What happened
Shares of Ternium (TX +0.00%) were down more than 11% as of 10:45 a.m. EDT on Wednesday following the release of the steel company's third-quarter report.
So what
Ternium shipped 3.1 million tons of steel during the third quarter, about even with Q2. The company shipped more finished steel in the U.S. market, which was offset entirely by lower volumes elsewhere. Ternium noted that while it continued ramping up its new hot-rolling mill in Pesquería, it did so at a slower-than-anticipated pace due to energy-related bottlenecks.
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On a more positive note, Ternium benefited from higher steel prices in the quarter, realizing a new record high. The steelmaker also generated record earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.9 billion. Meanwhile, it produced $475.4 million in free cash flow during the period. As a result, it ended the quarter with a net cash position of roughly $300 million, up from a net debt position of around $200 million at the end of Q2. That gave its board the confidence to declare an interim dividend of $0.80 per share, or $157 million.
Now what
Ternium expects to maintain its strong performance in the fourth quarter. However, it anticipates that EBITDA will decline slightly from its record showing in Q3 due to relatively stable shipments and lower margins caused by higher raw material costs. Meanwhile, the company expects 2022 to be a more balanced steel market as global supply chain pressures ease, suggesting steel prices could cool off. These headwinds could keep a lid on Ternium's stock price in the near term.
