GRUPO SIMEC ANNOUNCES RESULTS OF OPERATIONS FOR THE FIRST SIX MONTHS OF 2024

Rhea-AI Summary

Grupo Simec (NYSE: SIM) reported its first half of 2024 financial results. Net sales plummeted 29% year-over-year to Ps. 16,279 million, driven by a 22% drop in average sales price and an 8% decrease in shipment volumes. Sales outside Mexico fell 24%, while Mexican sales dropped 32%. Cost of sales fell 29%, aligning with the decline in net sales. Gross profit decreased 30% to Ps. 4,047 million. Operating income fell 40% to Ps. 2,916 million. EBITDA dropped 37% to Ps. 3,413 million.

However, net income surged 169% year-over-year to Ps. 5,435 million, primarily due to an increase in comprehensive financial income. On a quarterly basis, net sales grew 6% in Q2 2024 vs. Q1 2024, with a 12% increase in shipment volumes. Despite a 15% rise in domestic sales, sales outside Mexico decreased 3%. Net income increased 173% quarter-over-quarter to Ps. 3,979 million.

Positive

• None.

Negative

• Net sales down 29% year-over-year.
• Sales outside Mexico fell 24%.
• Mexican sales dropped 32%.
• Gross profit decreased 30% year-over-year.
• Operating income fell 40%.
• EBITDA dropped 37%.
• Selling, general and administrative expenses up 7% year-over-year.
• Other income decreased 69%.
• Cost of sales increased 8% quarter-over-quarter.
• Gross profit down 22% year-over-year for Q2.

Insights

Financial Analyst

The financial results presented by Grupo Simec for the first half of 2024 indicate a challenging period for the company. The net sales decreased by 29% compared to the first half of 2023, primarily driven by a reduction in shipments and average sales prices. This significant decline in revenue reflects broader market conditions that may include lower demand and competitive pricing pressures.

The gross profit also fell by 30%, maintaining a stable gross margin of 25%. However, this consistency in margin suggests cost management effectiveness, despite the lower sales figures. Additionally, the operating income experienced a substantial drop of 40%, which highlights the impact of reduced sales volumes and prices on overall profitability.

On a positive note, the net income saw an impressive increase of 169%, primarily due to the comprehensive financial cost improvements and lower income tax expenses. This anomaly suggests that foreign exchange gains and other financial incomes significantly contributed to the bottom line, rather than core operational performance.

In summary, while operational performance and sales are under pressure, certain financial maneuvers and cost controls are temporarily bolstering the net income. Investors should closely monitor whether these financial gains are sustainable or if they mask underlying operational weaknesses.

Market Research Analyst

The results offer an intriguing insight into the market dynamics affecting Grupo Simec. The 24% decrease in international sales and 32% drop in domestic sales highlight a troubling trend. This downturn suggests that both domestic and international markets are experiencing reduced demand or intensifying competition, driving down prices and volumes.

A noteworthy point is the decrease in shipments by 8%. This decline in sales volume indicates either lower market demand or potential supply chain issues. Additionally, the average price per ton for both commercial and special profiles dropped significantly, reflecting a price-sensitive market environment.

On a quarterly comparison, the second quarter of 2024 showed slight improvements in net sales and operating income over the first quarter, suggesting a potential stabilization or modest recovery. However, when compared to Q2 2023, there's a stark 17% decline in net sales, emphasizing the longer-term challenges the company faces in regaining its previous market position.

Overall, while there are some short-term positive signs, the broader market conditions remain challenging. Investors should remain cautious and look for consistent recovery trends before making long-term investment decisions.

Corporate Governance Expert

The financial performance of Grupo Simec for the first half of 2024 underscores the importance of robust corporate governance in navigating economic downturns. The increase in Selling, General and Administrative (SG&A) expenses by 7% despite falling revenues may raise concerns among investors about cost containment strategies. Effective governance would typically demand tighter cost controls, especially during periods of declining sales.

The significant improvement in net income from Ps. 2,019 million to Ps. 5,435 million, largely attributed to comprehensive financial cost management, reflects positively on the company’s financial oversight. However, this raises a red flag about the sustainability of such financial gains without corresponding improvements in core business operations.

Moreover, the transparency and detailed reporting of various financial metrics, including operating income, EBITDA and EBITDA adjustments, highlight a commitment to maintaining investor trust through clear communication. For long-term investors, assessing the governance practices around cost management and strategic responses to market challenges will be important in evaluating the company’s resilience and growth potential.

GUADALAJARA, Mexico, July 22, 2024 /PRNewswire/ -- Grupo Simec, S.A.B. de C.V. (NYSE: SIM) ("Simec") announced today its results of operations for the sixth-month period ended June 30th, 2024.

Comparative first six months of 2024 vs. first six months of 2023

Net Sales
Net sales of the Company decreased from Ps. 22,947 million in the first half of 2023 to Ps. 16,279 million in the first half of 2024. Shipments decreased 8% from 1,109 thousand tons in the first half of 2023 to 1,015 thousand tons in the first half of 2024. Total sales outside of Mexico in the first half of 2024 decreased 24% to Ps. 7,287 million compared to Ps. 9,639 million in the first half of 2023. Mexican sales decreased 32% from Ps. 13,308 million in the first half of 2023 to Ps. 8,992 million in the first half of 2024. Sales decreased for the first half of 2024 compared to the first half of 2023, is due to the combined of decrease in the average sales price of 22% and decrease in the volume of shipments approximately of 94 thousand tons that represent an 8%. 

Cost of Sales
Cost of sales decreased 29% from Ps. 17,128 million in the first half of 2023, to Ps. 12,232 million in the first half of 2024. Cost of sales as a percentage of net sales represented 75% for both periods. Cost of sales decreased due to mix products and a lower scrap purchase price.

Gross Profit
Gross profit of the Company for the first half of 2024 decreased 30% from Ps. 5,819 million in the first half of 2023, to Ps. 4,047 million in the first half of 2024. Gross profit as percentage of net sales was of 25%, for both periods. The gross profit between both periods is given by for less products shipped and lower average price.

Selling, General and Administrative Expense
Selling, general and administrative expense increased 7%, from Ps. 1,102 million in the first half of 2023 to Ps. 1,176 million in the same period 2024, selling, general and administrative expense represented 5% of the net sales in the first half of 2023 and 7% in the first half of 2024.

Other Income (Expenses,) net
The Company recorded other income net for Ps. 45 million in the first half of 2024 million compared to other income net Ps. 143 million in the same period of 2023.

Operating Income
Operating income decreased 40% from Ps. 4,860 million for the first half of 2023 compared to Ps. 2,916 million in the first half of 2024. Operating income as percentage of net sales was 18% in the first half of 2024 compared to 21% in the same period of 2023. The decrease in operating profit is mainly due to the for less of products shipped and lower sales prices.

Ebitda
The Ebitda amounted to Ps. 5,419 million in the first half of 2023 as a result of a net income of Ps. 2,019 million, less minority stake of Ps. 3 million, plus income taxes of Ps.1,244 million, plus comprehensive financial cost of Ps. 1,600 million, plus depreciation of Ps. 559 million to Ps 3,413 million in the first semester of 2024 as a result a net income of Ps. 5,435 million, less minority stake of Ps. 1 million, plus income taxes of Ps. 291 million, less comprehensive financial cost of Ps. 2,809 million, plus depreciation of Ps. 497 million.

Consolidated
Million		Comparative first six months of 2024 vs first six months of 2023,
		2024				2023
Net income (loss)			5,435				2,019
Loss attributable to noncontrolling interests				(1)			(3)
Net income (loss)			5,434				2,016
Depreciation, depletion and amortization			497				559
Income taxes			291				1,244
Financial results income (loss)			(2,809)				1,600
EBITDA			3,413				5,419
Items to reconciled adjusted EBITDA
Equity results and other results in associates and joint ventures			0				0
Dividends received and interest from associates and joint ventures (i)			((1)0				0
Impairment and disposal of non-current assets			0				0
Adjusted EBITDA			3,413				5,419

 

Comprehensive Financial Cost
Comprehensive financial cost for the first half of 2024 represented an income of Ps. 2,809 million compared with an expense of Ps. 1,600 million for the first half of 2023. The comprehensive financial cost is comprised by the exchange income of Ps. 2,030 million in the first half of 2024 compared with an exchange loss of Ps. 2,009 million in the first half of 2023. Likewise, the Company recorded a net income interest of Ps. 737 million for the first half of 2024 compared with a net income interest of Ps. 365 million in 2023, in the first half of 2024 there is a record of other financial income for Ps. 42 million compared to Ps. 44 million in the same period of 2023.

Income Taxes
The Company recorded an expense of Ps. 291 million for the net income tax during the first half of 2024, (comprised for a current expense tax of Ps. 412 million and income for deferred tax of Ps. 121 million) compared with an expense of Ps. 1,244 million to the first half of 2023 (comprised for a current expense tax of Ps. 1,243 million and expense for deferred tax of Ps. 1 million).

Net Income
As a result of the foregoing, the Company recorded an increase in net income of 169% to pass of Ps. 2,019 million in the first half of 2023 to Ps. 5,435 million in the same period of 2024.

Comparative second quarter of 2024 vs. first quarter of 2024

Net Sales
Net sales of the Company increased 6% in the second quarter of 2024 compared to the first quarter of the same period, to pass of Ps. 7,885 million during the first quarter of 2024 to Ps. 8,394 million in the second quarter of 2024. Shipments of finished steel products increased from 479 thousand tons in the first quarter of 2024 to 536 thousand tons in the second quarter of the same year. Total sales outside of Mexico in the second quarter of 2024 decreased 3% to get to Ps. 3,593 million compared to Ps. 3,694 million of the first quarter of the same year. Domestic sales increased from Ps. 4,191 million in the first quarter of 2024 to Ps. 4,801 million in the second quarter of the same year. The sales increased mainly a higher shipped by 57 thousand tons compared with the first quarter that represent a 12% and a lower sales price in 5%.

Cost of Sales
Cost of sales increased 8% from Ps. 5,876 million in the first quarter of 2024 to Ps. 6,356 million in the second quarter of 2024. Cost of sales as a percentage of net sales represented 75% for the first quarter of 2024 compared to 76% in the second quarter of the same year, the average cost of sales by ton records a decrease between both quarters of 3%.

Gross Profit
Gross profit of the Company for the second quarter of 2024 increased 1% to pass of Ps. 2,009 million in the first quarter of 2024 to Ps. 2,038 million in the second quarter of same year. Gross profit as a percentage of net sales represented 25% for the first quarter of 2024 compared to 24% in the second quarter of the same year. The gross profit in the second quarter of 2024 it originates from a lower average sale price and highest volume shipped.

Selling, General and Administrative Expense
Selling, general and administrative expense decreased 3%, from Ps. 595 million in the first quarter of 2024 to Ps. 580 million in the second quarter of the same year, and as percentage of net sales represented 8% in the first quarter of 2024 compared to 7% in the second quarter of the same year.

Other (Expenses) Income, net 
The Company recorded other income net for Ps. 40 million during the second quarter of 2024 compared to other income net for Ps. 5 million in the first quarter of 2024.

Operating Income
Operating income increased 6%, of Ps. 1,419 million in the first quarter of 2024 compared to Ps. 1,498 million of the second quarter of the same year. Operating income as percentage of net sales was 18% for both periods. Operating profit is mainly due to a lower average sale price and a higher volume shipped.

Ebitda
The Ebitda amounted to Ps. 1,668 million in the first quarter of 2024 as a result of a net income of Ps. 1,456 million, plus income taxes of Ps. 110 million, less comprehensive financial cost of Ps. 147 million, plus depreciation of Ps. 249 million to Ps 1,747 million in the second quarter of 2024 as a result of a net income of Ps. 3,979 million, plus income taxes of Ps. 181 million, less comprehensive financial cost of Ps. 2,662 million, plus depreciation of Ps. 249 million.

|Consolidated
Million		Comparative second quarter of 2024 vs first quarter of 2024,
		Second quarter				First quarter
Net income (loss)			3,979				1,456
Loss attributable to noncontrolling interests
Net income (loss)			3,979				1,456
Depreciation, depletion and amortization			249				249
Income taxes			181				110
Financial results income (loss)			(2,662)				(147)
EBITDA			1,747				1,668
Items to reconciled adjusted EBITDA
Equity results and other results in associates and joint ventures			0				0
Dividends received and interest from associates and joint ventures (i)			0				0
Impairment and disposal of non-current assets			0				0
Adjusted EBITDA			1,747				1,668

 

Comprehensive Financial Cost
Comprehensive financial cost of the Company in the second quarter of 2024 represented an income of Ps. 2,662 million compared with of Ps. 147 million an income for the first quarter of 2024. The comprehensive financial cost is comprised for the net interest income of Ps. 487 million in the second quarter of 2024, while in the first quarter was a net income of Ps. 250 million. Likewise, we recorded a net exchange income of Ps. 2,133 million in the second quarter of 2024 compared a net exchange loss Ps. 103 million in the first quarter of the same year, in the second quarter of 2024 there is a record of other financial income for Ps. 42 million.

Income Taxes
The Company have been recorded an expense of Ps. 181 million of income tax during the second quarter of 2024, (comprised for an expense by current tax of Ps. 294 million and an income for deferred tax of Ps. 113 million) compared with the Ps. 110 million of expense for the first quarter of the same year, (comprised for an expense by current tax of Ps. 118 million and an income for deferred tax of Ps. 8 million).

Net Income
As a result of the foregoing, the Company recorded an increase of 173% from a net income of Ps. 1,456 million in the first quarter of 2024 compared to a net income of Ps. 3,979 million for the second quarter of 2024.

Liquidity and Capital Resources
As of June 30th, 2024, 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 June 30th, 2024 was U.S. $812,000, or Ps. 14.9 million).  As June 30, 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. 5.2 million (accrued interest on June 30, 2023 was U.S. $697,000, or Ps. 11.9 million).

Comparative second quarter of 2024 vs. second quarter of 2023

Net Sales
Net sales of the Company decreased 17% from Ps. 10,122 million during the second quarter of 2023 to Ps. 8,394 million in the second quarter of 2024. Sales in tons of finished steel increased 6% from 505 thousand tons in the second quarter of 2023 compared with 536 thousand tons in the second quarter of 2024. Sales outside of Mexico in the second quarter of 2024 decreased 19% from Ps. 4,458 million in the second quarter of 2023 to Ps. 3,593 million in the second quarter of 2024. Domestic sales decreased 15% from Ps. 5,664 million in the second quarter of 2023 to Ps. 4,801 million in the second quarter of 2024. The decrease in sales in the second quarter of 2024 compared to the second quarter of 2023 is due to a decrease in the average sales price of 22% and a increase in the volume of shipments approximately of 31 thousand of tons that represents 6%.

Cost of Sales
Cost of sales decreased 15% in the second quarter of 2024 compared to the second quarter of 2023 from Ps. 7,510 million in the second quarter of 2023 to Ps. 6,356 million in the second quarter of 2024. With respect to sales, the cost of sales of the second quarter of 2024 represented 76% compared to 74% for the second quarter of 2023. The average cost of sales by ton of steel products decreased 20% in the second quarter of 2024 versus the second quarter of 2023, due to the cost of certain raw materials mainly scrap and the highest volume shipped.

Gross (Loss) Profit
Gross profit of the Company for the second quarter of 2024 amount to Ps. 2,038 million compared to Ps. 2,612 million in the second quarter of 2023, this represented a decrease of 22% between both periods. Gross profit as a percentage of net sales for the second quarter of 2024 was 24% compared to 26% of the second quarter of 2023. The decrease in gross profit is mainly due to a lower average sales price and a for highest volume shipped, in the second quarter of 2024 compared to the second quarter of 2023.

Selling, General and Administrative Expense
The selling, general and administrative expenses increased 13% in the second quarter of 2024 from Ps. 515 million in the second quarter of 2023 to Ps. 580 million in the second quarter of 2024. Selling, general and administrative expense as a percentage of net sales represented 7% in the second quarter of 2024 compared to 5% of the second quarter of 2023.

Other Income (Expenses), net 
The company recorded other income net of Ps. 40 million in the second quarter of 2024 compared with other income net of Ps. 85 million for the second quarter of 2023.

Operating (Loss) Income
Operating income amounted to Ps. 1,498 million in the second quarter 2024 compared to Ps. 2,182 million in the second quarter of 2023, this represented 31% of decrease between both quarters. The operating income as a percentage of net sales was 18% for the second quarter of 2024, compared to 22% of the second quarter of 2023. The decrease in operating profit is due to a lower average sale price and highest volume shipped.

Ebitda
The Ebitda amounted to Ps. 2,460 million in the second quarter of 2023 as a result of a net income of Ps. 987 million, less minority stake of Ps. 2 million, plus income taxes of Ps. 712 million, plus comprehensive financial cost of Ps. 484 million, plus depreciation of Ps. 279 million to Ps 1,747 million in the second quarter of 2024 as a result of a net income of Ps. 3,979 million, plus income taxes of Ps. 181 million, less comprehensive financial cost of Ps. 2,662 million, plus depreciation of Ps. 249 million.

|Consolidated
Million		Comparative second quarter of 2024 vs second quarter of 2023,
		2024				2023
Net income (loss)			3,979				987
Loss attributable to noncontrolling interests							(2)
Net income (loss)			3,979				985
Depreciation, depletion and amortization			249				279
Income taxes			181				712
Financial results income (loss)			(2,662)				484
EBITDA			1,747				2,460
Items to reconciled adjusted EBITDA
Equity results and other results in associates and joint ventures			0				0
Dividends received and interest from associates and joint ventures (i)			0				0
Impairment and disposal of non-current assets			0				0
Adjusted EBITDA			1,747				2,460

 

Comprehensive Financial Cost
Comprehensive financial cost of the Company for the second quarter of 2024 represented a net income of Ps. 2,662 million compared with a net expense of Ps. 484 million for the second quarter of 2023. The comprehensive financial cost is comprised for the net interest income of Ps. 487 million in the second quarter of 2024, compared to a net interest income of Ps. 175 million for the same period of 2023. Also record an exchange income of Ps. 2,133 million in the second quarter of 2024 and an exchange loss of Ps. 703 million in the second quarter of 2023 in the second quarter of 2024 there is a record of other financial income for Ps. 42 million compared to Ps. 44 million for the same period in 2023.

Income Taxes
The company recorded an expense of Ps. 181 million of expense tax in the second quarter of 2024, (comprised by current expense tax of Ps. 294 million and an income for deferred tax of Ps. 113 million) compared to an expense accrual of Ps. 712 million for income tax for the second quarter of 2023, (comprised by current expense tax of Ps. 711 million and an expense for deferred tax of Ps. 1 million).

Net Income (Loss)
As a result of the foregoing, the Company recorded a net income of Ps. 3.979 million in the second quarter of 2024 compared to Ps. 987 million for the second quarter of 2023, an increase of 303% between both quarters.

(millions of pesos)	1H '24		1H '23		Year 24 VS  '23
Sales	16,279		22,947		(29 %)
Cost of Sales	12,232		17,128		(29 %)
Gross Profit	4,047		5,819		(30 %)
Selling, General and Administrative Expense	1,176		1,102		7 %
Other Income (Expenses), net	45		143		(69 %)
Operating Profit	2,916		4,860		(40 %)
EBITDA	3,413		5,419		(37 %)
Net income	5,435		2,019		169 %
Sales Outside Mexico	7,287		9,639		(24 %)
Sales in Mexico	8,992		13,308		(32 %)
Total Sales (Tons)	1,015		1,109		(8 %)

 

Quarter
(millions of pesos)	2Q'24	1Q '24	2Q '23	2Q´24vs 1Q´24	2Q´24 vs 2Q '23
Sales	8,394	7,885	10,122	6 %	(17 %)
Cost of Sales	6,356	5,876	7,510	8 %	(15 %)
Gross Profit	2,038	2,009	2,612	1 %	(22 %)
Selling, General and Adm. Expenses	580	595	515	(3 %)	13 %
Other Income (Expenses), net	40	5	85	700 %	(53 %)
Operating Profit	1,498	1,419	2,182	6 %	(31 %)
EBITDA	1,747	1,668	2,460	5 %	(29 %)
Net Income	3,979	1,456	987	173 %	303 %
Sales Outside Mexico	3,593	3,694	4,458	(3 %)	(19 %)
Sales in Mexico	4,801	4,191	5,664	15 %	(15 %)
Total Sales (Tons)	536	479	505	12 %	6 %

 

Product	Thousands of Tons Jan-Jun 2024	Millions of Pesos          Jan-Jun 2024	Average Price per Ton Jan-Jun 2024	Thousands of Tons Jan – Jun 2023	Millions of Pesos      Jan- Jun 2023	Average Price per Ton  Jan-Jun 2023
Commercial Profiles	744	11,191	15,042	779	15,156	19,456
Special Profiles	271	5,088	18,775	330	7,791	23,609
Total	1,015	16,279	16,038	1,109	22,947	20,692

 

Product	Thousands of Tons Apr-Jun 2024	Millions of Pesos     Apr-Jun 2024	Average Price per Ton Apr-Jun 2024	Thousands of Tons Jan – Mar 2024	Millions of Pesos     Jan- Mar 2024	Average Price per Ton Jan-Mar 2024	Thousands of Tons          Apr-Jun 2023	Millions of Pesos           Apr-Jun 2023	Average Price per Ton          Apr-Jun 2023
Commercial Profiles	392	5,756	14,684	352	5,435	15,440	354	6,573	18,568
Special Profiles	144	2,638	18,319	127	2,450	19,291	151	3,549	23,503
Total	536	8,394	15,660	479	7,885	16,461	505	10,122	20,044

 

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.

PRESS RELEASE	Contact: José Luis Tinajero
	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 2024?

Grupo Simec's net sales for the first half of 2024 were Ps. 16,279 million, a 29% decline from the same period in 2023.

How did Grupo Simec's net income change in the first half of 2024?

Grupo Simec's net income surged 169% in the first half of 2024, reaching Ps. 5,435 million.

What caused the decline in Grupo Simec's sales in the first half of 2024?

The decline in Grupo Simec's sales was due to a 22% drop in average sales price and an 8% decrease in shipment volumes.

How did Grupo Simec's operating income perform in the first half of 2024?

Operating income fell 40% to Ps. 2,916 million in the first half of 2024.

What was the year-over-year change in Grupo Simec's EBITDA for the first half of 2024?

Grupo Simec's EBITDA dropped 37% year-over-year to Ps. 3,413 million for the first half of 2024.

How did Grupo Simec's sales perform in Mexico vs. outside Mexico in the first half of 2024?

Sales in Mexico dropped 32% while sales outside Mexico fell 24% in the first half of 2024.

What were the cost of sales for Grupo Simec in the first half of 2024?

Grupo Simec's cost of sales decreased 29% to Ps. 12,232 million in the first half of 2024.

How did Grupo Simec's net income perform in Q2 2024 compared to Q1 2024?

Grupo Simec's net income increased 173% in Q2 2024 compared to Q1 2024, reaching Ps. 3,979 million.