Ternium Q3 2026 Earnings: Steel Gains Lift Adjusted EBITDA

Ternium (NYSE: TX) reported Q3 2026 net sales of $4.64 billion, up about 17% from $3.96 billion a year earlier, while earnings attributable to equity holders were $1.42 per ADS. Adjusted EBITDA rose to $785 million with a 17% margin, and free cash flow turned positive despite higher working capital requirements and continued investment in the company’s new Mexican slab mill.

Core Financial Results

Higher steel shipments and realized prices drove the year-over-year improvement, more than offsetting increased raw material and purchased slab costs. Consolidated net income swung to a $368 million profit, although a $116 million deferred tax loss linked mainly to Mexican peso depreciation limited the benefit of stronger operating results.

Of total net income, $279 million was attributable to owners of the parent, with $88 million attributable to non-controlling interests.

Adjusted EBITDA and free cash flow are company-defined non-IFRS measures. The other financial results are reported under IFRS.

Business and Segment Performance

The Steel segment accounted for the earnings improvement as both shipments and realized prices increased. Mexico was the main volume driver: commercial shipments recorded significant year-over-year growth, while sales to industrial customers increased both sequentially and from the prior-year period.

Mining moved in the opposite direction, with shipments affected by the temporary suspension of certain Mineração Usiminas operations after iron ore export profitability deteriorated.

Cash operating income is a company-defined non-IFRS segment measure. In Brazil and the Southern Region, steel volumes were higher sequentially but broadly stable year over year. Other Markets shipments were stable from Q2 and slightly lower than a year earlier.

Peso-Linked Tax Losses Tempered the Operating Improvement

Adjusted EBITDA increased 10% sequentially from $717 million, and operating income rose to $578 million from $528 million. However, net income declined from $465 million in Q2 because income tax expense increased to $215 million from $23 million.

The main factor was a $116 million deferred tax loss caused primarily by the Mexican peso’s depreciation against the U.S. dollar. Ternium’s subsidiaries use the U.S. dollar as their functional currency, so local-currency movements can produce accounting tax effects. The same currency movement generated a $12 million foreign-exchange gain on the Mexican subsidiaries’ net short local-currency position, but this was smaller than the deferred tax loss.

Cash Flow and Balance Sheet

Operating cash flow reached $613 million despite a $148 million working capital use. Trade and other receivables increased by $99 million as realized steel prices and volumes rose, while inventories increased by $88 million because of higher unit costs. A $39 million increase in trade payables and other liabilities partly offset those cash requirements.

Capital expenditures totaled $398 million, primarily reflecting construction of the new slab mill in Pesquería, Mexico. Lower capital spending than in the prior-year quarter helped free cash flow improve to $215 million from a $175 million outflow.

Ternium ended September with net cash of $22 million, compared with net debt of $112 million at the end of June. The September figure included $725 million of cash, cash equivalents, and other investments held by Ternium Argentina. The company also recorded a $74 million decline in the fair value of Argentine securities during the quarter.

The board approved an interim dividend of $0.90 per ADS, totaling approximately $177 million. The payment date is November 17, 2026, for holders of record on November 16.

Management Commentary

Management expects Q4 adjusted EBITDA to remain broadly in line with Q3. A modest seasonal decline in steel shipments is expected to be offset by a slightly higher margin per ton, with higher consolidated revenue per ton more than covering increased raw material and slab costs.

In Mexico, Ternium expects revenue per ton to continue rising with North American steel prices. The company said it is gaining market share by replacing imports in commercial and industrial markets, while data center and gas pipeline investments should support steel demand.

Brazil presents a less favorable near-term picture. Management expects lower shipments, a weaker sales mix, and elevated raw material and energy costs. Iron ore volumes are also expected to decline because part of MUSA’s mining operations remains temporarily idled in response to international prices and freight rates.

Southern Region shipments should remain relatively stable. In Argentina, oil and gas, mining, and agriculture remain active, but home appliances and automotive continue to face weak domestic demand and unfairly traded imports, while construction has not yet recovered.

Risks Investors Need to Watch

• Raw material and slab costs: Higher input costs already raised steel cost per ton. Further increases could limit the benefit of higher selling prices and efficiency initiatives.
• Currency-related tax volatility: Mexican peso movements can create significant deferred tax effects even when underlying operating income improves.
• Brazilian and mining weakness: Lower expected Brazilian shipments, a less favorable mix, and reduced iron ore output could weigh on segment revenue and margins.
• Argentina exposure: Weak domestic demand in several industries and volatility in Argentine securities could affect operating performance and the value of liquid investments.
• Working capital and capital spending: Higher prices, volumes, and unit costs absorbed $148 million of working capital, while the new slab mill continues to require substantial investment.

Summary

Ternium’s Q3 2026 results were led by higher steel prices and shipments, particularly in Mexico, which lifted revenue, operating profit, and adjusted EBITDA margins despite rising input costs. Cash generation improved enough to produce positive free cash flow and a small net cash position, while peso-linked deferred tax losses and weaker mining volumes remained notable offsets. The next quarter will depend on whether higher revenue per ton can continue to balance seasonal shipment softness and elevated raw material costs.