Grupo Simec Announces Results of Operations for the First Nine Months of 2010

Oct 28, 2010, 14:31 ET from Grupo Simec, S.A.B. de C.V.

GUADALAJARA, Mexico, Oct. 28 /PRNewswire-FirstCall/ -- Grupo Simec, S.A.B. de C.V. (AMEX: SIM) ("Simec") announced today its results of operations for the nine-month period ended September 30, 2010.

Nine-Month Period Ended September 30, 2010 compared to September-Month Period Ended September 30, 2009

Net Sales

Net sales increased 33% to Ps. 18,942 million in the nine-month period ended September 30, 2010 compared to Ps. 14,277 million in the same period of 2009. Shipments of finished steel products increase 13% to 1,719 thousand tons in the nine-month period ended September 30, 2010 compared to 1,528 thousand tons in the same period of 2009. Total sales outside of Mexico in the nine-month period ended September 30, 2010 increase 75% to Ps. 10,683 million, compared with Ps. 6,108 million  in the same period of 2009, while total sales in Mexico increased 1% from Ps. 8,169 million in the nine-month period ended September 30, 2009 to Ps. 8,259 millions in the same period  of 2010.  The increase in sales is due to an increase shipments during the nine-month period ended September 30, 2010, compared to the same period in 2009 (191 thousand tons increase). The average price of steel products increased 18% in the nine-month period ended September 30, 2010 compared with the same period of 2009.

Direct Cost of Sales

Direct cost of sales increased 40% from Ps. 11,610 million in the nine-month period ended September 30, 2009 to Ps. 16,283 million in the same period of 2010. Direct cost of sales as a percentage of net sales represented 86% in the nine-month period ended September 30, 2010 compared to 81% in the same period of 2009. The average cost of raw materials used to produce steel products increased 25% in the nine-month period ended September 30, 2010 versus the same period of 2009, primarily as a result of increases in the price of scrap and certain other  raw materials, and an increase in  sales in The United States of America.

Marginal Profit

Marginal profit in the nine-month period ended September 30, 2010 was Ps. 2,659 million compared to Ps. 2,667 million in the same period of 2009. Marginal profit as a percentage of net sales in the nine-month period ended September 30, 2010 was 14% compared to 19% in the same period of 2009. The decline in marginal profit is due to an increase in scrap and other raw materials during the nine-month period ended September 30, 2010 compared with the same period of 2009.

Operating Expenses

Operating expenses decreased 6% to Ps. 1,559 million in the nine-month period ended September 30, 2010 compared to Ps. 1,665  million in the same period of  2009, and represented 8% of net sales in the nine-month period ended September 30, 2010 and 12% of net sales in the same period  of 2009.

Operating Income

Operating income increased 10% to Ps. 1,100 million for the nine-month period ended September 30, 2010 compared to Ps. 1,002 million in the same period of 2009. Operating income as a percentage of net sales was 6% in the nine-month period ended September 30, 2010 compared to 7% in the same period of 2009. The increase in operating income is due to an increase in shipments of 13% during the nine-month period ended September 30, 2010 compared with the same period of 2009.

EBITDA

The EBITDA in the nine month period ended September 30, 2010, increased 4% from  Ps.1,814 million in  2009, to Ps 1,880 million in 2010. This is due to an increase in shipments of steel products during 2010.

Comprehensive Financial Cost  

Comprehensive financial cost in the nine-month period ended September 30, 2010 represented an expense of Ps. 88 million compared with an expense of Ps. 49 million in the same period of 2009. Net interest expenses were Ps. 2 million in the nine-month period ended September 30, 2010 compared with a net interest expenses of Ps. 24 million in the same period of 2009. At the same time, we registered an exchange loss of Ps. 86 million in the nine-month period ended September 30, 2010 compared with an exchange loss of Ps. 25 million in the same period of 2009, reflecting a 4% increase in the value of the peso versus the dollar in the nine-month period ended September 30, 2010.

Other Expenses (Income) net

The company recorded other net expenses of Ps. 42  million in the nine-month period ended September 30, 2010 compared to other income net of Ps. 7 million in the same period of 2009.

Income Taxes

Income Taxes recorded a provision of Ps. 45 million in the nine-month period ended September 30, 2010 (including the income of deferred income tax of Ps. 19 million) compared to Ps. 168 million in the same period of 2009 (including the provision of Ps. 15 million of deferred income taxes).

Net Income

As a result of the foregoing, net income decreased by 9% to Ps. 1,069 million in the nine-month period ended September 30, 2010 from Ps. 1,169 million in the same period of 2009.  

Liquidity and Capital Resources

As of September 30, 2010, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998 (accrued interest on September 30, 2010 was U.S. $438,819).  As of December 31, 2009, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998 (accrued interest on December 31, 2009 was U.S. $418,176).

Comparative third quarter 2010 vs second quarter 2010

Net Sales

Net sales decreased 3% from Ps. 6,367 million in the second quarter of 2010 to Ps. 6,182 million for the third quarter of 2010. Sales in tons are similar in both quarters, finished steel in third quarter was 556 thousand tons compared with 558 thousand tons in the second quarter of 2010. The total sales outside of Mexico for the third quarter of 2010 decreased 5% to Ps. 3,553 million compared with Ps. 3,749 million in the second quarter of 2010. Total sales in Mexico are similar to 2,629 million in the third quarter of 2010 compared Ps. 2,618 million in the second quarter of 2010.  Prices of finished products sold in the third quarter of 2010 decreased approximately 3% compared to the second quarter of 2010.

Direct Cost of Sales

Direct cost of sales was Ps. 5,503 million in the second quarter of 2010 to Ps. 5,511 million for the third quarter of 2010. With respect to sales, in the third quarter of 2010, the direct cost of sales represents 89% compared to 86% for the second quarter of 2010. The average cost of raw materials used to produce steel products increased 1% in the third quarter of 2010 versus the second quarter of 2010, primarily as a result of increases in the price of scrap and certain other raw materials and increase in sales in the United States of America.

Marginal Profit

Marginal profit for the third quarter of 2010 decreased 22% to Ps. 671 million compared to Ps. 864 million in the second quarter of 2010. The marginal profit as a percentage of net sales for the third quarter of 2010 was 11% compared with 14% for the second quarter of 2010.  The decline in marginal profit is due to the increase in the cost of raw materials used to produce steel products in the third quarter of 2010 versus the second quarter of 2010.

Operating Expenses

Operating expenses increased 11% to Ps. 551 million in the third quarter of 2010 compared to Ps. 496 million for the second quarter of 2010. Operating expenses as a percentage of net sales represented 9% during the third quarter of 2010 and 8% during the second quarter of 2010.

Operating Income

Operating income decreased 67% from an operating income of Ps. 368 million in the second quarter of 2010 to Ps. 120 million of operating income for the third quarter of 2010. The operating income as a percentage of net sales in the third quarter of 2010 was 2% compared to 6% in the second quarter of 2010. The decrease in operating income is due to the increase in the cost of raw materials used to produce steel products in the third quarter of 2010 versus the second quarter of 2010 and more sales in the United States of America.

EBITDA

The EBITDA in the third quarter of 2010 decreased 39% from Ps. 629 million in the second quarter of 2010 to Ps. 381 million in the third quarter of 2010. The decrease in the EBITDA is due to the above explanation.

Comprehensive Financial Income (Cost)

Comprehensive financial for the third quarter for 2010 was an expense of Ps. 50 million compared with an expense of Ps. 14 million for the second quarter of 2010 net interest expense in the third quarter was of Ps 5 million, while in the second quarter the interest was zero. At the same time we registered an exchange loss of Ps. 45 million in the third quarter of 2010 compared with an exchange loss of Ps. 14 million in the second quarter of 2010.

Other Expenses (Income) net

The company recorded other net expenses of Ps. 6 million in the third quarter  of 2010 compared to other net expenses of Ps. 46 million for the second quarter of 2010.

Income Taxes

Income Taxes for the third quarter  of 2010 was an expense of Ps. 58 million (including an expense tax deferred for Ps. 27 million) compared to Ps. 34 million of income for the second quarter of 2010, (including an income tax deferred income of Ps. 44 million).

Net Income

As a result of the foregoing, net income was Ps. 106 million in the third quarter of 2010 compared to Ps. 393 million of net income in the second quarter of 2010.

Comparative third quarter 2010 vs third quarter 2009

Net Sales

Net sales increased 23% from Ps. 5,035 million for the third quarter of 2009 to Ps. 6,182 million for the third quarter of 2010. Sales in tons of finished steel in the third quarter of 2010 were 556 thousand tons versus to 551 thousand tons in the third quarter of 2009. The total sales outside of Mexico for the third quarter of 2010 increased 51% to Ps. 3,553 million compared with Ps. 2,348 million for the third quarter of 2009. Total sales in Mexico were Ps. 2,629 million in the third quarter of 2010 to Ps. 2,687 million in the third quarter of 2009. Prices of finished products sold in the third quarter of 2010 increased approximately 22% compared to the third quarter of 2009.

Direct Cost of Sales

Direct cost of sales increased 30% from Ps. 4,243 million in the third quarter of  2009 to Ps. 5,511 million for the third quarter of 2010. With respect to sales, in the third quarter of 2010, the direct cost of sales represents 89% compared to 84% for the third quarter of 2009. The average cost of raw materials used to produce steel products increased 29% in the third quarter of 2010 versus the third quarter of 2009, primarily as a result of increases in the price of scrap and certain other raw materials.

Marginal Profit

Marginal profit for the third quarter of 2010 decreased 15% to Ps. 671 million compared to Ps. 792 million in the third quarter of 2009. The marginal profit as a percentage of net sales for the third quarter of 2010 was 11% compared with 16% for the third quarter of 2009.  The decline in marginal profit is due to increase of scrap and raw materials.

Operating Expenses

Operating expenses increased 3% to Ps. 551 million in the third quarter of 2010 compared to Ps. 537 million for the third quarter of 2009. Operating expenses as a percentage of net sales represented 9% during the third quarter of 2010 and 11% during the third quarter of 2009.

Operating Income

Operating income decreased 53% from an operating income of Ps. 255 million in the third quarter of 2009 to Ps. 120 million in the third quarter of 2010. The operating income as a percentage of net sales in the third quarter of 2010 was 2% compared to 5% in the third quarter of 2009. The decrease in operating income is due to increases in scrap and other raw materials price.

EBITDA

The EBITDA from the third quarter of 2010 decreased 27% from Ps 522 million in the third quarter of 2009 to Ps 381 million in the third quarter of 2010.

Comprehensive Financial Income (Cost)

Comprehensive financial cost for the third quarter of 2010 was an expense of Ps. 50 million compared with an income of Ps 11 million in the third quarter of 2009. Net interest expense was Ps. 5 million in the third quarter of 2010 compared with Ps. 13 million of net interest expense in the third quarter of 2009. At the same time we registered an exchange loss of Ps. 45 million in the third quarter of 2010 compared with an exchange gain of Ps. 24 million in the third quarter of 2009.

Other Expenses (Income) net

The company recorded other net expenses of Ps. 6 million in the third quarter of 2010 compared with other income net of Ps. 7 million for the third quarter of 2009.

Income Taxes

Income Taxes for the third quarter of 2010 was an expense of Ps. 58 million (including a provision of deferred income tax of Ps 27 million),  compared to Ps. 7 million of income for the third quarter of 2009, (including a provision of deferred income tax of Ps. 15 million).

Net Income

As a result of the foregoing, net income was Ps. 106 million in the third quarter of 2010 compared to Ps. 348 million of net income in the third quarter of 2009.

Millions of pesos

Nine months ended September 30, 2010

Nine months ended September 30, 2009

2010 vs. 2009

Sales

18,942

14,277

33%

Cost of Sales

16,283

11,610

40%

Marginal Profit

2,659

2,667

0%

Operating Expenses

1,559

1,665

(6%)

Operating Income

1,100

1,002

10%

EBITDA

1,880

1,814

4%

Net Profit

925

793

17%

Sales outside Mexico

10,683

6,108

75%

Sales in México

8,259

8,169

1%

Total sales (tons)

1,719

1,528

13%

(Millions of pesos)

3Q '10

2Q '10

3Q '09

3Q´10 vs 2Q'10

3Q´10 vs 3Q´09

Sales

6,182

6,367

5,035

(3%)

23%

Cost of Sales

5,511

5,503

4,243

0%

30%

Marginal Profit

671

864

792

(22%)

(15%)

Operating Expenses

551

496

537

11%

3%

Operating Income

120

368

255

(67%)

(53%)

EBITDA

381

629

522

(39%)

(27%)

Net Profit

6

342

267

(98%)

(98%)

Sales outside Mexico

3,553

3,749

2,348

(5%)

51%

Sales in México

2,629

2,618

2,687

0%

(2%)

Total sales (tons)

556

558

551

0%

1%

Product

Thousands of tons nine months ended September 30, 2010

Million of pesos nine months ended September 30, 2010

Average price per ton nine months ended September 30, 2010

Thousands of tons nine months ended September 30,2009

Million of pesos nine months ended September 30, 2009

Average price per ton nine months ended September 30, 2009

SBQ

926

12,006

12,965

739

8,003

10,829

Light Structural

793

6,936

8,747

789

6,274

7,952

Total

1,719

18,942

11,019

1,528

14,277

9,344

Product

Thousands of tons 3Q '10

Millions  of pesos 3Q'10

Average price per ton 3Q'10

Thousands of tons 2Q '10

Millions  of pesos 2Q'10

Average price per ton 2Q'10

    Thousands of tons         3Q'09  

Millions of pesos              3Q'09

Average price per ton                  3Q'09

SBQ

273

3,656

13,392

308

4,090

13,279

276

2,962

10,732

Light Structural

283

2,526

8,926

250

2,277

9,108

275

2,073

7,538

Total

556

6,182

11,119

558

6,367

11,410

551

5,035

9,138

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, expected or estimated. The company assumes no obligation to update any forward-looking information contained herein.

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