Ternium Takes Its Lumps and Prospers

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

If adversity can be said to harden the resolve of the greatest competitors, then the mettle of this manufacturer is forged in solid steel.

One of the three main subsidiaries of multi-national steelmaker Ternium (NYSE: TX  ) was nationalized this year by Venezuela as part of President Hugo Chavez's broader march toward socialism. Despite the abrupt loss of the Sidor subsidiary, Ternium turned in results for the second quarter that showed how it rose through the adversity.

Net sales rose 22% from the first quarter, operating income rose 68%, and net income rose only 3% as no gains from the discontinued Sidor operations were recorded for the second quarter. Although the company expects some margin contraction in the third quarter, the EBITDA margin rose from 24% in the first quarter to 30% in the second quarter.

Further adversity may lie ahead for Ternium, as the company projects some weakening of steel prices in North America for the second half of 2008. Ternium derived about 80% of its revenue in the second quarter from the North American market, so the price outlook for this region matters to the company's bottom line. Meanwhile, U.S. steelmakers like Schnitzer Steel (Nasdaq: SCHN  ) and Nucor (NYSE: NUE  ) are pursuing lower production costs through a focus on scrap metal as feedstock.

While I admire the gumption Ternium exhibited by weathering the loss of a major subsidiary, I continue to view geography as a key consideration for this company. While Companhia Siderurgica Nacional (NYSE: SID  ) at last check derived two-thirds of its revenue from the domestic Brazilian market, Ternium looks North to a struggling U.S. economy. For its direct access to steel-hungry Asia, Korea's POSCO (NYSE: PKX  ) may have the most formidable geographical advantage of them all.

POSCO is an Income Investor recommendation. Try the market-beating, dividend-focused service today via a free 30-day trial.

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns no shares in the companies mentioned. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 703830, ~/Articles/ArticleHandler.aspx, 10/25/2016 8:11:28 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 10 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:02 PM
TX $22.88 Up +0.45 +2.01%
Ternium CAPS Rating: *****
NUE $47.68 Down -0.19 -0.40%
Nucor CAPS Rating: *****
PKX $53.73 Up +0.31 +0.58%
POSCO (ADR) CAPS Rating: ****
SCHN $23.40 Up +0.15 +0.65%
Schnitzer Steel In… CAPS Rating: *****
SID $3.34 Up +0.14 +4.38%
Companhia Siderurg… CAPS Rating: **