Grupo Simec Announces Results of Operations for the First Six Months of 2020

Rhea-AI Summary

Grupo Simec reported a significant financial performance for the first half of 2020, with a 206% increase in net income to Ps. 2,460 million, driven by a 28% gross profit increase to Ps. 2,923 million. Despite a 13% drop in net sales to Ps. 16,096 million, cost of sales improved by 19%, resulting in better profit margins.

However, the second quarter showed a 71% decline in net income from the previous quarter, down to Ps. 546 million, alongside 11% lower sales and a 13% drop in shipments. The company's financial costs shifted from income to a net expense, indicating increased market volatility.

Positive

• 206% increase in net income to Ps. 2,460 million
• 28% increase in gross profit to Ps. 2,923 million
• Cost of sales decreased 19% from Ps. 16,236 million to Ps. 13,173 million
• Operating income increased 25% to Ps. 2,216 million

Negative

• 13% decrease in net sales to Ps. 16,096 million
• 71% decline in net income from Q1 2020 to Q2 2020
• 11% decrease in sales and 13% decline in shipments in Q2 2020
• Increased selling, general, and administrative expenses by 29%, reaching Ps. 867 million

GUADALAJARA, Mexico, July 27, 2020 /PRNewswire/ -- Grupo Simec, S.A.B. de C.V. (NYSE: SIM; BMV: SIMEC-B) ("Simec") announced today its results of operations for the sixth-month period ended June 30th, 2020.

Comparative first six months of 2020 vs. first six months of 2019

Net Sales
Net sales of the Company decreased from Ps. 18,528 million in the first half of 2019 to Ps. 16,096 million in the first half of 2020. Shipments decreased 2% from 1,183 thousand tons in the first half of 2019 to 1,162 thousand tons in the first half of 2020. Total sales outside of Mexico in the first half of 2020 decreased 10% to Ps. 8,168 million compared to Ps. 9,091 million in the first half of 2019. Mexican sales decreased 16% from Ps. 9,437 million in the first half of 2019 to Ps. 7,928 million in the first half of 2020. Sales increased for the first half of 2020 compared to the first half of 2019, is due to the combined of decreased in the average sales price of 12% and decrease in the volume of shipments approximately of 21 thousand tons that represent an 2%.

Cost of Sales
Cost of sales decreased 19% from Ps. 16,236 million in the first half of 2019, to Ps. 13,173 million in the first half of 2020. Cost of sales as a percentage of net sales represented 82% in the first half of 2020 while in the first half of 2019 represented 88%. Cost of sales decreased due to mix products and the less volume of products shipped.

Gross Profit
Gross profit of the Company for the first half of 2020 increased 28% from Ps. 2,292 million in the first half of 2019, to Ps. 2,923 million in the first half of 2020. Gross profit as percentage of net sales in the first half of 2020 was of 18%, while in the first half of 2019 was of 12%. The gross profit between both periods is given by better mix products shipped and lower average cost.

Selling, General and Administrative Expense
Selling, general and administrative expense increased 29%, from Ps. 674 million in the first half of 2019 to Ps. 867 million in the same period 2020, selling, general and administrative expense represented 4% of the net sales in the second quarter of 2019 and 5% in the second quarter of 2020.

Other Income (Expenses,) net
The Company recorded other income net for Ps. 160 million in the first half of 2020 million compared to other income Ps. 153 million in the same period of 2019.

Operating Income
Operating income increased 25% from Ps. 1,771 million for the first half of 2019 compared to Ps. 2,216 million in the first half of 2020. Operating income as percentage of net sales was 14% in the first half of 2020 compared to 10% in the same period of 2019. The increase in operating profit is mainly due to the mix of products shipped and lower cost of inputs for production.

Ebitda
The Ebitda amounted to Ps. 2,311 million in the first quarter of 2019 as a result of 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 to Ps 2,851 million in the first quarter of 2020 as a result a net income of Ps. 2,460 million, less minority stake of Ps. 3 million, plus income taxes of Ps. 951 million, less comprehensive financial cost of Ps. 1,193 million, plus depreciation of Ps. 636 million.

Comprehensive Financial Cost 
Comprehensive financial cost for the first half of 2020 represented an income of Ps. 1,193 million compared with an expense of Ps. 882 million for the first half of 2019. The comprehensive financial cost is comprised by the exchange income of Ps. 1,148 million in the first half of 2020 compared with an exchange loss of Ps. 939 million in the first half of 2019. Likewise, the Company recorded a net income interest of Ps. 45 million for the first half of 2020 compared with a net income interest of Ps. 57 million in 2019.

Income Taxes
The Company recorded an expense of Ps. 951 million for the net income tax during the first half of 2020, (comprised for a current expense tax of Ps. 954 million and income for deferred tax of Ps. 3 million) compared with an expense of Ps. 177 million to the first half of 2019 (comprised for a current expense tax of Ps. 204 million and income for deferred tax of Ps. 27 million).

Net Income
As a result of the foregoing, the Company recorded an increase in net income of 206% to pass of Ps. 803 million in the first half of 2019 to Ps. 2,460 million in the same period of 2020.

Comparative second quarter of 2020 vs. first quarter of 2020

Net Sales
Net sales of the Company decreased 11% in the second quarter of 2020 compared to the first quarter of the same period, to pass of Ps. 8,500 million during the first quarter of 2020 to Ps. 7,596 million in the second quarter of 2020. Shipments of finished steel products decreased from 622 thousand tons in the first quarter of 2020 to 540 thousand tons in the second quarter of the same year. Total sales outside of Mexico in the second quarter of 2020 decreased 1% to get to Ps. 4,072 million compared to Ps. 4,096 million of the first quarter of the same year. Domestic sales decreased from Ps. 4,404 million in the first quarter of 2020 to Ps. 3,524 million in the second quarter of the same year. The sales decreased mainly lower shipped by 82 thousand tons compared with the first quarter that represent a 13% and an income sales price in 3%.

Cost of Sales
Cost of sales decreased 11% from Ps. 6,960 million in the first quarter of 2020 to Ps. 6,213 million in the second quarter of 2020. Cost of sales as a percentage of net sales represented 82% for the first quarter of 2020 compared to 82% in the second quarter of the same year, the average cost of sales by ton record an increase between both quarters of 3%.

Gross Profit
Gross profit of the Company for the second quarter of 2020 decreased 10% to pass of Ps. 1,540 million in the first quarter of 2020 to Ps. 1,383 million in the second quarter of same year. Gross profit as a percentage of net sales represented 18% for the first quarter of 2020 compared to 18% in the second quarter of the same year. The gross profit in the second quarter of 2020 it originates from a lower volume shipped and the cost of purchasing supplies.

Selling, General and Administrative Expense
Selling, general and administrative expense increased 1%, from Ps. 431 million in the first quarter of 2020 to Ps. 436 million in the second quarter of the same year, and as percentage of net sales represented 5% in the first quarter of 2020 compared to 6% in the second quarter of the same year.

Other (Expenses) Income, net
The Company recorded other income net for Ps. 58 million during the second quarter of 2020 compared to other income net for Ps. 102 million in the first quarter of 2020.

Operating Income
Operating income decreased 17%, of Ps. 1,211 million in the first quarter of 2020 compared to Ps. 1,005 million of the second quarter of the same year. Operating income as percentage of net sales was 14% for the first quarter of 2020 compared to 13% 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. 1,526 million in the first quarter of 2020 as a result of a net income of Ps. 1,895 million, less minority stake of Ps. 1 million, plus income taxes of Ps. 578 million, less comprehensive financial cost of Ps. 1,262 million, plus depreciation of Ps. 316 million to Ps 1,325 million in the second quarter of 2020 as a result of a net income of Ps. 546 million, plus minority stake of Ps. 16 million, plus income taxes of Ps. 373 million, plus comprehensive financial cost of Ps. 69 million, plus depreciation of Ps. 321 million.

Comprehensive Financial Cost
Comprehensive financial cost of the Company in the second quarter of 2020 represented an expense of Ps. 69 million compared with of Ps. 1,262 million an income for the first quarter of 2020. The comprehensive financial cost is comprised for the net interest income of Ps. 1 million in the second quarter of 2020, while in the first quarter was a net income of Ps. 44 million. Likewise, we recorded a net exchange loss of Ps. 70 million in the second quarter of 2020 compared a net exchange income Ps. 1,218 million in the first quarter of the same year.

Income Taxes
The Company have been recorded an expense of Ps. 373 million of income tax during the second quarter of 2020, (comprised for an expense by current tax of Ps. 364 million and an expense for deferred tax of Ps. 9 million) compared with the Ps. 578 million of expense for the first quarter of the same year, (comprised for an expense by current tax of Ps. 590 million and income for deferred tax of Ps. 12 million).

Net Income
As a result of the foregoing, the Company recorded a decrease of 71% from a net income of Ps. 1,895 million in the first quarter of 2020 compared to a net income of Ps. 546 million for the second quarter of 2020.

Liquidity and Capital Resources
As of June 30th, 2020, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, or Ps. 7.0 million (accrued interest on June 30th, 2020 was U.S. $638,000, or Ps. 14.8 million).  As of December 31, 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. 5.7 million (accrued interest on December 31, 2019 was U.S. $677,000, or Ps. 12.8 million).

Comparative second quarter of 2020 vs. second quarter of 2019

Net Sales
Net sales of the Company decreased 16% from Ps. 9,025 million during the second quarter of 2019 to Ps. 7,596 million in the second quarter of 2020. Sales in tons of finished steel decreased 9% from 592 thousand tons in the second quarter of 2019 compared with 540 thousand tons in the second quarter of 2020. Sales outside of Mexico in the second quarter of 2020 decreased 5% from Ps. 4,308 million in the second quarter of 2019 to Ps. 4,072 million in the second quarter of 2020. Domestic sales decreased 25% from Ps. 4,717 million in the second quarter of 2019 to Ps. 3,524 million in the second quarter of 2020. The decrease in sales in the second quarter of 2020 compared to the second quarter of 2019 is due to a decrease in the average sales price of 8% and a decrease in the volume of shipments approximately of 52 thousand of tons that represent 9%.

Cost of Sales
Cost of sales decreased 21% in the second quarter of 2020 compared to the second quarter of 2019 from Ps. 7,830 million in the second quarter of 2019 to Ps. 6,213 million in the second quarter of 2020. With respect to sales, the cost of sales of the second quarter of 2020 represented 82% compared to 87% for the second quarter of 2019. The average cost of sales by ton of steel products decreased 13% in the second quarter of 2020 versus the second quarter of 2019, 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 2020 amount to Ps. 1,383 million compared to Ps. 1,195 million in the second quarter of 2019, this represented an increase of 16% between both periods. Gross profit as a percentage of net sales for the second quarter of 2020 was 18% compared to 13% of the second quarter of 2019. The increase in gross profit is mainly due to a lower average cost and a lower volume shipped, in the second quarter of 2020 compared to the second quarter of 2019.

Selling, General and Administrative Expense
The selling, general and administrative expenses increased 20% in the second quarter of 2020 from Ps. 363 million in the second quarter of 2019 to Ps. 436 million in the second quarter of 2020. Selling, general and administrative expense as a percentage of net sales represented 6% in the second quarter of 2020 compared to 4% of the second quarter of 2019.

Other Income (Expenses), net
The company recorded other income net of Ps. 58 million in the second quarter of 2020 compared with other income net of Ps. 87 million for the second quarter of 2019.

Operating (Loss) Income
Operating income amounted to Ps. 1,005 million in the second quarter 2020 compared to Ps. 919 million in the second quarter of 2019, this represented 9% of increase between both quarters. The operating income as a percentage of net sales was 13% for the second quarter of 2020, compared to 10% of the second quarter of 2019. The increase in operating profit is due to a lower average cost of sale.

Ebitda
The Ebitda amounted 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 to Ps 1,325 million in the second quarter of 2020 as a result of a net income of Ps. 546 million, plus minority stake of Ps. 16 million, plus income taxes of Ps. 373 million, plus comprehensive financial cost of Ps. 69 million, plus depreciation of Ps. 321 million.

Comprehensive Financial Cost 
Comprehensive financial cost of the Company for the second quarter of 2020 represented a net expense of Ps. 69 million compared with a net expense of Ps. 393 million for the second quarter of 2019. The comprehensive financial cost is comprised for the net interest income of Ps. 1 million in the second quarter of 2020, compared to a net interest income of Ps. 43 million for the same period of 2019. Also record an exchange loss of Ps. 70 million in the second quarter of 2020 and an exchange loss of Ps. 436 million in the second quarter of 2019.

Income Taxes
The company recorded an expense of Ps. 373 million of expense tax in the second quarter of 2020, (comprised by current expense tax of Ps. 364 million and an expense for deferred tax of Ps. 9 million) compared to an expense accrual of Ps. 198 million for income tax for the second quarter of 2019, (comprised by current expense tax of Ps. 204 million and an income for deferred tax of Ps. 6 million).

Net Income (Loss)
As a result of the foregoing, the Company recorded a net income of Ps. 546 million in the second quarter of 2020 compared to Ps. 377 million for the second quarter of 2019, an increase of 45% between both quarters.

(millions of pesos)	1H '20		1H '19		Year 20 VS  '19
Sales	16,096		18,528		(13%)
Cost of Sales	13,173		16,236		(19%)
Gross Profit	2,923		2,292		28%
Selling, General and Administrative Expense	867		674		29%
Other Income (Expenses), net	160		153		5%
Operating Profit	2,216		1,771		25%
EBITDA	2,851		2,311		23%
Net income	2,460		803		206%
Sales Outside Mexico	8,168		9,091		(10%)
Sales in Mexico	7,928		9,437		(16%)
Total Sales (Tons)	1,162		1,183		(2%)

 

Quarter
(millions of pesos)	2Q'20	1Q '20	2Q '19	2Q´20vs 1Q´20	2Q´20 vs 2Q '19
Sales	7,596	8,500	9,025	(11%)	(16%)
Cost of Sales	6,213	6,960	7,830	(11%)	(21%)
Gross Profit	1,383	1,540	1,195	(10%)	16%
Selling, General and Adm. Expenses	436	431	363	1%	20%
Other Income (Expenses), net	58	102	87	(43%)	(33%)
Operating Profit	1,005	1,211	919	(17%)	9%
EBITDA	1,325	1,526	1,185	(13%)	12%
Net Income	546	1,895	377	(71%)	45%
Sales Outside Mexico	4,072	4,096	4,308	(1%)	(5%)
Sales in Mexico	3,524	4,404	4,717	(20%)	(25%)
Total Sales (Tons)	540	622	592	(13%)	(9%)

 

Product	Thousands of Tons Jan-Jun 2020	Millions of Pesos          Jan-Jun 2020	Average Price per Ton Jan-Jun 2020	Thousands of Tons Jan – Jun 2019	Millions of Pesos      Jan- Jun 2019	Average Price per Ton  Jan-Jun 2019
Commercial Profiles	806	9,952	12,347	730	8,747	11,982
Special Profiles	356	6,144	17,258	453	9,781	21,592
Total	1,162	16,096	13,852	1,183	18,528	15,662

 

Product	Thousands of Tons Apr-Jun 2020	Millions of Pesos     Apr-Jun 2020	Average Price per Ton Apr-Jun 2020	Thousands of Tons Jan – Mar 2020	Millions of Pesos     Jan- Mar 2020	Average Price per Ton Jan-Mar 2020	Thousands of Tons          Apr-Jun 2019	Millions of Pesos           Apr-Jun 2019	Average Price per Ton          Apr-Jun 2019
Commercial Profiles	408	5,172	12,676	398	4,780	12,010	367	4,780	13,025
Special Profiles	132	2,424	18,363	224	3,720	16,607	225	4,245	18,867
Total	540	7,596	14,066	622	8,500	13,666	592	9,025	15,245

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

 

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

FAQ

What were Grupo Simec's net sales for the first half of 2020?

Grupo Simec reported net sales of Ps. 16,096 million for the first half of 2020.

How much did Grupo Simec's net income increase in the first half of 2020?

Grupo Simec's net income increased by 206% to Ps. 2,460 million in the first half of 2020.

What was the change in Grupo Simec's gross profit for the first half of 2020?

The gross profit for Grupo Simec increased by 28% to Ps. 2,923 million in the first half of 2020.

What was the decrease in net sales for Grupo Simec in the second quarter of 2020?

Net sales for Grupo Simec decreased by 11% in the second quarter of 2020 compared to the first quarter.

How did Grupo Simec's cost of sales change in the first half of 2020?

The cost of sales decreased by 19%, from Ps. 16,236 million in the first half of 2019 to Ps. 13,173 million in the first half of 2020.