Guillermo Etchepareborda Investor Relations / Responsable de Relaciones con el Mercado +54 (11) 4018 2752 www.terniumsiderar.com Siderar Files Fourth Quarter and Full Year 2015 Financial Reports with BCBA and CNV Buenos Aires, February 23, 2016 Siderar S.A.I.C. (Buenos Aires Stock Exchange: ERAR) filed today its financial reports for the fourth quarter and full year ended December 31, 2015 with the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires - BCBA) and the Argentine financial market regulator (Comisión Nacional de Valores - CNV). The financial and operational information contained in this press release is based on Siderar s operational data and consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and presented in Argentine pesos (ARP), U.S. dollars (USD) and metric tons. Summary Siderar s operating result in the fourth quarter 2015 was ARP920.6 million gain, a ARP153.0 million increase compared to operating result in the third quarter of the year as a result of slightly improved operating margins and higher shipments. Siderar s consolidated net results in the fourth quarter 2015 was ARP155.0 million gain, compared to a gain of ARP499.3 million in the third quarter of the year, a period that included deferred income tax recoveries. During the fourth quarter 2015 Siderar recorded higher financial result losses due to the depreciation of the Argentine Peso against the U.S. dollar, which were partially offset by the mentioned increase in operating results and an improved result in the equity in the result of associated companies. Siderar s operating result in the year 2015 was ARP3.4 billion gain, ARP1.6 billion lower compared to operating result in the year 2014 due to a significant decrease in the operating margin, from 23% of net sales in 2014 to 14% in 2015. The decrease in the operating margin was the result of higher cost per ton, not offset by higher revenue per ton. Siderar s consolidated net result in the year 2015 was ARP1.8 billion gain, ARP614.7 million lower than net result in 2014, being of note the mentioned decrease in operating results and higher financial results losses, partially offset by an improved result in the equity in the result of associated companies. During the year 2015, Siderar invested a total of ARP1.8 billion. The company continued to advance a number of different projects, mainly in the primary areas, hot-rolling mill and steel shop. As of December 31, 2015, Siderar recorded consolidated net cash position of ARP1.1 billion and total equity of ARP23.7 billion.
Outlook Siderar anticipates certain weakness in the level of steel shipments in Argentina during the first quarter 2016 compared to the fourth quarter 2015, due to an adjustment of steel demand following an election year and an adjustment of inventory in the steel industry value chain, in the context of a seasonal decrease in shipments during this time of the year. The normalization of the foreign exchange market as of the end of the fourth quarter, which entailed a significant depreciation of the value of the Argentine Peso, will result in an increase in the cost of Siderar s imported raw materials and other inputs, which although will not be reflected yet in the cost of sales in the first quarter of the year, as the company will gradually consume inventories produced with inputs purchased before this event. The global steel industry is in a complex situation due to steel production overcapacity in relationship with steel demand. This imbalance, more intensely witnessed in China, was evidenced last year through the achievement of historical records for Chinese steel exports, done to a great extent under unfair trade conditions, that triggered the reaction of the governments of the main steel producing countries by means of tariffs imposed over imports from such country. In addition, the substantial contraction of the Brazilian economy, manifested through decreased internal demand, incentivize exports from such country in a context where Brazil s internal costs are lower than those in Argentina. It will be relevant for Siderar, for the aforementioned, the Argentine government s future policies in connection with imports of steel and manufactured products from China, as well as with respect to the steps aimed at improving the competitiveness of the country in the region. Analysis of Fourth Quarter of 2015 Results 12 4Q 2015 3Q 2015 4Q 2014 1 Shipments (tons) 673,600 641,100 697,200 Net sales (ARP million) 6,487.7 5,957.0 5,893.2 Other net operating results (ARP million) (5.3) 19.6 21.9 Operating result (ARP million) 920.6 767.6 886.2 Financial result (ARP million) (636.2) (213.6) (65.2) Equity result (ARP million) 32.9 (61.1) 60.8 Net result (ARP million) 155.0 499.3 625.0 Per share net result 2 (ARP) 0.0343 0.1105 0.1384 1 Certain figures of the period have been modified in connection with the valuation adjustment of the participation in Usiminas, as reported to CNV on May 19, 2015. For further information on the valuation adjustment of the participation in Usiminas see note 3 to our consolidated financial statements as of December 31, 2015. 2 Per share net result was calculated based on 4.517.094.023 shares issued and outstanding during the period.
Net result for the fourth quarter of 2015 was a gain of ARP155.0 million, equivalent to a per share net gain 2 of ARP0.0343. Net sales for the fourth quarter of 2015 were ARP6.5 billion, compared to net sales of ARP5.9 billion in the fourth quarter of 2014. Shipments were 673,600 tons in the fourth quarter of 2015, a 23,600 tons decrease compared to shipments in the fourth quarter of 2014. Thousand metric tons Total shipments Domestic shipments Export shipments 4Q 2015 4Q 2014 4Q 2015 4Q 2014 4Q 2015 4Q 2014 Hot rolled 248.4 262.0 233.6 213.6 14.7 48.4 Cold rolled 146.0 136.8 139.7 125.3 6.4 11.5 Coated & other 234.1 218.0 232.6 212.1 1.5 5.8 Semi-finished 45.1 80.4 13.3 26.7 31.8 53.7 Total 673.6 697.2 619.2 577.7 54.4 119.4 Siderar s shipments in the domestic Argentine market in the fourth quarter of 2015 were 619,200 tons, a 41,500 tons increase compared to shipment levels during the fourth quarter of 2014. Exports totaled 54,400 tons in the fourth quarter of 2015, a 65,000 tons decrease compared to shipment levels during the prior-year period. Fifty-eight percent of the exports in the fourth quarter of 2015 were shipped to North America, with 40% shipped to South and Central America and 2% to Europe and other destinations. Cost of sales in the fourth quarter of 2015 totaled ARP4.8 billion, an increase of ARP494.1 million compared to the ARP4.3 billion recorded in the fourth quarter of 2014, mainly as a result of higher cost per ton and a sales mix of higher value, partially offset by lower shipments. The cost per ton change included higher costs of raw materials and consumables used, higher maintenance expenses and higher labor costs. Selling, general and administrative (SG&A) expenses in the fourth quarter of 2015 totaled ARP718.2 million, or 11% of net sales, higher than the ARP679.3 million, or 12% of net sales, in the fourth quarter of 2014. Notable items in the year-over-year SG&A increase included higher taxes, tariffs and contribution expenses, and higher expenses related to third party services. Financial net results totaled a loss of ARP636.2 million in the fourth quarter of 2015, compared to a loss of ARP65.2 million recorded in the fourth quarter of 2014. During the fourth quarter of 2015, net interest results totaled a loss of ARP93.7 million, compared to a loss of ARP148.9 million in the fourth quarter of 2014. The lower loss in the fourth quarter of 2015 was due mainly to a lower average interest rate. Change in fair value of financial instruments was a net loss of ARP90.0 million in the fourth quarter of 2015, compared to a net gain of AR84.2 million in the same period in 2014. Net foreign exchange results were a loss of ARP446.5 million in the fourth quarter 2015 compared to a gain of ARP2.7 million in the fourth quarter 2014. The fourth quarter 2015 loss was mainly due to the negative impact of the Argentine Peso depreciation against the U.S. dollar on overdue bills, which were due to the delay in the completion of some international trade transactions related to the acquisition of imported raw materials and consumables during the year 2015.
The equity in results of associated companies in the fourth quarter of 2015 was a gain of ARP32.9 million, lower than a ARP60.8 million gain recorded in the prior-year period. The equity in the results of Ternium Mexico in the fourth quarter of 2015 was a gain of ARP125.1 million, higher than a gain of ARP65.7 million in the fourth quarter of 2014, mainly due to Ternium Mexico s higher operating results and the effect the U.S. dollar appreciation against the Argentine peso. Siderar s equity in the results of Usiminas in the fourth quarter of 2015 was a loss of ARP95.7 million, compared to a loss of ARP8.6 million in the fourth quarter of 2014. The result in the fourth quarter 2015 included a ARP55.2 million write down against the value of the investment in Usiminas that was determined after performing an impairment test in accordance with applicable accounting methodologies. Income tax expense in the fourth quarter of 2015 was ARP162.4 million, compared to the income tax expense of ARP256.8 million recorded in the fourth quarter 2014. The Income tax rate in the fourth quarter 2015 was higher than usual due to the effect of financial results losses that did not generate tax credits. Analysis of Full Year 2015 Results 2015 2014 1 Shipments (tons) 2,580,600 2,560,700 Net sales (ARP million) 23,562.9 21,443.9 Other net operating results (ARP million) 9.2 505.9 Operating result (ARP million) 3,360.6 4,944.1 Financial result (ARP million) (1,037.8) (499.4) Equity result (ARP million) 65.1 (1,234.7) Net result (ARP million) 1,756.9 2,371.7 Per share net result 3 (ARP) 0.3889 0.5250 Net result for the year 2015 was a gain of ARP1.8 billion, equivalent to a per share net gain 3 of ARP0.3889. Net sales for the year 2015 were ARP23.6 billion, compared to net sales of ARP21.4 billion in the year 2014. Shipments were 2.6 million tons in the year 2015, a 19,900 tons increase compared to shipments in the year 2014. 3 Per share net result was calculated based on 4.517.094.023 shares issued and outstanding during the period.
Total shipments Domestic shipments Export shipments Thousand metric tons 2015 2014 2015 2014 2015 2014 Hot rolled 995.2 1,020.2 889.9 862.9 105.3 157.2 Cold rolled 588.8 560.5 562.8 516.8 26.0 43.7 Coated & other 893.9 848.9 885.2 834.5 8.7 14.4 Semi-finished 102.7 131.2 66.4 54.4 36.3 76.8 Total 2,580.6 2,560.7 2,404.4 2,268.6 176.3 292.1 Siderar s shipments in the domestic Argentine market in the year 2015 were 2.4 million tons, a 135,800 tons increase compared to shipment levels during the year 2014. Exports totaled 176,300 tons in the year 2015, a 115,800 tons decrease compared to shipment levels during the prior-year. Seventy-six percent of the exports in the year 2015 were shipped to South and Central America, with 22% shipped to North America and 2% to Europe and other destinations. Cost of sales in the year 2015 totaled ARP17.5 billion, an increase of ARP2.9 billion compared to the ARP14.6 billion recorded in the year 2014, as a result of higher cost per ton and a sales mix of higher value. The cost per ton change included higher costs of raw materials and consumables used, higher maintenance expenses and higher labor costs. SG&A expenses in the year 2015 totaled ARP2.7 billion, or 11% of net sales, higher than the ARP2.4 billion, or 11% of net sales, in the year 2014. Notable items in the year-over-year SG&A increase included higher expenses related to third party services, higher taxes, tariffs and contribution expenses, higher freight expenses and higher labor costs. Other net operating results in the year 2015 were a ARP9.2 million gain, lower than the ARP505.9 million gain in the year 2014. The gain in the year 2014 was mainly due to the income recognition on insurance recoveries. Financial net results totaled a loss of ARP1.0 billion in the year 2015, compared to the ARP499.4 million loss recorded in the year 2014. During the year 2015, net interest results totaled a loss of ARP478.0 million, which were lower than the loss of ARP626.0 million in the year 2014, due mainly to lower indebtedness. Change in fair value of financial instruments was a net loss of ARP85.1 million in the year 2015, compared to the net gain of ARP151.3 million recorded in the year 2014. Net foreign exchange results were a loss of ARP457.6 million in 2015 compared to a loss of ARP7.6 million in 2014. The year 2015 loss was due to the aforementioned impact of the Argentine Peso depreciation on overdue foreign suppliers bills. The equity in results of associated companies in the year 2015 was a gain of ARP65.1 million, compared to the ARP1.2 billion loss recorded in the prior-year. The equity in the results of Ternium Mexico in the year 2015 was a gain of ARP245.8 million, lower than a gain of ARP416.3 million recorded in 2014, due to Ternium Mexico s lower operating results, partially offset by the effect of the U.S. dollar appreciation against the Argentine peso. Siderar s equity in earnings of Usiminas in the year 2015 was a loss of ARP184.2 million, compared to a loss of ARP1.7 billion in the year 2014, a period that included a
ARP1.6 billion write down against the investment that was determined after performing an impairment test in accordance with applicable accounting methodologies. Income tax expense in the year 2015 was ARP630.9 million, compared to the income tax expense of ARP838.3 million recorded in the year 2014. Income tax expenses were affected, in both periods, by recoveries of deferred taxes. Cash Flow and Liquidity Net cash provided by operating activities in the year 2015 was ARP3.5 billion. Working capital decreased by ARP1.1 billion in 2015 as a result an aggregate net increase in accounts payable and other liabilities of ARP838.4 million and an aggregate net decrease in trade and other receivables of ARP304.1 million, partially offset by a ARP53.6 million increase in inventories. Increased accounts payable and other liabilities included overdue foreign suppliers bills amounting to ARP743.4 million (USD57.0 million). Net higher inventory volumes and the effect of higher costs in the replacement of semi-finished and finished steel products consumed in the period contributed to the inventory value increase in 2015, partially offset by the effect of net lower inventory volumes and lower costs in the replacement of raw materials consumed in the year. Capital expenditures in the year 2015 totaled ARP1.8 billion. Siderar s capital expenditure plans during the year included initiatives in progress such as, among others, expansion and enhancement activities in the coking area, revamping activities in the hot-rolling mill and investments in new equipment and enhancement projects in the steel shop. During the year 2015, Siderar paid dividends for an amount of ARP738.2 million. Net debt repayments were ARP264.9 million. Revenue from derivative financial products was ARP270.9 million. As of December 31, 2015, Siderar s consolidated net cash was ARP1.1 billion and its total equity was ARP23.7 billion. Net cash provided by operating activities in the fourth quarter of 2015 was ARP1.5 billion. Working capital decreased by ARP598.3 million in the fourth quarter of 2015 as a result of a ARP509.5 million decrease in inventories and an aggregate ARP223.6 million net decrease in trade and other receivables, partially offset by an aggregate ARP134.7 million net decrease in accounts payable and other liabilities. Net lower raw material, semi-finished and finished steel product inventory volumes contributed to the inventory value decrease in the fourth quarter of 2015.
Consolidated income statement ARP million 4Q 2015 4Q 2014 1 2015 2014 1 Net sales 6,487.7 5,893.2 23,562.9 21,443.9 Cost of sales (4,843.6) (4,349.5) (17,515.6) (14,647.9) Gross profit 1,644.0 1,543.6 6,047.2 6,796.0 Selling, general and administrative expenses (718.2) (679.3) (2,695.9) (2,357.8) Other operating (expenses) income, net (5.3) 21.9 9.2 505.9 Operating income 920.6 886.2 3,360.6 4,944.1 Financial expense (114.3) (159.6) (541.4) (670.7) Financial income 19.6 10.5 60.9 40.9 Other financial (expenses) income, net (541.5) 83.9 (557.4) 130.3 Equity in earnings (losses) of associated companies 32.9 60.8 65.1 (1,234.7) Income before income tax expense 317.4 881.8 2,387.8 3,210.0 Income tax expense (162.4) (256.8) (630.9) (838.3) Profit for the period 155.0 625.0 1,756.9 2,371.7 Attributable to: Equity holders of the Company 155.0 625.0 1,756.9 2,371.7 Non-controlling interest (0.0) 0.0 (0.0) (0.1) 155.0 625.0 1,756.9 2,371.7
Consolidated statement of financial position ARP million December 31, 2015 December 31, 2014 Property, plant and equipment, net 8,733.8 7,794.9 Intangible assets, net 112.8 69.9 Investments in associated companies 12,057.9 8,217.7 Deferred tax assets 3.2 2.4 Receivables, net 54.5 139.5 Trade receivables, net - 0.8 Total non-current assets 20,962.1 16,225.1 Receivables 298.3 302.2 Derivative financial instruments 23.3 37.1 Inventories, net 5,351.4 5,297.8 Trade receivables, net 371.1 531.0 Other investments 3,043.7 1,269.0 Cash and cash equivalents 528.8 412.8 Total current assets 9,616.7 7,849.9 Non-current assets classified as held for sales 9.1 9.1 Total assets 30,587.9 24,084.2 Capital and reserves attributable to the company's equity holders 23,655.3 18,302.0 Non-controlling interest 0.2 0.1 Total Equity 23,655.4 18,302.2 Provisions 85.4 65.7 Deferred income tax 301.9 560.4 Other liabilities 329.8 307.8 Borrowings 8.2 96.6 Total non-current liabilities 725.3 1,030.4 Provisions 254.1 282.5 Current income tax liabilities 49.1 377.6 Other liabilities 479.3 475.6 Trade payables 2,760.0 1,260.0 Derivative financial instruments 245.9 - Borrowings 2,418.9 2,355.9 Total current liabilities 6,207.2 4,751.6 Total liabilities 6,932.5 5,782.0 Total equity and liabilities 30,587.9 24,084.2
Consolidated statement of cash flows ARP million 4Q 2015 4Q 2014 2015 2014 Profit for the period 155.0 625.0 1,756.9 2,371.7 Adjustments for: Depreciation and amortization 179.0 188.3 752.6 716.6 Income tax accruals less payments 54.2 (54.9) (633.1) (808.3) Interest accruals less payments 46.9 (14.8) 41.1 5.2 Changes in value of derivate financial products 103.2 (87.2) (11.2) (164.8) Changes in provisions 3.3 (15.3) 25.2 (3.2) Equity in earnings of associated companies (32.9) (60.8) (65.1) 1,234.7 Changes in working capital 598.3 356.4 1,089.0 (1,677.9) Net foreign exchange results and others 412.0 26.4 551.1 75.5 Net cash provided by operating activities 1,519.1 962.9 3,506.5 1,749.5 Capital expenditures (390.2) (446.4) (1,767.7) (1,562.4) Dividends received and proceeds from the sale of associated companies - 2.8-2.8 Proceeds from the sale of property, plant and equipment 9.8 4.9 33.4 23.7 Increase in other Investments (890.7) (157.2) (1,007.0) (65.4) Net cash used in investing activities (1,271.1) (595.9) (2,741.4) (1,601.3) Dividends paid in cash - - (738.2) (688.9) Proceeds from borrowings 613.7 617.7 4,534.5 3,548.9 Repayments of borrowings (1,059.7) (1,053.7) (4,799.4) (3,228.7) Proceeds from derivative financial products, net 112.3 56.5 270.9 127.7 Net cash used in financing activities (333.7) (379.5) (732.2) (240.9) (Decrease) increase in cash and cash equivalents (85.7) (12.4) 32.9 (92.7)