Operating income in the first quarter 2013 was USD271.8 million, a sequential increase of USD147.9 million mainly related to a 73,000 ton increase in steel shipments and a USD68 decrease in steel operating cost per ton, partially offset by an USD11 decrease in steel revenue per ton. The steel segment's operating cost per ton decreased mainly as a result of lower raw material and purchased slab costs and a higher absorption of fixed costs following the restart in February of a blast furnace in Argentina.
Ternium's net income in the first quarter 2013 was USD151.4 million, a USD384.5 million higher result compared to net income in the fourth quarter 2012, mainly due to a USD279.7 million lower equity in losses of non-consolidated companies related to an impairment of the investment in Usiminas performed in the fourth quarter 2012 and the above mentioned increase in operating income, partially offset by a consequently higher income tax expense.
Operating income in the first quarter 2013 was USD12.4 million lower than in the first quarter 2012 as a result of a decrease in the steel segment's operating income partially offset by an increase in the mining segment's operating income. The decrease in the steel segment's operating income was principally due to a USD70 decrease in revenue per ton, partially offset by a 79,000 ton increase in shipments and a USD50 decrease in operating cost per ton as a result of lower raw material and purchased slab costs.
Net income in the first quarter 2013 was USD19.8 million lower year-over-year mainly as a result of higher net financial expenses and the above mentioned decrease in operating income, partially offset by a consequently lower income tax expense.
Mining Segment - Proportional Consolidation of Peña Colorada
The mining segment comprises the mining activities of Las Encinas, a company in which Ternium holds a 100% equity interest and also comprises 50% of the operations and results of Peña Colorada, a company in which Ternium maintains a 50% equity interest. Until December 31, 2012, Peña Colorada was presented as an investment in non-consolidated companies and its results included within "Equity in earnings (losses) of non-consolidated companies" in the consolidated income statement. Starting on January 1, 2013, Ternium applied the provisions of IFRS 11 and began to recognize Peña Colorada's assets, liabilities, revenue and expenses in relation to its interest in the joint operation.
Steel consumption is gradually recovering. However, the North American steel industry's capacity utilization looks moderately high relative to apparent consumption, a situation that could lead to a weaker steel pricing environment. In our region, the strongest sector continues to be manufacturing, especially within the automotive industry, while construction remains at low but improving levels. Offsetting the softer pricing environment, the company anticipates a sequential reduction in steel cost per ton mainly due to lower raw material and purchased slab costs. Consequently, Ternium expects to generate operating income in the second quarter 2013 roughly in line with that of the first quarter 2013.
Analysis of First Quarter 2013 Results
Net income attributable to Ternium's equity holders in the first quarter 2013 was USD129.3 million, compared to a net income of USD142.2 million in the first quarter 2012. Including non-controlling interest, net income for the first quarter 2013 was USD151.4 million, compared to a net income of USD171.2 million in the first quarter 2012. Earnings per ADS in the first quarter 2013 were USD0.66, compared to earnings of USD0.72 in the first quarter 2012.
Most Popular Stories
- 15 Myths That Could Ruin Your Hispanic Ad Campaign
- Bitcoin Clones Lurch Onto Financial Scene
- General Motors Names Mary Barra as First Female CEO
- Clinton to Keynote Annual Simmons Leadership Conference
- AIG to Create 230 Jobs in Charlotte
- How Bitcoin and Other Cryptocurrencies Work
- Californians Want to Legalize Marijuana
- Selena Gomez, Shakira Among Top Hispanic Searches
- Pacific Trade Pact Delay Hinders U.S. Pivot to Asia
- PhD Project Grooms Business Profs