SOURCE: Ternium S.A.

August 05, 2008 16:00 ET

Ternium Announces Second Quarter and First Half 2008 Results

LUXEMBOURG--(Marketwire - August 5, 2008) - Ternium S.A. (NYSE: TX) today announced its results for the second quarter and first half ended June 30, 2008.

The financial and operational information contained in this press release is based on consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and presented in U.S. dollars and metric tons.

Ternium has modified the accounting treatment for its investment in Sidor. For more information, please see Note 12 to Ternium's Consolidated Condensed Interim Financial Statements as of June 30, 2008 and "Sidor Nationalization Process - Deconsolidation from Ternium Financial Statements" in this press release.

Summary of Second Quarter 2008 Results(1)

                                 2Q 2008       1Q 2008         2Q 2007
                                ---------  --------------  ---------------
Shipments (tons)                2,063,000  2,088,000   -1% 1,604,000    29%
Net Sales (US$ million)           2,374.8    1,952.7   22%   1,255.9    89%
Operating Income (US$ million)      610.4      363.3   68%     203.0   201%
EBITDA (US$ million)                714.1      470.1   52%     281.9   153%
EBITDA Margin (% of net sales)         30%        24%             22%
EBITDA per Ton, Flat & Long
 Steel (US$/ton)                      337        213   58%       162   108%
Discontinued Operations(1)
 (US$ million)                          -      159.9           199.0
Net Income (US$ million)            498.9      483.6    3%     315.0    58%
Equity Holders' Net Income
 (US$ million)                      415.6      422.1   -2%     236.9    75%
Earnings per ADS (US$)               2.07       2.11   -2%      1.18    75%


Operating income was US$610.4 million in the second quarter 2008, an increase of 68% when compared to the first quarter 2008 mainly as a result of a 24% increase in revenue per ton, partially offset by a 12% increase in operating cost per ton due to higher raw material, energy and labor costs. Higher purchased slab and raw material costs are gradually reflected in the Company's cost of sales, as Ternium consumes slabs and raw materials from its inventories over time. Average prices increased across all products and regions during the second quarter 2008 compared to the first quarter 2008 and second quarter 2007. Operating income in the second quarter 2008 increased 201% when compared to the second quarter 2007. Excluding the effect of the consolidation of Grupo Imsa, operating income increased year-over-year mainly due to higher prices, partially offset by higher raw material, energy and labor costs. Ternium's shipments were relatively stable during the second quarter 2008 compared to the first quarter 2008 and increased 29% when compared to the second quarter 2007 mainly as a result of the consolidation of Grupo Imsa.

No results from discontinued operations related to Sidor have been accounted for in the second quarter 2008. In the first quarter 2008, results from discontinued operations included an after-tax gain of US$101.4 million related to the sale of non-core US assets and an after-tax gain of US$58.5 million related to Sidor, while in the second quarter 2007 results from discontinued operations comprised an after-tax gain of US$199.0 million related to Sidor.

Net income during the second quarter 2008 was US$498.9 million, an increase of 3% when compared to the first quarter 2008 mainly due to higher operating income, a higher foreign exchange gain of US$60.2 million mainly related to Ternium Mexico's financial debt and an improved result of US$40.7 million related to changes in the fair value of derivative instruments, partially offset by higher income tax expenses. In addition, the first quarter 2008 net income included a discontinued operations gain of US$159.9 million and an income tax gain of US$96.3 million related to Hylsa's reversal of deferred statutory profit sharing.

Net income during the second quarter 2008 increased 58% when compared to the second quarter 2007. This year-over-year increase was due to the consolidation of Grupo Imsa and higher operating income, as well as more favorable foreign exchange and changes in fair value of derivatives results. In addition, the second quarter 2007 net income included results of US$199.0 million from discontinued operations.

Summary of First Half 2008 Results(2)

                                                 1H 2008       1H 2007
                                                ---------  ---------------
Shipments (tons)                                4,152,000  3,148,000    32%
Net Sales (US$ million)                           4,327.5    2,430.7    78%
Operating Income (US$ million)                      973.6      413.1   136%
EBITDA (US$ million)                              1,184.3      557.8   112%
EBITDA Margin (% of net sales)                         27%        23%
EBITDA per Ton, Flat & Long Steel (US$/ton)           275        165    67%
Discontinued Operations(2) (US$ million)            159.9      318.7   -50%
Net Income (US$ million)                            982.4      566.6    73%
Equity Holders' Net Income (US$ million)            837.8      459.1    82%
Earnings per ADS (US$)                               4.18       2.29    82%


Operating income was US$973.6 million in the first half 2008, an increase of 136% when compared to the first half 2007 mainly as a result of higher steel prices and the consolidation of Grupo Imsa, partially offset by higher raw material, energy and labor costs. Higher purchased slab and raw material costs are gradually reflected in the Company's cost of sales, as Ternium consumes slabs and raw materials from its inventories over time. Ternium's net sales were US$4.3 billion during the first half 2008, an increase of 78% when compared to the first half 2007, reflecting higher steel prices and the consolidation of Grupo Imsa.

During the first half 2008, results from discontinued operations were an after-tax gain of US$101.4 million related to the sale of non-core US assets and an after-tax gain of US$58.5 million related to Sidor. During the first half 2007, results from discontinued operations were an after-tax gain of US$318.7 million related to Sidor.

Net income during the first half 2008 was US$982.4 million, an increase of 73% when compared to the first half 2007. This increase in net income was mainly due to the consolidation of Grupo Imsa, a higher operating income and a US$139.6 million higher foreign exchange net gain mainly related to Ternium Mexico's financial debt, partially offset by higher net interest and income tax expenses, and lower gains from discontinued operations.

Sidor Nationalization Process - Deconsolidation from Ternium Financial Statements

Based on the facts and circumstances described in Note 12 to Ternium's Consolidated Condensed Interim Financial Statements as of June 30, 2008, Ternium ceased consolidating Sidor's results of operations and cash flows as from April 1, 2008. The carrying amount of the Company's investment in Sidor at March 31, 2008 is its book value at that date. Thus, the carrying amount of this available-for-sale asset at June 30, 2008 does not represent its fair value at that date.

Outlook

Demand for steel products in the North America Region remains relatively stable. Although there are no indications of overstocking, prices in the North America Region may soften in the second half 2008 as a result of continued weakness in the region's construction, home appliances and automobile industries. Demand and prices in the South & Central America Region are expected to remain at healthy levels.

Ternium expects a slightly lower operating margin in the third quarter 2008 compared to the operating margin it achieved in the second quarter 2008. Higher purchased slab and raw material costs were not entirely reflected in Ternium's cost of sales during the second quarter 2008 and are expected to flow into the cost of sales in subsequent quarters as Ternium consumes purchased slabs and raw materials from its inventories over time.

Analysis of Second Quarter 2008 Results

Net income attributable to the Company's equity holders in the second quarter 2008 was US$415.6 million, compared with US$236.9 million in the second quarter 2007. Including minority interest, net income for the second quarter 2008 was US$498.9 million, compared with US$315.0 million in the second quarter 2007. Earnings per ADS(3) for the second quarter 2008 were US$2.07, compared with US$1.18 in the second quarter 2007.

Net sales for the second quarter 2008 increased 89% to US$2.4 billion compared with the same period in 2007. Net sales increased mainly due to the effect of the consolidation of Grupo Imsa and higher steel prices. Shipments of flat and long products were 2.1 million tons during the second quarter 2008, an increase of 29% compared to shipment levels in the second quarter 2007 mainly due to the consolidation of Grupo Imsa. Revenue per ton shipped increased 48% to US$1,120 in the second quarter 2008 versus the same quarter in 2007, mainly as a result of higher steel prices and the consolidation of Grupo Imsa's higher value added product mix.


                       Net Sales             Shipments       Revenue / ton
                     (million US$)        (thousand tons)      (US$/ton)
                                                             2Q    2Q
                  2Q 2008 2Q 2007 Dif. 2Q 2008 2Q 2007 Dif. 2008  2007 Dif.
                  ------- ------- ---  ------- ------- ---  ----- ---- ---

South & Central
 America            719.9   466.6  54%   690.9   598.9  15% 1,042  779  34%
North America     1,264.6   483.6 162% 1,042.2   592.1  76% 1,213  817  49%
Europe & other       10.0    69.1 -86%    11.6   101.2 -89%   864  682  27%
                  ------- ------- ---  ------- ------- ---  ----- ---- ---
Total flat
 products         1,994.5 1,019.2  96% 1,744.7 1,292.1  35% 1,143  789  45%

South & Central
 America             62.1    14.3 334%    67.9    25.3 168%   913  565  62%
North America       253.8   182.6  39%   249.6   286.4 -13% 1,017  638  59%
Europe & other        0.6       -          1.0       -        630    -
                  ------- ------- ---  ------- ------- ---  ----- ---- ---
Total long
 products           316.4   196.9  61%   318.5   311.7   2%   993  632  57%

Total flat and
 long products    2,311.0 1,216.2  90% 2,063.2 1,603.9  29% 1,120  758  48%

Other products(1)    63.8    39.7  61%
                  ------- ------- ---

Total Net Sales   2,374.8 1,255.9  89%


(1) Primarily includes iron ore, pig iron and pre-engineered metal
    buildings.


Net sales of flat products during the second quarter 2008 totaled US$2.0 billion, an increase of 96% compared with the same quarter in 2007. Net sales of flat products increased as a result of the effect of the consolidation of Grupo Imsa and higher steel prices. Shipments of flat products totaled 1.7 million tons in the second quarter 2008, an increase of 35% compared with the same period in 2007, mainly due to the consolidation of Grupo Imsa. Revenue per ton shipped increased 45% to US$1,143 in the second quarter 2008 compared with the same period in 2007, mainly due to higher steel prices and the consolidation of Grupo Imsa's higher value added product mix.

Net sales of long products were US$316.4 million during the second quarter 2008, an increase of 61% compared with the same period in 2007 due to higher steel prices and slightly higher shipment levels. Shipments of long products totaled 319,000 tons in the second quarter 2008, representing a 2% increase versus the same quarter in 2007. Revenue per ton shipped increased 57% to US$993 in the second quarter 2008 over the second quarter 2007.

Net sales of other products totaled US$63.8 million during the second quarter 2008, compared to US$39.7 million during the second quarter 2007. This increase resulted mainly from higher iron ore shipments and prices and the consolidation of Grupo Imsa's pre-engineered metal buildings business in Mexico.

Net sales of flat and long products in the North America Region were US$1.5 billion in the second quarter 2008, an increase of 128% versus the same period in 2007. Shipments in the region totaled 1.3 million tons during the second quarter 2008, or 47% higher than in the same period in 2007, mainly due to the consolidation of Grupo Imsa. Revenue per ton shipped in the region increased 55% to US$1,175 in the second quarter 2008 over the same quarter in 2007 mainly as a result of higher prices and the consolidation of Grupo Imsa's higher value added product mix.

Net sales of flat and long products in the South & Central America Region were US$782.0 million during the second quarter 2008, an increase of 63% versus the same period in 2007. This increase was due to higher shipments and revenue per ton. Shipments in the region totaled 759,000 tons during the second quarter 2008, or 22% higher than in the second quarter 2007. Revenue per ton shipped in the region increased 34% to US$1,030 in the second quarter 2008 over the same quarter in 2007, mainly due to higher prices.

Cost of sales totaled US$1.6 billion in the second quarter 2008 compared to US$931.1 million in the second quarter 2007. Cost of sales increased as a result, in part, of the consolidation of Grupo Imsa, which increased Ternium's production volume and cost per ton due to Grupo Imsa's higher production cost structure and higher value added product sales mix. Excluding this effect, the higher year-over-year cost of sales was related to higher costs for raw materials and other supplies, as well as for freight, services and labor.

The consolidation of Grupo Imsa resulted in an increased volume of purchased slabs with a cost per ton significantly higher than Ternium's average cost of slab production. This higher cost per ton for purchased slabs is gradually reflected in the cost of sales, as Ternium consumes slabs and other raw materials from its inventories over time. In the second quarter 2008, scrap and energy prices increased in Mexico, while the price of zinc was lower when compared to the prior year period. Iron ore costs were higher during the second quarter 2008 than they were in the same period in 2007, mainly as a result of higher annual contract prices for third party iron ore supplies and higher production costs at Ternium's iron ore mines.

Selling, General and Administrative (SG&A) expenses in the second quarter 2008 were US$181.8 million, or 8% of net sales, compared with US$118.2 million, or 9% of net sales, in the second quarter 2007. The increase in SG&A was due mainly to the consolidation of Grupo Imsa.

Operating income in the second quarter 2008 was US$610.4 million, or 26% of net sales, compared with US$203.0 million, or 16% of net sales, in the second quarter 2007.

EBITDA(4) in the second quarter 2008 was US$714.1 million, or 30% of net sales, compared with US$281.9 million, or 22% of net sales, in the second quarter 2007. Equity holders' EBITDA in the second quarter 2008 was 82% of EBITDA.

Net financial result totaled a gain of US$97.4 million in the second quarter 2008, compared with expenses of US$13.5 million in the same period in 2007. A higher net gain of US$98.9 million related to foreign exchange valuations and a US$24.2 million improved result related to changes in the fair value of some derivative instruments entered into by Ternium mainly to mitigate the effects of interest rate fluctuations were partially offset by a US$19.7 million year-over-year increase in net interest expenses primarily associated with an increase in net debt. The foreign exchange results in the second quarter 2008 (an effect that is offset to a large extent by changes in Ternium's net equity position) resulted primarily from the impact of the Mexican Peso fluctuation on the Company's Mexican subsidiaries' US dollar denominated debt (Ternium's subsidiaries prepare their financial statements in currencies other than the US dollar in accordance with IFRS).

Income tax expense for the second quarter 2008 was US$209.3 million, or 30% of income before income tax, discontinued operations and minority interest, compared with US$73.2 million in the second quarter 2007, or 39% of income before income tax, discontinued operations and minority interest.

Income attributable to minority interest for the second quarter 2008 was US$83.2 million, compared with US$78.0 million in the second quarter 2007. The year-over-year increase was due mainly to higher income attributable to minority interest in Siderar. In addition, there was no income attributable to minority interest in Sidor in the second quarter 2008, compared with US$39.0 million in the second quarter 2007.

Analysis of First Half 2008 Results

Net income attributable to the Company's equity holders for the first half ended June 30, 2008 was US$837.8 million, compared with US$459.1 million for the first half ended June 30, 2007. Including minority interest, net income for the first half 2008 was US$982.4 million, compared with US$566.6 million for the first half 2007. Earnings per ADS(5) were US$4.18 in the first half 2008, compared with US$2.29 in the first half 2007.

Net sales for the first half 2008 increased 78% to US$4.3 billion, compared with the same period in 2007. Net sales increased due to the effect of the consolidation of Grupo Imsa and higher steel prices. Shipments of flat and long products reached 4.2 million tons during the first half 2008, an increase of 32% compared to shipment levels in the first half 2007. Revenue per ton shipped increased 35% to US$1,012 in the first half 2008 versus the same period in 2007, mainly as a result of higher prices and the consolidation of Grupo Imsa's higher value added product mix.

                       Net Sales             Shipments       Revenue / ton
                     (million US$)        (thousand tons)      (US$/ton)
                                                            1H   1H
                1H 2008 1H 2007 Dif. 1H 2008 1H 2007 Dif.  2008 2007   Dif.
                ------- ------- ---  ------- ------- ---  ----- --- ------

South & Central
 America        1,355.8   900.1  51% 1,363.9 1,162.3  17%   994 774     28%
North America   2,285.6   963.7 137% 2,122.2 1,206.6  76% 1,077 799     35%
Europe & other     14.8   103.6 -86%    16.3   154.1 -89%   906 673     35%
                ------- ------- ---  ------- ------- ---  ----- --- ------
Total flat
 products       3,656.1 1,967.4  86% 3,502.4 2,523.0  39% 1,044 780     34%

South & Central
 America           98.5    14.3 589%   124.6    25.3 392%   791 565     40%
North America     440.1   375.5  17%   514.9   599.7 -14%   855 626     37%
Europe & other      5.8       -          9.8       -        591   -
                ------- ------- ---  ------- ------- ---  ----- --- ------
Total long
 products         544.4   389.8  40%   649.2   625.0   4%   839 624     34%

Total flat and
 long products  4,200.6 2,357.3  78% 4,151.6 3,148.0  32% 1,012 749     35%

Other products
 (1)              126.9    73.4  73%
                ------- ------- ---

Total Net Sales 4,327.5 2,430.7  78%


(1) Primarily includes iron ore, pig iron and pre-engineered
    metal buildings.

Net sales of flat products during the first half 2008 totaled US$3.7 billion, an increase of 86% compared with the same period in 2007. Net sales increased mainly as a result the effect of the consolidation of Grupo Imsa and higher steel prices. Shipments totaled 3.5 million tons in the first half 2008, an increase of 39% compared with the same period in 2007. Revenue per ton shipped increased 34% to US$1,044 in the first half 2008 compared with the same period in 2007, mainly as a result of higher prices and the consolidation of Grupo Imsa's higher value added product mix.

Net sales of long products were US$544.4 million during the first half 2008, an increase of 40% compared with the same period in 2007. This was due to higher prices and slightly higher shipments. Shipments totaled 649,000 tons in the first half 2008, representing a 4% increase versus the same period in 2007. Revenue per ton shipped increased 34% to US$839 in the first half 2008 over the first half 2007.

Net sales of other products totaled US$126.9 million during the first half 2008 compared to US$73.4 million during the same period in 2007. This increase resulted mainly from higher iron ore shipments and prices and the consolidation of Grupo Imsa's pre-engineered metal buildings business in Mexico.

Net sales of flat and long products in the North America Region totaled US$2.7 billion in the first half 2008, an increase of 104% versus the same period in 2007, mainly due to the effect of the Grupo Imsa consolidation and higher steel prices. Shipments in the region totaled 2.6 million tons during the first half 2008, or 46% higher than during the same period in 2007. Revenue per ton shipped in the region increased 39% to US$1,034 in the first half 2008 over the same period in 2007, mainly as a result of higher prices and the consolidation of Grupo Imsa's higher value added product mix.

Net sales of flat and long product in the South & Central America Region were US$1.5 billion during the first half 2008, an increase of 59% versus the same period in 2007. This increase was due to higher volumes and prices. Shipments in the region totaled 1.5 million tons during the first half 2008, or 25% higher than in the first half 2007, due to an increase in demand. Revenue per ton shipped in the region increased 27% to US$977 in the first half 2008 over the same period in 2007, mainly due to higher prices.

Cost of sales was US$3.0 billion in the first half 2008 compared to US$1.8 billion in the first half 2007. Cost of sales increased as a result, in part, of the consolidation of Grupo Imsa, which increased Ternium's production volume and cost per ton due to Grupo Imsa's higher production cost structure and higher value added product sales mix. Excluding this effect, the year-over-year cost of sales increase was related to higher costs for raw materials and other supplies, as well as for freight, services and labor.

The consolidation of Grupo Imsa resulted in an increased volume of purchased slabs with a cost per ton significantly higher than Ternium's average cost of slab production. This higher cost per ton for purchased slabs is gradually reflected in the cost of sales, as Ternium consumes slabs and other raw materials from its inventories over time. Scrap and energy prices increased in Mexico while the price of zinc was lower in the first half 2008 compared to the prior year period. Iron ore costs were higher during the first half 2008 than they were in the same period in 2007, mainly as a result of higher annual contract prices of third party iron ore supplies and higher production costs at Ternium's iron ore mines.

Selling, General and Administrative (SG&A) expenses in the first half 2008 were US$328.4 million, or 8% of net sales, compared with US$211.0 million, or 9% of net sales, in the first half 2007. The increase in SG&A was due mainly to the consolidation of Grupo Imsa.

Operating income in the first half 2008 was US$973.6 billion, or 23% of net sales, compared with US$413.1 million, or 17% of net sales, in the first half 2007.

EBITDA(6) in the first half 2008 was US$1.2 billion, or 27% of net sales, compared to US$557.8 million, or 23% of net sales, in the first half 2007. Equity holders' EBITDA in the first half 2008 was 81% of EBITDA.

Net financial result totaled a gain of US$68.1 million in the first half 2008, compared with an expense of US$3.4 million in the same period in 2007. A US$139.6 million increase in net foreign exchange gains was partially offset by a US$47.8 million increase in net interest expenses and other debt related expenses primarily associated with Ternium's higher average net debt and a US$16.7 million increase in the fair value of some derivative instruments entered into by Ternium mainly to mitigate the effects of interest rates fluctuations. The increase in net foreign exchange gains (an effect that is offset to a large extent by changes in Ternium's net equity position) resulted primarily from the impact of the Mexican Peso appreciation on Ternium's Mexican subsidiaries' US dollar denominated debt (Ternium's subsidiaries prepare their financial statements in currencies other than the US dollar in accordance with IFRS).

Income tax expense for the first half 2008 was US$316.4 million, or 30% of income before income tax, discontinued operations and minority interest, compared with US$161.0 million, or 39% of income before income tax, discontinued operations and minority interest, in the first half 2007. In addition, the first half 2008 result included a non-recurring gain of US$96.3 million on account of Hylsa's reversal of deferred statutory profit sharing.

Income attributable to minority interest for the first half 2008 was US$144.7 million, compared with US$107.5 million in the first half 2007. The year-over-year increase was due mainly to higher income attributable to minority interest in Siderar.

Cash Flow and Liquidity

Net cash used in operating activities in the first half 2008 was US$42.9 million, compared to net cash provided by operating activities of US$520.7 million in the first half 2007. Working capital increased US$940.8 million in the first half 2008, compared to a working capital decrease of US$144.7 million in the first half 2007, mainly due to higher costs for new inventory and a higher volume of raw materials and goods in process, as well as to an increase of trade receivables as a result of higher prices.

Capital expenditures in the first half 2008 were US$250.8 million, compared to US$162.8 million in the first half 2007. Capital expenditures during the first half 2008 were carried out in Mexico principally for the expansion of the flat steel shop in Monterrey, the upgrading of one hot strip mill and the upgrading of one cold rolled mill. Ternium continued to execute its expansion plan in Argentina, with capital expenditures during the first half 2008 carried out mainly for the relining of one blast furnace and the revamping and expansion of the coking facilities. The Company expects to reach in Argentina an annual crude steel production capacity of four million tons by mid 2010.

In the first half 2008, Ternium had a negative free cash flow(7) of US$293.8 million compared to free cash flow(7) of US$358.0 million in the first half 2007. Proceeds from the sale of non-core US assets were US$722.5 million in the first half 2008. Net cash provided by discontinued operations related to Sidor was US$89.8 million in the first half 2008, compared to US$269.2 million in the first half 2007.

Ternium's net repayment of borrowings in the first half 2008 was US$750.1 million, mostly related to the pre-payment of some of the Company's Mexican subsidiaries' outstanding debt. Ternium's dividend payment in the first half 2008 was US$100.2 million, similar to that of the first half 2007. As of June 30, 2008, Ternium's net debt position (borrowings less cash and cash equivalents and other current investments) was US$2.5 billion, while total financial debt was US$3.2 billion.

Net cash used in operating activities in the second quarter 2008 was US$45.7 million, compared to net cash provided by operating activities of US$191.3 million in the second quarter 2007. Working capital increased US$682.9 million in the second quarter 2008, compared to a working capital decrease of US$53.5 million in the second quarter 2007, mainly as a result of higher costs for new inventory and a higher volume of raw materials and goods in process, as well as to an increase of trade receivables as a result of higher prices.

Capital expenditures in the second quarter 2008 were US$149.3 million, compared to US$75.3 million in the second quarter 2007. In the second quarter 2008, Ternium had a negative free cash flow(8) of US$195.0 million, compared to free cash flow(8) of US$116.0 million in the second quarter 2007.

Forward Looking Statements

Some of the statements contained in this press release are "forward-looking statements." Forward-looking statements are based on management's current views and assumptions and involve known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied by those statements. These risks include but are not limited to risks arising from uncertainties as to gross domestic product, related market demand, global production capacity, tariffs, cyclicality in the industries that purchase steel products and other factors beyond Ternium's control.

About Ternium

Ternium is one of the leading steel companies 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 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 annual sales of approximately US$10 billion and ships approximately 8 million tons of steel products each year. More information about Ternium is available at www.ternium.com.

(1) Sidor's results of operations have been deconsolidated from Ternium's Financial Statements and are shown as Discontinued Operations. Discontinued operations include results from the non-core US assets that were sold during the first quarter 2008 and from Ternium's participation in Sidor until March 31, 2008. No results from discontinued operations related to Sidor have been accounted for in the second quarter 2008.

(2) Sidor's results of operations have been deconsolidated from Ternium's Financial Statements and are shown as Discontinued Operations. Discontinued operations include results from the non-core US assets that were sold during the first quarter 2008 and from Ternium's participation in Sidor until March 31, 2008. No results from discontinued operations related to Sidor have been accounted for in the second quarter 2008.

(3) Each American Depositary Share (ADS) represents 10 shares of Ternium's common stock. Results are based on a weighted average number of shares of common stock outstanding of 2,004,743,442.

(4) EBITDA in the second quarter 2008 equals operating income of US$610.4 million plus depreciation and amortization of US$103.8 million.

(5) Each American Depositary Share (ADS) represents 10 shares of Ternium's common stock. Results are based on a weighted average number of shares of common stock outstanding of 2,004,743,442.

(6) EBITDA in the first half 2008 equals operating income of US$973.7 million plus depreciation and amortization of US$210.5 million.

(7) Free cash flow for the first half 2008 equals net cash used in operating activities of US$42.9 million less capital expenditures of US$250.8 million, while free cash flow for the first half 2007 equals net cash provided by operating activities of US$520.7 million less capital expenditures of US$162.8 million.

(8) Free cash flow for the second quarter 2008 equals net cash used in operating activities of US$45.7 million less capital expenditures of US$149.3 million, while free cash flow for the second quarter 2007 equals net cash provided by operating activities of US$191.3 million less capital expenditures of US$75.3 million.



Consolidated income statement

  US$ million    2Q 2008   2Q 2007     Dif.    1H 2008   1H 2007     Dif.

  Net sales      2,374.8   1,255.9   1,118.9   4,327.5   2,430.7   1,896.8
  Cost of sales (1,584.1)   (931.1)   (653.0) (3,036.9) (1,809.7) (1,227.2)
                --------  --------  --------  --------  --------  --------
Gross profit       790.7     324.8     465.9   1,290.6     621.0     669.6
  Selling,
   general and
   administrative
   expenses       (181.8)   (118.2)    (63.6)   (328.4)   (211.0)   (117.3)
  Other operating
   income, net       1.5      (3.5)      5.0      11.4       3.1       8.3
                --------  --------  --------  --------  --------  --------
Operating income   610.4     203.0     407.4     973.6     413.1     560.5

  Interest expense (30.1)    (10.4)    (19.7)    (74.4)    (24.5)    (49.9)
  Interest income   12.0       7.7       4.3      24.1      14.9       9.2
  Other financial
   income
   (expenses), net 115.5     (10.8)    126.3     118.4       6.2     112.2

  Equity in earnings
   (losses) of
   associated
   companies         0.4      (0.4)      0.8       0.9      (0.8)      1.7
                --------  --------  --------  --------  --------  --------
Income before
 income tax
 expense           708.2     189.2     519.0   1,042.7     408.8     633.8

Income tax (expense)
 benefit

  Current and
   deferred
   income tax
   expense        (209.3)    (73.2)   (136.2)   (316.4)   (161.0)   (155.4)
  Reversal of
   deferred
   statutory
   profit sharing      -         -         -      96.3         -      96.3
Discontinued
 operations            -     199.0    (199.0)    159.9     318.7    (158.8)
Net income for
 the period        498.9     315.0     183.9     982.4     566.6     415.9

Attributable to:
  Equity holders
   of the Company  415.6     236.9     178.7     837.8     459.1     378.7
  Minority
   interest         83.2      78.0       5.2     144.7     107.5      37.2
                --------  --------  --------  --------  --------  --------
                   498.9     315.0     183.9     982.4     566.6     415.9



Consolidated balance sheet

                                                  June 30,     December 31,
US$ million                                          2008         2007(1)
                                                ------------- -------------
  Property, plant and equipment, net                  5,188.0       6,858.8
  Intangible assets, net                              1,501.0       1,452.2
  Investment in associated companies                      4.7          44.0
  Other investments, net                                 15.4          14.8
  Deferred tax assets                                     2.2          31.8
  Receivables, net                                       58.0         217.6
                                                ------------- -------------
Total non-current assets                              6,769.4       8,619.3

  Receivables                                           260.7         426.0
  Derivative financial instruments                        0.5           0.6
  Inventories, net                                    2,338.0       1,913.1
  Trade receivables, net                              1,051.2         847.8
  Available for sale assets                           1,318.9             -
  Other investments                                         -          65.3
  Cash and cash equivalents                             688.8       1,126.0
                                                ------------- -------------
Total current assets                                  5,658.0       4,378.9

Non-current assets classified as held for sale            6.7         769.1
                                                ------------- -------------

Total assets                                         12,434.1      13,767.3

Shareholders' equity                                  5,353.2       4,452.7
Minority interest in subsidiaries                     1,195.6       1,914.2

Minority interest & shareholders' equity              6,548.8       6,366.9

  Provisions                                             29.3          57.3
  Deferred income tax                                 1,233.4       1,337.0
  Other liabilities                                     176.6         336.5
  Trade payables                                            -           6.7
  Borrowings                                          2,569.1       3,677.5
                                                ------------- -------------
Total non-current liabilities                         4,008.3       5,415.1

  Current tax liabilities                               199.2         184.8
  Other liabilities                                     137.8         182.2
  Trade payables                                        927.9         983.9
  Derivative financial instruments                       15.4          13.3
  Borrowings                                            596.7         407.4
                                                ------------- -------------
Total current liabilities                             1,877.0       1,771.6

Liabilities related to non-current assets
 classified as held for sale                                -         213.8
                                                ------------- -------------
Total liabilities                                     5,885.3       7,400.4

Total liabilities, minority interest &
 shareholders' equity                                12,434.1      13,767.3

(1) According to IFRS 5, balances related to Sidor have been consolidated
    on a line-by-line basis as of December 31, 2007.




Consolidated cash flow statement

                            2Q      2Q              1H      1H
       US$ million         2008    2007    Dif.    2008    2007     Dif.
                          ------  ------  ------  ------  ------  --------
Income from continuing
 operations                498.9   116.0   382.9   822.5   247.8     574.7
  Adjustments for:
    Depreciation and
     amortization          103.8    78.9    24.8   210.6   144.7      65.9
    Income tax accruals
     less payments         140.9   (66.8)  207.6    74.5    (1.5)     75.9
    Equity in (earnings)
     losses of associated
     companies              (0.4)    0.4    (0.8)   (0.9)    0.8      (1.7)
    Interest accruals
     Less payments           3.0     2.4     0.6   (84.6)   (2.7)    (81.9)
Changes in provisions       (0.3)   (3.2)    2.8     2.0    (9.8)     11.8
Changes in working
 capital                  (682.9)   53.5  (736.4) (940.8)  144.7  (1,085.5)
Others                    (108.6)   10.0  (118.6) (126.2)   (3.4)   (122.8)
                          ------  ------  ------  ------  ------  --------

Net cash (used in) provided
 by operating activities   (45.7)  191.3  (237.0)  (42.9)  520.7    (563.7)

Capital expenditures      (149.3)  (75.3)  (74.0) (250.8) (162.8)    (88.1)
Proceeds from sale of
 property, plant &
 equipment                   0.3     1.1    (0.7)    1.0     6.2      (5.2)
Acquisition of business
Purchase consideration         -    (0.1)    0.1       -    (0.1)      0.1
Decrease in Other
 Investments                66.1       -    66.1    65.3       -      65.3
Proceeds from sale of
 discontinued operations       -       -       -   722.5       -     722.5
Discontinued operations     57.7    59.9    (2.2)   89.8   269.2    (179.4)
                          ------  ------  ------  ------  ------  --------

Net cash (used in)
 provided by investing
 activities                (25.2)  (14.5)  (10.6)  627.8   112.5     515.3

Dividends paid in cash
 and other distributions
 to company's equity
 shareholders             (100.2) (100.2)      -  (100.2) (100.2)        -
Dividends paid in cash
 and other distributions
 to minority shareholders  (19.6)  (19.9)    0.3   (19.6)  (19.9)      0.3
Proceeds from borrowings    76.3    72.1     4.2   181.3   112.3      69.0
Repayment of borrowings    (40.3) (371.6)  331.4  (931.4) (527.6)   (403.9)
                          ------  ------  ------  ------  ------  --------

Net cash (used in)
 provided by financing
 activities                (83.8) (419.6)  335.8  (870.0) (535.4)   (334.5)

(Decrease) increase in
 cash and cash
 equivalents              (154.7) (242.9)   88.2  (285.1)   97.8    (382.9)



                                Shipments

     Thousand tons                  2Q 2008 1Q 2008 2Q 2007 1H 2008 1H 2007
                                    ------- ------- ------- ------- -------
   South & Central America            690.9   673.0   598.9 1,363.9 1,162.3
   North America                    1,042.2 1,080.0   592.1 2,122.2 1,206.6
   Europe & other                      11.6     4.8   101.2    16.3   154.1
                                    ------- ------- ------- ------- -------
 Total flat products                1,744.7 1,757.7 1,292.1 3,502.4 2,523.0

   South & Central America             67.9    56.7    25.3   124.6    25.3
   North America                      249.6   265.3   286.4   514.9   599.7
   Europe & other                       1.0     8.8       -     9.8       -
                                    ------- ------- ------- ------- -------
 Total long products                  318.5   330.7   311.7   649.2   625.0
 Total flat and long products       2,063.2 2,088.5 1,603.9 4,151.6 3,148.0


                              Revenue / ton

         US$/ton                    2Q 2008 1Q 2008 2Q 2007 1H 2008 1H 2007
                                    ------- ------- ------- ------- -------
   South & Central America            1,042     945     779     994     774
   North America                      1,213     945     817   1,077     799
   Europe & other                       864   1,008     682     906     673
                                    ------- ------- ------- ------- -------
 Total flat products                  1,143     945     789   1,044     780

   South & Central America              913     643     565     791     565
   North America                      1,017     703     638     855     626
   Europe & other                       630     587       -     591       -
                                    ------- ------- ------- ------- -------
 Total long products                    993     689     632     839     624
 Total flat and long products         1,120     905     758   1,012     749


                                Net Sales

      US$ million                   2Q 2008 1Q 2008 2Q 2007 1H 2008 1H 2007
                                    ------- ------- ------- ------- -------
   South & Central America            719.9   635.8   466.6 1,355.8   900.1
   North America                    1,264.6 1,021.0   483.6 2,285.6   963.7
   Europe & other                      10.0     4.8    69.1    14.8   103.6
                                    ------- ------- ------- ------- -------
 Total flat products                1,994.5 1,661.6 1,019.2 3,656.1 1,967.4

   South & Central America             62.1    36.4    14.3    98.5    14.3
   North America                      253.8   186.4   182.6   440.1   375.5
   Europe & other                       0.6     5.2       -     5.8       -
                                    ------- ------- ------- ------- -------
 Total long products                  316.4   228.0   196.9   544.4   389.8

                                    ------- ------- ------- ------- -------
 Total flat and long products       2,311.0 1,889.6 1,216.2 4,200.6 2,357.3

 Other products (1)                    63.8    63.1    39.7   126.9    73.4
                                    ------- ------- ------- ------- -------

 Total net sales                    2,374.8 1,952.7 1,255.9 4,327.5 2,430.7

 (1) Includes iron ore, pig iron and metal buildings.




Consolidated income statement (historical series including Sidor as
discontinued operations)

    US$ million            2Q 2008   1Q 2008
                          --------  --------
  Net sales                2,374.8   1,952.7
  Cost of sales           (1,584.1) (1,452.8)
                          --------  --------
Gross profit                 790.7     499.9
  Selling, general and
   administrative expenses  (181.8)   (146.6)
  Other operating
   expense, net                1.5       9.9
                          --------  --------
Operating income             610.4     363.3

  Interest expense           (30.1)    (44.3)
  Interest income             12.0      12.1
  Other financial income
   (expenses), net           115.5       2.9

  Equity in earnings
   (losses) of associated
   companies                   0.4       0.4
                          --------  --------
Income before income tax
 expense                     708.2     334.4
Income tax (expense) benefit

  Current and deferred
   income tax expense       (209.3)   (107.1)
  Reversal of deferred
   statutory profit
   sharing                       -      96.3
Discontinued operations          -     159.9
Net income for the year /
 period                      498.9     483.6

Attributable to:
  Equity holders of the
   Company                   415.6     422.1
  Minority interest           83.2      61.4
                          --------  --------
                             498.9     483.6



                            Year
    US$ million             2007    4Q 2007   3Q 2007   2Q 2007   1Q 2007
                          --------  --------  --------  --------  --------
  Net sales                5,669.7   1,733.0   1,506.1   1,255.9   1,174.8
  Cost of sales           (4,309.8) (1,358.8) (1,141.4)   (931.1)   (878.6)
                          --------  --------  --------  --------  --------
Gross profit               1,359.9     374.2     364.7     324.8     296.2
  Selling, general and
   administrative
   expenses                 (520.7)   (165.9)   (143.8)   (118.2)    (92.8)
  Other operating
   expense, net                9.9       5.2       1.5      (3.5)      6.7
                          --------  --------  --------  --------  --------
Operating income             849.0     213.5     222.5     203.0     210.1

  Interest expense          (133.1)    (61.4)    (47.1)    (10.4)    (14.1)
  Interest income             41.6      13.7      12.9       7.7       7.2
  Other financial income
   (expenses), net           (38.9)      8.7     (53.7)    (10.8)     16.9

  Equity in earnings
   (losses) of associated
   companies                   0.4       1.6      (0.3)     (0.4)     (0.5)
                          --------  --------  --------  --------  --------
Income before income tax
 expense                     719.1     176.0     134.2     189.2     219.7
Income tax (expense) benefit
  Current and deferred
   income tax expense       (297.8)    (73.1)    (63.7)    (73.2)    (87.8)
  Reversal of deferred
   statutory profit sharing      -         -         -         -         -
Discontinued operations      579.9     117.7     143.5     199.0     119.8
Net income for the year /
 period                    1,001.2     220.6     214.0     315.0     251.6

Attributable to:
  Equity holders of the
   Company                   784.5     165.6     159.8     236.9     222.1
  Minority interest          216.7      55.0      54.2      78.0      29.5
                          --------  --------  --------  --------  --------
                           1,001.2     220.6     214.0     315.0     251.6



Consolidated cash flow statement (historical series including Sidor as
 discontinued operations)

    US$ million            2Q 2008   1Q 2008
                          --------  --------
Income from continuing
 operations                  498.9     323.6
  Adjustments for:
    Depreciation and
     amortization            103.8     106.9
    Income tax accruals
     less payments           140.9     (66.4)
    Equity in (earnings)
     losses of associated
     companies                (0.4)     (0.4)
    Interest accruals less
     payments                  3.0     (87.7)
  Changes in provisions       (0.3)      2.4
  Changes in working
   capital                  (682.9)   (257.9)
  Others                    (108.6)    (17.6)
                          --------  --------

Net cash (used in) provided
 by operating activities     (45.7)      2.8

  Capital expenditures      (149.3)   (101.5)
  Proceeds from sale of
   property, plant &
    equipment                  0.3       0.7
   Acquisition of
    business
 Purchase consideration          -         -
 Cash acquired                   -         -
   Income tax credit paid on
    business acquisition         -         -
   Decrease (Increase) in
    Other Investments         66.1      (0.8)
   Proceeds from sale of
    discontinued operations      -     722.5
   Discontinued operations    57.7      32.2
                          --------  --------

Net cash (used in) provided
 by investing activities     (25.2)    653.0

   Dividends paid in cash
    and other distributions
    to company's equity
    shareholders            (100.2)        -
   Dividends paid in cash
    and other distributions
    to minority
    shareholders             (19.6)        -
   Net proceeds from
    Initial Public Offering      -         -
   Contributions from
    shareholders                 -         -
   Proceeds from
    borrowings                76.3     105.0
   Repayment of
    borrowings               (40.3)   (891.2)
                          --------  --------

Net cash (used in) provided
 by financing activities     (83.8)   (786.2)

(Decrease) Increase in cash
 and cash equivalents       (154.7)   (130.4)



                              Year
    US$ million               2007   4Q 2007   3Q 2007   2Q 2007   1Q 2007

Income from continuing
 operations                  421.2     102.9      70.5     116.0     131.8
  Adjustments for:
    Depreciation and
     amortization            361.5     120.7      96.0      78.9      65.8
    Income tax accruals
     less payments           (45.0)    (28.0)    (15.5)    (66.8)     65.3
    Equity in (earnings)
     losses of associated
     companies                (0.4)     (1.6)      0.3       0.4       0.5
    Interest accruals
     less payments            87.6      54.9      35.4       2.4      (5.1)
  Changes in provisions       (0.9)      5.7       3.1      (3.2)     (6.6)
  Changes in working
   capital                    87.1     (58.0)      0.4      53.5      91.2
  Others                      28.9     (13.4)     45.6      10.0     (13.4)
                          --------  --------  --------  --------  --------

Net cash (used in) provided
 by operating activities     939.9     183.3     235.9     191.3     329.5

   Capital expenditures     (347.6)   (100.3)    (84.6)    (75.3)    (87.4)
   Proceeds from sale of
    property, plant &
    equipment                 24.5      17.8       0.5       1.1       5.1
   Acquisition of business
 Purchase consideration   (1,728.9)     (0.1) (1,728.7)     (0.1)        -
 Cash acquired               190.1         -     190.1         -         -
   Income tax credit
    paid on business
    acquisition             (297.7)        -    (297.7)        -         -
   Decrease (Increase) in
    Other Investments        (65.3)     (0.8)    (64.5)        -         -
   Proceeds from sale of
    discontinued
    operations                   -         -         -         -         -
   Discontinued operations   419.3      34.1     116.0      59.9     209.4
                          --------  --------  --------  --------  --------

Net cash (used in)
 provided by investing
 activities               (1,805.6)    (49.2) (1,868.9)    (14.5)    127.0

   Dividends paid in cash
    and other distributions
    to company's equity
    shareholders            (100.2)        -         -    (100.2)        -
   Dividends paid in cash
    and other distributions
    to minority
    shareholders             (20.0)        -      (0.1)    (19.9)        -
   Net proceeds from
    Initial Public
    Offering                     -         -         -         -         -
   Contributions from
    shareholders               1.2       0.1       1.1         -         -
   Proceeds from
    borrowings             4,052.7      70.8   3,869.7      72.1      40.1
   Repayment of
    borrowings            (2,574.6)   (157.5) (1,889.6)   (371.6)   (155.9)
                          --------  --------  --------  --------  --------

Net cash (used in)
 provided by financing
 activities                1,359.1     (86.6)  1,981.1    (419.6)   (115.8)

(Decrease) Increase in
 cash and cash equivalents   493.3      47.4     348.1    (242.9)    340.7





                  Shipments (historical series ex-Sidor)

     Thousand tons          2Q 2008   1Q 2008
                          --------- ---------
   South & Central America    690.9     673.0
   North America            1,042.2   1,080.0
   Europe & other              11.6       4.8
                          --------- ---------
 Total flat products        1,744.7   1,757.7

   South & Central America     67.9      56.7
   North America              249.6     265.3
   Europe & other               1.0       8.8
                          --------- ---------
 Total long products          318.5     330.7
 Total flat and long
  products                  2,063.2   2,088.5

                  Revenue / ton (historical series ex-Sidor)

     US$/ton                2Q 2008   1Q 2008
                          --------- ---------
   South & Central America    1,042       945
   North America              1,213       945
   Europe & other               864     1,008
                          --------- ---------
 Total flat products          1,143       945

   South & Central
    America                     913       643
   North America              1,017       703
   Europe & other               630       587
                          --------- ---------
 Total long products            993       689
 Total flat and long
  products                    1,120       905

                  Net Sales (historical series ex-Sidor)

     US$ million            2Q 2008   1Q 2008
                          --------- ---------
   South & Central America    719.9     635.8
   North America            1,264.6   1,021.0
   Europe & other              10.0       4.8
                          --------- ---------
 Total flat products        1,994.5   1,661.6

   South & Central America     62.1      36.4
   North America              253.8     186.4
   Europe & other               0.6       5.2
                          --------- ---------
 Total long products          316.4     228.0

                          --------- ---------
 Total flat and long
  products                  2,311.0   1,889.6

 Other products (1)            63.8      63.1
                          --------- ---------
 Total net sales            2,374.8   1,952.7


                  Shipments (historical series ex-Sidor)

     Thousand tons        Year 2007   4Q 2007   3Q 2007   2Q 2007   1Q 2007
                          --------- --------- --------- --------- ---------
   South & Central America  2,499.1     699.0     637.8     598.9     563.5
   North America            3,034.9     993.6     834.7     592.1     614.5
   Europe & other             184.9      12.3      18.5     101.2      52.8
                          --------- --------- --------- --------- ---------
 Total flat products        5,718.9   1,704.9   1,491.0   1,292.1   1,230.8

   South & Central America    132.8      55.2      52.3      25.3         -
   North America            1,113.4     268.9     244.8     286.4     313.3
   Europe & other              15.0      15.0         -         -         -
                          --------- --------- --------- --------- ---------
 Total long products        1,261.2     339.1     297.1     311.7     313.3
 Total flat and long
  products                  6,980.1   2,044.0   1,788.1   1,603.9   1,544.1

                   Revenue / ton (historical series ex-Sidor)

     US$/ton              Year 2007   4Q 2007   3Q 2007   2Q 2007   1Q 2007
                          --------- --------- --------- --------- ---------
   South & Central America      815       870       829       779       769
   North America                847       882       877       817       781
   Europe & other               665       641       619       682       654
                          --------- --------- --------- --------- ---------
 Total flat products            827       875       853       789       770

   South & Central America      527       489       550       565         -
   North America                625       611       637       638       616
   Europe & other               457       457         -         -         -
                          --------- --------- --------- --------- ---------
 Total long products            613       585       622       632       616
 Total flat and long
  products                      789       827       815       758       739

                  Net Sales (historical series ex-Sidor)

     US$ million          Year 2007   4Q 2007   3Q 2007   2Q 2007   1Q 2007
                          --------- --------- --------- --------- ---------
   South & Central America  2,037.0     607.9     528.9     466.6     433.5
   North America            2,571.8     876.3     731.8     483.6     480.1
   Europe & other             123.0       7.9      11.5      69.1      34.5
                          --------- --------- --------- --------- ---------
 Total flat products        4,731.7   1,492.0   1,272.2   1,019.2     948.2

   South & Central America     70.0      27.0      28.7      14.3         -
   North America              696.0     164.4     156.0     182.6     192.9
   Europe & other               6.9       6.9         -         -         -
                          --------- --------- --------- --------- ---------
 Total long products          772.8     198.2     184.8     196.9     192.9

                          --------- --------- --------- --------- ---------
 Total flat and long
  products                  5,504.5   1,690.3   1,457.0   1,216.2   1,141.1

 Other products (1)           165.1      42.7      49.1      39.7      33.7
                          --------- --------- --------- --------- ---------
 Total net sales            5,669.7   1,733.0   1,506.1   1,255.9   1,174.8
 (1) Includes iron ore, pig iron and metal buildings.

Contact Information

  • Sebastián Martí
    Ternium - Investor Relations
    +1 (866) 890 0443
    +52 (81) 8865 2111
    +54 (11) 4018 2389
    www.ternium.com