Ternium Sees Lower Operating Profit as Expectations Missed

Ternium SA, (TX) Latin America’s second- largest steelmaker, said it expects operating profit will be curbed next quarter after second-quarter net income missed expectations on lower prices. The stock tumbled.

Net income slid to $110.8 million, or 56 cents per American depositary share, from $197.7 million, or $1.01, a year earlier, Luxembourg-based Ternium, said late yesterday in a Marketwire statement. The company was expected to post per-share profit, excluding one-time items, of 63 cents, the average of five analysts’ estimates compiled by Bloomberg.

Ternium expects shipment levels to remain little changed in the third quarter compared with the second quarter as global economic turmoil affects steel market growth prospects.

“Declining prices in the region during recent months will result in a lower average price in the third quarter 2012 compared to the second quarter 2012 and will consequently reduce third quarter operating income,” Ternium said in the statement.

Ternium declined 4.9 percent to $18.59 at 10:54 a.m. in New York, after earlier dropping as much as 5.7 percent, the biggest intraday decline since July 23. The shares slid 32 percent in the 12 months through yesterday’s close.

“We expect a slightly negative reaction by the market,” Barclays Plc analysts led by Leonardo Correa in Sao Paulo said in a report released yesterday. “Particularly considering the weak earnings momentum into the 3Q12 and apparent lack of near- term catalysts.”

Capex Reiterated

Ternium sales fell 8 percent to $2.2 billion in the period. Revenue per ton shipped tumbled 7 percent to $989 a metric ton, mainly as a result of lower prices, the company said.

“We maintain our $1 billion projection for capex in 2012,” Chief Financial Officer Pablo Brizzio said today on a conference call, referring to Ternium’s annual spending budget.

Ternium’s investment in Brazilian steelmaker Usinas Siderurgicas de Minas Gerais SA (USIM5) contributed a loss of $6.7 million in the quarter.

The Techint Group, through its Ternium SA and Tenaris SA (TEN) units, on Nov. 27 agreed to pay 5.03 billion reais ($2.46 billion) for a 27.7 percent voting stake in Usiminas, teaming up with Nippon Steel Corp. (5401) to control Usiminas.

Usiminas, Brazil’s biggest maker of steel for the auto industry, said yesterday net sales climbed 6.6 percent to 3.23 billion reais in the second quarter, while steel sales volume rose 19 percent to 1.89 million metric tons.

Gerdau SA (GGBR4) is the biggest producer of steel in Latin America. Gerdau, based in Porto Alegre, Brazil, is scheduled to report quarterly earnings before markets open tomorrow.

To contact the reporter on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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