Grupo Simec Announces Results of Operations for the First Six Months of 2011

GUADALAJARA, Mexico, July 27, 2011 /PRNewswire/ -- Grupo Simec, S.A.B. de C.V. (AMEX: SIM) ("Simec") announced today its results of operations for the sixth-month period ended June 30, 2011.

Comparative first six months of 2011 vs. first six months of 2010

Net Sales

Net sales of the Company increased 8% from Ps. 12,760 million in the first half of 2010 compared to Ps. 13,758 million in the same period of 2011. Shipments of finished steel products decreased 2% from 1,162 thousand tons in the first half of 2010 compared to 1,139 thousand tons in the same period of 2011. Total sales outside of Mexico in the first half of  2011 increased 6% to Ps. 7,575 million compared to Ps. 7,129 million  in the same period of 2010, while total Mexican sales increased 10% from Ps. 5,631 million in the first half  of 2010 to Ps. 6,183 million in the same period  of 2011.  The increase in sales for the first six months of 2011 compared to the first six months of 2010, is  due to increase in the average sales price, better bland of steel shipment, and the increase in the sales price from the other steel products, while the volume of shipments decrease approximately 23 thousands a fall of 2%.

Cost of Sales

Cost of sales increased 9% from Ps. 11,095 million in the first six months of 2010, to Ps. 12,075 million in the same period of 2011. Cost of sales as a percentage of net sales represented 88% in the first half of 2011 compared to 87% in the same period of 2010. The increase in cost of sales is due to the bland of steel shipments, while the cost of certain  raw materials reflect mixed results and the net of this main consumption, reflect a low decrease.

Gross Profit

Gross profit of the Company for the first half of 2011 increased 1% from Ps. 1,665 million in the first half of 2010, to Ps. 1,683 million in the same period of 2011. Marginal profit as percentage of net sales in the first half of 2011 was of 12% while to the same period of 2010 was of 13%. The gross profit is similar in both periods, reflected by the increase in the shipments of special bar quality (SBQ), which sales and cost are higher than commercial products.

Operating Expenses

Selling, general and administrative expense decrease 29%, or Ps. 638 million in the first six months of 2010 to Ps. 453 million in the same period 2011, selling, general and administrative expense represented 5%  of the net sales  of the first six months of 2010 and 3% of net sales in the first half of 2011.

Operating Income

Operating income increased 20% from Ps. 1,027 million for the first six months of 2010 compared to Ps. 1,230 million in the same period of 2011. Operating income as percentage of net sales was 9% in the first half of 2011 compared to 8% in the same period of 2010, respectively. The increase in operating income is due to a better bland of shipments and the reduction in the selling, general and administrative expense.

Ebitda

The ebitda of the first six months of 2011, increase Ps 139 million or 9% this is due to a better bland of steel products shipments and the reduction of selling, general and administrative expense compared to ebitda of Ps. 1,547 million of the first half of 2010, and Ps. 1,686 million in the first half of 2011.

Comprehensive Financial Cost

Comprehensive financial cost for the first half of 2011 represented an expense of Ps. 172 million compared with an expense of Ps. 38 million for the first six months of 2010. The comprehensive financial cost is comprised by the exchange loss of Ps. 177 million in the first half of 2011 compared with an exchange loss of Ps. 41 million in the first half of 2010. Also recorded an income interest net of Ps. 5 million and Ps. 3 million in 2011 and 2010 respectively. As of June 30, 2011 the Mexican peso record an revaluation of 4% versus dollar compared the exchange rate of Mexican peso to dollar as of December 31, 2010.

Other Expenses (Income) net

The Company recorded other expense net of Ps. 36 million in the first half of 2010 while in the same period of 2011 the other expense reflected an expense net of Ps. 8 million.

Income Taxes

The Company recorded an income tax of Ps. 14 million in the first half of 2010 compared to Ps. 23 million of income tax in the same period of 2011.

Net Income

As a result of the foregoing, the Company record a decrease in net income of 5% from Ps. 1,010 million in the first half of 2010 to Ps. 961 million in the same period of 2011.

Comparative second quarter of 2011 vs. first quarter of 2011

Net Sales

Net sales of the Company increase 10% in the second quarter of 2011 compared to the first quarter of the same period of the year, from Ps. 6,565 million in the first quarter of 2011 compared to Ps. 7,193 million in the second quarter of 2011. Shipments of finished steel products increased 12% from 538 thousand tons in the first quarter of 2011 to 601 thousand tons in the second quarter of 2011. Total sales outside of Mexico in the second quarter of 2011 increased 6% to rose to Ps. 3,897 million compared to Ps. 3,678 million  in the first quarter of 2011. Total Mexican sales also show the same trend of growth, 14% from Ps. 2,887 million in the first quarter of 2011 to Ps. 3,296 million in the second quarter of 2011. The increase in sales of the second quarter is due to a; better bland of steel products shipments, increase in volume of shipments and a decrease in the average sales price compared to the first quarter of the same year, the volume shipment  was better in 63 thousand ton, compared to the first quarter of 2011.

Cost of Sales

Cost of sales increased 13% from Ps. 5,682 million in the first quarter of 2011 to Ps. 6,393 million in the second quarter of 2011. Cost of sales as a percentage of net sales represented 89% in the second quarter of 2011 while in the first quarter of the same year represented 87%, the average cost of sales by ton record an increase between the two quarter of 1%. The increase in the cost of sales is due to a better bland of steel shipments which cost is higher  and an increase in volume of products shipments.

Gross Profit

Gross profit of the Company for the second quarter of 2011 decreased 9% to Ps. 883 million in the first quarter to Ps. 800 million in the second quarter of 2011. Gross profit as a percentage of net sales in the second quarter of 2011 was 11% compared to 13% in the first quarter 2011. The decreased in the gross profit in the second quarter of 2011 is due for the bland of steel shipments and the fall in the average sales price in 2%.

Operating Expenses

Selling, general and administrative expense fell 39% from Ps. 282 million in the first quarter of 2011 to Ps. 171 million in the second quarter of 2011, and represented 4% and 2% of net sales in the first and second quarter of 2011 respectively.

Operating Income

Operating income increased 5%, to Ps. 629 million in the second quarter of 2011 compared to Ps. 601 million in the first quarter of 2011. Operating income as percentage of net sales was 9% in the first and second quarter of 2011 respectively. The increase in operating income is due to a better bland of steel products shipments, volume and reduction in selling, general and administrative expense.

Ebitda

The ebitda in the second quarter of 2011 recorded an increase of 3% compared to the first quarter of the same year, this is due to volume and bland of steel products shipment, and a reduction in the selling, general and administrative expense compared to the first quarter from Ps 831 million in the first quarter to Ps 855 million in the second quarter of 2011.

Comprehensive Financial Cost

Comprehensive financial cost of the Company in the first quarter of 2011 represented an expense of Ps. 84 million compared with an expense of Ps. 87 million for the second quarter of 2011. The comprehensive financial cost is comprised for: the interest expense net, represented an income interest net of Ps. 3 million in the second quarter of 2011, while in the first quarter of 2011 we had an income interest net of Ps. 2 million. Also we record an exchange loss net of Ps. 90 million in the second quarter of 2011 compared an exchange loss net of Ps. 86 million in the first quarter of the same year.

Other Expenses (Income) net

The Company recorded other expense net of Ps. 9 million in the second quarter of 2011 compared to other income net of Ps. 1 million in the first quarter of 2011.

Income Taxes

The Company recorded an income tax of Ps. 11 million in the second quarter of 2011 compared to an income tax of Ps. 11 million in the first quarter of the same year.

Net Income

As a result of the foregoing, the Company record a net income fell of 1% from  a net income of Ps. 483 million in the first quarter of 2011 compared to a net income of Ps. 478 million in the second quarter of 2011.

Liquidity and Capital Resources

As of June 30, 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 million (accrued interest on June 30, 2011 was U.S. $459,000, or Ps. 5.4 million).  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, or Ps. 3.7 million (accrued interest on December 31, 2010 was U.S. $445,000, or Ps. 5.5 million).

Comparative second quarter of 2011 vs second quarter of 2010

Net Sales

Net sales of the Company increased 13% from Ps. 6,367 million in the second quarter of 2010 to Ps. 7,193 million in the second quarter of 2011. Sales in tons of finished steel increased 8% to 558 thousand tons in the second quarter of 2010 compared with 601 thousand tons in the second quarter of 2011. The total sales outside of Mexico for the second quarter of 2011 increased 4% from Ps. 3,749 million to Ps. 3,897 million for the second quarter of 2011. Total Mexican sales increase 26% from Ps. 2,618 million in the second quarter of 2010 to Ps. 3,296 million in the second quarter of 2011. Prices of finished products sold in the second quarter of 2011 increased 5% compared to the second quarter of 2010.

Cost of Sales

Cost of sales increased 12% in the second quarter of 2011 compared to same period of 2010, from Ps. 5,704 million in the second quarter of 2010 to Ps. 6,393 million in the second quarter of 2011. With respect to sales, in the second quarter of 2010, the direct cost of sales represent 90% compared to 89% for the second quarter of 2011. The average cost of raw materials used to produce steel products increased 4% in the second quarter of 2011 versus the second quarter of 2010, primarily as a result of better bland of steel products shipments.

Gross (Loss) Profit

Gross profit of the Company for the second quarter of 2011 rose to Ps. 800 million compared to Ps. 663 million in the second quarter of 2010, this represented an increase of 21%. The gross profit as a percentage of net sales for the second quarter of 2011 was 11% compared to 10% for the second quarter of 2010. The increase in gross profit is due to the increase in volume, bland of steel products shipments and the average sales price.

Operating Expenses

The selling, general and administrative expense decreased 31% in the second quarter of 2011 from Ps. 248 million in the second quarter of 2010 to Ps. 171 million in the second quarter of 2011. The selling, general and administrative expense as a percentage of net sales represented 2% during the second quarter of 2011 and 4% the second quarter of 2010.

Operating (Loss) Income

Operating income rose to Ps. 629 million in the second quarter 2011 compared to Ps. 415 million in the second quarter of 2010, this represented the 52% of increase. The operating income as a percentage of net sales in the second quarter of 2010 was 6% compared to 9% in the second quarter of 2011. The increase in the operating income is due to better bland of steel products shipments, volume, average sales price and reduction in selling, general and administrative expense.

Ebitda

The ebitda of the second quarter of 2011 increase compared to 2010 in 26% from Ps 676 million in the second quarter of 2010 compared to Ps. 855 million of the same period of 2011, this is due to the above explained in the operating income.

Comprehensive Financial Cost

Comprehensive financial cost of the Company for the second quarter of 2011 represented an expense of Ps. 87 million compared with an expense of Ps. 14 million for the second quarter of 2010. The comprehensive financial cost is comprised for: The interest cost recorded was an income net of Ps. 3 million in the second quarter of 2011, compared to an income net of Ps. zero. for the same period of 2010. Also recorded an exchange loss of Ps. 90 million in the second quarter of 2011 and Ps. 14 million in the second quarter of 2010.

Other Expenses (Income) net

The company recorded other expense net of Ps. 9 million in the second quarter of 2011 compared with other expense net of Ps.46 million for the second quarter of 2010.

Income Taxes

The company record an income tax for Ps. 11 million in the second quarter of 2011 compared to Ps. 33 million of income for income tax for the second quarter of 2010.

Net Income (Loss)

As a result of the foregoing, the Company net income was of Ps. 478 million in the second quarter of 2011 compared to Ps.439 million for the second quarter of 2010.

Note. In accordance with Mexican Financial Reporting Standards (MFRS), from 2011, only allowed the valuation of inventory through the system absorbing cost, and some figures have been adjusted in the income statement of 2010 for purposes of comparisons.

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.