Business & Finance

    GUADALAJARA, Mexico, July 27 /PRNewswire-HISPANIC PR WIRE/ -- 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, 2010.

 

    Comparative first six months 2010 vs. first six months 2009

 

    Net Sales

    Net sales increased 38% to Ps. 9,242 million in the first half 2009 compared to Ps. 12,760 million in the same period 2010. Shipments of finished steel products increased 19% from 977 thousand tons in the first half 2009 compared to 1,162 thousand tons in the same period 2010. Total sales outside of Mexico in the first half 2010 increased 90% to Ps. 7,129 million compared to Ps. 3,760 million in the same period 2009, while total Mexican sales increased 3% from Ps. 5,482 million in the first half 2009 to Ps. 5,631 million in the same period 2010.  The increase in sales can be explained due to an increase in major shipments during the first half 2010 of 19%, compared to the same period of 2009 (185 thousand tons increase). The average price of steel products increased 16% in the first half of 2010 compared with the same period of 2009.

 

    Direct Cost of Sales

    Direct cost of sales increased 46% from Ps. 7,367 million in the first six months 2009, to Ps. 10,772 million in the same period 2010. Direct cost of sales as a percentage of net sales represented 84% in the first half 2010 compared to 80% in the same period 2009. The cost of sales increased due an increase in the shipments of finished steel products and higher cost in raw material.

 

    Gross Profit

    Marginal profit in the first half 2010, increased 6% from Ps. 1,875 million in the first half 2009, to Ps. 1,988 million in the same period 2010. Marginal profit as a percentage of net sales in the first half 2010 was 16% compared to 20% in the same period 2009. The increase in gross profit is due to major shipments of 19% during the first half of 2010 compared with the same period of 2009.

 

    Operating Expenses

    Operating expenses fell 11% to Ps. 1,008 million in the first six months 2010 compared to Ps. 1,128 million in the same period 2009, and represented 8% and 12% of net sales in the first half 2010 and the same period of 2009 respectively.

 

    Operating Income

    Operating income increased 31% from Ps. 747 million for the first six months 2009 compared to Ps. 980 million in the same period 2010. Operating income as a percentage of net sales was 8% in the first half 2010 and 2009, respectively. The increase in operating income is due to major shipments of 19% during the first half of 2010 compared with the same period of 2009.

 

    EBITDA

    The EBITDA of the first six months of 2010, increased 16% or Ps. 209 million compared to 2009, the increase is due to major shipments of steel products during 2010

 

    Comprehensive Financial Cost

    Comprehensive financial cost for the first half 2010 represented an expense of Ps. 38 million compared with an expense of Ps. 61 million for the first six months 2009. At the same time we registered an exchange loss of Ps. 41 million in the first half 2010 compared with an exchange loss of Ps. 49 million in the first half 2009.

 

    Other Expenses (Income) net

    The company recorded other expense net of Ps. 36 million in the first half 2010 while in 2009 the other expense net was zero in the same period.

 

    Income Taxes

    The Company recorded an income tax of Ps. 14 million in the first half 2010 (including the income of Ps. 46 million of deferred taxes) compared to Ps. 161 million in the same period of 2009 (including the provision of Ps. 105 million of deferred taxes) .

 

    Net Income

    As a result of the foregoing, net income increased 75% from Ps. 526 million in the first half 2009 to Ps. 919 million in the same period 2010. The increase in the net income is due to major shipments.

 

    Comparative second quarter 2010 vs. first quarter 2010

 

    Net Sales

    Net sales were similar in the second and first quarter 2010, to Ps. 6,393 million in the first quarter compared to Ps. 6,367 million in the second quarter 2010. Shipments of finished steel products decreased 8% from 604 thousand tons in the first quarter 2010 to 558 thousand tons in the second quarter 2010. Total sales outside of Mexico in the second quarter 2010 increased 11% to Ps. 3,749 million compared to Ps. 3,380 million  in the first quarter 2010, while total Mexican sales decreased 13% from Ps. 3,013 million in the first quarter 2010 to Ps. 2,618 million in the second quarter 2010.  The increase in sales can be explained due to the increase in the average price of sales during the second quarter 2010, compared to the first quarter of 2010, the shipments in the second quarter decreased 46 thousand tons.

 

    Direct Cost of Sales

    Direct cost of sales increased 4% from Ps. 5,269 million in the first quarter 2010 to Ps. 5,503 million in the second quarter 2010. Direct cost of sales as a percentage of net sales represented 86% in the second quarter 2010 compared to 82% in the first quarter period 2010. The average cost of sales by ton in the first half of 2010 increased 13% compared to the first quarter of 2010.

 

    Gross Profit

    Marginal profit in the second quarter 2010 decreased 23% to Ps. 1,124 million in the first quarter to Ps. 864 million in the second quarter 2010.  Gross profit as a percentage of net sales in the second quarter 2010 was 14% compared to 18% in the first quarter 2010. The decrease in marginal profit is due to the increase in price of raw materials.

 

    Operating Expenses

    Operating expenses fell 3% from Ps. 512 million in the first quarter 2010  to Ps. 496  million in the second quarter 2010, and represented 8% of net sales in the first and second quarter 2010.

 

    Operating Income

    Operating income decreased  40%, to Ps. 368 million in the second quarter 2010 compared to Ps. 612 million in the first quarter 2010. Operating income as a percentage of net sales was 10% in the first quarter 2010 compared to 6% in the second quarter 2010. The decrease in operating income is due to the major increase of price of raw materials and a decrease in shipments.

 

    EBITDA

    The EBITDA in the second quarter, 2010 decreased 28% from Ps. 870 million in the first quarter to Ps. 629 million in the second quarter. The fall in EBITDA is due to minor shipments of steel products and increased cost of sales.

 

    Comprehensive Financial Cost

    Comprehensive financial cost for the first quarter 2010 represented an expense of Ps. 24 million compared with an expense of Ps. 14 million for the second quarter 2010. At the same time we registered an exchange loss of Ps. 14 million in the second quarter 2010 compared with an exchange loss of Ps. 27 million in the first quarter 2010.

 

    Other Expenses (Income) net

    The company recorded other expense net of Ps. 46 million in the second quarter 2010 compared to other income net of Ps. 10 million in the first quarter 2010.

 

    Income Taxes

    Income Taxes recorded an income of Ps. 34 million in the second quarter 2010 (including the income of Ps. 44 million of deferred income taxes) compared to an expense of Ps. 21 million in the first quarter 2010 (including the benefits of Ps. 2 million of deferred income taxes).

 

    Net Income

    As a result of the foregoing, net income fell 41% from Ps. 577 million in the first quarter 2010 to Ps. 342 million in the second quarter 2010. 

 

    Liquidity and Capital Resources

    As of June 30, 2010, Simecs total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTNs") due 1998, or Ps. 3.8 million (accrued interest on June 30, 2010 was U.S. $431,634, or Ps. 5.4 million).  As of December 31, 2009, Simecs total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTNs") due 1998 (accrued interest on December 31, 2009 was U.S. $418,176).

 

    Comparative second quarter 2010 vs second quarter 2009

 

    Net Sales

    Net sales increased 53% from Ps. 4,161 million in the second quarter 2009 to Ps. 6,367 million in the second quarter 2010. Sales in tons of finished steel increased 18% to 558 thousand tons in the second quarter 2010 compared with 471 thousand tons in the second quarter 2009. The total sales outside of Mexico for the second quarter 2010 increased 144% to Ps. 3,749 million compared with Ps. 1,539 million for the second quarter 2009. Total Mexican sales decreased 2% from Ps. 2,623 million in the second quarter 2009 to Ps. 2,618 million in the second quarter 2010.  Prices of finished products sold in the second quarter 2010 increased 29% compared to the second quarter 2009.

 

    Direct Cost of Sales

    Direct cost of sales increased 69% in the second quarter 2010 compared to same period 2009, from Ps. 3,256 million in the second quarter 2009 to Ps. 5,503 million in the second quarter 2010. With respect to sales, in the second quarter 2010, the direct cost of sales represent 86% compared to 78% for the second quarter 2009. The average cost of raw materials used to produce steel products increased 43% in the second quarter 2010 versus the second quarter 2009, primarily as a result of increases in the price of scrap and certain other raw materials.

 

    Gross (Loss) Profit

    Marginal profit for the second quarter 2010 decreased 5% to Ps. 864 million compared to Ps. 905 million in the second quarter 2009. The gross profit as a percentage of net sales for the second quarter 2010 was 14% compared to 22% for the second quarter of 2009.  The decrease in marginal profit is due to the increase in the cost of raw materials used to produce steel products and increase of shipments.

 

    Operating Expenses

    Operating expenses decreased 9% from Ps. 543 million in the second quarter 2009 versus Ps. 496 million in the second quarter 2010. Operating expenses as a percentage of net sales represented 8% during the second quarter 2010 and 13% the second quarter 2009.

 

    Operating (Loss) Income

    Operating income was Ps. 368 million in the second quarter 2010 compared to Ps. 362 million in the second quarter 2009. The operating income as a percentage of net sales in the second quarter 2010 was 6% compared to 9% in the second quarter 2009.

 

    EBITDA

    The EBITDA of the second quarter 2010 was Ps. 629 million compared to Ps. 632 million in 2009, the similar EBITDA in both periods is due to major shipments of steel products of 18% in 2010, but the increase in cost of sales was major to the price of sales.

 

    Comprehensive Financial Cost

    Comprehensive financial cost for the second quarter 2010 represented an expense of Ps. 14 million compared with an expense of Ps. 121 million for the second quarter 2009. At the same time we registered an exchange loss of Ps. 14 million in the second quarter 2010 compared with an exchange loss of Ps. 113 million in the second quarter 2009.

 

    Other Expenses (Income) net

    The company recorded other expense net of Ps. 46 million in the second quarter 2010 compared with other expense net of Ps. 2 million for the second quarter 2009.

 

    Income Taxes

    Income Taxes for the second quarter 2010 was an income of Ps. 34 million compared to Ps. 154 million of expense for the second quarter 2009.

 

    Net Income (Loss)

    As a result of the foregoing, net income was Ps. 342 million in the second quarter 2010 compared to Ps. 86 million for the second quarter 2009.

 

 

                                                                    Year 10

     (millions of pesos)    1H 10              1H 09                  vs

                                                                      09

    Sales                   12,760               9,242                  38%

    Cost of Sales           10,772               7,367                  46%

    Gross Profit             1,988               1,875                   6%

    Operating Expenses       1,008               1,128                 -11%

    Operating Profit           980                 747                  31%

    EBITDA                   1,500               1,291                  16%

    Net Profit                 919                 526                  75%

    Sales Outside

     Mexico                  7,129               3,760                  90%

    Sales in Mexico          5,631               5,482                   3%

    Total Sales (Tons)       1,162                 977                  19%

 

 

 

    Quarter

                                                                    2Q 10

     (millions of pesos)    2Q 10    1Q 10    2Q 09   1Q 10 vs      vs

                                                          2Q 10    2Q 09

    Sales                    6,367     6,393     4,161          0%      53%

    Cost of Sales            5,503     5,269     3,256          4%      69%

    Gross Profit               864     1,124       905        -23%      -5%

    Operating Expenses         496       512       543         -3%      -9%

    Operating Profit           368       612       362        -40%       2%

    EBITDA                     629       870       632        -28%       0%

    Net Profit                 342       577        86        -41%     298%

    Sales Outside

     Mexico                  3,749     3,380     1,539         11%     144%

    Sales in Mexico          2,618     3,013     2,623        -13%      -2%

    Total Sales (Tons)         558       604       471         -8%      18%

   

 

 

                     Thousands

        Product          of      Millions of    Average

                        Tons        Pesos      Price per

                      Jan-Jun      Jan-Jun        Ton

                       2010         2010        Jan-Jun

                                                  2010

    Comercial

     Profiles            542        4,810        8,874

    Special

     Profiles            620        7,950       12,823

 

    Total              1,162       12,760       10,981

 

 

 

        Product     Thousands   Millions of    Average

                      of Tons      Pesos      Price per

                      Jan-Jun     Jan-Jun        Ton

                      2009         2009        Jan-Jun

                                                 2009

    Comercial

     Profiles             546        4,516       8,271

    Special

     Profiles             431        4,726      10,965

   

    Total                 977        9,242       9,460

 

 

 

                     Thousands   Millions   Average

        Product         of          of       Price

                       Tons       Pesos       per

                     Apr-Jun     Apr-Jun      Ton

                        2010        2010    Apr-Jun

                                              2010

    Comercial

     Profiles             250      2,277      9,108

    Special

     Profiles             308      4,090     13,279

   

    Total                 558      6,367     11,410

 

 

 

                                

        Product      Thousands    Millions  Average

                     of Tons        of       Price

                                   Pesos      per

                       Jan -       Jan-       Ton

                        Mar         Mar     Jan-Mar

                        2010       2010      2010

                                              

    Comercial

     Profiles            292      2,533     8,674

    Special

     Profiles            312      3,860    12,372

   

    Total                604      6,393    10,584

 

 

 

                                 

        Product      Thousands   Millions   Average

                                    of       Price

                     of Tons      Pesos       per

                     Apr-Jun     Apr-Jun      Ton

                       2009        2009     Apr-Jun

                                             2009

    Comercial

     Profiles           263       2,103     7,996

    Special

     Profiles           208       2,058     9,894

                        

 

    Total               471       4,161     8,835

 

    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.