Comments on: Ternium 2008 financial results http://www.nerdsofsteel.com/2009/02/24/ternium-2008-financial-results/ Industrial revolutionaries at work Fri, 18 Feb 2011 12:51:48 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Varun http://www.nerdsofsteel.com/2009/02/24/ternium-2008-financial-results/comment-page-1/#comment-175 Varun Tue, 07 Apr 2009 19:23:02 +0000 http://www.nerdsofsteel.com/?p=782#comment-175 thank you very much for you reply James. i will be eargerly waiting for your articles on valuatons. thank you very much for you reply James. i will be eargerly waiting for your articles on valuatons.

]]> By: James Moss http://www.nerdsofsteel.com/2009/02/24/ternium-2008-financial-results/comment-page-1/#comment-174 James Moss Mon, 06 Apr 2009 13:07:12 +0000 http://www.nerdsofsteel.com/?p=782#comment-174 Hi Varun - good question. Replacement value is fraught with local variations. In addition, it's a very theoretical valuation method that might turn out very differently if actually followed through to construction. In distressed markets, it often provides a valuation that is too high. Take a look at reports of the <a href="http://www.thyssenkruppnewusplant.com/overview/prospective/alabama/" rel="nofollow">ThyssenKrupp investment in Mobile, AL </a> to get a recent North American example (absent a full front end) - works out to $725/ton; <a href="http://charlotte.bizjournals.com/charlotte/stories/2008/05/12/daily45.html" rel="nofollow">or the Nucor planned front end investment </a>in Louisiana which proposed $3Bn for 6MT of iron in two phases. Those projects combined would indicate something like $1,200/ton for an integrated facility in North America which is in the typically cited range. That said, no one method can provide all the valuation answers so earnings multiples, discounted cashflow methods etc., as well as replacement cost should all be compared to get a range of values of a specific asset. We have plans to do something on valuations soon, so keep watching. Hi Varun – good question. Replacement value is fraught with local variations. In addition, it’s a very theoretical valuation method that might turn out very differently if actually followed through to construction. In distressed markets, it often provides a valuation that is too high. Take a look at reports of the ThyssenKrupp investment in Mobile, AL to get a recent North American example (absent a full front end) – works out to $725/ton; or the Nucor planned front end investment in Louisiana which proposed $3Bn for 6MT of iron in two phases. Those projects combined would indicate something like $1,200/ton for an integrated facility in North America which is in the typically cited range.

That said, no one method can provide all the valuation answers so earnings multiples, discounted cashflow methods etc., as well as replacement cost should all be compared to get a range of values of a specific asset. We have plans to do something on valuations soon, so keep watching.

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