Ternium S.A. (TX) Cash Flow Statement

The OCF/NI ratio has been highly volatile, ranging from -0.89 in 2024Q2 to 25.98 in 2025Q3, indicating that operating cash flow is heavily influenced by working capital changes rather than core earnings. In 2026Q2, OCF/NI fell to 0.74 as a $418M working capital outflow offset net income, suggesting that earnings quality may be lower than the headline numbers imply. Investors should monitor whether these swings reflect cyclical inventory builds or structural inefficiencies.

Despite a recovery in net income to $343.7M in 2026Q2, FCF turned negative due to a $431M capex outlay and a $418M working capital drain, resulting in a -4.0% FCF margin. Over the trailing ten quarters, cumulative FCF is roughly -$1.1B, indicating that the company is not generating sufficient cash to cover its investment needs. This suggests that Ternium's growth investments are consuming cash faster than operations can replenish it, a trend that warrants close monitoring.

The elevated capex intensity suggests Ternium is in a significant expansion or modernization phase, likely tied to its industrial strategy in the Americas. However, the resulting negative FCF in several quarters indicates that these investments are not yet generating sufficient returns. If steel prices remain soft, the high capital outlays could strain liquidity, though the company's balance sheet appears adequate to absorb near-term pressure.

The large swings in working capital, particularly in receivables and inventory, appear to be a primary driver of the divergence between net income and operating cash flow. In 2025Q2, a $781M working capital inflow boosted OCF to $1.0B, while in 2026Q2, a $418M outflow reduced OCF to $256M. This pattern suggests that Ternium's cash conversion is highly sensitive to the steel cycle, with inventory builds during periods of expected demand recovery and releases during downturns.

Capital deployment has been focused on shareholder returns and strategic acquisitions, with dividends totaling over $1.4B over the past ten quarters. The $335.6M acquisition in 2026Q1 indicates an active M&A strategy, which may explain the elevated capex and negative FCF. While dividends provide a return to shareholders, the combination of heavy capex, acquisitions, and dividends could pressure liquidity if operating cash flow weakens further.

The cumulative gap between net income and operating cash flow is substantial, with OCF exceeding net income by $3.5B, driven by large non-cash charges and working capital inflows. However, this divergence is not necessarily negative; it may reflect heavy depreciation and amortization (averaging ~$200M per quarter) and timing of working capital. Investors should assess whether the gap narrows as capex normalizes, or if it signals persistent earnings quality issues.