Grupo Simec Announces Results of Operations for the First Quarter, of 2011, Ended March 31, 2011

GUADALAJARA, Mexico, May 2, 2011 /PRNewswire/ -- Grupo Simec, S.A.B. de C.V. (AMEX: SIM) ("Simec") announced today its results of operations for the three-month period ended March 31, 2011.

Comparative first quarter of 2011 vs. first quarter of 2010

Net Sales

Net sales of the company increased 3% by the combination of: improved in the sales price and fall of volume of shipments, sales rose from Ps. 6,393 millions in the first quarter of 2010 to Ps. 6,565 millions in the same period of 2011. Shipments of finished steel products decreased 11%, from 604 thousand tons in the first quarter of 2010 compared to 538 thousand tons in the same period of 2011. Total sales outside of Mexico in the first quarter of 2011 increased 9% to Ps. 3,678 millions compared to Ps. 3,380 millions in the same period of 2010. The Mexican sales decreased 4% from Ps. 3,013 millions in the first quarter of 2010 to Ps. 2,887 millions in the same period of 2011. The increase in sales can be explained due to improvement in the price of the subsidiary Simrep, because the volume of tons shipments in both periods are similar, while the finished products of the facilities of Mexico showed a fall in the first quarter of 2011, by the failure of the transformer in the plant of Guadalajara. Comparatively with the same period of 2010, sales in volume decreased 66 thousand shipment in 2011. The average price of steel products increased 15% in the first quarter of 2011 compared with the same period of 2010.

Direct Cost of Sales

Direct cost of sales increased 5% from Ps. 5,391 millions in the first quarter of 2010 to Ps. 5,682 millions in the same period of 2011. Direct cost of sales as a percentage of net sales in the first quarter of 2011 represented 87% compared to 84% the same period of previous year. The increase is due to increase in price of raw materials. The average cost of finished steel products in the first quarter of 2011 increased 18% compared to the same period of 2010.

Marginal Profit

Marginal profit of the company for the same period decreased 12% from Ps. 1,002 millions in 2010 to Ps. 883 millions in the same period of 2011. Marginal profit as a percentage of net sales in the first quarter of 2011 was 13% and for the same period of 2010 was 16%. The fall in marginal profit is due to fall in volume of shipments and increase in raw materials during the first quarter of 2011 compared with the same period of 2010.

Operating Expenses

Operating expenses decrease 20% to Ps. 282 millions in the first quarter of 2011 compared to Ps. 354 millions in the same period of 2010, and represented 4% of net sales in the first quarter of 2011 and 6% in the first quarter of 2010.

Operating Income

Operating income decreased 7% from Ps. 648 millions for the first quarter of 2010 compared to Ps. 601 millions in the same period of 2011. Operating income as a percentage of net sales was 10% in the first quarter of 2010 compared to 9% in the same period of 2011. The decreased in operating income is due to fall in volume of shipments, increased in raw material during the first quarter of 2011 compared with the same period of 2010.

EBITDA

The EBITDA of the company for the first quarter of 2011, show a decreased of 8%, by the above mentioned, to fall from Ps. 906 millions in the first quarter of 2010 compared against Ps. 831 millions of the first quarter of 2011,

Comprehensive Financial Cost  

Comprehensive financial cost in the first quarter of 2011 represented an expense of Ps. 84 millions compared with an expense of Ps. 24 millions in the same period of 2010. Net interest income was Ps. 2 millions in the first quarter of 2011 compared with a net gain of Ps. 3 millions in the same period of 2010. At the same time, Simec registered an exchange loss of Ps. 86 millions in the first quarter of 2011 compared with an exchange loss of Ps. 27 millions in the same period of 2010, due to 5.3% revaluation of the peso versus the dollar as of March 31, 2011 compared to December 31, 2010.

Other Expenses (Income) net

The company recorded other income net of Ps. 1 millions in the first quarter of 2011 compared to other income net of Ps. 10 millions in the same period of 2010.

Income Taxes

Income Taxes recorded an income of Ps. 11 millions in the first quarter of 2011 (including the income of Ps. 33 millions of deferred income taxes) compared to an expense of Ps. 21 millions in the same period of 2010 (including the benefits of Ps. 2 millions of deferred income taxes) .

Net Income

As a result of the foregoing, net income decreased 14% to Ps. 529 millions in the first quarter of 2011 versus Ps. 614 millions in the same period of 2010.  

Liquidity and Capital Resources

As of March 31, 2011, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, or Ps. 3.6 millions (accrued interest on March 31, 2011 was U.S. $452,189, or Ps. 5.4 millions).  As of December 31, 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 December 31, 2010 was U.S. $445,314).

Comparative first quarter of 2011 vs. fourth quarter of 2010

Net Sales

Net sales of the company increased 17% from Ps. 5,615 millions of the fourth quarter of 2010 to Ps. 6,565 millions to the first quarter of 2011. Sales in tons of finished steel increased 3% from 522 thousand tons in the fourth quarter of 2010 compared with 538 thousand tons in the first quarter of 2011. The total sales outside of Mexico for the first quarter of 2011 increased 19% to Ps. 3,094 millions in the fourth quarter of 2010, compared with Ps. 3,678 millions for the first quarter of 2011. The Mexican sales increased 15% from Ps. 2,521 millions in the fourth quarter of 2010 to Ps. 2,887 millions in the first quarter of 2011.  Prices of finished products sold in the first quarter 2011 increased 13% compared to the fourth quarter 2010.

Direct Cost of Sales

Direct cost of sales increased 11% from Ps. 5,136 millions in the fourth quarter of 2010 to Ps. 5,682 millions in the first quarter of 2011. With respect to sales, in the first quarter of 2011, the direct cost of sales represent 87% compared to 91% for the fourth quarter of 2010. The average cost of raw materials used to produce steel products increased 7% in the first quarter of 2011 versus the fourth quarter of 2010, primarily as a result of increase in the volume of shipments and increases in the price of raw materials.

Marginal (Loss) Profit

Marginal profit for the first quarter of 2011 grew to Ps. 883 millions compared with the profit of Ps. 479 millions in the fourth quarter of 2010, this represented an increased of 84%. The marginal profit as a percentage of net sales for the first quarter of 2011 was 13% compared with 9% for the fourth quarter of 2010. The increase in marginal profit is due to the swift improved in the volume of the shipments and improved of the sales price.

Operating Expenses

Operating expenses represented to Ps. 282 millions in the first quarter of 2011 versus Ps. 325 millions in the fourth quarter of 2010, equivalent to a decreased of 13%. Operating expenses as a percentage of net sales represented 4% during the first quarter of 2011 and 6% for the fourth quarter of 2010.

Operating (Loss) Income

Operating income was Ps. 601 millions in the first quarter of 2011 compared to Ps. 154 millions of the fourth quarter of 2010. The operating income increase 290% between both quarters. The operating income as a percentage of net sales in the first quarter of 2011 was 9% compared to a operating loss of 3% in the fourth quarter 2010. The increase in operating income is due to the improved in shipments and sales price for the first quarter of 2011 compared with the fourth quarter of 2010.

EBITDA

The EBITDA of the first quarter of 2011 was of Ps. 831 millions compared to Ps. 402 millions of the fourth quarter of 2010, an increased of Ps 429 millions.

Comprehensive Financial Cost

Comprehensive financial cost for the first quarter of 2011 represented an expense of Ps. 84 millions compared with an expense of Ps. 10 millions for the fourth quarter of 2010. Net interest income was Ps. 2 millions in the first quarter of 2011 compared with a zero cost in the fourth quarter of 2010. At the same time we registered an exchange net loss of Ps. 86 millions in the first quarter of 2011 compared with an exchange net loss of Ps. 10 millions in the fourth quarter of 2010.

Other Expenses (Income) net

The company recorded other income net of Ps. 1 millions in the first quarter of 2011 compared with other expenses net of Ps. 14 millions for the fourth quarter of 2010.

Income Taxes

Income Taxes, the company recorded an income of Ps. 11 millions in the first quarter of 2011 (include an income of income tax deferred for Ps 33 millions) compared against an income of Ps. 85 millions of income for income tax for the fourth quarter of 2010.

Income (Loss)

As a result of the foregoing, the company recorded a net income of Ps. 529 millions in the first quarter 2011 compared to a net income of Ps. 215 millions in the fourth quarter 2010.

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.