Ternium S.A. announced its results for the second quarter and first half ended 30 June 2012 and also provided an outlook for the third quarter.

Outlook
Ternium expects its shipment levels to remain steady in the third quarter 2012 compared to the second quarter 2012 as global economic uncertainty continues to adversely impact steel market growth prospects. The company anticipates that 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.

Summary of Second Quarter 2012 Results
Operating income in the second quarter 2012 was $87.8 million lower than in the second quarter 2011 due to a $77 decrease in revenue per ton, partially offset by a $29 decrease in operating cost per ton mainly related to lower raw material and energy costs.

Ternium’s net income in the second quarter 2012 was $125.1 million, a decrease of $65.4 million compared to net income in the first quarter 2012 mainly due to $38.3 million higher net financial expenses and the above mentioned $25.6 million lower operating income. This increase in net financial expenses was principally related to a $23.0 million lower result from the change in fair value of financial instruments and a $9.6 million higher net interest expense due to higher net indebtedness. The change in fair value of financial instruments loss in the second quarter 2012 included a $4.0 million loss related to the change in the fair value of certain derivative instruments entered into by Ternium’s Argentine subsidiary Siderar to compensate the interest rate charges derived from its Argentine Peso denominated financial debt, compared to a $17.6 million gain in the first quarter 2012.

Net income in the second quarter 2012 was $121.8 million lower than net income in the second quarter 2011 mainly due to the above mentioned $87.8 million lower operating income and a $62.1 million lower net financial result, partially offset by a consequently lower income tax expense. This change in net financial result was principally related to a $29.0 million higher net interest expense due to a higher net indebtedness, a $22.5 million lower net foreign exchange non-cash gain mainly due to the change in the functional currency of Ternium’s Mexican subsidiaries and a $10.9 million lower change in fair value of financial instruments result.

Analysis of Second Quarter 2012 Results
Net income attributable to Ternium’s equity holders in the second quarter 2012 was $110.8 million, compared to $197.7 million in the second quarter 2011. Including non-controlling interest, net income for the second quarter 2012 was $125.1 million, compared to $246.9 million in the second quarter 2011. Earnings per ADS in the second quarter 2012 were $0.56, compared to $1.01 in the second quarter 2011.

Net sales in the second quarter 2012 were $2.2 billion, 8% lower than net sales in the second quarter 2011. Shipments of flat and long products were 2.2 million tons in the second quarter 2012, relatively stable compared to shipments in the second quarter 2011, with higher shipments in North America offsetting lower shipments in South & Central America. Revenue per ton shipped was $989 in the second quarter 2012, a 7% decrease compared to the second quarter 2011, mainly as a result of lower prices.

Sales of flat and long products in the North America Region were $1.2 billion in the second quarter 2012, a decrease of 2% compared to the same period in 2011 mainly due to lower revenue per ton partially offset by higher shipments. Shipments in the region totaled 1.3 million tons during the second quarter 2012, or 9% higher than in the same period in 2011. Revenue per ton shipped in the region decreased 11% to $937 in the second quarter 2012 over the same quarter in the second quarter 2011.

Flat and long product sales in the South & Central America Region were $897.6 million during the second quarter 2012, a decrease of 13% compared to the same period in 2011 mainly as a result of lower shipments and lower revenue per ton. Shipments in the region totaled 838,000 tons during the second quarter 2012, or 12% lower than in the second quarter 2011. Revenue per ton shipped in the region was $1,071 in the second quarter 2012, a decrease of 2% compared to the same quarter in 2011.

Sales of other products totaled $8.9 million during the second quarter 2012, $9.6 million lower than the second quarter 2011, mainly as a result of lower iron ore sales.

Flat steel products segment
Operating income for the flat steel products segment was $208.7 million in the second quarter 2012, a decrease of $77.8 million compared to the second quarter 2011, reflecting lower sales and operating costs. Sales of flat products in the second quarter 2012 decreased 8% compared to the second quarter 2011, reflecting a decrease in revenue per ton shipped, mainly due to lower steel prices in Ternium’s main steel markets.

Long steel products segment
Operating income for the long steel products segment was $49.1 million in the second quarter 2012, a decrease of $7.5 million compared to the second quarter 2011, reflecting higher operating costs. Sales of long products in the second quarter 2012 were similar to those in the second quarter 2011. Total shipments remained relatively stable, with higher participation of the North America Region. Revenue per ton shipped remained relatively stable, with a higher value-added sales mix offset by a decrease in prices.

Summary of First Half 2012 Results
Ternium’s operating income in the first half 2012 was $90.5 million lower than operating income in the first half 2011 as a result of a $19 lower revenue per ton and stable operating cost per ton. The year-over-year decrease in operating income also included a $19.3 million lower operating result mainly due to lower iron ore sales.

Ternium’s net income in the first half 2012 was $315.6 million, a decrease of $174.5 million year-over-year mainly due to a $135.1 million lower net financial results and the above mentioned $90.5 million lower operating income, partially offset by a consequently lower income tax expense. This change in net financial results was principally related to lower net foreign exchange non-cash gains due to the change in the functional currency of Ternium’s Mexican subsidiaries and a higher net indebtedness.

Usiminas
Ternium’s investment in Usiminas, which is accounted for under the equity method, contributed a loss of $6.7 million in the second quarter 2012. In addition, the 10.9% depreciation of the Brazilian Real to the US Dollar during the period prompted a negative adjustment in the "currency translation adjustments" line of Ternium’s statements of changes in equity, in accordance with applicable IFRS, that led to a $215.8 million reduction in the value of Ternium’s equity. Consequently, the book value of Usiminas, as reflected in Ternium’s financial statements, decreased from $2.2 billion as of 31 March 2012, to $2.0 billion as of 30 June 2012.

Analysis of First Half 2012 Results
Net income attributable to the Company’s equity holders in the first half 2012 was $270.4 million, compared to $402.4 million in the first half 2011. Including non-controlling interest, net income in the first half 2012 was $315.6 million, compared to $490.1 million in the first half 2011. Earnings per ADS were $1.38 in the first half 2012, compared to $2.04 in the first half 2011.

Net sales were $4.3 billion in the first half 2012, 3% lower than net sales in the first half 2011. Shipments of flat and long products were 4.3 million tons in the first half 2012, relatively stable compared to shipments in the first half 2011, with higher shipments in North America offsetting lower shipments in South & Central America. Revenue per ton shipped was $998 in the first half 2012, a 2% decrease compared to the first half 2011, mainly as a result of lower flat steel prices in Mexico.

Sales of flat and long products in the North America Region were $2.5 billion in the first half 2012, an increase of 2% compared to the first half 2011 mainly due to higher shipments, partially offset by lower revenue per ton. Shipments in the region totaled 2.7 million tons in the first half 2012, a 7% increase compared to the first half 2011. Revenue per ton shipped in the region decreased 4% to $944 in the first half 2012 over first half 2011, mainly due to lower flat steel prices in Mexico.

Flat and long product sales in the South & Central America Region were $1.8 billion in the first half 2012, a decrease of 7% compared to the first half 2011 due to lower shipments, partially offset by higher revenue per ton. Shipments in the region totaled 1.7 million tons in the first half 2012, or 9% lower than first half 2011. Revenue per ton shipped was $1,085 in the first half 2012, an increase of 2% compared to the first half 2011, mainly due to higher long steel prices.

Sales of other products were $13.4 million in the first half 2012, compared to $50.5 million in the first half 2011, a reduction mainly related to lower iron ore sales.

Flat steel products segment
The flat steel products segment operating income was $424.8 million in the first half 2012, a decrease of $80.9 million compared to the first half 2011, reflecting lower sales and operating cost. Sales of flat products in the first half 2012 decreased 5% compared to the first half 2011, reflecting a 2% decrease in shipments, due to lower shipments in South & Central America partially offset by higher shipments in North America, and a 2% decrease in revenue per ton shipped, mainly due to lower prices in North America.

Long steel products segment
The long steel products segment operating income was $117.5 million in the first half 2012, a $9.8 million increase compared to the first half 2011, reflecting higher sales and operating costs. Sales of long products in the first half 2012 increased 16% compared to the first half 2011, reflecting a 11% increase in shipments, due to higher shipments in North America partially offset by lower shipments in South & Central America, and a 4% increase in revenue per ton.

Ternium is a leading steel company in Latin America, manufacturing and processing a wide range of flat and long steel products for customers active in the construction, home appliances, capital goods, container, food, energy and automotive industries. With its principal operations in Mexico and Argentina, Ternium serves markets in the Americas through its integrated manufacturing system and extensive distribution network. The company has an annual production capacity of approximately 10.8 million tons of finished steel products.