Grupo Simec Announces Results Of Operations For Q1, Of 2023, Ended March 31, 2023

Grupo Simec, S.A.B. de C.V. (NYSE:SIM) ("Simec") announced today its results of operations for the three-month period ended March 31, 2023.

Comparative first quarter of 2023 vs. first quarter of 2022

Net Sales

The net sales of the company decreased derived from a less sales price. Sales passed from Ps. 15,032 million in the first quarter of 2022 to Ps. 12,825 million in the same period of 2023. Shipments of steel finished goods decreased 3% from 623 thousand tons in the first quarter of 2022 compared to 604 thousand tons in the same period of 2023. Total sales outside of Mexico in the first quarter of 2023 decreased 26% to reach Ps. 5,181 million compared to Ps. 6,976 million in the same period of 2022. The Mexican sales decreased 5% from Ps. 8,056 million in the first quarter of 2022 to Ps. 7,644 million in the same period of 2023. The decrease in sales can be explained, from the average sales price per ton of steel finished goods decreased 12% in the first quarter of 2023 compared with the same period of 2022.

Cost of Sales

The cost of sales decreased from Ps. 11,190 million in the first quarter of 2022 to Ps. 9,618 million in the same period of 2023. Cost of sales as a percentage of net sales in the first quarter of 2023 and 2022 represented 75% and 74% respectively. The average cost of sales per ton of steel finished goods decreased 11% in the first quarter of 2023 compared to the same period of 2022.

Gross Profit

The gross profit of the company decreased 17% from Ps. 3,842 million in 2022 to Ps. 3,207 million in the same period of 2023. Gross profit as a percentage of net sales in the first quarter of 2023 and 2022 represented 25% and 26% respectively. The decrease in gross profit is due to explained from the average sales price per ton of steel finished goods in the first quarter of 2023 compared with the same period of 2022.

General, Sales and administrative Expenses

General, selling, and administrative expenses increased 13%, from Ps.518 million in the first quarter of 2022 to Ps. 587 million in the same period of 2023 and representing 3% of net sales in 2022 compared to 5% for the period 2023.

Other Expenses (Income) net

The company recorded other income net of Ps. 58 million in the first quarter of 2023 compared to other income net of Ps. 1 million in the same period of 2022.

Operating Income

The operating income decreased from Ps. 3,325 million for the first quarter of 2022 compared to Ps. 2,678 million in the same period of 2023. Operating income as a percentage of net sales was 21% in the first quarter of 2023 compared to 22% in the same period of 2022. The decrease in operating income is from the average sales price per ton of steel finished goods in the first quarter of 2023 compared with the same period of 2022.

EBITDA

The EBITDA of the Company was of Ps. 3,605 million for the first quarter of 2022, as a result of a net income of Ps. 2,494 million, plus income taxes of Ps. 460 million, plus comprehensive financial cost of Ps. 371 million, plus depreciation of Ps. 280 million to Ps 2,959 million in the same period of 2023 as a result of a net income of Ps. 1,033 million, less minority stake of Ps. 2 million plus income taxes of Ps. 531 million, plus comprehensive financial cost of Ps. 1,116 million, plus depreciation of Ps. 281.

Comprehensive Financial Cost 

The Comprehensive financial cost in the first quarter of 2023 represented a net expense of Ps. 1,116 million compared with a net expense of Ps.371 million in the same period of 2022. Net interest was an income of Ps. 190 million in the first quarter of 2023 compared with a net income of Ps. 29 million in the same period of 2022. At the same time, registered an exchange loss of Ps. 1,306 million in the first quarter of 2023 compared with an exchange loss of Ps.400 million in the same period of 2022.

Income Taxes

Income Taxes recorded an expense of Ps. 531 million in the first quarter of 2023, compared to an expense of Ps.460 million in the same period of 2022 (including the benefits of Ps. 7 million of deferred income taxes).

Net Income (loss)

As a result of the foregoing, net income decreases to Ps. 1,033 million in the first quarter of 2023 from Ps. 2,494 million in the same period of previous year.

Financial Situation, Liquidity and Capital Resources

As of March 31, 2023, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, or Ps. 5.5 million (accrued interest on March 31, 2023 was U.S. $696 or Ps. 12.6 million).  As of March 31, 2022, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, or Ps. 6.0 million (accrued interest on March 31, 2022 was U.S. $676 or Ps. 13.4 million).

Comparative first quarter of 2023 vs. fourth quarter of 2022

Net Sales

The net sales of the company increased 26% comparing Ps. 10,147 million in the fourth quarter of 2022 to Ps. 12,825 million in the first quarter of 2023. The tons sales increased 13%, from 535 thousand tons in the fourth quarter of 2022 compared to 604 thousand tons in the first quarter of 2023. Total sales outside of Mexico in the first quarter of 2023 increased 40% from Ps. 3,704 million on the last quarter of 2022 compared to Ps. 5,181 million in the first quarter of 2023. The Mexican sales increased 19% from Ps. 6,443 million in the fourth quarter of 2022 to Ps. 7,644 million in the first quarter of 2023. The increase mainly due to a greater volume shipped, better average sales price per ton, increased 12%, in the first quarter of 2023 compared with the fourth quarter of 2022.

Cost of Sales

Cost of sales increased 29% from Ps. 7,441 million in the fourth quarter of 2022 to Ps. 9,618 million in the first quarter of 2023. Cost of sales as a percentage of net sales in the first quarter of 2023 represented 75% and in the last quarter of 2022 cost of sales represented 73%. The average cost of finished steel products in the first quarter of 2023 increased 14% compared to the fourth quarter of 2022 as a result of an increased on the cost of raw materials.

Gross Profit

Gross profit of the company for the first quarter of 2023 increased to Ps. 3,207 million in 2023 from Ps. 2,706 million in the last quarter of 2022. Gross profit as a percentage of net sales in the first quarter of 2023 was 25% and for the last period of 2022 was 27%. The increase in gross profit is due to a better average sales price and volume of shipments on the first quarter of 2023 compared with the last quarter of 2022.

General, Sales and administrative Expenses

General, selling and administrative expenses decreased to Ps. 587 million in the first quarter of 2023 compared to Ps. 732 million in the fourth quarter of 2022, representing 5% for the period of the first quarter 2023 and 7% for the period of the fourth quarter 2022.

Other Expenses (Income) net

The company recorded other net income of Ps. 58 million in the first quarter of 2023 compared to other net income of Ps. 65 million in the fourth quarter of 2022.

Operating Income

Operating income increased 31% to Ps. 2,678 million for the first quarter of 2023 compared to Ps. 2,039 million in the last quarter of 2022. Operating income as a percentage of net sales was 21% in the first quarter of 2023, compared to 20% in the last quarter of 2022. The increase in operating income is due to the increase in production and volume of shipments, in the first quarter of 2023 compared with the fourth quarter of 2022.

EBITDA

The EBITDA of the Company was of 2,322 million for the fourth quarter of 2022, as a result of a net loss of Ps. 334 million, less minority stake of Ps. 2 million, plus income taxes of Ps. 1,349 million, plus comprehensive financial cost of Ps. 1,026 million, plus depreciation of Ps. 283 million to Ps 2,959 million in the first quarter of 2023 as a result of a net income of Ps. 1,033 million, less minority stake of Ps. 2 million, plus income taxes of Ps. 531 million, plus comprehensive financial cost of Ps. 1,116 million, plus depreciation of Ps. 281.

Comprehensive Financial Cost 

Comprehensive financial cost in the first quarter of 2023 represented a net expense of Ps. 1,116 million compared with a net expense of Ps. 1,026 million in the fourth quarter of 2022. Net interest income of the first quarter of 2023 was of Ps. 190 million compared with an interest net income of Ps. 93 million in the last quarter of 2022. Likewise, an exchange less of 1,306 million was recorded in the first quarter of 2023 against an exchange less of Ps. 502 million in the last quarter of 2022. In the fourth quarter of 2022, other net financial expense was recorded for Ps. 617 million.

Income Taxes

Income Taxes recorded an expense of Ps. 531 million in the first quarter of 2023, compared with an expense of Ps. 1,349 million in the fourth quarter of 2022 (including Ps. 102 million of deferred expense taxes).

Net Income (loss)

As a result of the foregoing, the net income of the first quarter of 2023 is of Ps. 1,033 million compared net loss Ps. 334 million of the fourth quarter 2022.