AHMSA Announces Third Quarter 2019 Results

MONCLOVA, Coahuila, Oct. 26, 2019 (GLOBE NEWSWIRE) -- Altos Hornos de México, S.A.B. de C.V. and Subsidiaries (“AHMSA” or “the Company”) (BMV: AHMSA) reported financial results for the Third Quarter period ended September 30, 2019 (3Q 2019). Financial and operating figures included in this report are unaudited and are based on AHMSA’s operating figures and financial statements; they are prepared in accordance with International Financial Reporting Standards (IFRS) and are expressed in U.S. dollars (US$) and metric tons (MT), unless otherwise indicated.

3Q 2019 Highlights

• Adjusted EBITDA was US$ (40.4) million, a 149.6% decline compared to (US$ 81.5 million) in 3Q 2018. 
  
   
• Adjusted EBITDA for the Steel Segment was US$ (31.0) million, a 132.1% decline compared to US$ 96.6 million in 3Q 2018. This result was explained by the following:
  • Steel shipments were 733 thousand MT, a 16.9% decrease.
  • Average price per ton declined by 20.5%, due to unfavorable steel market conditions.
  • Net Sales declined by 34%, driven by a lower price environment, as well as weaker demand for our main products.
  • Cost of sales decreased by 19.0%, due to lower production volumes.
    
     
• Adjusted EBITDA for the Steam Coal Segment  reported a loss of US$ 6.9 million, compared to a loss of US$ 9.1 million in 3Q 2018, due to an improvement in prices derived from the new CFE contract.

Corporate Strategy Update

During the quarter, the Company has maintained the previously-implemented strict cost-control measures, in order to reduce expenses, well as the sales process of properties, aircraft, vehicles and various assets that are not required for AHMSA’s operation.

AHMSA is exploring various capitalization options and/or associations with a variety of industrial and financial groups; there is, however, so signed agreement at this time.

Currently, the Company is carrying out various strategic investments:

• The Artemisa project is in its final construction stage; we expect this project will conclude at the end of 2Q20. Artemisa will allow the Company to maximize its iron ore reserves; the project has partially initiated operations.
• The beginning of project Conchas Sur is set to start and was re-scheduled for the beginning of second quarter 2020; this was due to delays in the external infrastructure installation of the mine. This project will permit the Company to secure its own supply of metallurgical coal in the long term.

Financial Highlights

For the full version of this report, please visit: /assets/files/infromacion_financiera/comunicado%20de%20prensa/2019/ENG/AHMSA_3Q19_Earnings_Release_ENG.pdf

About AHMSA

AHMSA is the largest steel producer in Mexico.  The Company was founded in 1942 and began operations in 1944. In December 1991, the Company was privatized and Grupo Acerero del Norte, S.A. de C.V. (GAN) assumed control.  In December 1995, GAN incorporated into AHMSA the iron ore and coal mines to convert AHMSA into an integrated steel producer in Mexico with a nominal capacity of 3.8 million MT of liquid steel per year. Since 2007, it has managed the Fénix Project, the most ambitious investment program in the Company’s history aimed at increasing installed capacity by at least 40% and enabling AHMSA to surpass 5 million MT of liquid steel per year following the incorporation of its new electric arc furnace.  With this new equipment, AHMSA also expanded its ranges of steel and increased specifications, which allows the Company to enter new market niches.

In 2018, AHMSA held 13% share of the domestic steel market, 24% of the domestic market for flat products and 12% of exports from Mexico of finished steel products.  The corporate headquarters and steel mills have an area of approximately 1,200 hectares and is located in Monclova, Coahuila de Zaragoza, 248 km from the U.S. border. 

Forward-looking statements:

The information set forth in this presentation contains “forward-looking statements” within the meaning of applicable Mexican securities legislation and the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking statements") including but not limited to projections of revenues or losses, plans and objectives for future operations, products or services, and statements relating to future economic performance. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause AHMSA’s actual results to differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include but are not limited to regional, national or global economic, business, market and regulatory conditions and the following: (i) AHMSA’s ability to service its debt, including the outstanding non-transferable rights of each recognized creditor in the suspension of payments proceeding to receive certain payments; (ii) competition and loss of market shares; (iii) changes in AHMSA’s relationships with customers and suppliers; (iv) increases in raw material costs or interruptions in supply; (v) declines in, and volatility affecting, global prices of steel; (vi) the existence or termination of free trade agreements, such as the North American Free Trade Agreement; (vii) foreign currency exchange fluctuations; (viii) the inherently dangerous nature of mining; (ix) work stoppages, strikes or other labor disputes; (x) changes in Mexican economic policy, as well as currency instability; (xi) inaccuracies in AHMSA’s estimates of economically recoverable coal reserves; and (xii) AHMSA’s dependence on certain raw materials.

The financial and operating projections, as well as estimates of assets, are based solely on the assumptions developed by AHMSA that it believes are reasonable based upon information available to AHMSA as of the date hereof. All projections and estimates are subject to material uncertainties, and should not be viewed as a prediction or an assurance of actual future performance. The validity and accuracy of AHMSA’s projections will depend upon unpredictable future events, many of which are beyond AHMSA’s control and, accordingly, no assurance can be given that AHMSA’s assumptions will prove true or that its projected results will be achieved.

Non-GAAP Financial Measures:

This presentation provides information regarding EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are not recognized terms or measures of financial performance under U.S. GAAP or IFRS and do not purport to be and should not be considered as alternatives to net income, as determined on a consolidated basis in accordance with IFRS, as indicators of AHMSA's operating performance or as net resources generated by operating activities as a measure of AHMSA's liquidity. AHMSA includes EBITDA and Adjusted EBITDA because it believes that they enhance the understanding of AHMSA's financial performance and its ability to satisfy principal and interest obligations with respect to its indebtedness as well as to fund capital expenditures and working capital requirements.

Exchange Rate disclaimer

This document includes certain exchange rate conversions from Mexican Pesos to U.S. Dollars, only for convenience of the user.  The exchange rate used for the purposes of this translation is, for accounts related to the Income or Cash Flow statements, the average of the Official Exchange Rates published by Banco de Mexico each day during the months and the years ended, and the last day of each period for accounts related to the Balance Sheet.