MONCLOVA, Mexico–(BUSINESS WIRE)–Altos Hornos de México, S.A.B. de C.V. and Subsidiaries (“AHMSA” or “the Company”) (BMV: AHMSA) reported financial results for the period ended March 31, 2018 (1Q 2018). 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$) and metric tons (MT).
1Q 2018 Highlights
- Adjusted EBITDA reached US$ 64 million, a 109% increase compared to US$ 30 million in 1Q 2017.
- Steel Segment Adjusted EBITDA increased 101% to US$ 81 million from US$ 40 million in 1Q 2017.
- Steel volume was 1,012k MT, an 18.2% increase, compared to the same period in 2017.
- Average realized prices increased by 14.8%, due to stronger international steel market conditions.
- Net Sales grew 36%, compared to 1Q 2017, driven by higher volume and better price conditions.
- During March, the Company reached a new monthly record in terms of shipments, reaching 364 thousand TM.
- Cost of sales increased by 35% compared to 1Q 2017, mainly due to higher raw material costs and usage.
- Coal Segment adjusted EBITDA reached a loss of US$ 12 million compared to a loss of US$ 5 million in 1Q 2017. This was mainly explained by the following factors:
- Adverse economic environment that negatively affected the price calculation according to the formula established in the contracts, which considers a 35% price adjustment due to the exchange rate fluctuation, and that was insufficient to offset the higher costs incurred for the operation of the Dos Republicas mine.
- Reduction in the monthly shipment volume requested by CFE1 in order to lower its inventory.
- Currently, AHMSA continues to advance in a number of strategic investments:
- During the month of March 2018, the Company began the testing process for the vacuum degassing system, which has proven to be satisfactory. The production phase is estimated to begin towards the end of 2Q 2018.
- The Company is in the middle of the implementation of Proyecto Artemisa; the SAG mill is expected to be installed by mid-2018, which will improve the recovery of our iron mineral reserves and optimize iron ore concentrate production.
- AHMSA continues to report advances in the repair project of 35 coke ovens at our #1 Coking Battery. The project is expected to increase annual coke capacity by approximately 177 thousand MT.
- The Company is expecting the bidding process announcement for renewal of the steam coal contracts. The current contracts expire in December.
- Plans are underway for the re-instatement of AHMSA’s shares on the Mexican Stock Exchange (BMV).
*Projects to optimize our iron ore concentrate production (left: La Perla Unit, right: Artemisa Project)
Comment from AHMSA’s Chairman of the Board:
The quarter we just concluded was a very positive one for AHMSA, as it took place in a very favorable environment with the announcement of some very encouraging news for the North American steel industry. The resolution of the U.S. government regarding the application of tariffs on steel and aluminum products (Section 232) coming into the U.S. benefits us, as Mexico was included in the list of countries exempt from this restriction.
This measure, together with the expected positive resolution of the North American Free Trade Agreement (NAFTA), has stimulated the Mexican steel market, and we can already see these benefits reflected in the quarter just concluded, primarily in March. This is a trend that we expect will continue in the coming months.
Added to the above, we have asked the Mexican authorities to replicate the protections applied by the U.S.
Within this favorable environment, in March we were able to surpass our previous record of monthly shipments, reaching 364 thousand metric tons during this period.
In terms of our corporate strategy update, we initiated testing for the new vacuum degassing line, which has been satisfactory so far. We expect to conclude it during the coming quarter in order to enter into the production phase.
In terms of the coal sector, we continue facing the impact of the macroeconomic factors on the price structure. At this time we are awaiting the announcement for the public bidding process by the CFE for the new contracts, where we will seek to correct these price distortions as soon as the coming year.
As always, we thank you for your interest in AHMSA.