Ternium Argentina’s net income was higher than in 1H 2018, although slightly below expectations due to decreases in deliveries and operating margin, along with a lower result of associated companies. Target price estimate is expected to remain relatively stable.
Ternium Argentina's consolidated net sales fell 5,9% y-o-y in 1H 2019, as a consequence of a decrease (-16,1%) in deliveries in tons due to domestic market contraction. Cost of sales grew 2,2% in line with higher raw materials and supplies cost, labor, and depreciations. The operating result showed a serious deterioration due to all of the aforementioned, resulting in an operating margin slump (from 10,7% to 2,8%).
The operating income was also negatively affected by a lower result of associated companies due to lower Ternium Mexico profit; which was offset by the improvement in financial result which became positive. Thus, consolidated net income reached $4.202,0 million, +50,1% y-o-y.
Domestic deliveries could increase taking into account a slow recovery of the local market, but this could be compensated by lower exports in 3Q 2019.
It should be mentioned that the company has stated that 2018 and 2019 values are expressed in constant Argentine pesos as of June 30, 2019, in accordance with International Financial Reporting Standards (IFRS), including the international accounting standard 29 (financial reporting in hyperinflationary economies).