Ternium SA ADRTX

Morningstar Rating

Stock Research and Analysis

by Min Ye

The $1.97 billion cash compensation from Venezuela for Ternium's Sidor stake brought much-needed cash to reduce Ternium's debt burden. Strategy-wise, the post-Sidor Ternium has been searching for another source of cheap billets for its Argentine and Read more

Bulls Say

Ternium owns two iron ore mines close to its Mexican facilities and has prime access to low-cost raw materials and labor in its home countries. This gives it natural competitive advantages over outside suppliers.

Ternium prefers to sell to independent, small and medium-size companies in South America and Central America that are more prone to forgo imports for cheaper, easier-to-attain local products.

Hylsamex has more than 100 registered brands of products and services and has recently developed a patented technology for the reduction of iron ore in the steelmaking process.

Ternium's extensive global network of companies provides local customer service in countries such as Spain, Italy, China, and the United States and allows the firm to stay in the know in terms of local pricing and demand trends.

Ternium owns the land surrounding its Mexican mines, which may contain additional iron ore reserves, increasing the upside potential for the company. Read more

Bears Say

Although local antidumping laws have put minimum prices on imported steel, this advantage also plays in reverse; Ternium's exports are hurt by the same sorts of restrictions in countries such as Peru and Thailand.

The regional economies of Mexico and Argentina faced trouble amid a global slowdown. Steel demand in these nations could lag considerably should developing economies struggle under decelerating global trade.

Ternium is not self-sufficient in coking coal supply, and has lost a significant source for cheap billets (Sidor). This could increase the firm's overall production cost level going forward. Read more

Strategy

Ternium's strategy is to capitalize on its low-cost advantage and dominant market positions in the Latin American markets. The firm also enhances its competitive advantage by being a consolidating force Read more

Management

Ternium's chairman Paolo Rocca is also director of San Faustin, Ternium's ultimate parent company. San Faustin, which is controlled by Rocca & Partners, indirectly owns 70% of Ternium as of 2007. Only 15% of Ternium's shares are publicly traded. Read more

Profile

Headquartered in Luxembourg, Ternium is a leading manufacturer and distributor of flat and long steel products in the Latin American market. The company sells 95% of its Read more

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