Grupo Simec Announces Results of Operations for the First Six Months of 2010
GUADALAJARA, Mexico, July 27 -- 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, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") 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, 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 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
Product of of Average
Price
Tons Pesos per
Apr-Jun
2010 Apr-Jun Ton
2010 Apr-Jun
2010
Comercial
Profiles 250 2,277 9,108
Special
Profiles 308 4,090 13,279
Total 558 6,367 11,410
Millions
Product Thousands of Average
Price
of Tons Pesos per
Jan - Jan-
Mar Mar Ton
2010 2010 Jan-Mar
2010
Comercial
Profiles 292 2,533 8,674
Special
Profiles 312 3,860 12,372
Total 604 6,393 10,584
Millions
Product Thousands of Average
Price
of Tons Pesos per
Apr-Jun Apr-Jun Ton
2009 2009 Apr-Jun
2009
Comercial
Profiles 2,103 7,996
263
Special
Profiles 2,058 9,894
208
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.