Grupo Simec Announces Results of Operations for the First Nine Months of 2019

GUADALAJARA, Mexico, Oct. 28, 2019 /PRNewswire/ -- Grupo Simec, S.A.B. de C.V. SIM ("Simec") announced today its results of operations for the nine-month period ended September 30, 2019.

Comparative first nine months of 2019 vs. first nine months of 2018

Net Sales
Net sales of the Company decreased to Ps. 26,856 million in the first nine months of 2019 compared to Ps. 26,880 million in the first nine months of 2018. Shipments of finished steel products increased 9% to 1 million 779 thousand tons in the first nine months of 2019 compared to 1million 631 thousand tons in the first nine months of 2018. Total sales outside of Mexico in the first nine months of 2019 increased 15% to Ps. 13,239 million compared to Ps. 11,532 million in the same period of 2018. Mexican sales decreased 11% from Ps. 15,348 million in the first nine months of 2018 to Ps. 13,617 million in the same period of 2019. The decrease in sales for the first nine months of 2019 is due to a decrease in the average selling price in 8% and it is compensated with a higher volume of shipments compared to the first nine months of 2018 (148 thousand tons equivalent to 9% increase).

Cost of Sales
Cost of sales increased 3% from Ps. 22,465 million in the first nine months of 2018, to Ps. 23,232 million in the first nine months of 2019. Cost of sales as a percentage of net sales represented 87% in the first nine months of 2019 while in the first nine months of 2018 represented 84%. Cost of sales by steel ton decreased approximately 5% in the first nine months of 2019 over the same period of 2018 due to a lower price in inputs.

Gross Profit
Gross profit of the Company for the first nine months of 2019 increased 18% from Ps. 4,4158 million in the first nine months of 2018, to Ps. 3,624 million in the first nine months of 2019. Marginal profit as percentage of net sales in the first nine months of 2019 was of 13% while in the first nine months of 2018 was of 16%. The gross profit decrease is given by a lower average selling price and a higher volume of shipments.

General, Selling and Administrative Expense
Selling, general and administrative expenses increased 35%, to Ps. 1,107 million in the first nine months of 2019 from Ps. 820 million in the same period of 2018, selling, general and administrative expenses represented 4% to the 2019 and 3% to the 2018 of the net sales for both periods.

Other Income (Expenses,) net
The Company recorded other income net for Ps. 161 million during the first nine months of 2019 while in the same period of 2018 the other income net by this concept was of Ps. 20 million.

Operating Income
Operating income decreased 26% to Ps. 2,678 million for the first nine months of 2019 compared to Ps. 3,615 million in the first nine months of 2018. Operating income as percentage of net sales was 10% in the first nine months of 2019 and 13% in the same period of 2018. The decrease in operating income is due to a lower average sales prices between both periods.

Ebitda
The Ebitda decreased 21%, from Ps. 4,419 million in the first nine months of 2018 as a result of a net income of Ps. 3,186 million, plus minority stake of Ps. 30 million, plus income taxes of Ps. 251 million, plus comprehensive financial cost of Ps. 148 million, plus depreciation of Ps. 804 million to Ps 3,481 million in the same period of 2019 as a result of a net income of Ps. 1,593 million, less minority stake of Ps. 128 million, plus income taxes of Ps. 306 million, plus comprehensive financial cost of Ps. 907 million, plus depreciation of Ps. 803.

Comprehensive Financial Cost
Comprehensive financial cost for the first nine months of 2019 represented an expense of Ps. 907 million compared with an expense of Ps. 148 million for the first nine months of 2018. The net interest income was of Ps. 131 million for the first nine months of 2019, compared with a net interest expense of Ps. 17 million in the same period of 2018. Likewise, we record an exchange loss of Ps. 1,038 million in the first nine months of 2019 compared with an exchange loss of Ps. 131 million in the first nine months of 2018 due to the slip in the exchange rate of the Ps. against the dollar of 0.12% in the first nine months of 2019.

Income Taxes
The Company recorded an expense of Ps.306 million for the net income tax during the first nine months of 2019, (includes a deferred income tax of Ps. 74 million) compared with an expense of Ps. 251 million of income tax for the first nine months of 2018 (includes a deferred expense tax of Ps. 124 million).

Net Income
As a result of the foregoing, the Company recorded a decrease in net income of 50% to pass of Ps. 3,186 million in the first nine months of 2018 to Ps. 1,593 million of the same period of 2019.

Liquidity and Capital Resources
At September 30, 2019, Simec's total consolidated debt consisted of U.S. $ 302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, or Ps. 5.9 million (accrued interest on September 30, 2019 was U.S. $ 658,000, or Ps. 12.9 million).  At December 31, 2018, Simec's total consolidated debt consisted of U.S. $ 302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, or Ps. 6.0 million (accrued interest on December 31, 2018 was U.S. $ 640,000, or Ps. 12.6 million).

Comparative third quarter of 2019 vs. second quarter of 2019

Net Sales
Net sales of the Company decreased to pass of Ps. 9,025 million during the second quarter of 2019 to Ps. 8,328 million in the third quarter of 2019. Shipments of finished steel products increased to 596 thousand tons in the third quarter of 2019 from 592 thousand tons in the second quarter of the same year. Total sales outside of Mexico in the third quarter of 2019 decreased 4% to get to Ps. 4,148 million compared to Ps. 4,308 million of the second quarter of the same year. Mexican sales in the third quarter of 2019 decreased to Ps. 4,180 million compared to Ps. 4,717 million in the second quarter of the same year. The average selling price decreased 8% in the third quarter of 2019 compared to the second quarter of the same year.

Cost of Sales
Cost of sales decreased to P s. 6,996 million in the third quarter of 2019 from Ps. 7,830 million in the second quarter of 2019. Cost of sales as a percentage of net sales represented 84% in the third quarter of 2019 and 87% in the second quarter of the same year. The cost of sales by ton decrease 11% in the third quarter of 2019 compared to the second quarter of the same year, due mainly to a decrease of some supplies for the manufacture of steel.

Gross Profit
Gross profit of the Company for the third quarter of 2019 increased 11% to pass of Ps. 1,195 million in the second quarter of 2019 to Ps. 1,332 million in the third quarter of same year. Gross profit as a percentage of net sales in the third quarter of 2019 was of 16% compared to 13% in the second quarter of the same year. The increased in the gross profit in the third quarter of 2019 is due to a better cost of sales in the third quarter of 2019.

General, Selling and Administrative Expense
Selling, general and administrative expense increased 19% to pass of Ps. 363 million in the second quarter of 2019 to Ps. 433 million in the third quarter of the same year, and as percentage of net sales represented 4% in the second quarter and 5% in the third quarter of the same year.

Other (Expenses) Income, net
The Company recorded other income net for Ps. 7 million during the third quarter of 2019 compared to other income net for Ps. 87 million in the second quarter of 2019.

Operating Income
The Operating income was of Ps. 906 million in the third quarter of 2019 compared to Ps. 919 million in the second quarter of the same year. Operating income as percentage of net sales represented 11% for the third quarter of 2019 and 10% for the second quarter of 2019.

Ebitda
The Ebitda show a decrease of 1%, to pass of Ps 1,185 million in the second quarter of 2019 as a result of a net income of Ps. 350 million, less minority stake of Ps. 49 million, plus income taxes of Ps. 198 million, plus comprehensive financial cost of Ps. 420 million, plus depreciation of Ps. 266 million to Ps. 1,169 million in the third quarter of the same year as a result of a net income of Ps. 817 million, less minority stake of Ps. 38 million, plus income taxes of Ps. 129 million, plus comprehensive financial cost of Ps. 2 million, plus depreciation of Ps. 263 million.

Comprehensive Financial Cost
Comprehensive financial cost of the Company in the third quarter of 2019 represented an income of Ps. 2 million compared with an expense of Ps. 420 million for the second quarter of 2019. The comprehensive financial cost is comprised for: the net interest income of Ps. 101 million in the third quarter of 2019 compared to net interest income of 16 million in the second quarter of the same year. Also, we record a net exchange expense of Ps. 99 million in the third quarter of 2019 compared a net exchange expense of Ps. 436 million in the second quarter of the same year.

Income Taxes
The Company have been recorded Ps. 129 million of expense tax during the third quarter of 2019, (includes a deferred income tax of Ps. 47 million) compared with the Ps. 198 million of expense for the second quarter of the same year, (includes a deferred income tax of Ps. 6 million).

Net Income
As a result of the foregoing, the Company recorded a net income of Ps. 817 million in the third quarter of 2019 compared to a net income of Ps. 350 million for the second quarter of 2019.

Comparative third quarter of 2019 vs. third quarter of 2018

Net Sales
Net sales of the Company decreased 16% from Ps. 9,858 million during the third quarter of 2018 to Ps. 8,328 million in the third quarter of 2019. Sales in tons of finished steel increased to 596 thousand tons in the third quarter of 2019 from 538 thousand tons in the third quarter of 2018. Sales outside of Mexico decreased 9% from Ps. 4,544 million in the third quarter of 2018 to Ps. 4,148 million in the third quarter of 2019. Mexican sales decreased 21% from Ps. 5,314 million in the third quarter of 2018 to Ps. 4,180 million in the third quarter of 2019. The average sales price decreased approximately 24% in the third quarter of 2019, compared to the same period of 2018.

Cost of Sales
Cost of sales decreased 17% in the third quarter of 2019 compared to the third quarter of 2018 from Ps. 8,420 million in the third quarter of 2018 to Ps. 6,996 million in the third quarter of 2019. With respect to sales, the cost of sales of the third quarter of 2018 represented 85% compared to 85% for the third quarter of 2019. The average cost of raw materials used to produce steel products decreased in 25%, due to a decrease of raw materials prices.

Gross (Loss) Profit
Gross profit of the Company for the third quarter of 2019 decreased 7% from Ps. 1,438 million in the third quarter of 2018 compared to Ps. 1,332 million in the third quarter of 2019. Gross profit as a percentage of net sales for the third quarter of 2019 was 16% compared to 15% of the third quarter of 2018. The decrease in gross profit is given by a different mix of products shipped and lower average sales price.

General, Selling and Administrative Expense
The selling, general and administrative expense increased 62% in the third quarter of 2019 to Ps. 433 million in the third quarter of 2019 from Ps. 267 million in the third quarter of 2018. Selling, general and administrative expense as a percentage of net sales represented 5% in the third quarter of 2019 and 3% in the third quarter of 2018.

Other Income (Expenses), net
The company recorded other income net of Ps. 7 million in the third quarter of 2019 compared with other income net of Ps. 0.3 million for the third quarter of 2018.

Operating (Loss) Income
Operating income decreased from Ps. 1,171 million in the third quarter of 2018 compared to Ps. 906 million in the third quarter of 2019, this represent 23% of decrease between both quarters. The operating income as a percentage of net sales was 11% for the third quarter of 2019 compared to 12% for the third quarter of 2018. The decrease in the operating income is due to a different mix of products shipped and lower average sales price.

Ebitda
The Ebitda of the Company decreased 19% from Ps 1,449 million in the third quarter of 2018 as a result of a net income of Ps. 1,391 million, plus minority stake of Ps. 51 million, plus income taxes of Ps. 107 million, less comprehensive financial cost of Ps. 378 million, plus depreciation of Ps. 278 million to Ps. 1,169 million of the same period of 2019, as a result of a net income of Ps. 817 million, less minority stake of Ps. 38 million, plus income taxes of Ps. 129 million, less comprehensive financial cost of Ps. 2 million, plus depreciation of Ps. 263 million.

Comprehensive Financial Cost
Comprehensive financial cost of the Company for the third quarter of 2019 represented a net income of Ps. 2 million compared with an expense of Ps. 378 million for the third quarter of 2018. The comprehensive financial cost is comprised for: the net interest income of Ps. 5 million in the third quarter of 2018, compared to a net interest income of Ps. 101 million for the same period of 2019. Also record an exchange gain of Ps. 373 million in the third quarter of 2018 and an exchange loss of Ps. 99 million in the third quarter of 2019.

Income Taxes
The company recorded an expense tax for Ps. 129 million in the third quarter of 2019, (includes a deferred income tax of Ps. 47 million) compared to an expense tax of Ps. 107 million for the third quarter of 2018, (includes an accrual of deferred expense tax of Ps. 123 million).

Net Income (Loss)
As a result of the foregoing, the Company recorded a net income of Ps. 817 million in the third quarter of 2019 compared to a net income of Ps. 1,391 million for the same period of 2018.

Any forward-looking information contained herein is inherently subject to various risks, uncertainties and assumptions which, if incorrect, may cause actual results to vary materially from those anticipated.

Contact: Sergio Vigil González
Mario Moreno Cortez
Grupo Simec, S.A.B. de C.V.
Calzada Lázaro Cárdenas 601
44440 Guadalajara, Jalisco, México
52 55 1165 1025
52 33 3770 6734

SOURCE Grupo Simec, S.A.B. de C.V.