Market Overview

AHMSA Announces Second Quarter 2018 Results


Altos Hornos de México, S.A.B. de C.V. and Subsidiaries ("AHMSA" or "the
Company") (BMV:AHMSA) reported financial results for the second quarter
period ended June 30, 2018 (2Q 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).

2Q 2018 Highlights

  • Adjusted EBITDA reached US$ 126 million, a 130% increase
    compared to US$ 55 million in 2Q 2017.
  • Steel Segment Adjusted EBITDA increased 146% to US$ 143 million
    from US$ 58 million in 2Q 2017.
    • Steel shipments were 985 thousand MT, a 6% increase compared to
      the same period in 2017.
    • Average realized prices increased by 24%, due to stronger steel
      market conditions.
    • Net Sales grew 31%, compared to 2Q 2017, driven by
      higher volume and better price conditions.
    • Cost of sales increased by 24% compared to 2Q 2017, mainly due
      to higher raw material costs and higher raw material usage.
  • Steam Coal Segment adjusted EBITDA resulted in a loss of US$ 13
    million compared to a US$ 2 million gain in 2Q 2017. This was mainly
    explained by the following factors:
    • Adverse exchange rate conditions negatively impacted the
      pricing formula of the CFE
      1 contracts,
      specifically a 35% price adjustment due to the exchange rate
    • Reduction in the monthly shipment volume requested by CFE.

Corporate Update

  • AHMSA continues to move forward on a number of strategic investments:
    • During the current month, the Company initiated the operating
      phase for its vacuum degassing system. This new line will
      allow the Company to access markets that require higher
      value-added products.
    • The progress rate for the Proyecto Artemisa iron ore recovery
      program is advancing at a solid pace. The system, through which
      the Company aims to increase iron ore recovery rates and the
      optimization of concentrate production is expected to be
      operational year-end.
    • AHMSA continues to report progress in the repair project of
      35 coke ovens at our #1 Coking Battery. As a result, we expect to
      increase annual coke capacity at this plant by approximately 177
      thousand MT.
  • During the month of June, AHMSA concluded new steam coal supply
    contracts with the CFE, which include a new formula that corrects the
    former price distortions caused by foreign exchange imbalances. The
    new contract terms will become effective in January 2019.
  • Plans are underway for the re-instatement of AHMSA's shares on the
    Mexican Stock Exchange (BMV).

For the full version of this release, in English:

In Spanish:


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 2017, AHMSA held 12% share of the domestic steel market, 22% 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.

1. CFE. Comisión Federal de Electricidad (Federal
Electricity Commission).

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