SAO PAULO/MEXICO CITY (Reuters) -Steelmaker Ternium reported on Thursday an 84% drop in its third-quarter net income to $220 million as it was hit by lower realized steel prices and an increase in raw material and energy costs.
The “temporary mismatch” between a decline in steel prices and high costs, the firm said in a media release, should also affect its steel margin in the fourth quarter, leading to a lower adjusted EBITDA when compared to the previous three months.
“Ternium anticipates this dynamic to mostly reverse during the first quarter of 2023,” it added.
The company, which operates mainly across Latin America, reported revenues of $4.13 billion in the three months to September, a 10% drop year-on-year.
Ternium had already predicted in August that higher raw material costs and lower steel prices would hit its third quarter margins, causing core earnings to fall.
Its adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, declined 64% to $679 million.
Tighter monetary policy, supply issues and a slowing global economy have hit demand for steel, while slumping prices saw India’s Tata Steel earlier this week post profits down nearly 90%.
Ternium said its steel shipments reached 2.97 million tonnes in the third quarter, down 3% from a year ago but roughly stable on a sequential basis.
In Mexico, shipments increased slightly from the previous quarter as the local auto industry made progress in dealing with supply chain hurdles, though remaining below its production capacity, the steelmaker said.
Ternium expects Mexican shipments to increase slightly in the fourth quarter despite December being a seasonally slow month. It also foresees an upside for steel shipments to the auto industry next year.
In Argentina, the company reported some bottlenecks in the manufacturing sector in the third quarter, leading to a 7% drop in shipments in the Southern Region, but said local steel demand remains roughly stable.
(Reporting by Gabriel Araujo and Valentine Hilaire; Editing by Steven Grattan and Chizu Nomiyama)
