Grupo Simec Announces Results Of Operations For The First Six Months Of 2019

News provided by

Jul 24, 2019, 16:46 ET

GUADALAJARA, Mexico, July 24, 2019 /PRNewswire/ -- Grupo Simec, S.A.B. de C.V. (NYSE: SIM) ("Simec") announced today its results of operations for the sixth-month period ended June 30th, 2019.

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

Net Sales
Net sales of the Company increased from Ps. 17,022 million in the first half of 2018 to Ps. 18,528 million in the first half of 2019. Shipments increased 8% from 1,092 thousand tons in the first half of 2018 to 1,183 thousand tons in the first half of 2019. Total sales outside of Mexico in the first half of 2019 increased 30% to Ps. 9,091 million compared to Ps. 6,988 million in the first half of 2018. Mexican sales decreased 6% from Ps. 10,034 million in the first half of 2018 to Ps. 9,437 million in the first half of 2019. Sales increased for the first half of 2019 compared to the first half of 2018, is due to the combined of increased in the average sales price of 0.5% and increase in the volume of shipments approximately of 91 thousand tons that represent an 8.5%.

Cost of Sales
Cost of sales increased 16% from Ps. 14,045 million in the first half of 2018, to Ps. 16,236 million in the first half of 2019. Cost of sales as a percentage of net sales represented 88% in the first half of 2019 while in the first half of 2018 represented 83%. Cost of sales increased due to mix products and the higher volume of products shipped.

Gross Profit
Gross profit of the Company for the first half of 2019 decreased 23% from Ps. 2,977 million in the first half of 2018, to Ps. 2,292 million in the first half of 2019. Gross profit as percentage of net sales in the first half of 2019 was of 12%, while in the first half of 2018 was of 17%. The gross profit between both periods is given by better mix products shipped and better average sales price.

Selling, General and Administrative Expense
Selling, general and administrative expense increased 22%, from Ps. 554 million in the first half of 2018 to Ps. 674 million in the same period 2019, selling, general and administrative expense represented 3% of the net sales in the second quarter of 2018 and 4% in the second quarter of 2019.

Other Income (Expenses,) net
The Company recorded other income net for Ps. 153 million in the first half of 2019 million compared to other income Ps. 20 million in the same period of 2018.

Operating Income
Operating income decreased 28% from Ps. 2,443 million for the first half of 2018 compared to Ps. 1,771 million in the first half of 2019. Operating income as percentage of net sales was 10% in the first half of 2019 compared to 14% in the same period of 2018. The increase in operating income is due to a higher cost in inputs and the mix of products shipped.

Ebitda
The Ebitda amounted to Ps. 2,969 million in the first quarter of 2018 as a result of a net income of Ps. 1,656 million, less minority stake of Ps. 22 million, plus income taxes of Ps. 283 million, plus comprehensive financial cost of Ps. 526 million, plus depreciation of Ps. 526 million to Ps 2,311 million in the first quarter of 2019 as a result a net income of Ps. 803 million, less minority stake of Ps. 91 million, plus income taxes of Ps. 177 million, plus comprehensive financial cost of Ps. 882 million, plus depreciation of Ps. 540 million.

Comprehensive Financial Cost
Comprehensive financial cost for the first half of 2019 represented an expense of Ps. 882 million compared with an expense of Ps. 526 million for the first half of 2018. The comprehensive financial cost is comprised by the exchange loss of Ps. 939 million in the first half of 2019 compared with an exchange loss of Ps. 504 million in the first half of 2018. Likewise, the Company recorded a net income interest of Ps. 57 million for the first half of 2019 compared with a net expense interest of Ps. 22 million in 2018.

Income Taxes
The Company recorded an expense of Ps. 177 million for the net income tax during the first half of 2019, (comprised for a current expense tax of Ps. 204 million and income for deferred tax of Ps. 27 million) compared with an expense of Ps. 283 million to the first half of 2018 (comprised for a current expense tax of Ps. 143 million and an expense for deferred tax of Ps. 140 million).

Net Income
As a result of the foregoing, the Company recorded a decrease in net income of 52% to pass of Ps. 1,656 million in the first half of 2018 to Ps. 803 million in the same period of 2019.

Comparative second quarter of 2019 vs. first quarter of 2019

Net Sales
Net sales of the Company decreased 5% in the second quarter of 2019 compared to the first quarter of the same period, to pass of Ps. 9,503 million during the first quarter of 2019 to Ps. 9,025 million in the second quarter of 2019. Shipments of finished steel products remained from 591 thousand tons in the first quarter of 2019 to 592 thousand tons in the second quarter of the same year. Total sales outside of Mexico in the second quarter of 2019 decreased 10% to get to Ps. 4,308 million compared to Ps. 4,783 million of the first quarter of the same year. Domestic sales were very similar from Ps. 4,720 million in the first quarter of 2019 to Ps. 4,717 million in the second quarter of the same year. The sales mainly remained due to a greater shipped by 1 thousand tons compared with the first quarter that represent a 0% and a lower sales price in 5%.

Cost of Sales
Cost of sales decreased 7% from Ps. 8,406 million in the first quarter of 2019 to Ps. 7,830 million in the second quarter of 2019. Cost of sales as a percentage of net sales represented 88% for the first quarter of 2019 compared to 87% in the second quarter of the same year, the average cost of sales by ton record a decrease between both quarters of 7%.

Gross Profit
Gross profit of the Company for the second quarter of 2019 increased 9% to pass of Ps. 1,097 million in the first quarter of 2019 to Ps. 1,195 million in the second quarter of same year. Gross profit as a percentage of net sales represented 12% for the first quarter of 2019 compared to 13% in the second quarter of the same year. The gross profit in the second quarter of 2019 is caused by a lower cost in purchase of supplies.

Selling, General and Administrative Expense
Selling, general and administrative expense increased 17%, from Ps. 311 million in the first quarter of 2019 to Ps. 363 million in the second quarter of the same year, and as percentage of net sales represented 3% in the first quarter of 2019 compared to 4% in the second quarter of the same year.

Other (Expenses) Income, net
The Company recorded other income net for Ps. 87 million during the second quarter of 2019 compared to other income net for Ps. 67 million in the first quarter of 2019.

Operating Income
Operating income increased 8%, of Ps. 853 million in the first quarter of 2019 compared to Ps. 919 million of the second quarter of the same year. Operating income as percentage of net sales was 9% for the first quarter of 2019 compared to 10% for the second quarter of the same year. The operating income is due mainly to a better average cost in the purchase of certain supplies.

Ebitda
The Ebitda amounted to Ps. 1,127 million in the first quarter of 2019 as a result of a net income of Ps. 425 million, less minority stake of Ps. 41 million, less income taxes of Ps. 21 million, plus comprehensive financial cost of Ps. 490 million, plus depreciation of Ps. 274 million to Ps 1,185 million in the second quarter of 2019 as a result of a net income of Ps. 377 million, less minority stake of Ps. 49 million, plus income taxes of Ps. 198 million, plus comprehensive financial cost of Ps. 393 million, plus depreciation of Ps. 266 million.

Comprehensive Financial Cost
Comprehensive financial cost of the Company in the second quarter of 2019 represented an expense of Ps. 393 million compared with of Ps. 490 million for the first quarter of 2019. The comprehensive financial cost is comprised for the net interest income of Ps. 43 million in the second quarter of 2019, while in the first quarter was a net income of Ps. 13 million. Likewise, we recorded a net exchange loss of Ps. 436 million in the second quarter of 2019 compared a net exchange loss of Ps. 503 million in the first quarter of the same year.

Income Taxes
The Company have been recorded an expense of Ps. 198 million of income tax during the second quarter of 2019, (comprised for an expense by current income tax of Ps. 204 million and an income for deferred tax of Ps. 6 million) compared with the Ps. 21 million of income for the first quarter of the same year, (comprised for an income for deferred tax of Ps. 21 million).

Net Income
As a result of the foregoing, the Company recorded a decrease of 11% from a net income of Ps. 425 million in the first quarter of 2019 compared to a net income of Ps. 377 million for the second quarter of 2019.

Liquidity and Capital Resources
As of June 30th, 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. 5.8 million (accrued interest on June 30th, 2019 was U.S. $670,000, or Ps. 12.8 million). As of 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. 5.9 million (accrued interest on December 31, 2018 was U.S. $649,000, or Ps. 12.8 million).

Comparative second quarter of 2019 vs. second quarter of 2018

Net Sales
Net sales of the Company decreased 1% from Ps. 9,073 million during the second quarter of 2018 to Ps. 9,025 million in the second quarter of 2019. Sales in tons of finished steel increased 10% from 537 thousand tons in the second quarter of 2018 compared with 592 thousand tons in the second quarter of 2019. Sales outside of Mexico in the second quarter of 2019 increased 17% from Ps. 3,681 million in the second quarter of 2018 to Ps. 4,308 million in the second quarter of 2019. Domestic sales decreased 13% from Ps. 5,392 million in the second quarter of 2018 to Ps. 4,717 million in the second quarter of 2019. The decrease in sales in the second quarter of 2019 compared to the second quarter of 2018 is due to a decrease in the average sales price of 10% and an increase in the volume of shipments approximately of 55 thousand of tons that represent 10%.

Cost of Sales
Cost of sales increased 2% in the second quarter of 2019 compared to the second quarter of 2018 from Ps. 7,706 million in the second quarter of 2018 to Ps. 7,830 million in the second quarter of 2019. With respect to sales, the cost of sales of the second quarter of 2019 represented 87% compared to 85% for the second quarter of 2018. The average cost of sales by ton of steel products decreased 8% in the second quarter of 2019 versus the second quarter of 2018, due to the cost of certain raw materials mainly scrap and electrodes.

Gross (Loss) Profit
Gross profit of the Company for the second quarter of 2019 amount to Ps. 1,195 million compared to Ps. 1,367 million in the second quarter of 2018, this represented a decrease of 13% between both periods. Gross profit as a percentage of net sales for the second quarter of 2019 was 13% compared to 15% of the second quarter of 2018. The decrease in gross profit is mainly due to a lower average price of sales and the cost of the volume of shipments in the second quarter of 2019 compared with the second quarter of 2018.

Selling, General and Administrative Expense
The selling, general and administrative expenses increased 29% in the second quarter of 2019 from Ps. 281 million in the second quarter of 2018 to Ps. 363 million in the second quarter of 2019. Selling, general and administrative expense as a percentage of net sales represented 4% in the second quarter of 2019 compared to 3% of the second quarter of 2018.

Other Income (Expenses), net
The company recorded other income net of Ps. 87 million in the second quarter of 2019 compared with other income net of Ps. 43 million for the second quarter of 2018.

Operating (Loss) Income
Operating income amounted to Ps. 919 million in the second quarter 2019 compared to Ps. 1,129 million in the second quarter of 2018, this represented 19% of decrease between both quarters. The operating income as a percentage of net sales was 10% for the second quarter of 2019, compared to 12% of the second quarter of 2018. The decrease in the operating income is due to the higher volume shipment, lower average sales price and an increase of selling, general and administrative expense.

Ebitda
The Ebitda amounted to Ps. 1,387 million in the second quarter of 2018 as a result of a net income of Ps. 682 million, less minority stake of Ps. 40 million, plus income taxes of Ps. 274 million, plus comprehensive financial cost of Ps. 213 million, plus depreciation of Ps. 258 million to Ps 1,185 million in the second quarter of 2019 as a result of a net income of Ps. 377 million, less minority stake of Ps. 49 million, plus income taxes of Ps. 198 million, plus comprehensive financial cost of Ps. 393 million, plus depreciation of Ps. 266 million.

Comprehensive Financial Cost
Comprehensive financial cost of the Company for the second quarter of 2019 represented a net expense of Ps. 393 million compared with a net expense of Ps. 213 million for the second quarter of 2018. The comprehensive financial cost is comprised for the net interest income of Ps. 43 million in the second quarter of 2019, compared to a net interest income of Ps. 31 million for the same period of 2018. Also record an exchange loss of Ps. 436 million in the second quarter of 2019 and an exchange loss of Ps. 182 million in the second quarter of 2018.

Income Taxes
The company recorded an expense of Ps. 198 million of income tax in the second quarter of 2019, (comprised by current expense tax of Ps. 204 million and an income for deferred tax of Ps. 6 million) compared to an expense accrual of Ps. 274 million for income tax for the second quarter of 2018, (comprised by current expense tax of Ps. 118 million and an expense for deferred tax of Ps. 156 million).

Net Income (Loss)
As a result of the foregoing, the Company recorded a net income of Ps.377 million in the second quarter of 2019 compared to Ps. 682 million for the second quarter of 2018, a decrease of 45% between both quarters.

(millions of pesos)	1H '19	1H '18	Year '19 VS '18
Sales	18,528	17,022	9%
Cost of Sales	16,236	14,045	16%
Gross Profit	2,292	2,977	(23%)
Selling, General and Administrative Expense	674	554	22%
Other Income (Expenses), net	153	20	665%
Operating Profit	1,771	2,443	(28%)
EBITDA	2,311	2,969	(22%)
Net income	803	1,656	(52%)
Sales Outside Mexico	9,091	6,988	30%
Sales in Mexico	9,437	10,034	(6%)
Total Sales (Tons)	1,183	1,092	8%

Quarter
(millions of pesos)	2Q '19	1Q '19	2Q '18	2Q '19 vs 1Q '19	2Q '19 vs 2Q '18
Sales	9,025	9,503	9,073	(5%)	(1%)
Cost of Sales	7,830	8,406	7,706	(7%)	2%
Gross Profit	1,195	1,097	1,367	9%	(13%)
Selling, General and Adm. Expenses	363	311	281	17%	29%
Other Income (Expenses), net	87	67	43	30%	102%
Operating Profit	919	853	1,129	8%	(19%)
EBITDA	1,185	1,127	1,387	5%	(15%)
Net Income	377	425	682	(11%)	(45%)
Sales Outside Mexico	4,308	4,783	3,681	(10%)	17%
Sales in Mexico	4,717	4,720	5,392	0%	(13%)
Total Sales (Tons)	592	591	537	0%	10%

Product	Thousands of Tons Jan-Jun 2019	Million of Pesos Jan-Jun 2019	Average Price per Ton Jan-Jun 2019	Thousands of Tons Jan-Jun 2018	Million of Pesos Jan-Jun 2018	Average Price per Ton Jan-Jun 2018
Commercial Profiles	730	8,747	11,982	645	8,303	12,873
Special Profiles	453	9,781	21,592	447	8,719	19,505



Total	1,183	18,528	15,662	1,092	17,022	15,588

Product	Thousands of Tons Apr-Jun 2019	Million of Pesos Apr-Jun 2019	Average Price per Ton Apr-Jun 2019	Thousands of Tons Jan-Mar 2019	Million of Pesos Jan-Mar 2019	Average Price per Ton Jan-Mar 2019	Thousands of Tons Apr-Jun 2018	Million of Pesos Apr-Jun 2018	Average Price per Ton Apr-Jun 2018
Commercial Profiles	367	4,780	13,025	363	5,001	13,777	339	4,888	14,419
Special Profiles	225	4,245	18,867	228	4,502	19,746	198	4,185	21,136



Total	592	9,025	15,245	591	9,503	16,080	537	9,073	16,896

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.

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.