented to the Chief Human Resources Officer and the CEO for approval.
Ternium's community programs are developed in collaboration with the Techint Group, aiming to create an
international network of support and development across all affiliated companies. Within Ternium there are
regional Community Relations teams responsible for implementing community programs in their respective
regions and leading the relationship with the community stakeholders.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
92
5.
SEGMENT INFORMATION
As of March 31, 2024, following the acquisition of an additional participation in Usiminas on July 3, 2023, the
Chief Operating Decision Maker ("CODM") performed a review of the new business structure to decide on the
allocation of resources and the assessment of performance, and decided to organize the Company in two
operating segments: Steel and Mining.
The Steel segment includes the sales of steel products done by the Company's subsidiaries, which comprises
mainly slabs, heavy plates, hot and cold rolled products, coated products, stamped steel parts for the automotive
industry, roll-formed and tubular products, billets, bars and other products, including sales of energy.
The Mining segment includes the sales of mining products, done by the Company’s subsidiaries, mainly iron ore
and pellets, and comprises the mining activities of Las Encinas, an iron ore mining company in which Ternium
holds a 100% equity interest, the 50% of the operations and results performed by Peña Colorada, another iron
ore mining company in which Ternium maintains that same percentage over its equity interest, and the mining
activities of Mineraçao Usiminas, an iron ore mining company in which Usiminas holds a 70% equity interest.
Ternium’s Chief Executive Officer (“CEO”) functions as the CODM. The various geographic regions operate as
an integrated steel producer. The CEO allocates resources and assesses performance of the Steel Segment as an
integrated business and does the same with the Mining Segment. The CEO uses “Operating income –
Management view” as per the below table as the key performance measure which differs from operating income
determined in accordance with IFRS principally as follows:
•
The use of direct cost methodology to calculate the inventories, while under IFRS is at full cost, including
absorption of production overheads and depreciation.
•
The use of costs based on previously internally defined cost estimates, while, under IFRS, costs are
calculated at historical cost (with the FIFO method).
•
In the case of Usiminas, the use of costs based in the weighted average cost, while, under IFRS, costs are
calculated under the FIFO method.
•
Other differences related to other operating income and expenses.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
93
5.
SEGMENT INFORMATION (continued)
Year ended December 31, 2024
Steel
Mining
Inter-segment
eliminations
Total
Operating income - Management view
1,559,938
(165,862)
5,844
1,399,920
Reconciliation:
Differences in Cost of sales
(190,243)
Differences in Other operating income (expense), net
53,634
Operating income - Under IFRS
1,263,311
Financial income (expense), net
(194,214)
Equity in earnings (losses) of non-consolidated
companies
69,108
Provision for ongoing litigation related to the acquisition
of a participation in Usiminas
(410,200)
Income before income tax expense - IFRS
728,005
Net sales from external customers
17,220,220
428,840
—
17,649,060
Net sales from transactions with other operating segments
of the same entity
—
629,940
(629,940)
—
Depreciation and amortization
(551,621)
(191,656)
—
(743,277)
Year ended December 31, 2023
Steel
Mining
Inter-segment
eliminations
Total
Operating income - Management view
2,390,546
16,091
(2,463)
2,404,174
Reconciliation:
Differences in Cost of sales
(206,160)
Operating income - Under IFRS
2,198,014
Financial income (expense), net
123,454
Equity in earnings (losses) of non-consolidated
companies
105,305
Effect related to the increase of the participation in
Usiminas
(171,045)
Recycling of other comprehensive income related to
Usiminas
(934,946)
Income before income tax expense - IFRS
1,320,782
Net sales from external customers
17,280,993
329,099
—
17,610,092
Net sales from transactions with other operating segments
of the same entity
—
546,038
(546,038)
—
Depreciation and amortization
(542,295)
(115,397)
—
(657,692)
Year ended December 31, 2022
Steel
Mining
Inter-segment
eliminations
Total
Operating income - Management view
2,556,949
3,716
10,500
2,571,165
Reconciliation:
Differences in Cost of sales
128,354
Operating income - Under IFRS
2,699,519
Financial income (expense), net
(70,133)
Equity in earnings (losses) of non-consolidated
companies
37,114
Income before income tax expense - IFRS
2,666,500
Net sales from external customers
16,414,334
132
—
16,414,466
Net sales from transactions with other operating segments
of the same entity
—
410,636
(410,636)
—
Depreciation and amortization
(523,818)
(92,674)
—
(616,492)
Information on segment assets is not disclosed as it is not reviewed by the CEO.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
94
5.
SEGMENT INFORMATION (continued)
GEOGRAPHICAL INFORMATION
The Company had no revenues attributable to the Company’s country of incorporation (Luxembourg) in 2024,
2023 and 2022.
For purposes of reporting geographical information, net sales are allocated based on the customer’s location.
Allocation of depreciation and amortization is based on the geographical location of the underlying assets.
Year ended December 31, 2024
Mexico
Southern
region
Brazil
Other markets
Total
Net sales
8,701,272
2,415,303
4,280,784
2,251,701
17,649,060
Non-current assets (2)
5,625,883
1,085,913
2,382,168
309,302
9,403,266
Year ended December 31, 2023
Mexico
Southern
region
Brazil
Other markets
Total
Net sales
9,419,873
3,588,651
2,518,764
2,082,804
17,610,092
Non-current assets (2)
4,965,628
878,642
2,474,178
315,287
8,633,735
Year ended December 31, 2022
Mexico
Southern
region
Brazil (1)
Other markets
Total
Net sales
8,949,104
3,853,390
743,713
2,868,259
16,414,466
Non-current assets (2)
4,769,161
859,351
1,265,013
312,771
7,206,296
(1)The non-current assets value includes the impact of the impairment charge of $ 99.0 million recognized in the Brazil CGU.
(2) Includes Property, plant and equipment and Intangible assets.
REVENUES BY PRODUCT
Year ended December 31,
2024
2023
2022
Slabs
102,723
177,240
640,231
Hot rolled (1)
7,633,699
7,913,232
6,991,466
Cold rolled
2,623,498
2,379,499
1,951,702
Coated (2)
5,889,062
5,708,328
5,704,765
Roll-formed and tubular (3)
620,993
789,255
660,830
Billets, round bars and others
21,565
45,351
142,511
Other products (4)
757,520
597,187
322,961
TOTAL SALES
17,649,060
17,610,092
16,414,466
(1) Hot rolled includes hot rolled flat products, merchant bars, reinforcing bars, stirrups and rods.
(2) Coated includes tin plate and galvanized products.
(3) Roll-formed and tubular includes pre-engineered metal building systems, tubes, beams, insulated panels, roofing and cladding, roof
tiles and steel decks.
(4) Other products include mainly sales of energy and pig iron.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
95
6.
COST OF SALES
Year ended December 31,
2024
2023
2022
Inventories at the beginning of the year
4,948,376
3,470,215
3,908,305
Acquisition of business (Note 3)
—
1,707,311
—
Translation differences
(298,816)
(22,514)
—
Plus: Charges for the year
Raw materials and consumables used and
other movements
11,753,018
11,193,050
9,773,523
Services and fees
304,159
250,333
183,003
Labor cost
1,084,009
940,411
862,593
Depreciation of property, plant and equipment
589,309
556,630
532,160
Amortization of intangible assets
86,852
47,374
43,947
Maintenance expenses
950,939
825,809
612,928
Office expenses
18,203
14,873
10,295
Insurance
36,014
24,867
15,184
Change of obsolescence allowance
10,969
4,707
20,804
Valuation allowance
—
(15,333)
15,333
Recovery from sales of scrap and by-products
(29,851)
(37,186)
(42,000)
Others
57,554
38,567
21,422
Less: Inventories at the end of the year
(4,750,511)
(4,948,376)
(3,470,215)
Cost of Sales
14,760,224
14,050,737
12,487,282
7.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Year ended December 31,
2024
2023
2022
Services and fees (1)
106,272
91,853
73,401
Labor cost
382,392
355,967
299,139
Depreciation of property, plant and equipment
23,915
16,562
13,990
Amortization of intangible assets
43,201
37,126
26,395
Maintenance and expenses
12,312
10,340
8,311
Taxes
149,256
164,935
170,216
Office expenses
86,016
72,426
41,921
Freight and transportation
812,694
681,416
499,127
Increase (decrease) of allowance for doubtful accounts
5,566
12,528
114
Others
29,135
28,525
11,032
Selling, general and administrative expenses
1,650,759
1,471,678
1,143,646
(1) For the year ended December 31, 2024, it includes fees accrued for professional services rendered by PwC to Ternium S.A. and its
subsidiaries that amounted to $ 4,411, including $ 3,954 for audit services, $ 338 for audit-related services, and $ 119 for all other services.
For the year ended December 31, 2023, it includes fees accrued for professional services rendered by PwC to Ternium S.A. and its
subsidiaries that amounted to $ 5,340, including $ 4,783 for audit services, $ 268 for audit-related services, $ 8 for tax services, and $ 281
for all other services.
For the year ended December 31, 2022, it includes fees accrued for professional services rendered by PwC to Ternium S.A. and its
subsidiaries that amounted to $ 3,991, including $ 3,681 for audit services, $ 272 for audit-related services and $ 38 for all other services..
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
96
8.
LABOR COSTS (Included Cost of sales and Selling, General and Administrative expenses)
Year ended December 31,
2024
2023
2022
Wages, salaries and social security costs
1,377,006
1,216,566
1,093,105
Termination benefits
28,396
23,189
22,246
Post-employment benefits (Note 21 (i))
60,999
56,623
46,381
Labor costs
1,466,401
1,296,378
1,161,732
As of December 31, 2024, 2023 and 2022, the number of employees was 33,949, 34,458, and 20,510, respectively.
9.
OTHER OPERATING INCOME (EXPENSES), NET
Year ended December 31,
2024
2023
2022
Results of sundry assets
8,867
8,165
8,177
Gain from the agreement related to the post-retirement benefits from
Usiminas
—
108,696
—
Provision for legal claims and other matters (Note 19 and 25 (i) and (ii))
60,469
59,649
1,069
Other operating income (1)
—
—
5,735
Other operating income
69,336
176,510
14,981
Impairment charge (2)
(32,435)
(42,316)
(99,000)
Other operating expense (1)
(11,667)
(23,857)
—
Other operating expense
(44,102)
(66,173)
(99,000)
Other operating income (expenses), net
25,234
110,337
(84,019)
(1) For the year ended December 31, 2023, it includes the value update of certain tax liabilities in Usiminas of $10,000.
(2) For the years ended December 31, 2024 and 2023, see note 4(e)(2). For the year ended December 31, 2022, see note 4(f).
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
97
10.
OTHER FINANCIAL INCOME (EXPENSES), NET
Year ended December 31,
2024
2023
2022
Interest expense
(196,175)
(125,376)
(46,737)
Finance expense
(196,175)
(125,376)
(46,737)
Interest income
297,820
255,009
75,145
Finance income
297,820
255,009
75,145
Net foreign exchange gain (loss)
(104,024)
98,037
(163,740)
Change in fair value of financial assets
(145,768)
1,899
78,309
Derivative contract results
12,329
(60,183)
(2,132)
Others
(58,396)
(45,932)
(10,978)
Other financial income (expenses), net
(295,859)
(6,179)
(98,541)
11.
INCOME TAX EXPENSE
Income tax expense for each of the years presented is as follows:
Year ended December 31,
2024
2023
2022
Current tax
Current tax
(322,832)
(578,902)
(671,016)
Recovery of income tax
—
13,429
—
Deferred tax (Note 20)
Deferred tax
(256,830)
102,431
80,692
Recognition of previously unrecognized deferred tax assets (1)
25,438
128,634
—
Recovery of income tax
—
—
16,596
Income tax expense
(554,224)
(334,408)
(573,728)
(1) For 2024 and 2023, it includes the recognition of previously unrecognized tax losses and temporary differences in Ternium Investments
S.à r.l. and Ternium Brasil Ltda, respectively.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
98
11.
INCOME TAX EXPENSE (continued)
Income tax expense for the years ended December 31, 2024, 2023 and 2022 differed from the amount computed
by applying the statutory income tax rate in force in each country in which the company operates to pre-tax
income as a result of the following:
Year ended December 31,
2024
2023
2022
Income before income tax
728,005
1,320,782
2,666,500
Income tax expense at statutory tax rate
(327,243)
(643,686)
(785,888)
Non taxable income
—
39,755
—
Non deductible expenses
(5,793)
—
(45,862)
Current tax expense related to Pillar II
(21,436)
—
—
Effect of currency translation on tax base (1)
(170,078)
180,582
241,426
Recognition of previously unrecognized deferred tax assets
25,438
128,634
—
Provision for tax losses
(55,112)
(53,122)
—
Recovery of income tax
—
13,429
16,596
Income tax expense
(554,224)
(334,408)
(573,728)
(1) Ternium applies the liability method to recognize deferred income tax on temporary differences between the tax bases of assets and
their carrying amounts in the financial statements. By application of this method, Ternium recognizes gains and losses on deferred income
tax due to the effect of the change in the value on the tax basis in subsidiaries, which have a functional currency different to their local
currency, mainly Mexico, Brazil and Argentina.
Tax rates used to perform the reconciliation between tax expense (income) and accounting profit are those in
effect at each relevant date or period in each applicable jurisdiction.
In December 2021, the Organization for Economic Co-operation and Development (“OECD”) released the Pillar
Two model rules (the Global Anti-Base Erosion rules, or “GloBE”) to reform international corporate taxation.
Following Pillar Two OECD’s initiative, the European Union adopted in December 2022 a directive to impose a
global minimum taxation for multinational companies in the Union, to be effective as from 2024.
In May 2023, the IASB made narrow-scope amendments to IAS 12 setting an exception that provides relief from
the requirement to recognize and disclose deferred taxes arising from enacted or substantively enacted tax laws
that implement the Pillar Two model rules, including tax laws that implement qualified domestic minimum top-
up taxes as per described in those rules.
On December 20, 2023, the Luxembourg Parliament approved the Pillar Two law transposing the EU Pillar Two
Directive into domestic legislation. The law enters into force as from fiscal years starting on or after December
31, 2023.
The Company is within the scope of the rules, and therefore will be required to calculate its GloBE effective tax
rate for each jurisdiction where it operates and will be liable to pay a top-up tax for the difference between its
GloBE effective tax rate per jurisdiction and the 15% minimum rate, as from 2024.
The Company applies the exception to recognizing and disclosing information about deferred tax assets and
liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12 issued in May 2023.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
99
12.
PROPERTY, PLANT AND EQUIPMENT, NET
(1) Property, plant and equipment,net
Year ended December 31, 2024
Land
Buildings
and
improvements
Production
equipment
Vehicles,
furniture
and fixtures
Work in
progress
Spare
parts
Right-of-
use
assets
Total
Values at the beginning of the year
Cost
774,052
4,407,345 8,514,780
344,859 1,121,004 202,923
438,596 15,803,559
Accumulated depreciation
—
(2,162,192) (5,462,979)
(270,954)
— (31,271) (238,476) (8,165,872)
Net book value as of January 1,
2024
774,052
2,245,153 3,051,801
73,905 1,121,004 171,652
200,120 7,637,687
Opening net book value
774,052
2,245,153 3,051,801
73,905 1,121,004 171,652
200,120 7,637,687
Translation differences
(21,382)
(41,246)
(135,103)
(4,142)
(65,626)
(5,081)
(2,631) (275,211)
Additions (1)
24,619
22,373
19,222
1,706 1,527,992
44,307
13,850 1,654,069
Disposals / Consumptions
—
(2,604)
—
(970)
(2,366) (32,342)
(2,658)
(40,940)
Indexation
—
—
—
—
—
—
21,626
21,626
Transfers
3,390
475,523
404,380
45,558 (932,037)
943
(609)
(2,852)
Depreciation charge
—
(179,100)
(354,490)
(27,005)
—
(111)
(52,518) (613,224)
Closing net book value
780,679
2,520,099 2,985,810
89,052 1,648,967 179,368
177,180 8,381,155
Values at the end of the year
Cost
780,679
4,824,531 8,783,691
371,532 1,648,967 210,643
371,560 16,991,603
Accumulated depreciation
—
(2,304,432) (5,797,881)
(282,480)
— (31,275) (194,380) (8,610,448)
Net book value as of December 31,
2024
780,679
2,520,099 2,985,810
89,052 1,648,967 179,368
177,180 8,381,155
(1) It includes $ 966 million related to additions of Property, plant and equipment in Mexico, mainly in connection with the investment
plant in the Pesquería facilities.
Year ended December 31, 2023
Land
Buildings
and
improvements
Production
equipment
Vehicles,
furniture
and fixtures
Work in
progress
Spare parts
Right-of-
use
assets
Total
Values at the beginning of the year
Cost
607,971
4,091,108 7,744,607
309,469
547,102
173,731 395,620 13,869,608
Accumulated depreciation
—
(2,012,992) (5,123,790)
(254,599)
—
(30,864) (185,476) (7,607,721)
Net book value as of January 1,
2023
607,971
2,078,116 2,620,817
54,870
547,102
142,867 210,144 6,261,887
Opening net book value
607,971
2,078,116 2,620,817
54,870
547,102
142,867 210,144 6,261,887
Translation differences
(41)
358
1,810
53
(790)
(183)
(869)
338
Acquisition of business (note 3)
93,842
170,609
407,931
10,880
173,100
27,986
20,432
904,780
Additions
70,415
5,333
24,861
2,903
921,175
37,437
16,061 1,078,185
Disposals / Consumptions
(2,314)
(409)
(388)
(952)
(1,861)
(35,792)
(104)
(41,820)
Indexation
—
—
—
—
—
—
10,626
10,626
Transfers
4,179
139,552
343,301
27,825 (517,722)
(252)
—
(3,117)
Depreciation charge
—
(148,406)
(346,531)
(21,674)
—
(411) (56,170) (573,192)
Closing net book value
774,052
2,245,153 3,051,801
73,905 1,121,004
171,652 200,120 7,637,687
Values at the end of the year
Cost
774,052
4,407,345 8,514,780
344,859 1,121,004
202,923 438,596 15,803,559
Accumulated depreciation
—
(2,162,192) (5,462,979)
(270,954)
—
(31,271) (238,476) (8,165,872)
Net book value as of December 31,
2023
774,052
2,245,153 3,051,801
73,905 1,121,004
171,652 200,120 7,637,687
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
100
12.
PROPERTY, PLANT AND EQUIPMENT, NET (continued)
(2) Right-of-use assets
Right-of-use assets
Land
Buildings
and
improvements
Production
equipment
Vehicles,
furniture and
fixtures
Total
Values at the beginning of the year
Cost
376
281,250
156,614
355
438,595
Accumulated depreciation
(29)
(152,288)
(85,999)
(159)
(238,475)
Net book value as of January 1, 2024
347
128,962
70,615
196
200,120
Opening net book value
347
128,962
70,615
196
200,120
Translation differences
—
186
(2,800)
(17)
(2,631)
Additions
—
12,411
1,439
—
13,850
Disposal/Derecognition
—
(144)
(2,514)
—
(2,658)
Transfers
—
—
(609)
—
(609)
Indexation
194
14,429
7,003
—
21,626
Depreciation charge
(16)
(34,532)
(17,837)
(133)
(52,518)
Closing net book value
525
121,312
55,297
46
177,180
Values at the end of the year
Cost
570
258,797
112,060
134
371,561
Accumulated depreciation
(45)
(137,485)
(56,763)
(88)
(194,381)
Net book value as of December 31,
2024
525
121,312
55,297
46
177,180
Right-of-use assets
Land
Buildings
and
improvements
Production
equipment
Vehicles,
furniture and
fixtures
Total
Values at the beginning of the year
Cost
1,339
266,330
127,765
187
395,621
Accumulated depreciation
(4)
(118,709)
(66,639)
(125)
(185,477)
Net book value as of January 1, 2023
1,335
147,621
61,126
62
210,144
Opening net book value
1,335
147,621
61,126
62
210,144
Translation differences
—
(790)
(79)
—
(869)
Acquisition of business (note 3)
—
3,894
16,433
105
20,432
Additions
—
3,716
12,304
41
16,061
Disposal/Derecognition
—
(85)
(19)
—
(104)
Indexation
(962)
9,784
1,704
100
10,626
Depreciation charge
(26)
(35,178)
(20,854)
(112)
(56,170)
Closing net book value
347
128,962
70,615
196
200,120
Values at the end of the year
Cost
376
281,250
156,614
355
438,595
Accumulated depreciation
(29)
(152,288)
(85,999)
(159)
(238,475)
Net book value as of December 31,
2023
347
128,962
70,615
196
200,120
The cost related to variable-lease payments that do not depend on an index or rate amounted to $ 20.3 million
for the year ended December 31, 2024 ($ 19.1 million and $ 14.5 million for the year ended December 31, 2023
and 2022, respectively). The expenses related to leases for which the Company applied the practical expedient
described in paragraph 5 (a) of IFRS 16 (leases with contract term of less than 12 months) amounted to $ 2.1
million for the year ended December 31, 2024 ($ 2.8 million and $ 1.9 million for the year ended December 31,
2023 and 2022, respectively).
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
101
13.
INTANGIBLE ASSETS, NET
Year ended December 31, 2024
Information
system
projects
Mining
assets
Exploration
and
evaluation
costs
Customer
relationships
and other
contractual
rights
Trademarks
Goodwill
Total
Values at the beginning of the year
Cost
563,120
403,875
14,639
298,134
73,935
662,307
2,016,010
Accumulated amortization
(381,622) (275,533)
—
(288,872)
(73,935)
—
(1,019,962)
Net book value as of January 1, 2024
181,498
128,342
14,639
9,262
—
662,307
996,048
Opening net book value
181,498
128,342
14,639
9,262
—
662,307
996,048
Translation differences
(8,810)
—
—
—
—
—
(8,810)
Additions
100,345
62,303
37,443
—
—
—
200,091
Disposals / Consumptions
(2,216)
(2,000)
—
(36)
—
—
(4,252)
Impairment charge (note 4 (e)(2))
—
(32,435)
—
—
—
—
(32,435)
Transfers
1,463
35,355
(35,296)
—
—
—
1,522
Amortization charge
(48,297) (81,436)
—
(320)
—
—
(130,053)
Closing net book value
223,983
110,129
16,786
8,906
—
662,307
1,022,111
Values at the end of the year
Cost
651,838
466,817
16,786
298,098
73,935
662,307
2,169,781
Accumulated amortization
(427,855) (356,688)
—
(289,192)
(73,935)
—
(1,147,670)
Net book value as of December 31,
2024
223,983
110,129
16,786
8,906
—
662,307
1,022,111
Year ended December 31, 2023
Information
system
projects
Mining
assets
Exploration
and
evaluation
costs
Customer
relationships
and other
contractual
rights
Trademarks
Goodwill
Total
Values at the beginning of the year
Cost
460,434
358,767
29,360
297,427
73,935
662,307
1,882,230
Accumulated amortization
(348,260) (227,098)
—
(288,528)
(73,935)
—
(937,821)
Net book value as of January 1, 2023
112,174
131,669
29,360
8,899
—
662,307
944,409
Opening net book value
112,174
131,669
29,360
8,899
—
662,307
944,409
Translation differences
(227)
—
—
—
—
—
(227)
Acquisition of business (note 3)
34,451
—
—
—
—
—
34,451
Additions
67,754
32,407
40,333
726
—
—
141,220
Disposals / Consumptions
(113)
—
—
(19)
—
—
(132)
Impairment charge (note 4 (e)(2))
—
(42,316)
—
—
—
—
(42,316)
Transfers
3,181
55,016
(55,054)
—
—
—
3,143
Amortization charge
(35,722)
(48,434)
—
(344)
—
—
(84,500)
Closing net book value
181,498
128,342
14,639
9,262
—
662,307
996,048
Values at the end of the year
Cost
563,120
403,875
14,639
298,134
73,935
662,307
2,016,010
Accumulated amortization
(381,622)
(275,533)
—
(288,872)
(73,935)
—
(1,019,962)
Net book value as of December 31,
2023
181,498
128,342
14,639
9,262
—
662,307
996,048
The Company has not registered any impairment charges in connection with Goodwill (see notes 4 (f) and (bb)(1)
and (4)).
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
102
14.
INVESTMENTS IN NON-CONSOLIDATED COMPANIES
As of December 31,
2024
2023
At the beginning of the year
517,265
821,571
Acquisition of business (note 3)
—
400,037
Derecognition related to the increase of the participation in Usiminas
—
(771,995)
Equity in earnings of non-consolidated companies
69,108
105,305
Other comprehensive income and other effects
(90,795)
(2,812)
Dividends from non-consolidated companies (1)
(27,062)
(34,841)
At the end of the year
468,516
517,265
(1) Mainly related to dividends from Unigal Usiminas Ltda. and MRS Logística S.A.
The principal investments in non-consolidated companies, all of which are unlisted, are:
Country of
incorporation
Main activity
Voting rights at
Value at
December
31, 2024
December
31, 2023
December
31, 2024
December
31, 2023
Techgen S.A. de C.V.
Mexico
Provision of
electric power
48.00 %
48.00 %
130,433
116,849
Unigal Usiminas Ltda.
Brazil
Manufacturing
and selling of
l
d
70.00 %
70.00 %
98,280
124,064
MRS Logística S.A
Brazil
Logistical
services
11.48 %
11.41 %
203,778
235,268
Other non-consolidated
i
(1)
36,025
41,084
468,516
517,265
(1) It includes the investments held in Finma S.A.I.F., Recrotek S.R.L. de C.V., Gas Industrial de Monterrey S.A. de C.V.,
Modal Terminal de Graneis Ltda., Usiroll – Usiminas Court Tecnologia em Acabamento Superficial Ltda, Codeme
Engenharia S.A, Terminal de Cargas Paraopeba Ltda., Terminal de Cargas Sarzedo Ltda., and Metalcentro Ltda.
(a) Techgen S.A. de C.V.
Techgen is a Mexican natural gas-fired combined cycle electric power plant in the Pesquería area of the State of
Nuevo León, Mexico. The company started producing energy on December 1, 2016 and is fully operational. As
of February 2017, Ternium, Tenaris, and Tecpetrol International S.A. (a wholly-owned subsidiary of San Faustin
S.A., the controlling shareholder of both Ternium and Tenaris) completed their investments in Techgen. Techgen
is currently owned 48% by Ternium, 30% by Tecpetrol and 22% by Tenaris. Ternium and Tenaris also agreed
to enter into power supply and transportation agreements with Techgen, pursuant to which Ternium and
Tenaris will contract 78% and 22%, respectively, of Techgen’s power capacity of 900 megawatts.
Techgen stated in its unaudited annual accounts, prepared in accordance with IFRS Accounting Standards
(International Financial Reporting Standards), as of and for the year ended December 31, 2024, that revenues
amounted to $ 253 million ($ 444 million as of December 31, 2023), net profit from continuing operations to $ 27
million ($ 55 million as of December 31, 2023), non-current assets to $ 692 million ($ 766 million as of December
31, 2023), current assets to $ 104 million ($ 175 million as of December 31, 2023), non-current liabilities to $ 415
million ($ 466 million as of December 31, 2023), current liabilities to $ 109 million ($ 232 million as of December
31, 2023) and shareholders’ equity to $ 272 million ($ 243 million as of December 31, 2023).
During 2017 and 2016, Techgen’s shareholders made additional investments in Techgen, in the form of
subordinated loans, which in the case of Ternium amounted to $ 148.4 million as of December 31, 2024, and
which are due in June 2026.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
103
14.
INVESTMENTS IN NON-CONSOLIDATED COMPANIES (continued)
On February 2019, Techgen S.A. de C.V. entered into syndicated loan agreement with HSBC Mexico, Natixis,
Credit Agricole, BNP, Santander, Intesa SP and Norinchukin (the “Syndicated Loan”), according to the following
terms: (i) Libor + 170 bps; (ii) maturity on February 13, 2026; (iii) average life 4,30 years; and (iv) guaranteed by:
assets, shares, a debt service reserve account - which represents 10% of the outstanding amount- and the fix
capacity charge cash-flow.
On August 5, 2021, Ternium Investments completed the purchase of a participation in this Syndicated Loan for
an amount of $ 68 million. As of December 31, 2024, the outstanding syndicated loan amount was of $ 188
million and Ternium Investments’ participation was of $ 39 million.
For commitments from Ternium in connection with Techgen, see note 25.
(b) Unigal Usiminas Ltda.
Unigal is a Brazilian joint venture with a plant located in Ipatinga, Minas Gerais, between Usiminas and Nippon
Steel Corporation, which hold 70% and 30% ownership interest, respectively. The main activity of this joint
venture is the transformation of cold-rolled coils, provided only by Usiminas, into hot-dipped galvanized coils.
The plant has a galvanizing production capacity of 1,030 million tons per year. The control of Unigal is shared
between the partners, as provided for in the shareholders’ agreement.
Unigal stated in its unaudited annual accounts, prepared in accordance with IFRS Accounting Standards
(International Financial Reporting Standards), as of and for the year ended December 31, 2024, that revenues
amounted to $ 68 million ($37 million for the six-month period ended December 31, 2023), net profit from
continuing operations to $ 28 million ($ 17 million for the six-month period ended December 31, 2023), non-
current assets to $ 126 million ($ 163 million as of December 31, 2023), current assets to $ 35 million ($ 40 million
as of December 31, 2023), non-current liabilities to $ 38 million ($ 48 million as of December 31, 2023), current
liabilities to $ 9 million ($ 11 million as of December 31, 2023) and shareholders’ equity to $ 114 million ($143
million as of December 31, 2023).
(c) MRS Logística S.A.
MRS Logística is a Brazilian railway cargo operator and logistics services provider that manages a 1,634 km
network in the states of Minas Gerais, Rio de Janeiro and São Paulo, a region that concentrates about half of the
Brazilian GDP. Usiminas holds a 11.48% ownership interest, along with CSN (18.6%), Congonhas Minérios
(18.6%), Vale (10.9%), Gerdau (1.3%) and a wide group of small investors (6.5%). These companies, through a
shareholders’ agreement, constitute, through representatives, the Board of Directors, which is responsible, among
other duties, for this company’s overall strategic direction, for the decision on most significant investments and
for the health and longevity of the organization.
MRS Logística stated in its unaudited annual accounts, prepared in accordance with IFRS Accounting Standards
(International Financial Reporting Standards), as of and for the year ended December 31, 2024, that revenues
amounted to $ 1,304 million ($ 727 million for the six-month period ended December 31, 2023), net profit from
continuing operations to $ 263 million ($ 148 million for the six-month period ended December 31, 2023), non-
current assets to $ 2,461 million ($ 2,779 million as of December 31, 2023), current assets to $ 868 million ($ 954
million as of December 31, 2023), non-current liabilities to $ 1,576 million ($ 1,709 million as of December 31,
2023), current liabilities to $ 547 million ($ 704 million as of December 31, 2023) and shareholders’ equity to $
1,206 million ($1,320 million as of December 31, 2023).
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
104
15.
RECEIVABLES, NET – NON CURRENT AND CURRENT
As of December 31,
2024
2023
Receivables with related parties (Notes 26 and 14 (a))
147,285
135,124
Employee advances and loans
25,299
28,812
Advances to suppliers for the purchase of property, plant and equipment
218,503
181,962
Advances to suppliers for the purchase of property, plant and equipment with related
parties (Note 26)
131,365
123,599
Other tax credits
237,530
356,687
Judicial deposits and other receivables
165,667
178,602
Others
35,649
68,459
Receivables, net – Non-current
961,298
1,073,245
The carrying value of these receivables approximates the fair value.
As of December 31,
2024
2023
Value added tax
491,981
508,318
Income tax credits
129,713
486,470
Other tax credits
151,965
41,909
Employee advances and loans
9,049
12,592
Advances to suppliers
40,593
39,288
Advances to suppliers with related parties (Note 26)
2,844
3,166
Expenses paid in advance
33,235
28,207
Government tax refunds on exports
2,486
4,120
Receivables with related parties (Note 26)
13,389
11,387
Others
27,184
37,407
Receivables, net – Current
902,439
1,172,864
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
105
16.
TRADE RECEIVABLES, NET - NON CURRENT AND CURRENT
As of December 31,
2024
2023
Trade receivables
4,545
6,430
Allowance for doubtful accounts (Note 19)
(4,545)
(6,430)
Trade receivables, net – Non-current
—
—
Current accounts
1,586,615
2,092,361
Trade receivables with related parties (Note 26)
23,251
26,183
Allowance for doubtful accounts (Note 19)
(47,808)
(53,045)
Trade receivables, net - Current
1,562,058
2,065,499
Trade receivables, net as of December 31, 2024
Total
Fully
performing
Past due
Guaranteed
604,467
570,821
33,646
Not guaranteed
1,009,944
944,236
65,708
Trade receivables
1,614,411
1,515,057
99,354
Allowance for doubtful accounts (Note 19)
(52,353)
—
(52,353)
Trade receivables, net
1,562,058
1,515,057
47,001
Trade receivables, net as of December 31, 2023
Total
Fully
performing
Past due
Guaranteed
697,001
664,698
32,303
Not guaranteed
1,427,973
1,246,206
181,767
Trade receivables
2,124,974
1,910,904
214,070
Allowance for doubtful accounts (Note 19)
(59,475)
—
(59,475)
Trade receivables, net
2,065,499
1,910,904
154,595
17.
INVENTORIES, NET
As of December 31,
2024
2023
Raw materials, materials and spare parts
1,340,641
1,409,316
Goods in process
2,158,745
2,312,068
Finished goods
837,118
947,768
Goods in transit
536,159
479,248
Obsolescence allowance (Note 19)
(122,152)
(200,024)
Inventories, net
4,750,511
4,948,376
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
106
18.
CASH, CASH EQUIVALENTS AND OTHER INVESTMENTS, NON-CURRENT AND
CURRENT
As of December 31,
2024
2023
(i) Other investments
Investments in debt instruments and other
22,823
210,774
Other investments
156
156
Other investments, net – Non-current
22,979
210,930
As of December 31,
2024
2023
(i) Other investments
Other deposits with maturity of more than three months
2,160,051
1,975,646
Other investments - Current
2,160,051
1,975,646
(ii) Cash and cash equivalents
Cash and banks
456,385
492,684
Restricted cash
2,746
3,129
Short-term bank deposits
413,965
478,778
Other deposits with maturity of less than three months
818,167
871,422
Cash and cash equivalents
1,691,263
1,846,013
19.
ALLOWANCES AND PROVISIONS - NON CURRENT AND CURRENT
Provisions and allowances - Non current
Deducted from
assets
Liabilities
Liabilities
Allowance for
doubtful
accounts
Legal claims
and other
matters
Asset
retirement
obligation
Year ended December 31, 2024
Values at the beginning of the year
6,430
839,921
104,455
Translation differences
(1,387)
(163,514)
(13,546)
Additions
—
32,176
14,597
Reversals
(34)
(92,645)
(1,900)
Transfers
—
—
(23,063)
Uses
(464)
(63,338)
—
As of December 31, 2024
4,545
552,600
80,543
Year ended December 31, 2023
Values at the beginning of the year
—
81,422
38,104
Translation differences
75
(4,108)
7,558
Acquisition of business (note 3)
6,663
856,153
58,127
Additions
—
37,112
828
Reversals
(308)
(96,761)
(162)
Uses
—
(33,897)
—
As of December 31, 2023
6,430
839,921
104,455
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
107
19.
ALLOWANCES AND PROVISIONS - NON CURRENT AND CURRENT (continued)
Provisions and allowances - Current
Deducted from assets
Liabilities
Allowance for
doubtful
accounts
Obsolescence
allowance
Asset
retirement
obligation
Provision for
ongoing
litigation
related to the
acquisition of a
participation in
Usiminas
Year ended December 31, 2024
Values at the beginning of the year
53,045
200,024
7,332
—
Translation differences
(6,835)
(18,436)
(7,101)
—
Additions
9,089
57,550
12,294
813,988
Reversals
(3,489)
(46,581)
(17,770)
(403,788)
Transfers
—
—
23,063
—
Uses
(4,002)
(70,405)
—
—
As of December 31, 2024
47,808
122,152
17,818
410,200
Year ended December 31, 2023
Values at the beginning of the year
9,870
79,063
3,304
—
Translation differences
(771)
(1,521)
(217)
—
Acquisition of business (note 3)
37,963
77,895
1,428
—
Additions
15,639
35,215
6,946
—
Reversals
(2,803)
(30,508)
—
—
Uses
(6,853)
39,880
(4,129)
—
As of December 31, 2023
53,045
200,024
7,332
—
20.
DEFERRED INCOME TAX
Deferred income taxes are calculated in full on temporary differences under the liability method using the tax
rate of the applicable country.
Changes in deferred income tax are as follows:
As of December 31,
2024
2023
At the beginning of the year
1,542,565
37,495
Acquisition of business (note 3)
—
1,327,232
Translation differences
(263,349)
(4,373)
Recognition of previously unrecognized tax losses
25,438
128,634
Charges directly to other comprehensive income
57,867
(48,854)
Deferred tax credit (note 11)
(256,830)
102,431
At the end of the year
1,105,691
1,542,565
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
108
20.
DEFERRED INCOME TAX (continued)
The changes in deferred tax assets and liabilities (prior to offsetting the balances within the same tax jurisdiction)
during the year are as follows:
Deferred tax assets
(liabilities)
At the
beginning of
the year
Translation
differences
Credits
(Charges)
directly to
OCI
Recognition
of previously
unrecognized
tax losses
Income
statement
credit
(charge)
Total as of
December
31, 2024
Property, pland and
equipment
323,538
(81,642)
—
—
(111,558)
130,338
Inventories
17,831
(15,440)
—
—
(40,304)
(37,913)
Intangible assets
134,328
(34,905)
—
—
52,978
152,401
Provisions
354,097
(48,805)
—
—
(38,024)
267,268
Trade receivables
42,674
(5,608)
—
—
4,242
41,308
Tax losses (1)
382,971
(65,362)
—
25,438
(28,987)
314,060
Other (2)
287,126
(11,587)
57,867
—
(95,177)
238,229
At the end of the year
1,542,565
(263,349)
57,867
25,438
(256,830)
1,105,691
(1) As of December 31, 2024, the recognized deferred tax assets on tax losses amount to $ 314.1 million, mainly connected to Ternium
Brasil Ltda. and Usinas Siderúrgicas de Minas Gerais S.A. Additionally, there are net unrecognized deferred tax assets of $ 8.0 million,
connected to Usinas Siderúrgicas de Minas Gerais S.A., and unrecognized tax losses amounting to $ 287.6 million from Usinas Siderúrgicas
de Minas Gerais S.A. and $ 688.4 million from Ternium Brasil Ltda. Under the Luxembourg tax law, tax losses generated before 2017 can
be carried forward indefinitely and are not subject to any yearly consumption limitation, while losses incurred as from 2017 may be carried
forward for a maximum of 17 years. Unrecognized tax losses of Ternium SA as of December 31, 2023 amounted to $ 2.2 billion and the
estimated tax loss for the fiscal year 2024 amounted to $ 26.7 million, with approximately 92% of the referred tax losses generated before
2017. Unrecognized tax losses of Ternium Investments S.à r.l. as of December 31, 2023 amounted to $ 2.6 billion and the estimated tax
result for fiscal year 2024 amounted to $ 7.8 million, with approximately 98% of the referred tax losses generated before 2017.
(2) It corresponds mainly to the deferred tax assets related to post-employment benefits and asset retirement obligations.
Deferred tax assets
(liabilities)
At the
beginning
of the year
Translation
differences
Acquisition
of business
Credits
(Charges)
directly to
OCI
Recognition
of previously
unrecognized
tax losses
Income
statement
credit
(charge)
Total as of
December 31,
2023
Property, pland and
equipment
(200,556)
(2,360)
412,320
—
—
114,134
323,538
Inventories
(69,594)
(903)
116,290
—
—
(27,962)
17,831
Intangible assets
(22,923)
(683)
143,033
—
—
14,901
134,328
Provisions
98,999
(698)
255,529
—
—
267
354,097
Trade receivables
15,515
—
28,510
—
—
(1,351)
42,674
Tax losses (3)
17,400
4,901
304,237
—
—
56,433
382,971
Other (4)
198,654
(4,630)
67,313
(48,854)
128,634
(53,991)
287,126
At the end of the year
37,495
(4,373) 1,327,232
(48,854)
128,634
102,431
1,542,565
(3) As of December 31, 2023, the recognized deferred tax assets on tax losses amount to $ 383.0 million, mainly connected to Ternium
Brasil Ltda. and Usinas Siderúrgicas de Minas Gerais S.A. Additionally, there are net unrecognized deferred tax assets of $ 14.2 million,
connected to Usinas Siderúrgicas de Minas Gerais S.A., and unrecognized tax losses amounting to $ 357.4 million from Usinas
Siderúrgicas de Minas Gerais S.A. and $ 889.4 million from Ternium Brasil Ltda. Under the Luxembourg tax law, tax losses generated
before 2017 can be carried forward indefinitely and are not subject to any yearly consumption limitation, while losses incurred as from
2017 may be carried forward for a maximum of 17 years. Unrecognized tax losses of Ternium SA as of December 31, 2022 amounted to $
2.1 billion and the estimated tax loss for the fiscal year 2023 amounted to $ 30.1 million, with approximately 92% of the referred tax losses
generated before 2017. Unrecognized tax losses of Ternium Investments S.à r.l. as of December 31, 2022 amounted to $ 2.6 billion and the
estimated tax result for fiscal year 2023 amounted to $ 0.9 million, with approximately 98% of the referred tax losses generated before
2017.
(4) It corresponds mainly to the deferred tax assets related to post-employment benefits and asset retirement obligations.
Deferred tax assets and liabilities are offset when the entity a) has a legally enforceable right to set off the
recognized amounts; and b) intends to settle the tax on a net basis or to realize the asset and settle the liability
simultaneously.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
109
21.
OTHER LIABILITIES-NON CURRENT AND CURRENT
As of December 31,
2024
2023
(i) Other liabilities - Non current
Post-employment benefits
573,834
673,453
Other employee benefits
73,502
93,194
Asset retirement obligation (note 19) (1)
80,543
104,455
Put option liability (note 3 (e))
—
249,264
Other
38,082
28,632
Other liabilities – Non-current
765,961
1,148,998
The carrying value of these liabilities approximates the fair value.
(1) The asset in connection with this liability is included in Property, plant and equipment.
Post-employment benefits
The amounts recognized in the consolidated statement of financial position are determined as follows:
Post-employment benefits
As of December 31,
2024
2023
Present value of obligations
1,456,677
1,975,462
Fair value of plan assets
(1,032,356)
(1,525,330)
Asset ceiling
149,513
223,321
Net liability (asset) in the statement of financial position
573,834
673,453
The amounts recognized in the consolidated income statement are as follows:
Post-employment benefits
Year ended December 31,
2024
2023
Current service cost
17,260
14,876
Interest cost (income), net
40,217
30,686
Interest on Asset ceiling/ Onerous liability
16,678
20,973
Reversal of prior service cost - Saúde Usiminas healthcare plan
—
(108,696)
Total included in income statement
74,155
(42,161)
The amounts recognized in other comprehensive income are as follows:
Post-employment benefits
Year ended December 31,
2024
2023
Remeasurements
Effect of changes in demographic assumptions
66,333
(31,024)
Effect of changes in financial assumptions
(236,205)
26,509
Effect of experience adjustments
33,735
66,817
Change in asset ceiling
(42,157)
32,707
Expected return on assets
177,519
(42,882)
Total included in other comprehensive income
(775)
52,127
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
110
21.
OTHER LIABILITIES-NON CURRENT AND CURRENT (continued)
Changes in the liability recognized in the consolidated statement of financial position are as follows:
Post-employment benefits
As of December 31,
2024
2023
At the beginning of the year
1,975,462
405,018
Acquisition of business (note 3)
—
1,529,949
Transfers, new participants and funding of the plan
157
30,116
Total expense
166,827
79,396
Remeasurements
(136,137)
62,302
Translation differences
(399,929)
40,168
Contributions paid
(149,703)
(171,487)
At the end of the year
1,456,677
1,975,462
Changes in fair value of the plan assets are as follows:
Fair value of plan assets
As of December 31,
2024
2023
At the beginning of the year
1,525,330
—
Acquisition of business (Note 3) (1)
—
1,462,147
Expected return on assets
(177,519)
42,882
Interest income
109,350
142,529
Translation differences
(330,283)
(5,933)
Funding of the plan
13,111
14,848
Contributions paid
(107,633)
(131,143)
At the end of the year
1,032,356
1,525,330
(1) The asset ceiling at the acquisition date amounted to $ 169.7 million.
The major categories of plan assets are as follows:
Fair value of plan assets
As of December 31,
2024
2023
Usiminas shares
29,305
64,819
Non-US government securities
716,909
1,054,671
Fixed income
81,821
99,602
Investments funds
202,987
241,481
Others
1,334
64,757
At the end of the year
1,032,356
1,525,330
As of December 31, 2024, the pension plan assets included 34,109,762 common shares of Usiminas (34,109,762
common shares of the Usiminas as of December 31, 2023).
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
111
21.
OTHER LIABILITIES-NON CURRENT AND CURRENT (continued)
The principal actuarial assumptions used were as follows:
Year ended December 31,
Mexico
2024
2023
Discount rate
10.25%
9.00%
Compensation growth rate
6.00% - 7.00%
6.00% - 7.00%
Year ended December 31,
Argentina
2024
2023
Discount rate
6.00% - 7.00%
6.00% - 7.00%
Compensation growth rate
2.00% - 3.00%
2.00% - 3.00%
Year ended December 31,
Brazil
2024
2023
Discount rate
7.46% - 8.10%
5.23% - 5.40%
Compensation growth rate
0.50% - 2.90%
0.50% - 2.90%
Long-term increase in medical service costs
4.75%
4.75%
Expected return on plan assets
11.76% - 12.42%
9.28% - 9.46%
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is as follows:
Impact on defined benefit obligation
Change in
assumption
Increase in
assumption
Decrease in
assumption
Discount rate
1.00%
-6.9%
7.9%
Compensation growth rate
1.00%
0.8%
-0.7%
Pension growth rate
1.00%
-0.2%
-0.8%
Life expectancy
1 year
1.0%
-1.1%
The estimated future payments for the next five years will be between $ 148.1 million and $ 163.7 million per
year.
The post-retirement benefits related to Usiminas are guaranteed with property, plant and equipment up to the
amount of $ 215 million.
As of December 31,
2024
2023
(ii) Other liabilities - Current
Payroll and social security payable
184,805
174,188
VAT liabilities
37,259
68,178
Other tax liabilities
60,373
70,815
Termination benefits
128
100
Related Parties (Note 26)
463
3,588
Asset retirement obligation (Note 19)
17,818
7,332
Dividends payable
1,967
51,249
Put option liability (note 3 (e))
263,201
—
Others
63,664
54,263
Other liabilities – Current
629,678
429,713
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
112
22.
DERIVATIVE FINANCIAL INSTRUMENTS
Net fair values of derivative financial instruments
The net fair values of derivative financial instruments as of December 31, 2024 and 2023 were as follows:
As of December 31,
2024
2023
Contracts with positive fair value
Commodities contracts
169
247
Foreign exchange contracts
4,314
15,159
4,483
15,406
Contracts with negative fair value
Commodities contracts
(85)
(6,190)
Foreign exchange contracts
(50,257)
(2,030)
(50,342)
(8,220)
Derivative financial instruments breakdown is as follows:
(a) Interest rate contracts
Fluctuations in market interest rates create a degree of risk by affecting the amount of the Company’s interest
payments and the value of its floating-rate debt.
(b) Foreign exchange contracts
Ternium’s subsidiaries enter into derivative agreements to manage their exposure to currencies other than the $,
in accordance with the Company’s policy for derivative instruments.
During 2024, 2023 and 2022, Ternium Mexico entered into several forward agreements mainly to manage the
exchange rate exposure generated by future payables in EUR related to the investment plan in Pesquería among
other standard liabilities in EUR. The outstanding notional amount hedged as of December 31, 2024, was EUR
570.3 million. These agreements will be due up to December 2025 and have been accounted for as cash flow
hedges. As of December 31, 2024, the aggregate notional amount on these agreements amounted to $ 617.4
million.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
113
22.
DERIVATIVE FINANCIAL INSTRUMENTS (continued)
In addition, during 2024 Ternium Mexico has engaged in multiple non-deliverable forward agreements to
manage the exposure arising from future payables in MXN linked to the investment plan in Pesqueria, seeking to
mitigate the impact of exchange rate volatility on the budget assigned for the investment. These agreements will
be due up to March 2026 and have been accounted for as cash flow hedges. As of December 31, 2024, its notional
value amounted to $ 900.0 million.
Finally, during 2024, Ternium Mexico has entered into non-deliverable forward agreements to manage the
exchange rate exposure generated by future payables in JPY related to the investment plan in Pesquería. The
notional amount hedged as of December 31, 2024, was JPY 1.8 billion. These agreements will be due up to May
2025 and have been accounted for as cash flow hedges. As of December 31, 2024, the notional amount on these
agreements amounted to $ 11.8 million.
Changes in fair value of derivative instruments designated as cash flow hedges for each of the years presented are
included below:
Cash flow hedges - Foreign exchange derivatives
Gross amount
Income tax
Total
As of December 31, 2022
—
—
—
(Decrease) / Increase
22,721
(6,824)
15,897
Reclassification to income statement
—
—
—
As of December 31, 2023
22,721
(6,824)
15,897
(Decrease) / Increase
(75,160)
22,548
(52,612)
Reclassification to income statement
—
—
—
As of December 31, 2024
(52,439)
15,724
(36,715)
During 2024, 2023 and 2022, Ternium Colombia S.A.S. has entered into non-deliverable forward agreements to
manage the aggregate exposure arising from its balance sheet position in conjunction with expected off balance
future trade receivables denominated in its local currency. As of December 31, 2024, the notional amount on
these agreements amounted to $ 30.0 million, which will be settling on January 30 and 31, 2025.
During 2024 and 2023, Ternium Guatemala entered into several non-deliverable forward agreements in order to
manage the exchange rate exposure generated primarily by trade receivables denominated in Guatemalan
quetzals. As of December 31, 2024, the notional amount on these agreements amounted to $ 2.0 million, which
will be settling on January 27, 2025.
During 2024 and 2023, Ternium del Atlántico entered into several non-deliverable forward agreements to manage
the aggregate exposure arising from its balance sheet position in conjunction with expected off balance future
trade receivables denominated in Colombian pesos. As of December 31, 2024, the notional amount on these
agreements amounted to $ 38.0 million, which will be settling on January 29 and 31, 2025.
During 2024 and 2023, Ternium Procurement entered into specific forward agreements in order to manage the
exchange rate exposure generated by purchases of semi-finished steel products. As of December 31, 2024, the
notional amount on these agreements amounted to $ 17.7 million, which will be settling on February 14, 2025.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
114
22.
DERIVATIVE FINANCIAL INSTRUMENTS (continued)
During 2024, Ternium Argentina conducted specific forward agreements as a strategy to convert financing rates
in Argentine pesos to competitive $ rates through cross currency transactions, enhancing its overall financial
position. As of December 31, 2024, the notional amount on these agreements amounted to $ 37.8 million.
The net fair values of the exchange rate derivative contracts as of December 31, 2024 and 2023 were as follows:
Fair value at December 31,
Currencies
Contract
Notional amount
2024
2023
MEX/$
ND Forward - Buy MXN
18.8 billion MXN
(25,940)
—
EUR/$
Forward - Buy EUR
589.8 million EUR
(24,073)
15,159
JPY/$
ND Forward - Buy JPY
1.8 billion JPY
(431)
—
GTQ/$
ND Forward - Sell GTQ
15.4 million GTQ
(2)
(6)
ARS/$
ND Forward - Buy ARS
44.3 billion ARS
3,952
—
COP/$
ND Forward - Sell COP
299.1 billion COP
362
(2,024)
EUR/$
Forward - Sell EUR
3.3 million EUR
189
—
(45,943)
13,129
ARS: Argentine pesos; COP: Colombian pesos; EUR: Euros; $: US dollars; GTQ: Guatemalan quetzales; JPY: Japanese yens; MXN:
Mexican pesos.
(c) Commodities contracts
During 2024, 2023 and 2022, Ternium Mexico entered into swap agreements to mitigate the specific impact of the
fluctuation of zinc price fluctuations affecting the manufacturing of galvanized products to be sold with a fixed
zinc price. As of December 31, 2024, Ternium Mexico has several agreements outstanding with an aggregate
notional amount of $ 9.0 million. Outcome from these transactions will be presented in the income statement.
During 2024, 2023 and 2022, Mineraçao Usiminas, one of Usiminas’ subsidiaries, entered into forward
agreements to manage the impact of the fluctuation of iron ore prices affecting its sales in the foreign market. As
of December 31, 2024, Mineraçao Usiminas has several agreements outstanding with an aggregate notional
amount of $ 61.5 million. These transactions are accounted for as cash flow hedges.
Changes in fair value of derivative instruments designated as cash flow hedges for each of the years presented are
included below:
Cash flow hedges - Commodities derivatives
Gross amount
Income tax
Total
As of December 31, 2022
—
—
—
(Decrease) / Increase
—
—
—
Reclassification to income statement
—
—
—
As of December 31, 2023
—
—
—
(Decrease) / Increase
(879)
299
(580)
Reclassification to income statement
—
—
—
As of December 31, 2024
(879)
299
(580)
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
115
23.
LEASE LIABILITIES
Lease liabilities
Current
Non Current
Total
Year ended December 31, 2024
Values at the beginning of the year
52,174
188,913
241,087
Translation differences
(1,764)
(9,639)
(11,403)
Net proceeds
5,006
8,034
13,040
Indexation
3,778
17,287
21,065
Repayments
(61,194)
—
(61,194)
Interest accrued
16,967
—
16,967
Interest paid
(9,438)
—
(9,438)
Reclassifications
40,929
(40,929)
—
As of December 31, 2024
46,458
163,666
210,124
Year ended December 31, 2023
Values at the beginning of the year
49,015
190,134
239,149
Translation differences
(750)
4,799
4,049
Acquisition of business (Note 3)
8,009
17,668
25,677
Net proceeds
2,746
11,810
14,556
Indexation
5,755
5,384
11,139
Repayments
(58,900)
—
(58,900)
Interest accrued
16,200
—
16,200
Interest paid
(10,783)
—
(10,783)
Reclassifications
40,882
(40,882)
—
As of December 31, 2023
52,174
188,913
241,087
As of December 31,
2024
As of December 31,
2023
Commitments in relation to finance leases are payable as follows:
Within one year
59,433
57,002
Later than one year but not later than five years
146,282
159,888
Later than five years
87,878
87,557
Minimum lease payments
293,593
304,447
Future finance charges
(83,469)
(63,360)
Total Financial lease liabilities
210,124
241,087
The present value of finance lease liabilities is as follows:
Within one year
46,458
52,174
Later than one year but not later than five years
117,195
140,330
Later than five years
46,471
48,583
Total minimum lease payments
210,124
241,087
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
116
24.
BORROWINGS
As of December 31,
2024
2023
(i) Non-current
Bank borrowings
499,593
9,353
Bonds
421,079
747,260
Debentures
642,110
454,136
Less: debt issue costs
(2,735)
(4,788)
1,560,047
1,205,961
(ii) Current
Bank borrowings
646,258
915,989
Bonds
13,284
23,485
Debentures
12,587
4,220
Less: debt issue costs
(2,057)
(3,241)
670,072
940,453
Total Financial Debt
2,230,119
2,146,414
The maturity of borrowings is as follows:
Expected Maturity Date
2025
2026
2027 and
thereafter
At December 31, (1)
2024
2023
Borrowings - Fixed Rate
607,209
42,362
—
649,571
315,696
Borrowings - Floating Rate
38,520
149,977
299,027
487,524
609,062
Bonds
12,220
428,185
—
440,405
764,810
Debentures
12,123
—
640,496
652,619
456,846
Total
670,072
620,524
939,523
2,230,119
2,146,414
(1) As most borrowings and the debentures incorporate floating rates that approximate market rates and the contractual repricing occurs
mostly every 1 month, the fair value of the borrowings and the debentures approximates their carrying amount and it is not disclosed
separately. Fixed rate borrowings are uncommitted short-term revolving loans, and their fair value approximates to their carrying amount.
Regarding the bonds, its fair value approximates the market value.
The weighted average interest rates - which incorporate instruments denominated mainly in U.S. dollars and
which do not include the effect of derivative financial instruments nor the devaluation of these local currencies -
at year-end were as follows:
As of December 31,
2024
2023
Bank borrowings
7.15%
7.28%
Bonds
5.88%
5.88%
Debentures
13.50%
12.52%
The nominal average interest rates shown above were calculated using the rates set for each instrument in its
corresponding currency and weighted using the dollar-equivalent outstanding principal amount of said
instruments as of December 31, 2024 and 2023, respectively.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
117
24.
BORROWINGS (continued)
Breakdown of borrowings by currency is as follows:
As of December 31,
Currencies
Contract
2024
2023
$
Fixed
969,826
1,021,909
$
Floating
475,157
609,062
BRL
Floating
652,619
456,846
COP
Fixed
79,140
53,135
ARS
Fixed
41,010
—
MXN
Floating
12,367
—
GTQ
Fixed
—
5,110
BRL
Fixed
—
352
2,230,119
2,146,414
$: U.S. dollars; ARS: Argentine pesos; BRL: Brazilian reais; COP: Colombian pesos; EUR: European euros; GTQ:
Guatemalan quetzales; MXN: Mexican pesos.
Ternium’s most significant current borrowings as of December 31, 2024, were those incurred under Ternium
Brasil’s bilateral credit lines, in order to finance solely activities related to its exports of goods, and under
Usiminas’ bonds and debentures issued in order to refinance its financial debt:
In $ million
Date
Borrower
Type
Original
principal
amount
Outstanding
principal amount
as of December 31,
2024
Maturity
May 2024
Ternium Brasil
Bilateral credit lines
600
600 October 2027
July 2019
Usiminas
Bonds
750
430 July 2026
May 2022
Usiminas
Debentures - 8th emission
145
113 November 2029
December 2022
Usiminas
Debentures - 9th emission
310
242 December 2032
August 2024
Usiminas
Debentures - 10th emission
320
287 September 2031
The main covenants on these loan agreements, bonds and debentures are limitations on liens and encumbrances,
limitations on the sale of certain assets and compliance with financial ratios (i.e. leverage ratio). As of December
31, 2024, Ternium was in compliance with all of its covenants.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
118
25.
CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS
Ternium is from time to time subject to various claims, lawsuits and other legal proceedings, including customer,
employee, tax and environmental-related claims, in which third parties are seeking payment for alleged damages,
reimbursement for losses, or indemnity. Management with the assistance of legal counsel periodically reviews the
status of each significant matter and assesses potential financial exposure.
Some of these claims, lawsuits and other legal proceedings involve highly complex issues, and often these issues
are subject to substantial uncertainties and, therefore, the probability of loss and an estimation of damages are
difficult to ascertain. Accordingly, with respect to a large portion of such claims, lawsuits and other legal
proceedings, Ternium is unable to make a reliable estimate of the expected financial effect that will result from
ultimate resolution of the proceeding. In those cases, Ternium has not accrued a provision for the potential
outcome of these cases.
If a potential loss from a claim, lawsuit or other proceeding is considered probable and the amount can be
reasonably estimated, a provision is recorded. Accruals for loss contingencies reflect a reasonable estimate of the
losses to be incurred based on information available to management as of the date of preparation of the financial
statements and take into consideration litigation and settlement strategies. In a limited number of ongoing cases,
Ternium was able to make a reliable estimate of the expected loss or range of probable loss and has accrued a
provision for such loss but believes that publication of this information on a case-by-case basis would seriously
prejudice Ternium’s position in the ongoing legal proceedings or in any related settlement discussions.
Accordingly, in these cases, the Company has disclosed information with respect to the nature of the contingency
but has not disclosed its estimate of the range of potential loss.
The Company believes that the aggregate provisions recorded for potential losses in its consolidated financial
statements are adequate based upon currently available information. However, if management’s estimates prove
incorrect, current reserves could be inadequate and Ternium could incur a charge to earnings which could have a
material adverse effect on Ternium’s results of operations, financial condition, net worth and cash flows.
(i) Tax claims and other contingencies
The tax claims and other contingencies recognized at the increase of the participation of Usiminas are included in
note 3.
(a) Provision for ongoing litigation related to the acquisition of a participation in Usiminas
The Company is party to a longstanding lawsuit filed in Brazil by Companhia Siderúrgica Nacional, or CSN, and
various entities affiliated with CSN against Ternium Investments, its subsidiary Ternium Argentina, and
Tenaris’s subsidiary Confab, all of which compose the T/T Group under the Usiminas shareholders agreement.
The entities named in the CSN lawsuit had acquired participations in Usiminas in January 2012. The CSN
lawsuit alleges that, under applicable Brazilian laws and rules, the acquirers were required to launch a tag-along
tender offer to all non-controlling holders of Usiminas ordinary shares for a price per share equal to 80% of the
price per share paid in such acquisition, or BRL 28.8, and seeks an order to compel the acquirers to launch an
offer at that price plus interest. If so ordered, the offer would need to be made to 182,609,851 ordinary shares of
Usiminas not belonging to the Usiminas control group. Ternium Investments and Ternium Argentina’s respective
shares in the offer would be 60.6% and 21.5%.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
119
25.
CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS (continued)
On September 23, 2013, the first instance court dismissed the CSN lawsuit, and on February 8, 2017, the court of
appeals maintained the understanding of the first instance court. CSN filed an appeal to the Superior Court of
Justice (SCJ), seeking the review and reversal of the decision issued by the Court of Appeals, and on March 7,
2023, the SCJ, by majority vote, rejected CSN’s appeal.
CSN made several submissions in connection with the SCJ decision, including a motion for clarification that
challenged the merits of the SCJ decision. Decisions at the SCJ are adopted by majority vote. At an October 17,
2023 session, two justices of the SCJ voted in favor of remanding the case to the first instance for it to be retried
following production and assessment of the new evidence, and two justices of the SCJ voted, without requiring
any further evidence, in favor of granting CSN’s motion for clarification and reversing the March 7, 2023
decision that rejected CSN’s appeal; because the fifth member of SCJ excused himself from voting, a justice from
another panel at the SCJ was summoned to produce the tie-breaking vote. On June 18, 2024, the SCJ completed
its voting on CSN’s motion for clarification and reversed, by majority vote, its March 7, 2023 decision, and
resolved that Ternium Investments, its subsidiary Ternium Argentina and Tenaris’s subsidiary Confab should
pay CSN an indemnification in connection with the acquisition by the T/T Group of the participations in
Usiminas in January 2012, with CSN being allowed to retain ownership of the Usiminas ordinary shares it
currently owns.
On August 1, 2024, Ternium Investments, Ternium Argentina and the other T/T Group entities filed a motion
for clarification against the SCJ decision and, subsequently, CSN filed its reply. On December 6, 2024, the SCJ
rejected this motion for clarification, confirming the obligation of the T/T Group entities to pay indemnification
in connection with the 2012 acquisition of the participations in Usiminas. Notwithstanding the foregoing, the
SCJ unanimously resolved to modify the applicable monetary adjustment mechanism and to cap the applicable
attorney’s fees, thereby lowering the aggregate amount that would be payable if CSN ultimately prevails in this
claim. Based on such SCJ decision, assuming monetary adjustment thorough December 31, 2024, and attorney’s
fees in the amount of BRL 5 million, the revised aggregate amount potentially payable by Ternium Investments
and Ternium Argentina if CSN finally prevails on its claims would be of approximately BRL 1,875.9 million
(approximately $ 302.9 million at the BRL/$ rate as of such date) and BRL 664.1 million (approximately $ 107.3
million at the BRL/$ rate as of such date), respectively.
The Company continues to believe that all of CSN's claims and allegations are unsupported and without merit,
as confirmed by several opinions of Brazilian legal counsel, two decisions issued by the Brazilian securities
regulator in February 2012 and December 2016, the first and second instance court decisions and the March 7,
2023 SCJ decision referred to above, and that in connection with the Usiminas acquisition the T/T Group was
not required either to launch a tender offer or to pay indemnification to CSN. Accordingly, on February 10, 2025,
Ternium filed an extraordinary appeal against the SCJ decisions that ordered an indemnification payment,
seeking their review and reversal by the Supreme Federal Tribunal. The Company, however, cannot predict the
ultimate resolution on the matter.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
120
25.
CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS (continued)
(b) Potential Mexican income tax adjustment
In March 2015, as part of a tax audit with respect to fiscal year 2008, the Mexican tax authority (“SAT”)
challenged the deduction by Ternium Mexico of a tax loss arising from an intercompany sale of shares in
December 2008. In addition, in September 2018, as part of a tax audit for fiscal year 2011, the SAT objected to
the deduction by Ternium Mexico of the remainder of the 2008 tax loss. Ternium Mexico requested an
injunction from the Mexican courts against the SAT claims and filed its defense and supporting documents with
the SAT. After Ternium Mexico obtained an injunction in August 2020, in November 2020 the SAT issued a new
preliminary audit report in which it reiterated its objections to the deduction of the 2008 tax loss. In June 2021,
the SAT determined income tax adjustments with respect to 2008 and 2011 for amounts currently estimated at
approximately $ 72.8 million and $ 35.6 million, respectively. Ternium Mexico appealed the SAT determinations.
More recently, however, Ternium Mexico withdrew its appeals and agreed to provide further information and
documentation to the SAT. With all of the above-mentioned information and documentation, the SAT reduced
the 2008 and 2011 tax adjustments downwards to approximately $ 17.5 million and $ 35.8 million, respectively.
The Company had a tax provision of $ 53.3 million already included in its consolidated condensed interim
financial statements as of September 30, 2023. The payment to the SAT was done on October 9, 2023, and the
Company received formal documentation issued by the SAT with the closure of both audits.
(c) Tax assessments relating to the use of certain ICMS tax credits
The Imposto Sobre Operações Relativas à Circulação de Mercadorias e Serviços, or ICMS, is a Brazilian value-
added tax on the services (inter-states) and the transfer of goods in Brazil. Payment of ICMS generates tax credits
that, subject to applicable law, rules and regulations, may be either used to offset ICMS payment obligations
generated in connection with domestic sales of products and services, or sold and transferred to third parties.
The Rio de Janeiro State Treasury Office is challenging the use by Ternium Brasil of ICMS tax credits generated
in connection with purchases of refractory materials in the period from December 2010 through December 2016,
and intends to assess taxes and impose fines on Ternium Brasil on the argument that such materials may not be
qualified as “raw materials” or “intermediary products” but as “goods for consumption” and, accordingly, ICMS
tax credits generated in connection with their purchase are not available and may not be used to offset ICMS
payment obligations generated in connection with Ternium Brasil’s domestic sales of carbon steel slabs. Ternium
Brasil has appealed against the Rio de Janeiro State Treasury Office tax assessments and fines. A provision in the
amount of $ 57.7 million was recorded as of the acquisition date in connection with this matter ($ 29.3 million
and $ 37.5 million as of December 31, 2024 and 2023, respectively).
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
121
25.
CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS (continued)
(d) BP Energía México (BPEM) – Arbitration process
On February 2022, BP Energía México (“BPEM”) started an arbitration process against Gas Industrial de
Monterrey, S.A. de C.V. (“GIMSA”), Ternium México and Ternium Gas México (“Respondents”), claiming
payment for the gas supply from February 12 to February 28, 2021, for $ 27.6 million, $ 12.4 million, and $ 2.4
million, plus V.A.T. and interest, respectively. On June 9, 2024, after the arbitration process was completed, the
arbitration award was notified and the Arbitration Tribunal ordered the Respondents to pay BPEM $ 22.0
million, $ 9.9 million and $ 2.1 million, plus V.A.T. and interest, respectively. Additionally, the Parties were
ordered to pay expenses and costs for $ 2.4 million. As of September 30, 2024, the Company recognized a
provision of $ 34.2 million in its consolidated condensed interim financial statements.
On October 25, 2024, the parties reached an agreement settling the reciprocal claims, and all parties formally
dismissed the legal actions initiated with respect to the arbitration award.
(e) PIS and COFINS credits defense action - Usiminas
In August 2024, the Federal Government had filed two new tax claims for a total of approximately BRL 503
million ($ 92 million; BRL 518 million or $ 84 million as of December 31, 2024). The contingencies are related to
tax assessments that partially approved offset statements through which Usiminas claimed PIS and COFINS
credits arising from a final court decision, which discussed the exclusion of ICMS from the calculation basis of
said contributions. The tax authority disagreed with the calculation methodology adopted by Usiminas.
Usiminas filed a defense action in the aforementioned proceedings, arguing that the calculations are correct and
the credit rights should be recognized.
(ii) Commitments
The following are Ternium’s main off-balance sheet commitments:
(a) Ternium Argentina signed agreements, mainly with Vale S.A. and Mineração Corumbaense Reunida S.A., to
cover 80% of its required iron ore, pellets and iron ore fines volumes until December 31, 2024,having no residual
value as of such date. Although they do not set a minimum amount or a minimum commitment to purchase a
fixed volume, under certain circumstances a penalty is established for the party that fails of:
- 7% in case the annual operated volume is between 70% and 75% of the total volume of purchases of the
Company; such percentage is applied over the difference between the actual purchased volume and the 80% of
the total volume of purchases.
-15% in case the annual operated volume is lower than 70% of the total volume of purchases of the Company;
such percentage is applied over the difference between the actual purchased volume and the 80% of the total
volume of purchases.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
122
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CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS (continued)
(b) Ternium Argentina also signed various contracts for the provision and transportation of natural gas,
including Tecpetrol and Energy Consulting Services S.A., both related companies of Ternium, assuming firm
commitments for a total of $ 10.2 million payable until April 2025. Additionally, Ternium Argentina signed
contracts for gas transportation with Transportadora de Gas del Norte S.A., a related company of Ternium,
assuming firm commitments for a total of $ 28.5 million payable until April 2028.
(c) Ternium Argentina signed an agreement with Air Liquide Argentina S.A. for the supply of oxygen, nitrogen
and argon, for an aggregate amount of $ 58.8 million, which is due to terminate in 2037.
(d) Ternium Argentina signed various contracts within its investment plan for the future acquisition of Property,
plant and equipment for a total of $ 35.8 million. Also, Vientos de Olavarría, a subsidiary controlled by Ternium
Argentina, subscribed various contracts for the maintenance and the operation of the wind farm for a total of $
62.0 million payable until the year 2054.
(e) On April 24, 2017, Ternium Mexico entered into a 25-year contract (effective as of December 1, 2016, through
December 1, 2041) with Techgen, S.A. de C.V. for the supply of 699 MW (which represents 78% of Techgen’s
capacity) and covers most of Ternium Mexico’s facilities electricity needs. Monthly payments are determined on
the basis of capacity charges, operation costs, back-up power charges, and transmission charges. As of the
seventh contract year (as long as Techgen’s existing or replacing bank facility has been repaid in full), Ternium
Mexico has the right to suspend or early terminate the contract if the rate payable under the agreement is higher
than the rate charged by Comisión Federal de Electricidad (“CFE”) or its successors. Ternium Mexico may
instruct Techgen to sell to any affiliate of Ternium Mexico, to CFE, or to any other third party all or any part of
unused contracted energy under the agreement and Ternium Mexico will benefit from the proceeds of such sale.
The contract with Techgen is under the Self Supply Scheme. According to this regulatory scheme, CFE needs to
authorize the sale of energy to other third party final users. On August 27, 2021, Ternium México and Techgen
signed an amendment to the contract to establish changes in the supply to Ternium; these changes were mainly
connected to a new direct transmission line between Techgen and Ternium´s Pesqueria Site for the direct supply
of electricity to this site.
(f) Ternium México issued a guarantee letter covering up to approximately $ 28.8 million of the obligations of
Gas Industrial de Monterrey, S.A. de C.V. (“GIMSA”), under the natural gas trading agreement between GIMSA
and NEG Natural S.A. de C.V. (“NEG”) The credit line granted by NEG in connection with this natural gas
trading agreement amounted to approximately $ 19.1 million. As of December 31, 2024, the outstanding amount
under the natural gas trading agreement was $ 9.5 million, which is below the amount included in the guarantee
letter issued by Ternium México.
(g) Ternium Mexico issued a guarantee letter covering up to approximately $ 58.7 million of the obligations of
Techgen, S.A. de C.V. (“Techgen”), under the Clean Energy Certificates trading agreement between Techgen and
Enel Green Power (“ENEL”). The amount equals the remnant balance if Techgen decides to terminate the
agreement prior to the expiration date (and decreases as time of the contract passes). The contract was signed on
May 25, 2018, and terminates on June 30, 2041.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
123
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CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS (continued)
(h) In June 2008, Ternium Mexico entered into an industrial gas supply agreement with Praxair Mexico for the
Guerrero and Juventud facilities until December 2024, for a total amount of $ 421 million. In 2011, an
amendment agreement added the purchase of hydrogen for the Juventud and Universidad facilities, valid until
April 2025. As of December 31, 2024, the agreement considers a minimum annual oxygen consumption of 96
million cubic meters, valued at approximately $ 4.5 million per year. The Company is in compliance with the
minimum annual quotas established, which represent less than half of the average annual consumption.
(i) On May 9, 2018, Ternium Mexico entered into a 10-year contract (effective as of July 1, 2018) with Kinder
Morgan Texas Pipeline L.L.C., Kinder Morgan Tejas Pipeline L.L.C. and Kinder Morgan Border Pipeline L.L.C.
for the transportation of natural gas in the United States of America (Texas). The contracted capacity is 60,000
MMBTU/day and the annual cost is approximately $ 3.7 million.
(j) On December 30, 2019, Ternium Mexico entered into a 15-year contract (effective as of July 1, 2021) with
Kinder Morgan Texas Pipeline L.L.C., Kinder Morgan Tejas Pipeline L.L.C. and Kinder Morgan Gas Natural de
México S. de R.L. de C.V. for the transportation of natural gas in the United States of America (Texas) and in
Mexico. The contracted capacity is 31,000 MMBTU/day and the annual cost is approximately $ 4.8 million.
(k) In February 2023, Ternium's Board of Directors approved a new project in Pesquería, which involves the
construction of an electric arc furnace and a direct reduced iron plant. As of December 31, 2024, Ternium
México has commitments for property, plant and equipment for an amount of approximately $1.3 billion in
Euros, Mexican pesos, Japanese yens, and U.S. dollars. These commitments are mainly covered by currency
derivative financial instruments as commented in note 22 in these Consolidated Financial Statements.
(l) Techgen is a party to gas transportation capacity agreements with Kinder Morgan Gas Natural de Mexico, S.
de R.L. de C.V., Kinder Morgan Texas Pipeline LLC and Kinder Morgan Tejas Pipeline LLC for the whole
transportation capacity starting on August 1, 2016 and ending during the second half of 2036. As of December 31,
2024, the outstanding value of this commitment was approximately $ 164.8 million. Ternium’s exposure under
the guarantee in connection with these agreements amounts to $ 79.1 million, corresponding to the 48% of the
agreements’ outstanding value as of December 31, 2024.
(m) Ternium issued two stand-by letters of credit covering 48% of the funding of a debt service reserve account
under a syndicated loan agreement between Techgen and several banks led by Citigroup Global Markets Inc.,
Credit Agricole Corporate and Investment Bank, and Natixis, New York Branch acting as joint bookrunners.
The loan agreement dated as of February 13, 2019, amounted to $ 640 million and the proceeds were used by
Techgen to refinance in full all amounts owed under a previous syndicated loan between Techgen and several
banks, which funds were used in the construction of the facility. As of December 31, 2024, the outstanding
aggregated amount under the stand-by letters of credit was $ 49.6 million, as a result the amount guaranteed by
Ternium was approximately $ 23.8 million.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
124
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CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS (continued)
(n) During 2006, CSA, the predecessor of Ternium Brasil, has entered into a 15-year contract denominated
“Contrato de comercialização de energia elétrica no ambiente regulado – CCEAR por disponibilidade” to
provide electric energy to 24 distributors starting on 2011. Under this contract, Ternium Brasil has to provide 200
MW average per year and the price is adjusted by the Brazilian inflation index. The penalty for not delivering the
volume of energy of the contract is the difference between the spot price and the unit variable cost (calculated
and published by the Agéncia Nacional de Energía Elétrica), calculated per hour.
(o) Ternium Brasil signed an exclusivity agreement with Vale S.A. for the purchase of iron ore (pellets, sinter feed
and lump ore), which is due to terminate in 2029. The total purchased volume, in accordance with the actual
production capacity, is of approximately 8.0 million tons per year. Ternium Brasil has not the obligation to take
or pay the mentioned volume and only should pay logistic costs in case of not purchasing the contracted volume.
(p) Ternium Brasil also signed on March 2024 a contract with Primetals Technologies Brazil Ltda. for caster
equipment maintenance services for the steel plant. As of December 31, 2024, the outstanding amount of the
mentioned services was approximately $ 124.1 million and is due to terminate in March 2034. The agreement
prevents the delivery of the minimum take-or-pay volume by Ternium and a minimum quantity of contracted
hours by Primetals.
(q) Ternium Brasil is a party to a long-term contract with the Consortium formed by Air Liquide Brasil Ltda.,
AirSteel Ltda., White Martins Gases Industriais Ltda., White Martins Steel Ltda. and ThyssenKrupp MinEnergy
GmbH for the supply of air, oxygen, nitrogen and argon to satisfy the requirements up to January 2029. The
outstanding amount was approximately $ 117.3 million as of December 31, 2024. The contract has minimum
daily-required volumes.
(r) Ternium Brasil, for its activity of energy generation through gas and steam turbines, signed on March 2017 a
contract with GE Global Parts and Products GMBH, General Electric International Inc. and Alstom Energia
Térmica e Indústria Ltda. for the maintenance services of such turbines (including the supply of spare parts) for a
period of 20 years. This agreement was extended for an additional period of 4 years. As of December 31, 2024,
the outstanding amount of this commitment was $ 147.4 million.
(s) Ternium Brasil signed on January 2015 a contract with Naturgy (formerly Companhia Distribuidora de Gás
do Rio de Janeiro) for the supply of natural gas, which was due to terminate in December 2019. This agreement
was automatically renewed for another two years, was due to terminate in December 2024 and could be
interrupted by common agreement due to free market conditions’ changes. Ternium Brasil was purchasing more
than the minimum volume required by the contract, which is 85% of the volume mentioned before. The contract
was terminated in September 2024 without penalty.
(t) Ternium Brasil signed in December 2023 a contract with Vix Logística S.A. for logistics supply chain
operations. This agreement is due to terminate in December 2028 and the outstanding amount was $ 33.6 million
as of December 31, 2024. The contract has minimum required volumes and a penalty for early termination.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
125
25.
CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS (continued)
(u) Ternium Brasil signed on January 2024 a contract with Petrobras S.A. for the supply of petcoke. As of
December 31, 2024, the outstanding amount of the agreement was approximately $ 61.2 million and is due to
terminate in February 2026. The contract has minimum required volumes.
(v) Ternium Brasil signed on September 2024 a contract with Petrobrás S.A. for the supply of natural gas on free
market. This agreement started on October 1, 2024. As of December 31, 2024, the outstanding amount for this
agreement was approximately $ 122.4 million. This agreement is due to terminate in in December 2029. The
contract has minimum required volumes.
(w) As of December 31, 2024, Usiminas’ commitments for the acquisition of immobilized assets totaled $ 213.8
million and are intended, mainly, for adaptation, reforms, and improvements in the primary areas of Ipatinga,
increase in quality, reduction of costs, maintenance, technological updating of equipment and environmental
protection.
(x) In July 2011, Usiminas Mineração S.A. subscribed an agreement with MBL Materiais Básicos Ltda, related to
the mining rights adjacent to its mining reserves. On October 15, 2012, the agreement was authorized by the
National Mining Agency (ANM). It has a duration of 30 years, or until the complete depletion of these mineral
reserves. The monthly payments are linked to the volume of iron ore extracted from the areas covered by the
agreement. Since 2015, a minimum annual volume of 3.6 million metric tons was established. If the annual
volume of iron ore extracted is below the minimum volume, a payment under a take-or-pay arrangement will be
due, calculated as the difference between the minimum volume and the volume effectively extracted. The
outstanding amount was approximately $ 261.1 million as of December 31, 2024.
(y) In June 2016, Usiminas S.A. entered into electricity purchase agreement with Cemig S.A. for the Cubatão steel
plant facilities until December 2030. The contract has two ranges: the first range up to 32 MW and the second
range up to 65.4 MW. The entire volume of the first range represents a take-or-pay arrangement, and if
consumption reaches the second band, a lower tariff will be applied. The outstanding amount was approximately
$ 187.0 million as of December 31, 2024.
(z) In July 2023, Usiminas S.A. entered into an electricity purchase agreement with Engie S.A. for the Ipatinga
steel plant facilities until December 2026. The contract is fully take-or-pay; however, Usiminas can sell this
electricity in the market at any time, and even if consumption is lower than contracted, the energy is
automatically sold by the Electric Energy Commercialization Chamber (CCEE). The outstanding amount was
approximately $ 38.0 million as of December 31, 2024.
(aa) In December 2021, Usiminas S.A. entered into a solar energy purchase agreement with Canadian Solar S.A.
for the supply to the Ipatinga steel plant facilities until December 2039. Usiminas has the obligation to take or
pay the agreed amount of the contract. As of December 31, 2024, the total outstanding amounted to
approximately $ 256.3 million.
(ab) In September 2023, Usiminas S.A. entered into an electricity purchase agreement with Enel S.A. for the
Ipatinga steel plant facilities until December 2026. The contract is fully take-or-pay; however, Usiminas can sell
this electricity in the market at any time, and even if consumption is lower than contracted, the energy is
automatically sold by the Electric Energy Commercialization Chamber (CCEE). The outstanding amount was
approximately $ 39.2 million as of December 31, 2024.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
126
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CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS (continued)
(ac) In December 2024, Usiminas S.A. entered into an agreement with Comgas S.A. for the supply of natural gas
to the Cubatão Steel Plant facilities until December 2025. The contracted capacity is 250 thousand cubic meters
per day with a flexibility of plus or minus 5%. Daily, Usiminas S.A. can schedule any volume as needed, with
acceptance conditioned on the availability in the Comgas S.A. pipeline. The flexibility calculation is done on a
daily basis, while the take-or-pay volume is 80% annually. The outstanding amount was approximately $ 54.4
million as of December 31, 2024.
(ad) In December 2023, Usiminas S.A. entered into an agreement with Gasmig S.A. for the supply of natural gas
to the Ipatinga steel plant facilities until June 2025. The contracted capacity is 850 thousand cubic meters per day
with a flexibility of plus or minus 10%. Daily, Usiminas S.A. can schedule any volume as needed, with
acceptance conditioned on the availability in the Gasmig S.A. pipeline. The flexibility calculation is done on a
daily basis, while the take-or-pay volume is 80% annually. The outstanding amount was approximately $ 93.5
million as of December 31, 2024.
(ae) Mineração Usiminas S.A. signed in August 2024 a contract with SOTREQ S.A. for the provision of
mechanical maintenance services for Caterpillar off-road trucks until September 2029. The contract has an
unjustified termination clause with a 24-month grace period. After this period, termination fines are applicable
depending on the month of termination. The outstanding amount was approximately $ 10.3 million as of
December 31, 2024.
(af) Usiminas S.A. signed in September 2024 a contract with the National Operator of the Electric System (ONS)
for the use of the transmission system by the Ipatinga steel plant facilities until September 2025. Usiminas has the
obligation to take or pay the total contracted amount. The outstanding amount was approximately $ 18.3 million
as of December 31, 2024.
(ag) Usiminas S.A. signed in April 1996 a contract with White Martins Gases Industriais LTD for the supply of
oxygen, nitrogen and argon for the Ipatinga steel plant until December 2032. Usiminas has the obligation to take
or pay the 50% of the contracted volume. The outstanding amount was approximately $ 122.8 million as of
December 31, 2024.
(ah) Usiminas S.A. signed in July 2009 a contract with White Martins WK for the supply of oxygen, nitrogen and
argon for the Cubatão steel plant until June 2032. Usiminas has the obligation to take or pay the 47.2% of the
contracted volume. The outstanding amount was approximately $ 29.3 million as of December 31, 2024.
(ai) Usiminas S.A. signed between January 2021 and January 2022 several agreements with VLI Multimodal S.A.
for the rail transportation of steel products, iron ore and other raw materials until April 2025. The contracts have
minimum yearly-required volumes. The outstanding amount was approximately $ 139.1 million as of December
31, 2024.
(aj) Usiminas S.A. signed in January 2021 a contract with VLI Multimodal S.A. for port and accessory services at
the Port of Praia Mole until April 2025. The contract has an annual minimum and maximum movement
commitment linked to a take-or-pay agreement, with a minimum volume of 1.8 million tons and a maximum of
2.1 million tons, to be confirmed each year. The outstanding amount was approximately $ 49.5 million as of
December 31, 2024.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
127
25.
CONTINGENCIES, COMMITMENTS AND RESTRICTIONS ON THE DISTRIBUTION OF
PROFITS (continued)
(ak) Mineração Usiminas S.A. signed in June 2021 a contract with Porto Sudeste do Brasil S.A. to load iron ore
vessels for export until December 2026. The contract includes exclusivity in the provision of port services for the
export of the product directly or indirectly by Usiminas S.A. Exclusivity is limited to 8 million tons of product
per year. A penalty is established for the party that fails the exclusivity. The outstanding amount was
approximately $ 178.3 million as of December 31, 2024.
(al) Usiminas S.A. signed in January 2022 a contract with MRS Logística S.A., a related company of Usiminas,
for railway transportation services until December 2025. For the purposes of calculating the take-or-pay
commitment, the annual basic tonnage of the plants will be considered, being Ipatinga 750 thousand tons and
Cubatão 402 thousand tons, with a tolerance of 20% to comply with the volumes. The outstanding amount was
approximately $ 45.4 million as of December 31, 2024.
(am) Usiminas S.A. signed in January 2024 a purchase agreement with Petrobras S.A. for the supply of coke to
support operations at the Ipatinga steel plant until February 2026. The agreement stipulated a total annual
volume of 96 thousand tons, subject to a take-or-pay arrangement. The outstanding amount was approximately
$ 48.4 million as of December 31, 2024.
(an) Mineração Usiminas S.A. signed in September 2023 an agreement with Armac Locação Logistica e Serviços
S.A. for the supply of internal material handling services from the Ouro Negro area until November 2026. The
contract has a termination clause with a termination penalty of 50% of the remaining value of the contract from
the 13th to the 21st month, 25% of the remaining value from the 22nd to the 24th month and no penalty from the
25th to the 36th month with 60 days' notice. The outstanding amount was approximately $ 20.4 million as of
December 31, 2024.
(iii)
Restrictions on the distribution of profits
In accordance with Luxembourg Law, the Company is required to transfer a minimum of 5% of its net profit for
each financial year to a legal reserve until such reserve equals 10% of the issued share capital.
As of December 31, 2024, this reserve is fully allocated and additional allocations to the reserve are not required
under Luxembourg law. Dividends may not be paid out of the legal reserve.
The Company may pay dividends to the extent, among other conditions, that it has distributable retained
earnings calculated in accordance with Luxembourg law and regulations.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
128
26.
RELATED PARTY TRANSACTIONS
As of December 31, 2024, Techint Holdings S.à r.l. (“Techint”) indirectly owned 65.03% of the Company’s share
capital and Tenaris Investments S.à r.l. (“Tenaris”) held 11.46% of the Company’s share capital and voting
rights. Each of Techint and Tenaris were controlled by San Faustin S.A., a Luxembourg company (“San
Faustin”). Rocca & Partners Stichting Administratiekantoor Aandelen San Faustin (“RP STAK”), a private
foundation (Stichting) located in the Netherlands, held voting shares in San Faustin sufficient in number to
control San Faustin. No person or group of persons controls RP STAK.
For commitments with Related parties, see note 25.
The following transactions were carried out with related parties:
Year ended December 31,
2024
2023
2022
(i) Transactions
(a) Sales of goods and services
Sales of goods to non-consolidated parties
138,416
163,591
720,137
Sales of goods to other related parties
151,270
174,869
224,698
Sales of services and others to non-consolidated parties
181
168
177
Sales of services and others to other related parties
2,844
3,932
4,213
292,711
342,560
949,225
(b) Purchases of goods and services
Purchases of goods from non-consolidated parties
333,260
491,011
643,494
Purchases of goods from other related parties
93,214
81,404
70,951
Purchases of services and others from non-consolidated parties
99,397
23,574
13,735
Purchases of services and others from other related parties
179,329
103,334
78,899
705,200
699,323
807,079
(c) Financial results
Income with non-consolidated parties
13,484
12,263
8,298
Expenses in connection with lease contracts from other related parties
(822)
(757)
(976)
12,662
11,506
7,322
(d) Dividends received
Dividends from non-consolidated parties
27,062
34,841
15,493
27,062
34,841
15,493
(e) Other income and expenses
Income (expenses), net with non-consolidated parties
915
1,396
3,300
Income (expenses), net with other related parties
2,548
1,753
682
3,463
3,149
3,982
As of December 31,
2024
2023
(ii) Year-end balances
(a) Arising from sales/purchases of goods/services and other transactions
Receivables from non-consolidated parties
156,937
143,292
Receivables from other related parties
26,988
29,402
Advances from non-consolidated parties
2,524
2,843
Advances to suppliers with other related parties
131,685
123,921
Payables to non-consolidated parties
(57,230)
(149,562)
Payables to other related parties
(39,721)
(27,963)
Lease liabilities with other related parties
(1,861)
(1,379)
219,322
120,554
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
129
26.
RELATED PARTY TRANSACTIONS (continued)
(iii) Officers and Directors’ compensation
During the year ended December 31, 2024, the cash compensation of Officers and Directors amounted to $ 27,221
(2023: $ 26,608). In addition, Officers received 1,051,000 Units for a total amount of $ 6,408 (2023: $ 6,731) in
connection with the incentive retention program mentioned in note 4 (o)(3).
27.
OTHER REQUIRED DISCLOSURES
(a) Statement of comprehensive income
Cash flow hedges
Currency
translation
adjustment
Gross amount
Income tax
Total
As of December 31, 2022
—
—
—
(3,875,636)
(Decrease) / Increase
22,721
(6,824)
15,897
132,339
Reclassification to income statement
—
—
—
839,437
As of December 31, 2023
22,721
(6,824)
15,897
(2,903,860)
(Decrease) / Increase
(76,039)
22,847
(53,192)
(823,783)
Reclassification to income statement
—
—
—
—
As of December 31, 2024
(53,318)
16,023
(37,295)
(3,727,643)
(b) Statement of cash flows
Year ended December 31,
2024
2023
2022
(i) Changes in working capital (1)
Inventories
(108,826)
202,470
438,090
Receivables and others
(169,482)
6,342
10,888
Trade receivables
297,284
(104,280)
573,811
Other liabilities
39,305
(64,022)
46,403
Trade payables
(74,161)
280,571
83,306
(15,880)
321,081
1,152,498
(ii) Income tax accrual less payments
Tax accrued (Note 11)
554,224
334,408
573,728
Taxes paid (2)
(56,527)
(495,348)
(1,769,289)
497,697
(160,940)
(1,195,561)
(iii) Interest accruals less payments
Interest accrued (Note 10 and 23)
(84,678)
(113,433)
(13,940)
Interest received
263,192
202,000
31,880
Interest paid
(194,845)
(133,706)
(42,735)
(16,331)
(45,139)
(24,795)
(1) Changes in working capital are shown net of the effect of exchange rate changes.
(2) It includes the recovery of previously paid tax in Mexico for an amount of $ 235.2 million.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
130
27.
OTHER REQUIRED DISCLOSURES (continued)
(c) Financial debt reconciliation
Financial debt
Finance
lease
liabilities
Short term
borrowings
Long term
borrowings
Total
As of December 31, 2022
(239,149)
(499,164)
(532,701) (1,271,014)
Cash flows
69,683
248,587
12,500
330,770
Reclassifications
—
(511,723)
511,723
—
Acquisitions - finance leases
(14,556)
—
—
(14,556)
Acquisition of business (note 3)
(25,677)
(26,558)
(1,197,841) (1,250,076)
Foreign exchange adjustments
(4,049)
(30,199)
2,267
(31,981)
Other non cash movements
(27,339)
(121,396)
(1,909)
(150,644)
As of December 31, 2023
(241,087)
(940,453)
(1,205,961) (2,387,501)
Cash flows
70,632
541,250
(591,539)
20,343
Reclassifications
—
(106,116)
106,116
—
Acquisitions - finance leases
(13,040)
—
—
(13,040)
Foreign exchange adjustments
11,403
27,514
135,441
174,358
Other non cash movements
(38,032)
(192,267)
(4,104)
(234,403)
As of December 31, 2024
(210,124)
(670,072)
(1,560,047) (2,440,243)
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
131
28.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The following amendments, standards and interpretations have been applied on the year starting January 1,
2024:
Classification of Liabilities as Current or Non-current – Amendments to IAS 1 Non-current Liabilities with
Covenants – Amendments to IAS 1
Amendments made to IAS 1 Presentation of Financial Statements in 2020 and 2022 clarified that liabilities are
classified as either current or non-current, depending on the rights that exist at the end of the reporting period.
Classification is unaffected by the entity’s expectations or events after the reporting date (e.g. the receipt of a
waiver or a breach of covenant). The amendments require disclosures if an entity classifies a liability as non-
current and that liability is subject to covenants that the entity must comply with within 12 months of the
reporting date. The disclosures include the carrying amount of the liability, information about the covenants, and
facts and circumstances, if any, that indicate that the entity may have difficulty complying with the covenants.
As of December 31, 2024, the Company's management had already assessed the effects of applying these
amendments on the Company’s financial statements and had not identified any material impact in the
application of these amendments.
Lease Liability in a Sale and Leaseback – Amendments to IFRS 16
In September 2022, the IASB finalized narrow-scope amendments to the requirements for sale and leaseback
transactions in IFRS 16 Leases which explain how an entity accounts for a sale and leaseback after the date of the
transaction.
As of December 31, 2024, the Company's management had already assessed the effects of applying these
amendments on the Company’s financial statements and had not identified any material impact in the
application of these amendments.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
The amendments to IAS 12 Income Taxes require companies to recognize deferred tax on transactions that, on
initial recognition, give rise to equal amounts of taxable and deductible temporary differences, and will require
the recognition of additional deferred tax assets and liabilities. The amendment should be applied to transactions
that occur on or after the beginning of the earliest comparative period presented. In addition, entities should
recognize deferred tax assets (to the extent that it is probable that they can be utilized) and deferred tax liabilities
at the beginning of the earliest comparative period for all deductible and taxable temporary differences
associated with right-of-use assets and lease liabilities, and decommissioning, restoration and similar liabilities,
and the corresponding amounts recognized as part of the cost of the related assets.
As of December 31, 2023, the Company's management had already assessed the effects of applying these
amendments on the Company’s financial statements and had not identified any material impact in the
application of these amendments.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
132
28.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (continued)
OECD Pillar Two Rules – Amendments to IAS 12
In December 2021, the Organization for Economic Co-operation and Development (“OECD”) released the Pillar
Two model rules (the Global Anti-Base Erosion rules, or “GloBE”) to reform international corporate taxation.
Following Pillar Two OECD’s initiative, the European Union adopted in December 2022 a directive to impose a
global minimum taxation for multinational companies in the Union, to be effective as from 2024. In May 2023,
the IASB made narrow-scope amendments to IAS 12 setting an exception that provides relief from the
requirement to recognize and disclose deferred taxes arising from enacted or substantively enacted tax laws that
implement the Pillar Two model rules, including tax laws that implement qualified domestic minimum top-up
taxes as per described in those rules.
No current tax impacts were recognized in the Consolidated Financial Statements as of December 31, 2023, due
to the application of Pillar Two rules, as they were applicable as from 2024 in jurisdictions relevant for the
Company. As of December 31, 2024, the Company recognized the corresponding charges in current tax (see note
11). In addition, the Company has applied the exception prescribed by the amendments to IAS 12, and therefore
it has not recognized any deferred tax impact from the Pillar Two application.
The following standards, amendments to standards and interpretations are not mandatory for the financial year
beginning January 1, 2024, and have not been early adopted:
IFRS 18, ‘Presentation and disclosure in Financial Statements’
In April 2024, the IASB issued IFRS 18, “Presentation and disclosure in financial statements”, which introduces
new requirements to present specified categories and defined subtotals in the statement of profit or loss, provide
disclosures on management-defined performance measures (MPMs) in the notes to the financial statements and
improve aggregation and disaggregation. Once implemented, it will replace IAS 1, carrying forward many of the
requirements in IAS 1 unchanged and complementing them. IFRS 18 must be applied on annual periods
beginning on or after January 1, 2027. The Company's management is currently assessing the potential impact
that the application of this standard may have on the Company's financial condition or results of operations.
Other standards and interpretations non-significant for the Company’s financial statements:
–
Amendments to IAS 7 and IFRS 7 - Supplier finance arrangements
–
IFRS 19 Subsidiaries without Public Accountability: Disclosures
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
133
29.
FINANCIAL RISK MANAGEMENT
1) Financial risk factors
Ternium’s activities expose the Company to a variety of risks: market risk (including the effects of changes in
foreign currency exchange rates, interest rates and commodities prices), credit risk and liquidity risk.
Ternium’s overall risk management program focuses on the unpredictability of financial markets and seeks to
minimize potential adverse effects on the financial performance. Ternium’s subsidiaries may use derivative
financial instruments to hedge certain risk exposures.
1.1) Market Risk
(i) Foreign exchange rate risk
Ternium operates and sells its products in different countries, and as a result is exposed to foreign exchange rate
volatility. Ternium’s subsidiaries may use derivative contracts in order to hedge their exposure to exchange rate
risk derived from their trade and financial operations.
Ternium’s foreign exchange policy seeks to minimize the impact of fluctuations in the value of other currencies
with respect to the U.S. dollar. Ternium’s subsidiaries monitor their actual and expected short-term net cash
flows in currencies other than the U.S. dollar and analyze potential hedging according to its needs in line with its
derivative policy. This hedging can be carried out either by netting positions or by financial derivatives.
However, regulatory or legal restrictions in the countries in which Ternium’s subsidiaries operate, could limit the
possibility of the Company carrying out its hedging policy.
The following table shows a breakdown of Ternium’s assessed financial position exposure to currency risk as of
December 31, 2024:
Exposure to
functional currency
$ million
BRL million
US dollar ($)
—
(187)
EU euro (EUR)
33
(5)
Argentine peso (ARS)
18
—
Mexican peso (MXN)
(801)
—
Brazilian real (BRL)
(297)
—
Colombian peso (COP)
(64)
—
Yen (JPY)
99
—
Other currencies
(1)
(0)
The main relevant exposures correspond to:
(a) Argentine peso vs. U.S. dollar
If the Argentine peso had weakened by 1% against the U.S. dollar, it would have generated a pre-tax loss of $ 0.2
million and a pre-tax gain of $ 1.3 million as of December 31, 2024 and 2023, respectively.
(b) Mexican peso vs. U.S. dollar
If the Mexican peso had weakened by 1% against the U.S. dollar, it would have generated a pre-tax gain of $ 8.0
million and $ 3.1 million as of December 31, 2024 and 2023, respectively.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
134
29.
FINANCIAL RISK MANAGEMENT (continued)
(c) Colombian peso vs. U.S. dollar
If the Colombian peso had weakened by 1% against the U.S. dollar, it would have generated a pre-tax gain of $
0.6 million and $ 0.2 million as of December 31, 2024 and 2023, respectively.
(d) Brazilian real vs. U.S. dollar
If the Brazilian real had weakened by 1% against the U.S. dollar, it would have generated a pre-tax loss of $ 3.0
million and $ 5.3 million as of December 31, 2024 and 2023, respectively.
We estimate that if the Argentine peso, Mexican peso, Colombian peso and Brazilian real had weakened
simultaneously by 1% against the U.S. dollar with all other variables held constant, total pre-tax gain for the year
would have been $ 5.4 million higher (total pre-tax loss of $ 0.6 million higher as of December 31, 2023), as a
result of foreign exchange gains/losses on translation of U.S. dollar-denominated financial position, mainly local
currency cash, trade receivables, trade payables, tax credits and liabilities, lease liabilities, borrowings and other
liabilities.
Considering the same variation of the currencies against the U.S. dollar of all net investments in foreign
operations amounting to $ 2.3 billion, the currency translation adjustment included in total equity would have
been $ 5.2 million higher, arising mainly from the adjustment on translation of the equity related to the Brazilian
real during the year 2024.
(ii) Interest rate risk
Ternium manages its exposure to interest rate volatility through its financing alternatives and hedging
instruments. Borrowings issued at variable rates expose the Company to the risk of increased interest expense in
the event of a raise in market interest rates, while borrowings issued at fixed rates expose the Company to a
variation in its fair value. The Company’s interest-rate risk mainly arises from long-term borrowings that bear
variable-rate interest that could be partially fixed through different derivative transactions, such as interest rate
swaps.
Ternium’s nominal weighted average interest rate for its debt instruments, which do not include neither the effect
of derivative financial instruments, nor the devaluation of the local currencies, was 8.83% and 8.46% as of
December 31, 2024 and 2023, respectively. These rates were calculated using the rates set for each instrument in
its corresponding currency and weighted using the dollar-equivalent outstanding principal amount of each
instrument.
Ternium’s total variable interest rate debt amounted to $ 1,140.1 million (51.1% of total borrowings) as of
December 31, 2024, and $ 1,065.9 million (49.7% of total borrowings) as of December 31, 2023.
If interest rates on the aggregate average notional of U.S. dollar denominated borrowings held during 2024,
excluding borrowings with derivatives contracts mentioned in Note 22 (a), had been 100 basis points higher with
all other variables held constant, total pre-tax income for the year ended December 31, 2024 would have been $
21.1 million lower ($ 18.3 million lower as of December 31, 2023).
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
135
29.
FINANCIAL RISK MANAGEMENT (continued)
1.2) Credit risk
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit
exposures to customers, including outstanding receivables and committed transactions. Ternium’s subsidiaries
have credit guidelines in place to ensure that derivative and treasury counterparties are limited to high credit
quality financial institutions.
Ternium invests in financial assets with a minimum credit rating of investment grade established by an
international qualification agency renowned in the financial market, in line with corporate investment portfolio
policies. Approximately 41.0% of the Company’s liquid financial assets correspond to investment grade rated
instruments as of December 31, 2024, in comparison with approximately 34.8% as of December 31, 2023. The
investments in financial assets are as follows:
As of December
31, 2024
As of December
31, 2023
Cash and cash equivalents
1,691,263
1,846,013
Other Investments - Current and Non-Current
2,182,874
2,186,420
Fixed Income (time-deposit, zero-coupon bonds, commercial papers)
673,042
1,025,207
Deposit certificates and investment funds
636,104
844,428
Commercial papers
2,258
129,798
Other
34,680
50,981
Bonds and other fixed income
1,499,130
1,160,230
Non - U.S. government securities
1,201,842
928,419
U.S. government and corporate securities
287,248
231,811
Other notes
10,702
983
Ternium has no significant concentrations of credit risk from customers. No single customer accounts for more
than ten percent of Ternium’s sales. Ternium’s subsidiaries have policies in place to ensure that sales are made to
customers with an appropriate credit history, and that credit insurances, letters of credit or other instruments are
requested to reduce credit risk whenever deemed necessary. The subsidiaries maintain allowances for potential
credit losses. The utilization of credit limits is regularly monitored.
Trade and other receivables are carried at face value less allowance for doubtful accounts, if applicable. This
amount does not differ significantly from fair value. The other receivables do not contain significant impaired
assets.
As of December 31, 2024, trade receivables total $ 1,562.1 million ($ 2,065.5 million as of December 31, 2023).
These trade receivables are collateralized by guarantees under letter of credit and other bank guarantees of $ 1.0
million ($ 1.4 million as of December 31, 2023), credit insurance of $ 576.5 million ($ 686.2 million as of
December 31, 2023) and other guarantees of $ 27.0 million ($ 9.4 million as of December 31, 2023).
As of December 31, 2024, trade receivables of $ 1,515.1 million ($ 1,910.9 million as of December 31, 2023) were
fully performing.
As of December 31, 2024, trade receivables of $ 99.4 million ($ 214.1 million as of December 31, 2023) were past
due (mainly up to 180 days).
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
136
29.
FINANCIAL RISK MANAGEMENT (continued)
The amount of the allowance for doubtful accounts was $ 52.4 million as of December 31, 2024 ($ 59.5 million as
of December 31, 2023).
The carrying amounts of the Company’s trade and other receivables as of December 31, 2024, are denominated in
the following currencies:
Currency
$ million
US dollar ($)
1,315
EU euro (EUR)
161
Argentine peso (ARS)
189
Mexican peso (MXN)
331
Brazilian real (BRL)
1,354
Colombian peso (COP)
75
Other currencies
1
3,426
1.3) Liquidity risk
Management maintains sufficient cash and marketable securities and credit facilities to finance normal
operations. Management monitors rolling forecasts of the group’s liquidity reserve on the basis of expected cash
flow.
The table below analyses financial liabilities into relevant maturity groups based on the remaining period at the
date of the statement of financial position to the contractual maturity date. The amounts disclosed in the table
are the contractual undiscounted cash flows.
$ million
2025
2026
2027
2028
Thereafter
Borrowings
670
621
373
110
456
Interests to be accrued (1)
159
128
100
77
78
Trade payables and other liabilities
1,890
19
10
13
80
Lease liabilities
46
41
34
32
57
Total
2,765
809
517
232
672
(1) These amounts do not include the effect of derivative financial instruments.
As of December 31, 2024, total cash and cash equivalents and other current and non-current investments less
borrowings amounted to $ 1,644.0 million.
1.4) Capital risk
Ternium seeks to maintain an adequate debt/equity ratio considering the industry and the markets where it
operates. The year-end ratio debt over debt plus equity is 0.12 and 0.11 as of December 31, 2024 and 2023,
respectively. The Company does not have to comply with regulatory capital adequacy requirements as known in
the financial services industry.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
137
29.
FINANCIAL RISK MANAGEMENT (continued)
2) Financial instruments by category and fair value hierarchy level
The accounting policies for financial instruments have been applied to the line items below. According to the
scope and definitions set out in IFRS 7 and IAS 32, employers’ rights and obligations under employee benefit
plans, and non-financial assets and liabilities such as advanced payments and income tax payables, are not
included.
As of December 31, 2024 (in $ thousands)
Amortized
cost
Assets at fair
value through
profit or loss
Assets at fair
value through
OCI
Total
(i) Assets as per statement of financial position
Receivables
423,521
—
—
423,521
Derivative financial instruments
—
4,483
—
4,483
Trade receivables
1,562,058
—
—
1,562,058
Other investments
549,077
134,667
1,499,130
2,182,874
Cash and cash equivalents
1,267,336
423,927
—
1,691,263
Total
3,801,992
563,077
1,499,130
5,864,199
As of December 31, 2024 (in $ thousands)
Liabilities at fair
value through
profit or loss
Amortized
cost
Total
(ii) Liabilities as per statement of financial position
Other liabilities
—
436,152
436,152
Trade payables
—
1,840,914
1,840,914
Derivative financial instruments
50,342
—
50,342
Finance lease liabilities
—
210,124
210,124
Borrowings
—
2,230,119
2,230,119
Total
50,342
4,717,309
4,767,651
As of December 31, 2023 (in $ thousands)
Amortized
cost
Assets at fair
value through
profit or loss
Assets at fair
value through
OCI
Total
(i) Assets as per statement of financial position
Receivables
472,384
—
—
472,384
Derivative financial instruments
—
15,406
—
15,406
Trade receivables
2,065,499
—
—
2,065,499
Other investments
883,513
142,677
1,160,230
2,186,420
Cash and cash equivalents
1,367,235
478,778
—
1,846,013
Total
4,788,631
636,861
1,160,230
6,585,722
As of December 31, 2023 (in $ thousands)
Liabilities at fair
value through
profit or loss
Amortized
cost
Total
(ii) Liabilities as per statement of financial position
Other liabilities
—
487,792
487,792
Trade payables
—
2,159,647
2,159,647
Derivative financial instruments
8,220
—
8,220
Finance lease liabilities
—
241,087
241,087
Borrowings
—
2,146,414
2,146,414
Total
8,220
5,034,940
5,043,160
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
138
29.
FINANCIAL RISK MANAGEMENT (continued)
Fair Value by Hierarchy
Following the requirements contained in IFRS 13, Ternium categorizes each class of financial instrument
measured at fair value in the statement of financial position into three levels, depending on the significance of the
judgment associated with the inputs used in making the fair value measurements:
–
Level 1 comprises financial assets and financial liabilities whose fair values have been determined on the basis
of quoted prices (unadjusted) in active markets for identical assets or liabilities.
–
Level 2 includes financial assets and financial liabilities for which fair values have been estimated using inputs
other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
–
Level 3 comprises financial instruments for which inputs to estimate fair value of the assets or liabilities are
not based on observable market data (unobservable inputs).
The following table presents the assets and liabilities that are measured at fair value as of December 31, 2024 and
2023:
Fair value measurement as of December 31, 2024
(in $ thousands):
Description
Total
Level 1
Level 2
Level 3 (*)
Financial assets at fair value through profit or loss / OCI
Cash and cash equivalents
423,927
423,927
—
—
Other investments
1,633,797
1,501,389
131,866
542
Derivative financial instruments
4,483
—
4,483
—
Total assets
2,062,207
1,925,316
136,349
542
Financial liabilities at fair value through profit or loss / OCI
Derivative financial instruments
50,342
—
50,342
—
Total liabilities
50,342
—
50,342
—
Fair value measurement as of December 31, 2023
(in $ thousands):
Description
Total
Level 1
Level 2
Level 3 (*)
Financial assets at fair value through profit or loss / OCI
Cash and cash equivalents
478,778
478,778
—
—
Other investments
1,302,907
1,086,319
197,743
18,845
Derivative financial instruments
15,406
—
15,406
—
Total assets
1,797,091
1,565,097
213,149
18,845
Financial liabilities at fair value through profit or loss / OCI
Derivative financial instruments
8,220
—
8,220
—
Total liabilities
8,220
—
8,220
—
(*) The fair value of financial instruments classified as level 3 is not obtained from observable market information, but from measurements of the asset
portfolio at market value provided by the fund manager. The evolution of such instruments during the years ended December 31, 2024 and 2023,
corresponds to the initial investment and to the changes in its fair value, as follows:
Guarantee fund
companies
Non - U.S.
government securities
As of December 31, 2023
983
17,862
Disinvestment
(1,484)
(7,901)
Interest accrued
—
—
Changes in fair value
1,240
—
Reclassifications
—
(9,961)
Net foreign exchange gain
(197)
—
At December 31, 2024
542
—
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
139
29.
FINANCIAL RISK MANAGEMENT (continued)
There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy there were no transfers
from Level 1 to Level 3 and there were transfers of Non-U.S. Government securities from Level 3 to Level 2.
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting
date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer,
broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly
occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by
Ternium is the current mid-price. These instruments are included in Level 1 and comprise primarily corporate
and sovereign debt securities.
The fair value of financial instruments that are not traded in an active market (such as certain debt securities,
certificates of deposits with original maturity of more than three months, forward and interest rate derivative
instruments) is determined by using valuation techniques which maximize the use of observable market data
when available and rely as little as possible on entity specific estimates. If all significant inputs required to value
an instrument are observable, the instrument is included in Level 2. Ternium values its assets and liabilities
included in this level using mid prices, interest rate curves, broker quotations, current exchange rates and
forward rates volatilities obtained from market contributors as of the valuation date.
If one or more of the significant inputs are not based on observable market data, the instruments are included in
Level 3. Ternium values its assets and liabilities in this level using observable market inputs, information
provided by fund managers and management assumptions which reflect the Company’s best estimate on how
market participants would price the asset or liability at measurement date.
3) Accounting for derivative financial instruments and hedging activities
Depending on the nature of the hedged item, Ternium either recognizes its derivative financial instruments’
transactions in the statement of financial position at cost and subsequently measures changes on a monthly basis
at fair value, or undertakes hedge accounting, classifying these transactions as cash flow hedges. While changes in
fair value are disclosed under “Other financial income (expenses), net” line item in the income statement, changes
in transactions classified as cash flow hedges are disclosed as an equity reserve in the statement of comprehensive
income. Ternium does not hedge its net investments in foreign entities.
Ternium designates certain derivatives as hedges of a particular risk associated with a recognized asset or liability
or a highly probable forecast transaction. These transactions are classified as cash flow hedges (mainly capital
expenditures). The effective portion of the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized within other comprehensive income. Amounts accumulated in other comprehensive income
are recognized in the income statement in the same period than any offsetting losses and gains on the hedged
item. Once the hedged item gets settled, the gain or loss relating to the ineffective portion is recognized
immediately in the income statement. The fair value of Ternium derivative financial instruments (asset or
liability) continues to be reflected on the statement of financial position.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
140
29.
FINANCIAL RISK MANAGEMENT (continued)
For transactions designated and qualifying for hedge accounting, Ternium documents the relationship between
hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking
various hedge transactions. The Company also documents its assessment, on an ongoing basis, of whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash
flows of hedged items. As of December 31, 2024 and 2023, the effective portion of designated cash flow hedges
(net of taxes) amounted to $ (37.3) million and $ 15.9 million, respectively, and were included under "changes in
the fair value of derivatives classified as cash flow hedges" line item in the statement of comprehensive income
(see Note 27 (a)).
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 22. The full fair
value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the
hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged
item is less than 12 months.
Changes in the fair value of any derivative instruments that do not qualify for hedge accounting under IAS 39 are
recognized immediately in the income statement.
4) Fair value estimation
The estimated fair value of a financial instrument is the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or liquidation sale.
For the purpose of estimating the fair value of financial assets and liabilities with maturities of less than one year,
the Company uses the market value less any estimated credit adjustments. For other investments, the Company
uses quoted market prices.
As most borrowings incorporate floating rates that approximate market rates and the contractual repricing
occurs mostly every one month, the fair value of the borrowings approximates their carrying amount and it is not
disclosed separately.
In assessing the fair value of derivatives and other financial instruments, Ternium uses a variety of methods,
including, but not limited to, estimated discounted value of future cash flows using assumptions based on market
conditions existing at each year-end.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
141
30.
FOREIGN EXCHANGE RESTRICTIONS IN ARGENTINA
Ternium’s Argentine subsidiary, Ternium Argentina S.A., is currently operating in a complex and volatile
economic environment.
Between September 2019 and December 13, 2023, the Argentine government imposed significant restrictions on
foreign exchange transactions. Although after a new administration took office in Argentina in December 2023
certain restrictions were eased and other changes to such regulations are expected, at the date of these
Consolidated Financial Statements the application of existing foreign exchange regulations remains uncertain
and the scope and timing of upcoming changes remain unknown. The main currently applicable measures are
described below:
• Access to the Argentine foreign exchange market (“MULC”) to pay for imports of services rendered by related
and non-related parties (including royalties) on or before December 12, 2023, is subject to Argentine Central
Bank approval. Currently, these approvals are rarely, if ever, granted. Access to the MULC to pay for imports of
services that were rendered or accrued as from December 13, 2023, does not require government approval, but
payment is deferred 30 calendar days as from the date of supply or accrual of the service (if the service was
rendered by a non-related party) or 180 calendar days (if rendered by a related party).
• In the context of high, but decelerating, inflation during 2024, restrictions of access to the MULC to pay for
imports of goods remain, but have been gradually made more flexible. The price for imports with customs
clearance on or after October 21, 2024, may be paid in full as from on the 30th day from the date of customs
clearance. In addition, the price for imports with customs clearance between August 1 and October 20, 2024, may
be paid in two equal installments on the 30th and 60th day from the date of customs clearance, and the price for
imports with customs clearance between December 13, 2023, and July 31, 2024, may be paid in four equal
installments payable on the 30th, 60th, 90th and 120th day from the date of customs clearance. Access to the
MULC to pay for imports that obtained customs clearance on or before December 12, 2023, continues to require
Argentine Central Bank approval.
• Foreign currency proceeds derived from exports of goods must be sold into the MULC and converted into
Argentine pesos within 60 days (if made to related parties) or 180 days (if made to unrelated parties) from
shipment date, or, if collected earlier, within five days of collection. Foreign currency proceeds from exports of
services must be sold into the MULC and converted into Argentine pesos within five business days of collection.
As from December 13, 2023, up to 20% of export of goods or services proceeds can be sold for Argentine pesos
through securities transactions resulting in a higher implicit exchange rate, as described further below. This
percentage has changed over time.
• Access to the MULC to make dividend payments requires prior Argentine Central Bank approval. When
required, Argentine Central Bank approvals are rarely, if ever, granted.
Ternium Argentina carries out all of its import and export transactions through the MULC. Therefore, assets
and liabilities in foreign currency as of December 31, 2024, have been valued considering the official exchange
rates at the end of the period.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
142
30.
FOREIGN EXCHANGE RESTRICTIONS IN ARGENTINA (continued)
Under Ternium Argentina’s annual accounts as of December 31, 2024, and for the year then ended, revenues
amounted to $ 2,212 million (2023: $ 3,419 million), net profit from continuing operations to $ 149 million (2023:
$ 686 million), total assets to $ 5,726 million (2023: $ 5,083 million), total liabilities to $ 790 million (2023: $ 759
million) and shareholders’ equity to $ 4,936 million (2023: $ 4,324 million).
Ternium Argentina’s cash and cash equivalents and other investments amounted to $ 1,293 million as of
December 31, 2024, broken down as follows:
- $ 1,275 million in U.S. dollars-denominated instruments in sovereign bonds issued by the Argentine
Government and payable in U.S. dollars, and Argentine Treasury bonds related to the official exchange rate. The
U.S. dollar value of these instruments recorded in Ternium’s consolidated financial statements is based on their
Argentine peso local market price, converted to the U.S. dollar at the ARS/$ official exchange rate. Therefore, the
valuation of such investments is subject to the volatility of the Argentine financial market and currency exchange
rates, leading to a potential significant reduction of such value in the consolidated financial statements.
- $ 17 million in Argentine pesos-denominated instruments.
- $ 1 million in negotiable obligations and promissory notes issued by Argentine export driven companies in U.S.
dollars and mainly payable in Argentine pesos.
Ternium Argentina’s financial position in ARS as of December 31, 2024, amounted to $ 218 million in monetary
assets and $ 184 million in monetary liabilities. All of Ternium Argentina’s ARS-denominated assets and
liabilities are valued at the prevailing official exchange rate. In the event of a devaluation, Ternium Argentina
may be adversely affected, and will also suffer a loss on deferred tax charge as a result of a deterioration on the
tax value of their fixed assets. At this time, the Company is unable to estimate all impacts of a new devaluation
of the Argentine peso against the U.S. dollar.
On April 24, 2023, Ternium Argentina’s board of directors approved the payment of a dividend in kind in US
dollar-denominated Argentine bonds for a total amount of up to $ 624 million. On May 4, 2023, Ternium
received its share of the dividend in kind. Considering the impact of foreign exchange restrictions in Argentina
and based on the value of the bonds in the international market, Ternium recorded in its equity a negative reserve
as of the collection date. With the disposal of a portion of these instruments, the Company partially reclassified
such reserve to financial results. As of December 31, 2024, the equity reserve was fully reclassified to financial
results upon disposal of these remaining bonds.
This context of volatility and uncertainty remains in place as of the issue date of these Consolidated Financial
Statements. Management continues to monitor closely the evolution of the main variables affecting its business,
identifying the potential impact thereof on its financial and economic situation and determining the appropriate
course of action in each case. The Company’s Consolidated Financial Statements should be read taking into
account these circumstances.
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
143
31.
SUBSEQUENT EVENTS
a. Annual Dividend Proposal
Upon approval of the Company´s 2024 annual accounts, the Board of Directors intends to propose, for the
approval of the Annual General Shareholders' meeting to be held on May 6, 2025, the payment of an annual
dividend of $ 0.27 per share ($ 2.70 per ADS), or approximately $ 530 million, which includes the interim
dividend of $0.09 per outstanding share ($0.90 per ADS) or approximately $ 177 million, paid on November 21,
2024. If the annual dividend is approved by the shareholders, a dividend of $ 0.18 per share ($ 1.80 per ADS), or
approximately $ 353 million will be paid on May 14, 2025, with an ex-dividend date of May 9, 2025. These
Consolidated Financial Statements do not reflect this dividend payable.
b. Recently Announced Tariffs on Imports in the United States
On February 1, 2025, the U.S. government announced the imposition, through the International Emergency
Economic Powers Act (IEEPA), of across-the-board tariffs applicable to all products imported from Mexico,
Canada and China. As of the date of this financial statements, Mexican and Canadian products that comply with
USMCA preferential rules of origin, are exempt from this tariff. Further, the Trump administration announced
that the U.S. would implement reciprocal tariffs with trading partners by April 2025.
In addition, on March 12, 2025, the U.S. government imposed a 25% tariff on virtually all imports of steel and on
certain steel derivatives, revoking previously negotiated country-specific exemptions and quota arrangements.
Other countries have announced retaliatory tariffs against U.S. exports. It is also anticipated that parties may
bring litigation regarding the timeliness and appropriateness of the Trump administration’s actions. In light of
the foregoing uncertainties, Ternium is unable at this time to predict the evolution or ultimate outcome of these
developments or to quantify the impact that the new tariffs and measures would have on its business or financial
condition.
Pablo Brizzio
Chief Financial Officer
TERNIUM S.A.
Consolidated Financial Statements as of December 31, 2024 and 2023
and for the years ended December 31, 2024, 2023 and 2022
144
Intentionally left blank.
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