Grupo Simec Announces Results Of Operations For The First Nine Months Of 2017

GUADALAJARA, Mexico, Oct. 23, 2017 /PRNewswire/ -- Grupo Simec, S.A.B. de C.V. (NYSE: SIM) ("Simec") announced today its results of operations for the nine-month period ended September 30, 2017.

Comparative first nine months of 2017 vs. first nine months of 2016

Net Sales

Net sales of the Company increased from Ps. 21,892 million in the first nine months of 2017 to Ps. 19,514 million in the first nine months of 2016. Shipments of finished steel products decreased 1% to 1million 617 thousand tons in the first nine months of 2017 compared to 1million 630 thousand tons in the first nine months of 2016. Total sales outside of Mexico in the first nine months of 2017 increased 22% to Ps. 9,710 million compared to Ps. 7,968 million in the same period of 2016. Mexican sales increased 6% from Ps. 11,546 million in the first nine months of 2016 to Ps. 12,182 million in the same period of f 2017. The increase in sales for the first nine months of 2017 is due to the decrease in the volume of shipments compared to the first nine months of 2016 (17 thousand tons equivalent to 1% increase). The average sales price by ton increased approximately 13%.

Cost of Sales

Cost of sales increased 14% from Ps. 15,894 million in the first nine months of 2016, to Ps. 18,154 million in the first nine months of 2017. Cost of sales as a percentage of net sales represented 83% in the first nine months of 2017 while in the first nine months of 2016 represented 81%. Cost of sales by steel ton increased approximately 15% in the first nine months of 2017 over the same period of 2016 due to a better price in inputs.

Gross Profit

Gross profit of the Company for the first nine months of 2017 increased 3% from Ps. 3,620 million in the first nine months of 2016, to Ps. 3,738 million in the first nine months of 2017. Marginal profit as percentage of net sales in the first nine months of 2017 was of 17% while in the first nine months of 2016 was of 19%. The gross profit increase is given by a better average cost of raw materials.

General, Selling and Administrative Expense

Selling, general and administrative expenses increased 3%, from Ps.933 million in the first nine months of 2016 to Ps. 965 million in the same period of 2017, selling, general and administrative expenses represented 4% to the 2017 and the 5% to the 2016 of the net sales for both periods.

Other Income (Expenses,) net

The Company recorded other expenses net for Ps. 8 million during the first nine months of 2017 while in the same period of 2016 the other income net by this concept was of Ps. 200 million.

Operating Income

Operating income decreased 4% from Ps. 2,765 million for the first nine months of 2017 compared to Ps. 2,887 million in the first nine months of 2016. Operating income as percentage of net sales was 13% in the first nine months of 2017 compared to 15% in the same period of 2016. The decrease in operating income is due to a mayor cost of some raw materials in the first nine months of 2017 compared with the same period of 2016.

Ebitda

The Ebitda increased 2%, from Ps. 3,788 million in the first nine months of 2016 to Ps. 3,856 million in the first nine months of 2017, due to a better average sales prices.

Comprehensive Financial Cost

Comprehensive financial cost for the first nine months of 2017 represented an expense of Ps. 607 million compared with an expense of Ps. 1,211 million for the first nine months of 2016. The net interest expense was of Ps. 4 million for the first nine months of 2017, compared with a net interest income of Ps. 55 million in 2016. Also we record an exchange loss of Ps. 603 million in the first nine months of 2017 compared with an exchange gain of Ps. 1,156 million in the first nine months of 2016 due to the slip in the exchange rate of the Ps. against the dollar of 12% in the first nine months of 2017.

Income Taxes

The Company recorded an income of Ps.25 million for the net income tax during the first nine months of 2017, (includes a deferred income tax of Ps. 174 million) compared with an income of Ps. 63 million of income tax for the first nine months of 2016 (includes a deferred income tax of Ps. 90 million).

Net Income

As a result of the foregoing, the Company recorded a decrease in net income of 52% to pass of Ps. 4,264 million in the first nine months of 2016 to Ps. 2,031 million of the same period of 2017.

Liquidity and Capital Resources

At September 30, 2017, 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 September 30, 2017 was U.S. $ 636,000, or Ps. 11.6 million).  At December 31, 2016, Simec's total consolidated debt consisted of U.S. $ 302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, or Ps. 6.2 million (accrued interest on December 31, 2016 was U.S. $ 506,000, or Ps. 10.5 million).

Comparative third quarter of 2017 vs. second quarter of 2017

Net Sales

Net sales of the Company decreased to pass of Ps. 7,159 million during the second quarter of 2017 to Ps. 6,810 million in the third quarter of 2017. Shipments of finished steel products increased to 533 thousand tons in the third quarter of 2017 from 521 thousand tons in the second quarter of the same year. Total sales outside of Mexico in the third quarter of 2017 decreased 9% to get to Ps. 2,855 million compared to Ps. 3,152 million of the second quarter of the same year. Mexican sales show a decrease of from Ps. 4,007 million in the second quarter of 2017 to Ps. 3,955 million in the third quarter of the same year. The average selling price decreased 7% in the third quarter of 2017 compared to the second quarter of the same year.

Cost of Sales

Cost of sales decreased to P s. 5,856 million in the third quarter of 2017 from Ps. 5,949 million in the second quarter of 2017. Cost of sales as a percentage of net sales represented 86% for the third quarter of 2017compared to 83% for the second quarter of the same year. The cost of sales by ton increases 4% in the third quarter of 2017 compared to the second quarter of the same year, due mainly to decrease of raw materials.

Gross Profit

Gross profit of the Company for the third quarter of 2017 decreased 21% to pass of Ps. 1,210 million in the second quarter of 2017 to Ps. 954 million in the third quarter of same year. Gross profit as a percentage of net sales in the third quarter of 2017 was of 14% compared to 17% in the second quarter of the same year. The decreased in the gross profit in the third quarter of 2017 is due to a decreased in the average selling price.

General, Selling and Administrative Expense

Selling, general and administrative expense decreased 35% to pass of Ps. 350 million in the second quarter of 2017 to Ps. 227 million in the third quarter of the same year, and as percentage of net sales represented 3% for the third quarter of 2017 and 5% for the second quarter of 2017.

Other (Expenses) Income, net

The Company recorded other income net for Ps. 5 million during the third quarter of 2017 compared to other expenses net for Ps. 14 million in the second quarter of 2017.

Operating Income

The Operating income was of Ps. 732 million in the third quarter of 2017 compared to Ps. 846 million in the second quarter of the same year. Operating income as percentage of net sales represented 11% for the third quarter of 2017 and 12% for the second quarter of 2017.

Ebitda

The Ebitda show a decrease of 11%, to pass of Ps 1,201 million in the second quarter of 2017 to Ps. 1,072 million in the third quarter of the same year, this is due to previously mentioned.

Comprehensive Financial Cost

Comprehensive financial cost of the Company in the third quarter of 2017 represented an income of Ps. 145 million compared with an expense of Ps. 221 million for the second quarter of 2017. The comprehensive financial cost is comprised for: the net interest expense of Ps.1 million in the third quarter of 2017 compared to net interest expense of 1 million in the second quarter of the same year. Also we record a net exchange profit of Ps. 146 million in the third quarter of 2017 compared a net exchange expense of Ps. 220 million in the second quarter of the same year.

Income Taxes

The Company have been recorded Ps. 27 million of expense tax during the third quarter of 2017, (includes a deferred income tax of Ps.51 million) compared with the Ps. 12 million of expense for the second quarter of the same year, (includes a deferred income tax of Ps. 53 million).

Net Income

As a result of the foregoing, the Company recorded a net income of Ps. 737 million in the third quarter of 2017 compared to a net income of Ps. 614 million for the second quarter of 2017.

Comparative third quarter of 2017 vs. third quarter of 2016

Net Sales

Net sales of the Company increased 2% from Ps. 6,671 million during the third quarter of 2016 to Ps. 6,810 million in the third quarter of 2017. Sales in tons of finished steel increased to 529 thousand tons in the third quarter of 2016 from 533 thousand tons in the third quarter of 2017. Sales outside of Mexico increased 42% from Ps. 2,017 million in the third quarter of 2016 to Ps. 2,855 million in the third quarter of 2017. Mexican sales decreased 15% from Ps. 4,654 million in the third quarter of 2016 to Ps. 3,955 million in the third quarter of 2017. The average sales price increased approximately 1% in the third quarter of 2017, compared to the same period of the 2016.

Cost of Sales

Cost of sales increased 8% in the third quarter of 2016 compared to the third quarter of 2017 from Ps. 5,435 million in the third quarter of 2016 to Ps. 5,856 million in the third quarter of 2017. With respect to sales, the cost of sales of the third quarter of 2016 represented 81% compared to 86% for the third quarter of 2017. The average cost of raw materials used to produce steel products increased in 7%, due to decrease of raw materials prices.

Gross (Loss) Profit

Gross profit of the Company for the third quarter of 2017 decreased 23% from Ps. 1,236 million in the third quarter of 2016 compared to Ps. 954 million in the third quarter of 2017. Gross profit as a percentage of net sales for the third quarter of 2017 was 14% compared to 19% of the third quarter of 2016. The decrease in gross profit is due an increase in the average selling cost of some raw materials.

General, Selling and Administrative Expense

The selling, general and administrative expense decreased 28% in the third quarter of 2017 to Ps. 227 million in the third quarter of 2017 from Ps.317 million in the third quarter of 2016. Selling, general and administrative expense as a percentage of net sales represented 3% during the third quarter of 2017 compared with 5% of the third quarter of 2016.

Other Income (Expenses), net

The company recorded other income net of Ps. 5 million in the third quarter of 2017 compared with other income net of Ps. 69 million for the third quarter of 2016.

Operating (Loss) Income

Operating income decreased from Ps. 988 million in the third quarter of 2016 compared to Ps. 732 million in the third quarter of 2017, this represent 26% of increase between both quarters. The operating income as a percentage of net sales was 11% for the third quarter of 2017 compared to 15% for the third quarter of 2016. The increase in the operating income is due to a better cost of sales.

Ebitda

The Ebitda of the third quarter of 2016 decreased 19%  from Ps 1,321 million in the third quarter of 2016 to Ps. 1,072 million of the same period of 2017, this is due to the above explained in the operating income.

Comprehensive Financial Cost

Comprehensive financial cost of the Company for the third quarter of 2017 represented a net income of Ps. 145 million compared with an income of Ps.407 million for the third quarter of 2016. The comprehensive financial cost is comprised for: the net interest income of Ps. 44 million in the third quarter of 2016, compared to a net interest expense of Ps. 1 million for the same period of 2017. Also record an exchange gain of Ps. 146 million in the third quarter of 2017 and an exchange gain of Ps. 363 million in the third quarter of 2016.

Income Taxes

The company recorded an expense tax for Ps. 27 million in the third quarter of 2017, (includes a deferred income tax of Ps. 51 million) compared to an income of Ps. 58 million for income tax for the third quarter of 2016, (includes an accrual of deferred income tax of Ps. 25 million).

Net Income (Loss)

As a result of the foregoing, the Company recorded a net income of Ps. 737 million in the third quarter of 2017 compared to a net loss of Ps. 1,461 million for the same period of 2016.

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 informationcontained herein.

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SOURCE Grupo Simec, S.A.B. de C.V.