What happened
Shares of Ternium (TX 2.81%) tumbled more than 12% by 11 a.m. ET on Wednesday. Weighing on the steelmaker were its fourth-quarter results and outlook for 2022.
So what
Ternium reported solid fourth-quarter results. The steel company's revenue soared 68%, while its earnings before interest, taxes, depreciation, and amortization (EBITDA) skyrocketed 133%. The company benefited from higher iron ore shipments and revenue per ton. That more than offset an 8% decline in steel shipments -- due to a 17% decrease in shipments to Mexico because of supply chain issues -- and lower spot steel prices.
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Ternium's solid finish to 2021 enabled the company to achieve record profitability last year. However, the company doesn't expect a repeat performance in 2022. While it anticipates delivering solid results this year, it sees normalizing steel prices and margins, along with ongoing supply chain issues, impacting its results this year.
It sees continued supply chain issues in North America putting pressure on steel prices during the first half of this year. Meanwhile, its outlook for Argentina remains significantly uncertain given the unstable macroeconomic conditions in that market. These factors have the company expecting a sequential decline in EBITDA during the first quarter due to lower margins.
Now what
Ternium benefited from strong steel demand last year to deliver record profits. However, with supply chain issues impacting demand this year, its earnings likely won't beat last year's record. Because of that, these issues will likely continue to weigh on the company's stock until demand picks up and steel prices stabilize.
