Grupo Simec Announces Results of Operations for the First Nine Months of 2009

GUADALAJARA, Mexico, Oct. 28 Grupo-Simec-3Q09-earn
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, 2009.
Nine-Month Period Ended September 30, 2009 compared to Nine-Month Period Ended September 30, 2008
Net Sales
Net sales decreased 48% to Ps. 14,277 million in the nine-month period ended September 30, 2009 (including the net sales generated by the newly acquired plants of Grupo San of Ps. 2,854 million) compared to Ps. 27,567 million in the same period 2008 (including the net sales generated by the newly acquired plants of Grupo San of Ps. 1,586 million). Shipments of finished steel products decreased 35% to 1,528 thousand tons in the nine-month period ended September 30, 2009 (including the net sales generated by the newly acquired plants of Grupo San of 386 thousand tons) compared to 2,357 thousand tons in the same period 2008 (including the net sales generated by the newly acquired plants of Grupo San of 144 thousand tons). Total sales outside of Mexico in the nine-month period ended September 30, 2009 decreased 69% to Ps. 6,108 million (including the net sales generated by the newly acquired plants of Grupo San of Ps. 9 million) compared with Ps. 19,489 million in the same period 2008, (including the net sales generated by the newly acquired plants of Grupo San of Ps. 97 million) while total Mexican sales increased 1% from Ps. 8,078 million in the nine-month period ended September 30, 2008 (including the net sales generated by the newly acquired plants of Grupo San of Ps. 1,489 million) to Ps. 8,169 millions in the same period 2009 (including the net sales generated by the newly acquired plants of Grupo San of Ps. 2,845 million). The decrease in sales is due to lower shipments during the nine-month period ended September 30, 2009, compared to the same period in 2008 (a 829,000 tons decrease). The average price of steel products decreased 20% in the nine-month period ended September 30, 2009 compared with the same period of 2008.
Direct Cost of Sales
Direct cost of sales decreased 48% from Ps. 22,469 million in the nine-month period ended September 30, 2008 (including the cost of sales generated by the newly acquired plants of Grupo San of Ps. 970 million) to Ps. 11,610 million in the same period 2009 (including the cost of sales generated by the newly acquired plants of Grupo San of Ps. 1,912 million). Direct cost of sales as a percentage of net sales represented 81% in the nine-month period ended September 30, 2009 compared to 82% in the same period 2008. The average cost of raw materials used to produce steel products decreased 20% in the nine-month period ended September 30, 2009 versus the same period 2008, primarily as a result of decreases in the price of scrap and certain other raw materials.
Marginal Profit
Marginal profit in the nine-month period ended September 30, 2009 was Ps. 2,667 million (including the marginal profit generated by the newly acquired plants of Grupo San of Ps. 942 million) compared to Ps. 5,098 million in the same period 2008 (including the marginal profit generated by the newly acquired plants of Grupo San of Ps. 616 million). Marginal profit as a percentage of net sales in the nine-month period ended September 30, 2009 was 19% compared to 18% in the same period 2008. The decline in marginal profit is due to lower shipments of 35% during the nine-month period ended September 30, 2009 compared with the same period of 2008.
Operating Expenses
Operating expenses increased 23% to Ps. 1,665 million in the nine-month period ended September 30, 2009 (including the operating expenses from the newly acquired plants of Grupo San of Ps. 331 million and the amortization of the tangible and intangible assets of Ps. 269 million registered by the acquisition of Grupo San) compared to Ps. 1,358 million in the same period 2008 (including the operating expenses from the newly acquired plants of Grupo San of Ps. 202 million), and represented 12% of net sales in the nine-month period ended September 30, 2009 and 5% of net sales in the same period 2008.
Operating Income
Operating income decreased 73% to Ps. 1,002 million for the nine-month period ended September 30, 2009 (including the operating income generated by the newly acquired plants of Grupo San of Ps. 342 million) compared to Ps. 3,740 million in the same period 2008 (including the operating income generated by the newly acquired plants of Grupo San of Ps. 414 million). Operating income as a percentage of net sales was 7% in the nine-month period ended September 30, 2009 compared to 14% in the same period 2008. The decline in operating income is due to lower shipments of 35% during the nine-month period ended September 30, 2009 compared with the same period of 2008.
Comprehensive Financial Cost
Comprehensive financial cost in the nine-month period ended September 30, 2009 represented an expense of Ps. 49 million compared with an expense of Ps. 233 million in the same period 2008. Net interest expense was Ps. 24 million in the nine-month period ended September 30, 2009 compared with a net interest income of Ps. 81 million in the same period 2008. At the same time, we registered an exchange loss of Ps. 25 million in the nine-month period ended September 30, 2009 compared with an exchange loss of Ps. 314 million in the same period 2008, reflecting a 0.3% increase in the value of the peso versus the dollar in the nine-month period ended September 30, 2009 compared to the same period of 2008.
Other Expenses (Income) net
The company recorded other income net of Ps. 7 million in the nine-month period ended September 30, 2009 compared to other income net of Ps. 53 million in the same period 2008.
Income Taxes
Income Taxes recorded a provision of Ps. 168 million in the nine-month period ended September 30, 2009 (including the provision of Ps. 15 million of deferred income taxes) compared to Ps. 1,209 million in the same period of 2008 (including the provision of Ps. 771 million of deferred income taxes).
Net Income
As a result of the foregoing, net income decreased by 66% to Ps. 792 million in the nine-month period ended September 30, 2009 from Ps. 2,351 million in the same period 2008.
Liquidity and Capital Resources
As of September 30, 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 September 30, 2009 was U.S. $411,654). As of December 31, 2008, Simec's total consolidated debt consisted of U.S. $952,000; U.S. $650,000 is a credit
bank and U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998 (accrued interest on December 31, 2008 was U.S. $387,882).
Comparative third quarter 2009 vs second quarter 2009
Net Sales
Net sales increased 21% from Ps. 4,161 million for the second quarter 2009 to Ps. 5,035 million for the third quarter 2009. Sales in tons of finished steel increased 17% to 551 thousand tons in the third quarter 2009 compared with 471 thousand tons in the second quarter 2009. The total sales outside of Mexico for the third quarter 2009 increased 53% to Ps. 2,348 million compared with Ps. 1,538 million for the second quarter 2009. Total Mexican sales increased 2% to Ps. 2,687 million in the third quarter 2009 from Ps. 2,623 million in the second quarter 2009. Prices of finished products sold in the third quarter 2009 increased approximately 3% compared to the second quarter 2009.
Direct Cost of Sales
Direct cost of sales increased 30% from Ps. 3,256 million in the second quarter 2009 to Ps. 4,243 million for the third quarter 2009. With respect to sales, in the third quarter 2009, the direct cost of sales represents 85% compared to 78% for the second quarter 2009. The average cost of raw materials used to produce steel products increased 12% in the third quarter 2009 versus the second quarter 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 2009 decreased 12% to Ps. 792 million compared to Ps. 905 million in the second quarter 2009. The marginal profit as a percentage of net sales for the third quarter 2009 was 16% compared with 22% for the second quarter of 2009. 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 2009 versus the second quarter 2009.
Operating Expenses
Operating expenses decreased 1% to Ps. 537 million in the third quarter 2009 compared to Ps. 543 million for the second quarter 2009. Operating expenses as a percentage of net sales represented 11% during the third quarter 2009 and 13% during the second quarter 2009.
Operating Income
Operating income decreased 30% from an operating income of Ps. 362 million in the second quarter 2009 to Ps. 255 million of operating income for the third quarter 2009. The operating income as a percentage of net sales in the third quarter 2009 was 5% compared to 9% in the second quarter 2009. 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 2009 versus the second quarter 2009.
Comprehensive Financial Income (Cost)
Comprehensive financial income for the third quarter 2009 represented a gain of Ps. 12 million compared with an expense of Ps. 121 million for the second quarter 2009. Net interest expense was Ps. 13 million in the third quarter 2009 compared with Ps. 8 million of net interest expense in the second quarter 2009. At the same time we registered an exchange gain of Ps. 25 million in the third quarter 2009 compared with an exchange loss of Ps. 113 million in the second quarter 2009.
Other Expenses (Income) net
The company recorded other income net of Ps. 7 million in the third quarter 2009 compared with other expense net of Ps. 1 million for the second quarter 2009.
Income Taxes
Income Taxes for the third quarter 2009 was an expense of Ps. 7 million compared to Ps. 154 million of expense for the second quarter 2009.
Net Income
As a result of the foregoing, net income was Ps. 267 million in the third quarter 2009 compared to Ps. 86 million of net income in the second quarter 2009.
Comparative third quarter 2009 vs third quarter 2008
Net Sales
Net sales decreased 52% from Ps. 10,533 million for the third quarter 2008 (including the net sales generated by the newly acquired plants of Grupo San of Ps. 1,073 million) to Ps. 5,035 million for the third quarter 2009 (including the net sales generated by the newly acquired plants of Grupo San of Ps. 955 million). Sales in tons of finished steel decreased 31% to 551 thousand tons in the third quarter 2009 compared with 795 thousand tons in the third quarter 2008. The total sales outside of Mexico for the third quarter 2009 decreased 68% to Ps. 2,348 million compared with Ps. 7,317 million for the third quarter 2008. Total Mexican sales decreased 16% to Ps. 2,687 million in the third quarter 2009 from Ps. 3,216 million in the third quarter 2008. Prices of finished products sold in the third quarter 2009 decreased approximately 31% compared to the third quarter 2008.
Direct Cost of Sales
Direct cost of sales decreased 51% from Ps. 8,726 million in the third quarter 2008 (including the cost of sales generated by the newly acquired plants of Grupo San of Ps. 663 million) to Ps. 4,243 million for the third quarter 2009 (including the cost of sales generated by the newly acquired plants of Grupo San of Ps. 671 million). With respect to sales, in the third quarter 2009, the direct cost of sales represents 84% compared to 83% for the third quarter 2008. The average cost of raw materials used to produce steel products decreased 30% in the third quarter 2009 versus the third quarter 2008, primarily as a result of decreases in the price of scrap and certain other raw materials.
Marginal Profit
Marginal profit for the third quarter 2009 decreased 56% to Ps. 792 million (including the marginal profit generated by the newly acquired plants of Grupo San of Ps. 284 million) compared to Ps. 1,807 million in the third quarter 2008 (including the marginal profit generated by the newly acquired plants of Grupo San of Ps. 410 million). The marginal profit as a percentage of net sales for the third quarter 2009 was 16% compared with 17% for the third quarter 2008. The decline in marginal profit is due to lower shipments of 31% during the third quarter 2009 compared with the third quarter 2008.
Operating Expenses
Operating expenses decreased 5% to Ps. 537 million in the third quarter 2009 (including the operating expenses from the newly acquired plants of Grupo San of Ps. 109 million and the amortization of the tangible and intangible assets of Ps. 89 million registered by the acquisition of Grupo San) compared to Ps. 564 million for the third quarter 2008 (including the operating expenses from the newly acquired plants of Grupo San of Ps. 149 million). Operating expenses as a percentage of net sales represented 11% during the third quarter 2009 and 5% during the third quarter 2008.
Operating Income
Operating income decreased 79% from an operating income of Ps. 1,243 million in the third quarter 2008 (including the operating income generated by the newly acquired plants of Grupo San of Ps. 261 million) to Ps. 255 million of operating income for the third quarter 2009 (including the operating loss generated by the newly acquired plants of Grupo San of Ps. 86 million). The operating income as a percentage of net sales in the third quarter 2009 was 5% compared to 12% in the third quarter 2008. The decrease in operating income is due to lower shipments of 31% during the third quarter 2009 compared with the third quarter 2008.
Comprehensive Financial Income (Cost)
Comprehensive financial income for the third quarter 2009 represented a gain of Ps. 12 million compared with a gain of Ps. 25 million for the third quarter 2008. Net interest expense was Ps. 13 million in the third quarter 2009 compared with Ps. 11 million of net interest expense in the third quarter 2008. At the same time we registered an exchange gain of Ps. 25 million in the third quarter 2009 compared with an exchange gain of Ps. 36 million in the third quarter 2008.
Other Expenses (Income) net
The company recorded other income net of Ps. 7 million in the third quarter 2009 compared with other income net of Ps. 49 million for the third quarter 2008.
Income Taxes
Income Taxes for the third quarter 2009 was an expense of Ps. 7 million compared to Ps. 483 million of income for the third quarter 2008.
Net Income
As a result of the foregoing, net income was Ps. 267 million in the third quarter 2009 compared to Ps. 834 million of net income in the third quarter 2008.
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.