form6k.htm
FORM 6 - K


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934


As of 5/5/2008


Ternium S.A.
(Translation of Registrant's name into English)


Ternium S.A.
46a, Avenue John F. Kennedy
L-1855 Luxembourg
(Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or 40-F.

Form 20-F ü  Form 40-F ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.

Yes ¨ No  ü
 
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
Not applicable
 
 
The attached material is being furnished to the Securities and Exchange Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange Act of 1934, as amended.

This report contains Ternium S.A.’s consolidated financial statements as of March 31, 2008.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


TERNIUM S.A.


By:
/s/ Roberto Philipps
 
 
By:
/s/ Daniel Novegil
 
Name: 
Roberto Philipps   Name: 
Daniel Novegil
Title:
Chief Financial Officer  
Title:
Chief Executive Officer
 
 
Dated: May 5, 2008
 
 
TERNIUM S.A.
 

 
 
 
CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS AS OF MARCH 31, 2008
AND FOR THE THREE-MONTH PERIODS
ENDED MARCH 31, 2008 AND 2007

 
46a, Avenue John F. Kennedy, 2nd floor
L – 1855
R.C.S. Luxembourg : B 98 668
 
 
Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Ternium S.A.:


We have reviewed the accompanying consolidated condensed balance sheet of Ternium S.A. and its subsidiaries as of March 31, 2008, and the related consolidated condensed statements of income and of changes in shareholders’ equity for the three-month periods ended March 31, 2008 and 2007 and the consolidated condensed statements of cash flows for the three-month periods ended March 31, 2008 and 2007. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated condensed interim financial statements for them to be in conformity with International Financial Reporting Standards.

As further explained in Note 14, in April 2008 the Government of Venezuela announced its intention to nationalize Ternium’s Venezuelan subsidiary, Sidor C.A. At the date of issue of these financial statements it is not possible to foresee the final outcome of this situation and its impact on the financial statements of Ternium S.A., if any.

We previously audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2007, and the related consolidated statements of income, of changes in shareholders’ equity and of cash flows for the year then ended (not presented herein), and in our report dated February 26, 2008 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2007, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived

Buenos Aires, Argentina

May 5, 2008


 PRICE WATERHOUSE & CO. S.R.L.
  
   
   
by
  
(Partner)
  
Marcelo D. Pfaff
  


TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2008
and for the three-month periods ended March 31, 2008 and 2007
(All amounts in USD thousands)

CONSOLIDATED CONDENSED INTERIM INCOME STATEMENTS

         
Three-month period
ended March 31,
  
   
Notes
    
2008
    
2007
  
         
(Unaudited)
  
Continuing operations
                  
Net sales
  
3
       2,427,678       1,798,293  
Cost of sales
  
3 & 4
       (1,766,892 )     (1,223,890 )
                         
Gross profit
  
3
       660,786       574,403  
                         
Selling, general and administrative expenses
  
3 & 5
       (236,955 )     (164,548 )
Other operating income, net
  
3
       11,024       5,561  
                         
Operating income
  
3
       434,855       415,416  
                         
Interest expense
             (45,138 )     (16,948 )
Interest income
             17,474       10,817  
Other financial expenses, net
  
6
       (55,798 )     (76,122 )
                         
Equity in earnings (losses) of associated companies
             295       (1,003 )
                         
Income before income tax expense
             351,688       332,160  
                         
Income tax
                       
Current and deferred income tax expense
             (65,755 )     (80,532 )
Reversal of deferred statutory profit sharing
  
9
       96,265       -  
                         
Income from continuing operations
             382,198       251,628  
                         
Discontinued operations
                        
Income from discontinued operations
  
12
       101,369       -  
                         
Net income for the period
             483,567       251,628  
                         
Attributable to:
                        
Equity holders of the Company
             422,125       222,133  
Minority interest
             61,442       29,495  
              483,567       251,628  
                         
Weighted average number of shares outstanding
             2,004,743,442       2,004,743,442  
Basic and diluted earnings per share for profit attributable to the equity holders of the Company (expressed in USD per share)
             0.21       0.11  

The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the fiscal year ended December 31, 2007.

-2-
 
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2008
and for the three-month periods ended March 31, 2008 and 2007
(All amounts in USD thousands)

CONSOLIDATED CONDENSED BALANCE SHEETS

   
Notes
    
March 31, 2008
    
December 31, 2007
  
ASSETS
        
(Unaudited)
              
Non-current assets
                              
Property, plant and equipment, net
    
7
       6,912,982             6,858,779        
Intangible assets, net
    
8
       1,463,768             1,452,230        
Investments in associated companies
             44,692             44,042        
Other investments, net
             15,304             14,815        
Deferred tax assets
             24,072             31,793        
Receivables, net
             77,524       8,538,342       217,638       8,619,297  
                                         
Current assets
                                        
Receivables
             561,260               426,038          
Derivative financial instruments
             -               577          
Inventories, net
             2,128,354               1,913,051          
Trade receivables, net
             923,248               847,827          
Other investments
             66,144               65,337          
Cash and cash equivalents
             996,633       4,675,639       1,126,041       4,378,871  
Non-current assets classified as held for sale
                     7,123               769,142  
                      4,682,762               5,148,013  
                                         
Total assets
                     13,221,104               13,767,310  
                                         
EQUITY
                                        
Capital and reserves attributable to the company’s equity holders
                     4,902,663               4,452,680  
                                         
Minority interest
                     1,978,317               1,914,210  
                                         
Total equity
                     6,880,980               6,366,890  
                                         
LIABILITIES
                                        
Non-current liabilities
                                        
Provisions
             59,559               57,345          
Deferred income tax
             1,157,862               1,337,039          
Non current tax liabilities
             1,461               -          
Other liabilities
             364,467               336,500          
Trade payables
             6,554               6,690          
Borrowings
             2,631,752       4,221,655       3,677,497       5,415,071  
                                         
Current liabilities
                                        
Current tax liabilities
             280,376               184,766          
Other liabilities
             179,689               182,239          
Trade payables
             1,085,089               983,884          
Derivative financial instruments
             29,464               13,293          
Borrowings
             543,851       2,118,469       407,404       1,771,586  
Liabilities directly associated with non-current assets classified as held for sale
                     -               213,763  
                      2,118,469               1,985,349  
                                         
Total liabilities
                     6,340,124               7,400,420  
                                         
Total equity and liabilities
                     13,221,104               13,767,310  

Contingencies, commitments and restrictions to the distribution of profits are disclosed in Note 11.

The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the fiscal year ended December 31, 2007.
 
-3-
 
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2008
and for the three-month periods ended March 31, 2008 and 2007
(All amounts in USD thousands)

CONSOLIDATED CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

   
Attributable to the Company’s equity holders (1)
                          
   
Capital stock (2)
    
Initial public offering expenses
    
Revaluation and other reserves
    
Capital stock issue discount (3)
    
Currency translation adjustment
    
Retained earnings
    
Total
    
Minority interest
    
Total
Equity
  
                                                       
Balance at January 1, 2008
     2,004,744       (23,295 )     1,946,962       (2,324,866 )     (110,739 )     2,959,874       4,452,680       1,914,210       6,366,890  
Currency translation adjustment
                                     27,858               27,858       2,665       30,523  
Net income for the period
                                             422,125       422,125       61,442       483,567  
Total recognized income for the period
     2,004,744       (23,295 )     1,946,962       (2,324,866 )     (82,881 )     3,381,999       4,902,663       1,978,317       6,880,980  
Balance at March 31, 2008
     2,004,744       (23,295 )     1,946,962       (2,324,866 )     (82,881 )     3,381,999       4,902,663       1,978,317       6,880,980  
                                                                         
Balance at January 1, 2007
     2,004,744       (23,295 )     2,047,199       (2,324,866 )     (121,608 )     2,175,384       3,757,558       1,729,583       5,487,141  
Currency translation adjustment
                                     (40,952 )             (40,952 )     (11,283 )     (52,235 )
Net income for the period
                                             222,133       222,133       29,495       251,628  
Total recognized income for the period
     2,004,744       (23,295 )     2,047,199       (2,324,866 )     (162,560 )     2,397,517       3,938,739       1,747,795       5,686,534  
Dividends paid in cash and other distributions by subsidiary companies
                                                     -       (154 )     (154 )
Balance at March 31, 2007
     2,004,744       (23,295 )     2,047,199       (2,324,866 )     (162,560 )     2,397,517       3,938,739       1,747,641       5,686,380  
                                                                         

 
(1)
Shareholders’ equity determined in accordance with accounting principles generally accepted in Luxembourg is disclosed in Note 11 (ii).
 
(2)
At March 31, 2008, the Capital Stock adds up to 2,004,743,442 shares at a nominal value of USD 1 each.
 
(3)
Represents the difference between book value of non-monetary contributions received from shareholders under Luxembourg GAAP and IFRS.
Dividends may be paid by Ternium to the extent distributable retained earnings calculated in accordance with Luxembourg law and regulations exist. Therefore, retained earnings included in these consolidated condensed interim financial statements may not be wholly distributable. See Note 11 (ii).
The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the fiscal year ended December 31, 2007.
 
-4-
 
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2008
and for the three-month periods ended March 31, 2008 and 2007
(All amounts in USD thousands)

CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENTS
   
Notes
    
Three-month period
ended March, 31
  
         
2008
    
2007
  
         
(Unaudited)
  
Cash flows from operating activities
                  
Net income for the period
           483,567       251,628  
Adjustments for:
                      
Depreciation and amortization
  
7 & 8
       157,682       115,259  
Income tax accruals less payments
           (108,019 )     57,976  
Equity in (earnings) losses of associated companies
           (295 )     1,003  
Interest accruals less payments
           (87,575 )     (4,735 )
Changes in  provisions
           5,444       (3,316 )
Changes in working capital
           (227,515 )     110,349  
Discontinued operations
  
12
       (101,369 )     -  
Others
             (1,830 )     2,129  
Net cash provided by operating activities
             120,090       530,293  
                         
Cash flows from investing activities
                        
Capital expenditures
  
7 & 8
       (156,644 )     (102,385 )
Proceeds form the sale of property, plant and equipment
             855       5,174  
Increase in other investments
             (807 )     -  
Discontinued operations
  
12
       722,523       -  
Net cash provided by (used in) investing activities
             565,927       (97,211 )
                         
Cash flows from financing activities
                        
Proceeds from borrowings
             104,984       120,141  
Repayments of borrowings
             (921,379 )     (212,527 )
Net cash used in financing activities
             (816,395 )     (92,386 )
                         
(Decrease)/Increase in cash and cash equivalents
             (130,378 )     340,696  
                         
Movement in cash and cash equivalents
                        
At January 1, (1)
             1,126,041       633,002  
Effect of exchange rate changes
             970       (380 )
(Decrease)/Increase in cash and cash equivalents
             (130,378 )     340,696  
Cash and cash equivalents at March 31, (1)
             996,633       973,318  

(1)  In addition, the Company had restricted cash for USD 10,372 at March 31, 2007.

The accompanying notes are an integral part of these consolidated condensed interim financial statements. These consolidated condensed interim financial statements should be read in conjunction with our audited Consolidated Financial Statements and notes for the fiscal year ended December 31, 2007.
 
-5-
 
TERNIUM S.A.
Consolidated condensed interim financial statements as of March 31, 2008
and for the three-month periods ended March 31, 2008 and 2007
(All amounts in USD thousands)

INDEX TO THE NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS
 
 
1
General information and basis of presentation
2
Accounting policies
3
Segment information
4
Cost of sales
5
Selling, general and administrative expenses
6
Other financial expenses, net
7
Property, plant and equipment, net
8
Intangible assets, net
9
Deferred Statutory Profit Sharing
10 
Distribution of  dividends
11
Contingencies, commitments and restrictions on the distribution of profits
12
Discontinued operations
13
Related party transactions
14
Subsequent event: Sidor nationalization process
15
Recently issued accounting pronouncements
 
-6-
 
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements


1
General information and basis of presentation

Ternium S.A. (the “Company” or “Ternium”), a Luxembourg Corporation (Societé Anonyme), was incorporated on December 22, 2003 under the name of Zoompart Holding S.A. to hold investments in flat and long steel manufacturing and distributing companies. The extraordinary shareholders’ meeting held on August 18, 2005, changed the corporate name to Ternium S.A.
 
Following a corporate reorganization carried out during fiscal year 2005, in January 2006 the Company successfully completed its registration process with the United States Securities and Exchange Commission (“SEC”). As from February 1, 2006, the Company’s shares are listed in the New York Stock Exchange.
 
The name and percentage of ownership of subsidiaries that have been included in consolidation in these Consolidated Condensed Interim Financial Statement is disclosed in Note 2 to the audited Consolidated Financial Statements for the year ended December 31, 2007.

These Consolidated Condensed Interim Financial Statements have been prepared in accordance with IAS 34, “Interim Financial Reporting”. These Consolidated Condensed Interim Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2007, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

Certain comparative amounts have been reclassified to conform to changes in presentation in the current period.

The preparation of consolidated condensed interim financial statements requires management to make estimates and assumptions that might affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet dates, and also the reported amounts of revenues and expenses for the reported periods. Actual results may differ from these estimates.

Material intercompany transactions and balances have been eliminated in consolidation. However, the fact that the functional currency of the Company’s subsidiaries differ, results in the generation of foreign exchange gains (losses) that are included in the consolidated condensed interim income statement under “Other financial expenses, net”.

These Consolidated Condensed Interim Financial Statements were approved by the Board of Directors of Ternium on May 5, 2008.

2
Accounting policies

The accounting policies used in the preparation of these Consolidated Condensed Interim Financial Statements are consistent with those used in the audited Consolidated Financial Statements for the year ended December 31, 2007.

Recently issued accounting pronouncements were applied by the Company as from their respective dates.
 
-7-
 
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)


3
Segment information

Primary reporting format – business segments
Business segments: for management purposes, the Company is organized on a worldwide basis into the following segments: flat steel products, long steel products and others.

The flat steel products segment comprises the manufacturing and marketing of hot rolled coils and sheets, cold rolled coils and sheets, tin plate, welded pipes, hot dipped galvanized and electrogalvanized sheets, pre-painted sheets and other tailor-made products to serve its customers’ requirements.

The long steel products segment comprises the manufacturing and marketing of billets (steel in its basic, semifinished state), wire rod and bars.

The other products segment includes products other than flat and long steel, mainly pig iron and pellets.

   
Flat steel products
    
Long steel products
    
Other
    
Total
  
   
(Unaudited)
  
Three-month period ended March 31, 2008
                        
                         
Net sales
     1,990,554       371,057       66,067       2,427,678  
Cost of sales
     (1,457,770 )     (267,640 )     (41,482 )     (1,766,892 )
Gross profit
     532,784       103,417       24,585       660,786  
                                 
Selling, general and administrative expenses
     (190,072 )     (40,902 )     (5,981 )     (236,955 )
Other operating income, net
     7,362       3,147       515       11,024  
Operating income
     350,074       65,662       19,119       434,855  
                                 
Depreciation - PP&E
     115,170       18,812       2,403       136,385  
                                 
   
Flat steel products
    
Long steel products
    
Other
    
Total
  
   
(Unaudited)
  
Three-month period ended March 31, 2007
                                
                                 
Net sales
     1,392,938       357,737       47,618       1,798,293  
Cost of sales
     (941,703 )     (249,290 )     (32,897 )     (1,223,890 )
Gross profit
     451,235       108,447       14,721       574,403  
                                 
Selling, general and administrative expenses
     (129,361 )     (30,526 )     (4,661 )     (164,548 )
Other operating income, net
     3,826       903       832       5,561  
Operating income
     325,700       78,824       10,892       415,416  
                                 
Depreciation - PP&E
     90,990       15,644       3,318       109,952  

-8-

TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)


3
Segment information (continued)

Secondary reporting format - geographical segments

The secondary reporting format is based on a geographical location. Ternium sells its products to three main geographical areas: South and Central America, North America, and Europe and others. The North American segment comprises principally United States, Canada and Mexico. The South and Central American segment comprises principally Argentina, Brazil, Colombia, Venezuela and Ecuador.

   
South and Central
America
    
North America
    
Europe and others
    
Total
  
   
(Unaudited)
  
Three-month period ended March 31, 2008
                        
Net sales
     1,144,634       1,244,093       38,951       2,427,678  
                                 
Depreciation – PP&E
     81,915       54,461       9       136,385  
                                 
Three-month period ended March 31, 2007
                                
Net sales
     1,011,159       733,236       53,898       1,798,293  
                                 
Depreciation – PP&E
     75,445       34,480       27       109,952  


4
Cost of sales 

   
Three-month period
ended March 31,
  
   
2008
    
2007
  
   
(Unaudited)
  
             
Inventories at the beginning of the year
     1,913,051       1,241,325  
Plus: Charges for the period
                
Raw materials and consumables used and other movements
     1,498,713       772,759  
Services and fees
     54,863       43,195  
Labor cost
     167,253       131,678  
Depreciation of property, plant and equipment
     133,444       106,701  
Amortization of intangible assets
     5,625       3,687  
Maintenance expenses
     100,538       95,987  
Office expenses
     2,288       1,719  
Freight and transportation
     11,192       6,451  
Insurance
     4,052       2,462  
Allowance (Recovery) for obsolescence
     3,276       (4,424 )
Recovery from sales of scrap and by-products
     (23,139 )     (20,498 )
Others
     24,090       24,247  
Less: Inventories at the end of the period
     (2,128,354 )     (1,181,399 )
Cost of sales
     1,766,892       1,223,890  

-9-
 
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)


5
Selling, general and administrative expenses

   
Three-month period
Ended March 31,
  
   
2008
    
2007
  
   
(Unaudited)
  
       
Services and fees
     19,900       11,237  
Labor cost
     60,179       39,713  
Depreciation of  property plant and equipment
     2,941       3,251  
Amortization of intangible assets
     15,672       1,620  
Maintenance expenses
     4,355       3,584  
Taxes
     25,087       15,547  
Office expenses
     8,287       5,975  
Freight and transportation
     93,280       80,104  
Insurance
     319       268  
Recovery for doubtful accounts
     (569 )     (2,155 )
Others
     7,504       5,404  
Selling, general and administrative expenses
     236,955       164,548  


6
Other financial expenses, net

   
Three-month period
Ended March 31,
  
   
2008
    
2007
  
   
(Unaudited)
  
             
Net foreign exchange transaction gains and change in fair value of derivative instruments
     16,722       18,904  
Debt issue costs
     (7,189 )     (1,063 )
Loss from Participation Account
     (38,871 )     (90,701 )
Others
     (26,460 )     (3,262 )
Other financial expenses, net
     (55,798 )     (76,122 )


7
Property, plant and equipment, net

   
Three-month period
Ended March 31,
  
   
2008
    
2007
  
   
(Unaudited)
  
             
At the beginning of the year
     6,858,779       5,420,683  
Currency translation differences
     46,366       (47,820 )
Transfers
     (3,174 )     -  
Additions
     147,962       92,403  
Disposals
     (566 )     (3,916 )
Depreciation charge
     (136,385 )     (109,952 )
At the end of the period
     6,912,982       5,351,398  
 
-10-
 
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)


8     Intangible assets, net
 
   
Three-month period
ended March 31,
  
   
2008
    
2007
  
   
(Unaudited)
  
             
At the beginning of the year
     1,452,230       551,587  
Currency translation differences
     21,292       (8,448 )
Transfers
     3,174       -  
Additions
     8,682       9,982  
Disposals
     (313 )     -  
Amortization charge
     (21,297 )     (5,307 )
At the end of the period
     1,463,768       547,814  


9
Deferred Statutory Profit Sharing

As mentioned in Note 4 (m) to the audited consolidated financial statements at December 31, 2007, Mexican laws require local companies to pay its employees a profit sharing bonus calculated on a basis similar to that used for local income tax purposes. The Company accounts for temporary differences arising between the statutory calculation and the reported expense determined under IFRS in a manner similar to calculation of deferred income tax.

In 2008, one of Ternium’s Mexican subsidiaries (Hylsa S.A. de C.V., “Hylsa”) entered into a spin off that became effective on March 31, 2008. After this corporate reorganization, all of Hylsa’s employees are included in the payroll of a company that is expected to generate non-significant taxable income and non-significant temporary differences. The Company agreed to pay its employees a bonus salary that will be calculated on a basis similar to that used for income tax purposes. Accordingly, during the three-month period ended March 31, 2008, the Company reversed the outstanding balance of the liability as of December 31, 2007 (amounting to USD 96 million) within Income tax benefit (expense) line item in the Consolidated Condensed Interim Income Statement.


10
Distribution of dividends

On February 26, 2008, the Board of Directors proposed a dividend distribution of USD 0.05 per share (USD 0.50 per ADS), or approximately USD 100.2 million in the aggregate, which is subject to shareholder approval at the Company’s annual general shareholders’ meeting to be held on June 4, 2008. If the annual dividend is approved at the annual general shareholders’ meeting, the payment date is expected to be on June 12, 2008.


11
Contingencies, commitments and restrictions on the distribution of profits

This note should be read in conjunction with Note 27 to the Company’s audited Consolidated Financial Statements for the year ended December 31, 2007. Significant changes or events since the date of the annual report are as follows:

(i) Siderar investment plan

Within the investment plan to increase its production capacity to 4 million tons per year, Siderar has entered into several commitments to acquire a new continuous casting machine for a total consideration of USD 70.6 million.
 
-11-
 
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)


11    Contingencies, commitments and restrictions on the distribution of profits (continued)

(ii) Restrictions on the distribution of profits

Under Luxembourg law, at least 5% of net income per year calculated in accordance with Luxembourg law and regulations must be allocated to a reserve until such reserve equals 10% of the share capital. At March 31, 2008, this reserve reached the above-mentioned threshold.

Ternium may pay dividends to the extent that it has distributable retained earnings and distributable reserves calculated in accordance with Luxembourg law and regulations. Therefore, retained earnings included in these consolidated condensed interim financial statements may not be wholly distributable.

Shareholders' equity under Luxembourg law and regulations comprises the following captions:

   
At March 31, 2008
  
   
(Unaudited)
  
       
Share capital
     2,004,744  
Legal reserve
     200,474  
Distributable reserves
     301,912  
Non distributable reserves
     1,414,122  
Accumulated profit at January 1, 2008
     1,231,825  
Profit for the period
     166,957  
Total shareholders’ equity under Luxembourg GAAP
     5,320,034  


12
Discontinued operations

On February 1, 2008, Ternium, through its subsidiary Imsa Acero S.A. de C.V., completed the sale of its interests in Steelscape Inc., ASC Profiles Inc., Varco Pruden Buildings Inc. and Metl-Span LLC to BlueScope Steel North America Corporation, a subsidiary of BlueScope Steel Limited, for a total consideration of USD 726.6 million on a cash-free and debt-free basis, subject to working capital and other adjustments. Direct transaction costs paid by the Company in connection with this sale totaled USD 4.1 million. The Company continues to own Steelscape’s Shreveport, LA plant. Ternium has also retained its pre-engineered metal buildings and insulated steel panels businesses in Mexico. The result of this transaction was a gain of USD 101.4 million, calculated as the net proceeds of the sale less the book value of discontinued net assets and the corresponding tax effect.


13
Related party transactions
 
The Company is controlled by San Faustín, which at March 31, 2008 indirectly owned 70.52% of Ternium’s shares and voting rights. Rocca & Partners S.A. controls a significant portion of the voting power of San Faustin N.V. and has the ability to influence matters affecting, or submitted to a vote of the shareholders of San Faustin N.V., such as the election of directors, the approval of certain corporate transactions and other matters concerning the Company’s policies. There are no controlling shareholders for Rocca & Partners S.A.
 
-12-
 
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)


13
Related party transactions (continued)

The following transactions were carried out with related parties:

   
Three-month period
Ended March, 31
  
   
2008
    
2007
  
   
(Unaudited)
  
(i)    Transactions
            
             
(a)   Sales of goods and services
            
Sales of goods to associated parties
     -       27  
Sales of goods to other related parties
     22,845       24,677  
Sales of services and others to associated parties
     85       829  
Sales of services and others to other related parties
     107       2,854  
      23,037       28,387  
(b)   Purchases of goods and services
                
Purchases of goods from associated parties
     12,413       20,101  
Purchases of goods from other related parties
     10,055       11,373  
Purchases of services and others from associated parties
     7,062       5,688  
Purchases of services and others  from other related parties
     47,050       57,843  
      76,580       95,005  


   
Three-month period
Ended March, 31
  
   
2008
    
2007
  
   
(Unaudited)
  
(i)    Transactions
            
             
(c)   Financial results
            
Income with associated parties
     644       1,161  
Income with other related parties
     35       -  
Expenses with other related parties
     -       (12 )
      679       1,149  
 

   
At March 31,
 2008
    
At December 31, 2007
  
   
(Unaudited)
        
(ii)   Period-end balances
            
(a)   Arising from sales/purchases of goods/services
            
Receivables from associated  parties
     36,830       40,980  
Receivables from other related parties
     32,949       53,004  
Payables to associated parties
     (12,128 )     (7,681 )
Payables to other related parties
     (40,883 )     (29,749 )
      16,768       56,554  
b)    Other investments
                
Time deposits
     12,781       12,673  
 
-13-
 
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)


14    Subsequent event: Sidor Nationalization Process

On March 31, 2008, the Company controlled approximately 59.7% of Sidor, while CVG Corporación Venezolana de Guayana (a company owned by the Venezuelan government) held approximately 20.4% of Sidor and certain Sidor employees and former employees held the remaining 19.9% interest.

On April 8, 2008, the Venezuelan government announced its intention to take control over Sidor. Following the confirmation of the Venezuelan government’s decision to nationalize Sidor, on April 16, 2008, Ternium, Sidor and the Venezuelan government entered into an agreement providing for the creation of a transition committee, composed of representatives of the government, the union and class B employee shareholders. This committee is charged with overseeing Sidor’s operations during the transition period until the nationalization is completed, acting in coordination with Sidor’s board of directors.

On April 29, 2008, the National Assembly of the Republic of Venezuela passed a resolution declaring that the shares of Sidor, together with all of its assets, are of public and social interest. This resolution authorizes the Venezuelan government to take any action it may deem appropriate in connection with any such assets, which may include expropriation.

The discussions among representatives of Ternium and the Venezuelan government regarding adequate and fair terms and conditions upon which all or a significant part of Ternium’s interest in Sidor would be transferred to the government, which began with the formation of a negotiating committee, are presently under way. The date on which control over Sidor would be transferred to the government is uncertain at this time.

The impact of the potential government actions with respect to Sidor on Ternium’s financial position is not determinable at this time.

Ternium continues to preserve all of its rights under contracts, investment treaties and Venezuelan and international law and will continue to evaluate its options in realizing the fair value of its interest in Sidor.

From an accounting perspective (book value), total assets and total liabilities of Sidor were USD 3,121.4 million and USD 855.5 million, respectively, at March 31, 2008, while the book value of Ternium´s interest in Sidor was USD 1,299.2 million at March 31, 2008. None of such book values represents the fair market value of Sidor as a going concern. Revenue, operating income and equity holders’ net income of Sidor for the first quarter of 2008 were USD 513.9 million, USD 63.4 million and USD 50.3 million, respectively


15  Recently issued accounting pronouncements

(i) International Accounting Standard 27 (amended 2008), “Consolidated and separate financial statements”

In January 2008, the International Accounting Standards Board (“IASB”) issued International Accounting Standard 27 (amended 2008), “Consolidated and separate financial statements” (“IAS 27 - amended”). IAS 27 - amended includes modifications to International Accounting Standard 27 that are related, primarily, to accounting for non-controlling interests and the loss of control of a subsidiary.

IAS 27 - amended must be applied for annual periods beginning on or after 1 July 2009, although earlier application is permitted. However, an entity must not apply the amendments contained in IAS 27 - amended for annual periods beginning before 1 July 2009 unless it also applies IFRS 3 (as revised in 2008).

The Company's management has not assessed the potential impact that the application of IAS 27 - amended may have on the Company's financial condition or results of operations.
 
-14-
 
TERNIUM S.A.
Notes to the Consolidated Condensed Interim Financial Statements (Contd.)


15  Recently issued accounting pronouncements (continued)

(ii) International  Financial Reporting Standard 3 (revised January 2008), “Business combinations”

In January 2008, the IASB issued International Financial Reporting Standard 3 (revised January 2008), “Business combinations” (“IFRS 3 revised”). IFRS 3 revised includes amendments that are meant to provide guidance for applying the acquisition method.
 
IFRS 3 revised replaces IFRS 3 (as issued in 2004) and comes into effect for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009.  Earlier application is permitted, provided that IAS 27 – amended is applied at the same time.
 
The Company's management estimates that the application of IFRS 3 revised will not have a material effect on the Company's financial condition or results of operations.

(iii) International  Financial Reporting Standard 2 (amended January 2008), “Share-based payment”

In January 2008, the IASB issued International Financial Reporting Standard 2 (amended January 2008), “Share-based payment” (“IFRS 2 revised”). IFRS 2 revised establishes that for equity-settled share-based payment transactions, an entity shall measure the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the entity is required to measure their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted. For goods or services measured by reference to the fair value of the equity instruments granted, IFRS 2 revised specifies that all non-vesting conditions are taken into account in the estimate of the fair value of the equity instruments.

Entities shall apply these amendments to all share-based payments within the scope of IFRS 2 for annual periods beginning on or after 1 January 2009. Earlier application is permitted.

The Company's management estimates that the application of IFRS 2 revised will not have a material effect on the Company's financial condition or results of operations.

(iv) Amendments to International Accounting Standard 32 “Financial instruments: presentation” and International Accounting Standard 1 “Presentation of financial statements” (as revised in 2007) - Puttable financial instruments and obligations

In February 2008 the IASB amended International Accounting Standard 32 “Financial instruments: presentation” by requiring some financial instruments that meet the definition of a financial liability to be classified as equity. The amendment addresses the classification of some: (a) puttable financial instruments, and (b) instruments, or components of instruments, that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation.

Entities shall apply these amendments for annual periods beginning on or after 1 January 2009. Earlier application is permitted. If entities apply these amendments for an earlier period, they shall disclose that fact.

The Company's management has not assessed the potential impact that the application of IAS 32 (revised 2008) and IAS 1 (revised 2008) may have on the Company's financial condition or results of operations.


 
Roberto Philipps
 
Chief Financial Officer
 
 
-15-