Ternium S.A. | CIK:0001342874 | 3

  • Filed: 4/24/2018
  • Entity registrant name: Ternium S.A. (CIK: 0001342874)
  • Generator: Workiva (WebFilings)
  • SEC filing page: http://www.sec.gov/Archives/edgar/data/1342874/000134287418000009/0001342874-18-000009-index.htm
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    • ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory

    PORTABLE OPERATING SEGMENTS
    The Company is organized in two reportable segments: Steel and Mining.
    The Steel segment includes the sales of steel products, which comprises slabs, hot rolled coils and sheets, cold rolled coils and sheets, tin plate, welded pipes, hot dipped galvanized and electro-galvanized sheets, pre-painted sheets, billets (steel in its basic, semi-finished state), wire rod and bars and other tailor-made products to serve its customers’ requirements.
    It also includes the sales of energy.
    The Steel segment comprises three operating segments: Mexico, Southern Region and Other markets. These three segments have been aggregated considering the economic characteristics and financial effects of each business activity in which the entity engages; the related economic environment in which it operates; the type or class of customer for the products; the nature of the products; and the production processes. The Mexico operating segment comprises the Company’s businesses in Mexico. The Southern region operating segment manages the businesses in Argentina, Paraguay, Chile, Bolivia and Uruguay. The Other markets operating segment includes businesses mainly in Brazil, United States, Colombia, Guatemala, Costa Rica, Honduras, El Salvador and Nicaragua.
    The Mining segment includes the sales of mining products, mainly iron ore and pellets, and comprises the mining activities of Las Encinas, an iron ore mining company in which Ternium holds a 100% equity interest and the 50% of the operations and results performed by Peña Colorada, another iron ore mining company in which Ternium maintains that same percentage over its equity interest. Both mining operations are located in Mexico. For Peña Colorada, the Company recognizes its assets, liabilities, revenue and expenses in relation to its interest in the joint operation.
    Ternium’s Chief Operating Decision Maker (CEO) holds monthly meetings with senior management, in which operating and financial performance information is reviewed, including financial information that differs from IFRS principally as follows:
    -
    The use of direct cost methodology to calculate the inventories, while under IFRS is at full cost, including absorption of production overheads and depreciation.
    -
    The use of costs based on previously internally defined cost estimates, while, under IFRS, costs are calculated at historical cost (with the FIFO method).
    -
    Other timing and non-significant differences.
    Most information on segment assets is not disclosed as it is not reviewed by the CODM.

     
    Year ended December 31, 2017
     
    Steel
     
    Mining
     
    Inter-
    segment
    eliminations
     
    Total
    IFRS
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
    Net sales
    9,700,260

     
    271,477

     
    (271,441
    )
     
    9,700,296

    Cost of sales
    (7,465,751
    )
     
    (212,860
    )
     
    275,586

     
    (7,403,025
    )
     
     
     
     
     
     
     
     
    Gross profit
    2,234,509

     
    58,617

     
    4,145

     
    2,297,271

     
     
     
     
     
     
     
     
    Selling, general and administrative expenses
    (811,487
    )
     
    (12,760
    )
     
    —

     
    (824,247
    )
    Other operating income, net
    (17,011
    )
     
    771

     
    —

     
    (16,240
    )
     
     
     
     
     
     
     
     
    Operating income - IFRS
    1,406,011

     
    46,628

     
    4,145

     
    1,456,784

     
     
     
     
     
     
     
     
    Management view
     
     
     
     
     
     
     
    Net sales
    9,700,260

     
    287,152

     
    (287,116
    )
     
    9,700,296

    Operating income
    1,065,605

     
    66,694

     
    (1,291
    )
     
    1,131,008

    Reconciliation items:
     
     
     
     
     
     
     
    Differences in Cost of sales
     
     
     
     
     
     
    325,776

     
     
     
     
     
     
     
     
    Operating income - IFRS
     
     
     
     
     
     
    1,456,784

     
     
     
     
     
     
     
     
    Financial income (expense), net
     
     
     
     
     
     
    (165,090
    )
    Equity in (losses) earnings of non-consolidated companies
     
     
     
     
     
     
    68,115

     
     
     
     
     
     
     
     
    Income before income tax expense - IFRS
     
     
     
     
     
     
    1,359,809

     
     
     
     
     
     
     
     
    Depreciation and amortization - IFRS
    (424,529
    )
     
    (49,770
    )
     
    —

     
    (474,299
    )
     
    Year ended December 31, 2016
     
    Steel
     
    Mining
     
    Inter-
    segment
    eliminations
     
    Total
    IFRS
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
    Net sales
    7,221,751

     
    204,894

     
    (202,670
    )
     
    7,223,975

    Cost of sales
    (5,391,038
    )
     
    (192,038
    )
     
    198,686

     
    (5,384,390
    )
     
     
     
     
     
     
     
     
    Gross profit
    1,830,713

     
    12,856

     
    (3,984
    )
     
    1,839,585

     
     
     
     
     
     
     
     
    Selling, general and administrative expenses
    (677,007
    )
     
    (10,935
    )
     
    —

     
    (687,942
    )
    Other operating income, net
    (9,543
    )
     
    (382
    )
     
    —

     
    (9,925
    )
     
     
     
     
     
     
     
     
    Operating income - IFRS
    1,144,163

     
    1,539

     
    (3,984
    )
     
    1,141,718

     
     
     
     
     
     
     
     
    Management view
     
     
     
     
     
     
     
    Net sales
    7,221,751

     
    208,230

     
    (206,006
    )
     
    7,223,975

    Operating income
    936,164

     
    3,871

     
    269

     
    940,303

    Reconciliation items:
     
     
     
     
     
     
     
    Differences in Cost of sales
     
     
     
     
     
     
    201,415

     
     
     
     
     
     
     
     
    Operating income - IFRS
     
     
     
     
     
     
    1,141,718

     
     
     
     
     
     
     
     
    Financial income (expense), net
     
     
     
     
     
     
    (37,885
    )
    Equity in (losses) earnings of non-consolidated companies
     
     
     
     
     
     
    14,624

     
     
     
     
     
     
     
     
    Income before income tax expense - IFRS
     
     
     
     
     
     
    1,118,457

     
     
     
     
     
     
     
     
    Depreciation and amortization - IFRS
    (361,685
    )
     
    (45,205
    )
     
    —

     
    (406,890
    )
     
    Year ended December 31, 2015
     
    Steel
     
    Mining
     
    Inter-
    segment
    eliminations
     
    Total
    IFRS
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
    Net sales
    7,875,161

     
    203,105

     
    (200,817
    )
     
    7,877,449

    Cost of sales
    (6,456,584
    )
     
    (214,651
    )
     
    193,963

     
    (6,477,272
    )
     
     
     
     
     
     
     
     
    Gross profit
    1,418,577

     
    (11,546
    )
     
    (6,854
    )
     
    1,400,177

     
     
     
     
     
     
     
     
    Selling, general and administrative expenses
    (757,078
    )
     
    (13,214
    )
     
    —

     
    (770,292
    )
    Other operating income, net
    9,151

     
    303

     
    —

     
    9,454

     
     
     
     
     
     
     
     
    Operating income - IFRS
    670,650

     
    (24,457
    )
     
    (6,854
    )
     
    639,339

     
     
     
     
     
     
     
     
    Management view
     
     
     
     
     
     
     
    Net sales
    7,875,161

     
    216,095

     
    (213,807
    )
     
    7,877,449

    Operating income
    1,012,282

     
    (3,490
    )
     
    (640
    )
     
    1,008,152

    Reconciliation items:
     
     
     
     
     
     
     
    Differences in Cost of sales
     
     
     
     
     
     
    (368,813
    )
     
     
     
     
     
     
     
     
    Operating income - IFRS
     
     
     
     
     
     
    639,339

     
     
     
     
     
     
     
     
    Financial income (expense), net
     
     
     
     
     
     
    (99,430
    )
    Equity in (losses) earnings of non-consolidated companies
     
     
     
     
     
     
    (272,810
    )
     
     
     
     
     
     
     
     
    Income before income tax expense - IFRS
     
     
     
     
     
     
    267,099

     
     
     
     
     
     
     
     
    Depreciation and amortization - IFRS
    (384,380
    )
     
    (49,408
    )
     
    —

     
    (433,788
    )

    GEOGRAPHICAL INFORMATION
    The Company has revenues attributable to the Company’s country of incorporation (Luxembourg), related to a contract acquired as a part of the business combination disclosed in note 3 (a).
    For purposes of reporting geographical information, net sales are allocated based on the customer’s location. Allocation of depreciation and amortization is based on the geographical location of the underlying assets.
     
    Year ended December 31, 2017
     
    Mexico
     
    Southern
    region
     
    Other markets (2)
     
    Total
     
     
     
     
     
     
     
     
    Net sales
    5,629,267

     
    2,316,444

     
    1,754,585

     
    9,700,296

     
     
     
     
     
     
     
     
    Non-current assets (1)
    4,042,914

     
    643,411

     
    1,756,007

     
    6,442,332

     
    Year ended December 31, 2016
     
    Mexico
     
    Southern
    region
     
    Other markets
     
    Total
     
     
     
     
     
     
     
     
    Net sales
    4,491,761

     
    1,867,622

     
    864,592

     
    7,223,975

     
     
     
     
     
     
     
     
    Non-current assets (1)
    4,108,539

     
    634,048

     
    235,947

     
    4,978,534

     
    Year ended December 31, 2015
     
    Mexico
     
    Southern
    region
     
    Other markets
     
    Total
     
     
     
     
     
     
     
     
    Net sales
    4,395,273

     
    2,572,723

     
    909,453

     
    7,877,449

     
     
     
     
     
     
     
     
    Non-current assets (1)
    4,166,148

     
    682,705

     
    246,919

     
    5,095,772

    (1) Includes Property, plant and equipment and Intangible assets.
    (2) Includes the assets related to the business acquisition disclosed in note 3 (a).
    REVENUES BY PRODUCT
     
    Year ended December 31,
     
    2017
     
    2016
     
    2015
     
     
     
     
     
     
    Semi-finished (1)
    123,752

     
    19,878

     
    88,264

    Slabs
    715,513

     
    —

     
    —

    Hot rolled (2)
    3,366,697

     
    2,763,403

     
    3,049,433

    Cold rolled
    1,321,663

     
    1,110,671

     
    1,176,019

    Coated (3)
    3,391,328

     
    2,900,009

     
    3,004,700

    Roll-formed and tubular (4)
    472,253

     
    413,991

     
    509,034

    Other products (5)
    309,090

     
    16,023

     
    49,999

     
     
     
     
     
     
    TOTAL SALES
    9,700,296

     
    7,223,975

     
    7,877,449

    (1)
    Semi-finished includes billets and round bars.
    (2)
    Hot rolled includes hot rolled flat products, merchant bars, reinforcing bars, stirrups and rods.
    (3)
    Coated includes tin plate and galvanized products.
    (4)
    Roll-formed and tubular includes tubes, beams, insulated panels, roofing and cladding, roof tiles, steel decks and pre-engineered metal building systems.
    (5)
    Other products include mainly sales of energy and pig iron.