Earnings call transcript: Ternium Q1 2026 beats EPS, revenue expectations

Ternium SA ADR (TX) reported impressive financial results for Q1 2026, surpassing analyst expectations with an EPS of $1.09, a 33.73% surprise over the forecasted $0.8151. The company also exceeded revenue projections, posting $3.93 billion against a forecast of $3.9 billion. The stock responded positively, closing up 3.16% at $44.11, though premarket trading indicated a slight dip to $44.

Ternium demonstrated robust performance in Q1 2026, with significant improvements across key financial metrics. The company reported a net income of $372 million, driven by favorable financial dynamics and currency gains in key markets. Despite some operational disruptions in Brazil, Ternium’s strategic initiatives, particularly in Mexico, bolstered its market position.

Ternium’s actual EPS of $1.09 significantly outperformed the forecast of $0.8151, marking a 33.73% surprise. The revenue of $3.93 billion also exceeded expectations, with a 0.77% surprise. This strong performance highlights the company’s ability to navigate market challenges effectively.

The stock closed at $44.11, up 3.16%, indicating positive investor sentiment following the earnings announcement. However, premarket trading showed a slight dip to $44, reflecting some cautiousness among investors. The stock remains near its 52-week high, suggesting confidence in Ternium’s long-term prospects.

Looking ahead, Ternium projects continued growth, with significant progress expected in its Pesquería project in Mexico. The company anticipates operating its cold rolling mill and galvanizing line at full capacity by October 2026, enhancing its vertical integration strategy. Future EPS forecasts indicate steady growth, with projections of $0.9 for Q3 2026 and $4.18 for FY 2026.

CEO Máximo Vedoya stated, "Our strong Q1 results reflect the effectiveness of our strategic initiatives and our focus on operational excellence." He emphasized the importance of the Pesquería project in enhancing Ternium’s competitive position.

During the earnings call, analysts questioned the impact of operational disruptions in Brazil and the timeline for the Pesquería project’s completion. Management reassured investors about mitigation strategies and reaffirmed their commitment to strategic growth initiatives.

Máximo Vedoya, Chief Executive Officer, Ternium: In Mexico, apparent steel consumption fell around 10% in 2025, driven by uncertainty triggered by U.S. trade actions. In 2026, however, we see an improvement. The Mexican government has been actively working to mitigate the negative effects of U.S. trade measures on the Mexican economy by defending the local industry against unfair imports from Asia. These actions not only support the continued development of the Mexican industry, but are closely aligned with the U.S. government’s own trade strategy. Plan Mexico is also central to this effort. It promotes industrial development, increased domestic content in manufacturing, and strengthens regional supply chains. In this same line, last week, the steel industry and the Mexican government signed a landmark agreement to prioritize domestically produced steel in all public procurements, a clear sign of the opportunity ahead.

Taken together, these policies support our expectation of a recovery in Mexican steel demand. In this context, we expect volumes in Mexico to continue improving in the second quarter, driven mainly by the commercial market. The significant destocking that took place across the value chain in 2025 is now giving way to a normalization of apparent demand. Beyond that, we are seeing early movements in several infrastructure projects, which could add meaningful demand in the coming quarters. Turning to our Pesquería project in Mexico, the ramp-up curve of the cold rolling mill and the galvanizing line are running ahead of plan. We expect both lines to be operating close to a full capacity by October. The slab facility is also advancing in line with expectation. This project is central to our strategy.

It will significantly increase our vertical integration in Mexico, reduce our reliance on externally sourced slabs, and enhance our product capabilities across automotive, industrial, and construction applications. Importantly, as the automotive USMCA rule of origin enter into effects next year, this facility will position Ternium as a key player in meeting a growing demand. In this respect, I am pleased to share that we have been granted a patent in the United States for our new electrical steelmaking process, which will enable us to produce exposed steel at scale. This innovation leverage the integration of direct reduction at the same site. In addition, innovations such as virtual stamping solution, which utilize artificial intelligence to streamline certification process for the automotive industry, reinforcing our drive for operational excellence. This commitment continue to be recognized by our customers.

In February, we were honored by Ariston Group with their Strategic Partner Award, the highest recognition for quality and partnership. In April, Ternium México received the 2025 John Deere Crop Award and achieved the partner level, John Deere’s highest distinction for cost-effective and long-term collaboration. Brazil steel consumption remains broadly stable, with some sectors showing resilience and other facing more pressure. The automotive industry continues to perform well, with production expected to grow around 4% this year. On the other hand, sectors like agribusiness have seen weaker demand. A key challenge in the quarter was a significantly increase in steel imports, up around 30% versus the previous quarter. Import accelerated ahead of the government’s anti-dumping measures on cold rolled and coated products.

This has resulted in elevated inventory levels of imported material in the market, which we expect to normalize by the second half of the year. As these trade defenses measure gain traction and inventories level normalize, we expect to see Usiminas’ market share to improve. However, it is also worth noting that import pressures is not limited to China. Volumes from Southeast Asia, particularly South Korea and Vietnam, has increased significantly, reflecting the indirect effect of China oversupply on the region’s trade flow. In March, we were honored to welcome President Lula to the official inauguration of the Roberto Rocca Technical School located near our Rio de Janeiro plant. School provides full funded technical education to young people from the surrounding communities, offering them access to a world-class education.

Built with an investment of $50 million, we expect to welcome close to 600 students by next year. In Argentina, at 2024 record one of the lowest steel consumption levels in 2 decades, the market began to recover in 2025. However, 2026 did not start as we had expected. Demand is growing unequally. Mining, energy, and agriculture are performing well. Automotive remains at reasonable levels. Constructions remain soft. Metal mechanical and home appliance sectors are lagging, affected by weak domestic consumption. As I bring my remarks to a close, I am pleased to share that Ternium has once again been recognized as a sustainability champion by the World Steel Association. This recognition is granted to companies that integrate sustainability into their core strategy, combining environmental management, safety performance, innovation, and responsible community engagement.

Looking ahead, we are constructive on our market and our ability to continue improving performance. In Mexico, the combination of normalizing demand, supportive industrial policies, and the ramp-up of our downstream projects position us well for the quarters ahead. In Brazil, as trade defenses measures gain traction and imports inventory normalize, we expect to see a healthy competitive environment. In Argentina, we continue to monitor the recovery closely while maintaining our operational discipline. Across all our operations, our teams remain focused on driving efficiency and lowering cost, and we’re already seeing the benefits. Overall, the recognition we continue to receive from our customers reflects the quality of what we are doing every day. We are confident in Ternium’s ability to deliver even stronger performance in the periods ahead. With that, I’d like to move to a review of our quarterly performance. Pablo, please go ahead.

Pablo, Chief Financial Officer, Ternium: Thanks, Máximo, and thanks everybody for participating in our call. Let’s review our operation and financial performance for the first quarter of this year. Starting the webcast presentation on page 3, we can see that the adjusted EBITDA increased sequentially by 21% in the first quarter, in line with our expectations and reflecting margin improvements. Looking ahead, we expect adjusted EBITDA margin to continue increasing, supported by higher revenue per ton, particularly in Mexico and Brazil, partially offset by higher cost per ton across our main markets. Let’s move to the next slide. Net income for the first quarter of 2026 reached $372 million. This reflects improved operating performance, stronger net financial results, primarily driven by foreign exchange gain in Mexico, Argentina, and Brazil, and positive deferred tax results.

Deferred tax gain amounted to $122 million, driven mainly by currency fluctuations in Argentina and Brazil and inflation effects in Argentina. Net income in the quarter also included a $48 million loss from the quarterly update of the value of a provision from ongoing litigation related to the acquisition of a participation in Usiminas in 2012. Let’s turn to page 5 to review the steel segment performance. Shipments were broadly in line with the previous quarter. In Mexico, volumes increased, supported by solid commercial market activity. This was driven by more effective trade defenses against unfair imports, healthier inventory level across the value chain, a