GRUPO SIMEC ANNOUNCES RESULTS OF OPERATIONS FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2023 AUDITED

Rhea-AI Summary

Grupo Simec, S.A.B. de C.V. (NYSE: SIM) reported a decrease in net sales by 24% and a decrease in gross profit by 27% for the twelve-month period ended December 31, 2023 compared to the same period in 2022. Operating income decreased by 31%, and EBITDA decreased by 29%. The company's net income also decreased by 33% year-over-year. Sales outside Mexico decreased by 31%, while sales in Mexico decreased by 18%. The company's total debt remained stable. In the fourth quarter of 2023, net sales decreased by 7%, and gross profit decreased by 6% compared to the fourth quarter of 2022.

Positive

• The decrease in net sales and gross profit indicates a challenging year for Grupo Simec.
• Operating income and EBITDA also experienced significant declines, reflecting operational challenges.
• The decrease in net income signals a less profitable year for the company.
• Sales outside Mexico and in Mexico showed substantial decreases, impacting overall revenue.
• The stable total debt indicates a manageable financial position for the company.
• Quarterly performance in the fourth quarter of 2023 showed a decline in net sales and gross profit compared to the same period in 2022.

Negative

• The significant decreases in net sales, gross profit, operating income, EBITDA, and net income are concerning for investors.
• The decline in sales both domestically and internationally raises questions about market demand for Grupo Simec's products.
• The consistent decrease in financial metrics throughout the year may indicate systemic issues within the company.
• The quarterly performance in the fourth quarter of 2023 shows a continued downward trend, which could impact investor confidence.

Insights

Financial Analyst

The reported decrease in net sales and EBITDA for Grupo Simec indicates a significant contraction in the company's revenue and profitability. This contraction could be attributed to a combination of reduced shipments and lower average sales prices for finished steel products. The 24% decline in net sales year-over-year and a 29% decrease in EBITDA are substantial and could signal underlying challenges in market demand, pricing pressures, or operational inefficiencies.

From a financial perspective, the increase in comprehensive financial costs, particularly the exchange losses, suggests currency volatility may have impacted the company's financial results. The 33% drop in net income further emphasizes the need for cost management and operational optimization to maintain profitability amidst challenging market conditions. Investors and stakeholders should closely monitor the company's strategic responses to these financial pressures, including potential cost-cutting measures, pricing strategies and market expansion efforts.

Market Research Analyst

The steel industry is known for its cyclical nature and sensitivity to global economic trends. Grupo Simec's performance, particularly the decline in sales outside of Mexico, could reflect broader market dynamics, such as reduced construction activity or increased competition from other steel producers. The 18% decrease in sales within Mexico, despite being a smaller decline, still points to potential domestic market saturation or competitive displacement.

Analyzing industry trends, such as the supply-demand balance for steel, input cost fluctuations and trade policies, is crucial to understanding Grupo Simec's position within the market. The reported 20% reduction in the average cost of finished steel produced may indicate effective cost-reduction strategies, but it also raises questions about the sustainability of these measures in the face of ongoing market pressures.

Economist

The financial results of Grupo Simec could be reflective of macroeconomic factors affecting the steel industry. The decrease in sales and net income may be symptomatic of slower economic growth, which typically leads to reduced demand for steel in construction and manufacturing sectors. Additionally, the reported exchange losses suggest that currency fluctuations and potentially unfavorable exchange rates have had a negative impact on the company's financials.

It's important to consider the economic indicators and forecasts that could influence the steel industry's trajectory, including GDP growth rates, infrastructure spending and manufacturing indices. These factors will play a crucial role in determining the future demand for steel products and, consequently, Grupo Simec's ability to recover from the reported declines.

GUADALAJARA, Mexico, Feb. 27, 2024 /PRNewswire/ -- Grupo Simec, S.A.B. de C.V. (NYSE: SIM) ("Simec") announced today its results of operations for the twelve-month period ended December 31, 2023 Audited and December 31, 2022.

Twelve-Month Period Ended December 31, 2023 compared to Twelve-Month Period Ended December 31, 2022.

Net Sales

Net sales decreased 24% by the combination shipments of finished steel products and a lower average sales price by 21% compared the same period of 2022, the sales decreased from Ps. 54,159 million in the twelve-month period ended December 31, 2022 to Ps. 41,217 million in the same period of 2023. Shipments of finished steel products decreased 4% to 2 million 176 thousand tons in the twelve-month period ended December 31, 2023 compared to 2 million 255 thousand tons in the same period of 2022. Total sales outside of Mexico on the twelve-month period ended December 31, 2023 decreased 31% to Ps. 16,891 million compared with Ps. 24,515 million in the same period of 2022. Total sales in Mexico decreased 18% from Ps. 29,644 million in the twelve-month period ended December 31, 2022 to Ps. 24,326 million in the same period of 2023. The decrease of 4% in sales and to a lower average sales price 21%. 

Cost of Sales

Cost of sales decreased 23% from Ps. 39,684 million in the twelve-month period ended December 31, 2022 to Ps. 30,588 million in the same period of 2023. Cost of sales as a percentage of net sales represented, 74% for 2023 and 2022 73%. The average cost of finished steel produced in the twelve-month period ended December 31, 2023 compared to the same period of 2022 decreased 20% mainly due to the volume shipped and due to scrap cost and to lower costs of some supplies during the year.

Gross Profit

Gross profit of the Company in the twelve-month period ended December 31, 2023 was of Ps. 10,629 million compared to Ps. 14,475 million in the same period of 2022. Gross profit as a percentage of net sales represented 26% and 27% for the 2023 and 2022 periods respectively. 

Operating Expenses

Selling, general and administrative expenses decreased 4% from Ps. 2,456 million in the twelve-month period ended December 31, 2022 to Ps. 2,348 million in the same period of 2023. Selling, general and administrative expenses as a percentage of net sales represented 5% during the twelve-month period ended December 31, 2022 and 6% in the same period of 2023.

Other Expenses (Income) net

The company recorded other net income of Ps. 72 million in the twelve-month period ended December 31, 2022 compared to other net income of Ps. 104 million in the same period of 2023.

Operating Income

Operating income decreased 31% from Ps. 12,091 million for the twelve-month period ended December 31, 2022 to Ps. 8,385 million in the same period of 2023. Operating income as a percentage of net sales represented 20% and 22% for the 2023 and 2022 periods respectively.

EBITDA

The EBITDA of the Company decreased 29% from Ps. 13,207 million in the twelve-month prior ended December 31, of 2022, as a result a net income of Ps. 7,703, less minority stake of Ps. 2 million, plus income taxes of Ps. 3,300, plus comprehensive financial cost of Ps. 1,089 million, plus depreciation of Ps. 1,117 million, to Ps. 9,412 million in the same period of 2023 as a result a net income of Ps. 5,186, less minority stake of Ps. 6 million, plus income taxes of Ps. 1,305 million, plus comprehensive financial cost of Ps. 1,900 million, plus depreciation of 1,027 million. 

Consolidated
Million		Twelve-month period ended December 31,
		2023				2022
Net income (loss)			5,186				7,703
Loss attributable to noncontrolling interests			(6)				(2)
Net income (loss)			5,180				7,701
Depreciation and amortization			1,027				1,117
Income taxes			1,305				3,300
Financial results income (loss)			1,900				1,089
EBITDA			9,412				13,207
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			9,412				13,207

Comprehensive Financial Cost 

Comprehensive financial cost in the twelve-month period ended December 31, 2023 represented a net expense of Ps. 1,900 million compared with a net expense of Ps. 1,089 million in the same period of 2022. The net interest was an income of Ps. 574 million in 2023 compared with a net income of Ps. 197 million in the twelve-month period ended December 31, 2022. As a result, we registered a net exchange loss of Ps. 2,541 million in the twelve-month period ended December 31, 2023 compared with a net exchange loss of Ps. 700 million in the same period of 2022, net other financial income was recorded for Ps. 67 million for the period 2023 compared to the Ps. 586 million of other financial expenses for the period 2022.

Income Taxes

The Company have recorded an expense net tax of Ps. 1,305 million in the twelve-month period ended December 31, 2023 (including the income of deferred tax of Ps. 144 million) compared with a net expense tax of Ps. 3,300 million in the same period of 2022 (including the tax deferred expense of Ps. 150 million). 

Net Income (loss)

As a result of the foregoing, net income decreased by 33% from Ps. 7,703 million net profit in the twelve-month period ended December 31, 2022 to Ps. 5,186 million a result net income in the same period of 2023.

Liquidity and Capital Resources

As of December 31, 2023, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, Ps. 5.1 million (accrued interest on December 31, 2023 was U.S. $812,916 or Ps. 13.7 million).  As of December 31, 2022, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, Ps. 5.8 million (accrued interest on December 31, 2022 was U.S. $694,987, or Ps. 13.5 million).

Comparative fourth quarter 2023 vs third quarter 2023

Net Sales                       

Net sales decreased from Ps. 9,454 million in the third quarter of 2023 to Ps. 8,815 million for the fourth quarter of 2023. Sales in tons increased from 531 thousand ton in the third quarter of 2023 to 536 thousand ton in the fourth quarter of the same period, an increase of 1%. Total sales outside of Mexico for the fourth quarter of 2023 decreased 16% from Ps. 3,932 million in the third quarter to Ps. 3,320 million in the four quarter of 2023. Sales in Mexico decreased to Ps. 5,495 million in the fourth quarter of 2023 compared Ps. 5,522 million in the third quarter of 2023 and decreased of 0.49%. Prices of finished products sold in the fourth quarter of 2023 decreased 8% compared with the third quarter of the same period. 

Cost of Sales

Cost of sales decreased to Ps. 6,282 million in the fourth quarter of 2023 compared to Ps. 7,177 million for the third quarter of 2023. With respect to sales, in the fourth quarter of 2023, the cost of sales represented 71% in the fourth quarter of 2023, compared to 76% in the third quarter of the same period. The average cost of sales by ton decreased of 13% in the fourth quarter of 2023 versus the third quarter of 2023.

Gross Profit

Gross profit of the Company for the fourth quarter of 2023 increased 11% to Ps. 2,533 million compared to Ps. 2,277 million in the third quarter of 2023. The gross profit as a percentage of net sales for the third and fourth quarter of 2023 was of 24% and 29% respectively.

Operating Expenses

Selling, general and administrative expenses increased 57% to Ps. 761 million in the fourth quarter of 2023 compared to Ps. 485 million for the third quarter of 2023. Selling, general and administrative expenses as a percentage of net sales for the third and fourth quarter of 2023 was of 5% and 9% respectively. 

Other Expenses (Income) net

The company recorded other net expenses of Ps. 63 million in the fourth quarter of 2023 compared to other net income of Ps. 24 million for the third quarter of 2023. 

Operating (Loss) Income

Operating income was of Ps. 1,709 million in the fourth quarter of 2023 compared to an operating income of Ps. 1,816 million in the third quarter of 2023. The operating income as a percentage of net sales represented 19% for both periods.

EBITDA

The EBITDA was Ps. 2,079 million in the third quarter of 2023 as a result a net income of Ps. 1,802 million, less minority stake of Ps. 2 million, plus income taxes of Ps. 298 million, less comprehensive financial cost of Ps. 283 million, plus depreciation of Ps. 264 million, compared to Ps. 1,914 million for the fourth quarter of 2023, as a result a net income of  Ps. 1,365 million, less minority stake of Ps. 2 million, less income taxes of Ps. 236 million, plus comprehensive financial cost of Ps. 582 million, plus depreciation of Ps. 205 million.

Consolidated
Million		Comparative fourth quarter vs third quarter 2023
		4Q 2023				3Q 2023
Net income (loss)			1,365				1,802
Loss attributable to noncontrolling interests			(2)				(2)
Net income (loss)			1,363				1,800
Depreciation and Amortization			205				264
Income taxes			(236)				298
Financial results income (loss)			582				(283)
EBITDA			1,914				2,079
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			1,914				2,079

Comprehensive Financial Income (Cost)

Comprehensive financial cost for the fourth quarter for 2023 was a net expense of Ps. 582 million compared with a net income of Ps. 283 million for the third quarter of 2023. The net interest income the fourth quarter was Ps. 181 million compared with a net income of Ps. 28 million in the third quarter of 2023. At same time we registered an exchange net profit of Ps. 255 million in the third quarter of 2023 compared with an exchange net loss of Ps. 787 million in the fourth quarter of 2023. Net other financial income was recorded for Ps. 24 million in the fourth quarter of 2023.

Income Taxes

Income Taxes for the third quarter of 2023 had an expense net tax of Ps. 298 million (including an income tax deferred for Ps. 8 million) compared to an income of Ps. 236 million for the fourth quarter of 2023, (including an income tax deferred of Ps. 136 million).

Net Income (loss)

As a result of the foregoing, the Company recorded a net income of Ps. 1,365 million in the fourth quarter of 2023 compared to Ps. 1,802 million of net income in the third quarter of 2023.

Comparative fourth quarter 2023 vs fourth quarter 2022

Net Sales

Net sales decreased 13% from Ps. 10,147 million for the fourth quarter of 2022 to Ps. 8,815million for the fourth quarter of 2023. Sales in tons of finished steel in the fourth quarter of 2022 were 535 thousand tons versus to 536 thousand tons in the fourth quarter of 2023. Total sales outside of Mexico decreased 10% from Ps. 3,704 million for the fourth quarter of 2022 to Ps. 3,320 million in the fourth quarter of 2023. Sales in Mexico decreased 15% from Ps. 6,443 million in the fourth quarter of 2022 to Ps. 5,495 million in the fourth quarter of 2023. The average sales prices of finished products sold in the fourth quarter of 2023 decreased 13%, compared to the same period of 2022.

Cost of Sales

Cost of sales decreased 16% from Ps. 7,441 million in the fourth quarter of 2022 compared to Ps. 6,282 million for the fourth quarter of 2023. With respect to sales, the cost of sales represented 71% during the fourth quarter of 2023 and 73% during the fourth quarter of 2022. The average cost of steel products decreased 16% in the fourth quarter of 2023 versus the fourth quarter of 2022.

Gross Profit

Gross profit for the fourth quarter of 2023 decreased 6% from Ps. 2,706 million in the fourth quarter of 2022 compared to Ps. 2,533 million in the fourth quarter of 2023. The gross profit as a percentage of net sales represented 27% for the fourth quarter of 2022 compared to 29% of the fourth quarter of 2023.

Operating Expenses

Selling, general and administrative expenses increased 4% from Ps. 732 million in the fourth quarter of 2022 compared to Ps. 761 million for the fourth quarter of 2023. Selling, general and administrative expenses as a percentage of net sales represented 7% for the fourth quarter of 2022 and 9% for the fourth quarter of 2023.

Other Expenses (Income) net

The company recorded other income net of Ps. 65 million in the fourth quarter of 2022 compared with other expenses net of Ps. 63 million for the fourth quarter of 2023.

Operating (Loss) Income

Operating income was of Ps. 1,709 million in the fourth quarter of 2023 compared to an operating profit of Ps. 2,039 million in the fourth quarter of 2022. The operating income as a percentage of net sales in the fourth quarter of 2023 was 19%, compared to an operating income of 20% in the fourth quarter of 2022.

EBITDA

The EBITDA was Ps. 2,322 million in the fourth quarter of 2022 as a result 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, compared to a profit of Ps 1,914 million in the fourth quarter of 2023 as a result a net income of Ps. 1,365 million, less minority stake of Ps. 2 million, less income taxes of Ps. 236 million, plus comprehensive financial cost of Ps. 582 million, plus depreciation of Ps. 205 million.

Consolidated
Million		Comparative fourth quarter vs fourth quarter
		2023				2022
Net income (loss)			1,365				(334)
Loss attributable to noncontrolling interests			(2)				(2)
Net income (loss)			1,363				(336)
Depreciation and Amortization			205				283
Income taxes			(236)				1,349
Financial results income (loss)			582				1,026
EBITDA			1,914				2,322
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			1,914				2,322

Comprehensive Financial Income (Cost)

Comprehensive financial cost for the fourth quarter of 2023 was a net expense of Ps. 582 million compared with a net expense of Ps 1,026 million in the fourth quarter of 2022. Net interest income was of Ps. 181 million in the fourth quarter of 2023 compared with a net interest income of Ps. 93 million in the fourth quarter of 2022. At same time we registered a net exchange loss of Ps. 787 million in the fourth quarter of 2023 compared with an exchange loss of Ps. 502 million in the fourth quarter of 2022. Net other financial income was recorded for Ps. 24 million in the fourth quarter of 2023, compared to the Ps. 617 million of other financial expenses for the period 2022.

Income Taxes

The Company recorded an income net taxes for the fourth quarter of 2023 of Ps. 236 million (including an income of deferred tax of Ps. 136 million), compared to an expense net tax of Ps. 1,349 million for the fourth quarter of 2022, (including an expense tax deferred of Ps. 102 million).

Net Income (loss)

As a result of the foregoing, the Company recorded a net profit of Ps. 1,365 million in the fourth quarter of 2023 compared to Ps. 334 million of net loss in the fourth quarter of 2022.

(million of pesos)	Jan - Dec '23		Jan - Dec '22		Year 23 vs  '22
Sales	41,217		54,159		(24 %)
Cost of Sales	30,588		39,684		(23 %)
Gross Profit	10,629		14,475		(27 %)
Selling, General and Administrative Expense	2,348		2,456		(4 %)
Other Income (Expenses), net	104		72		44 %
Operating Profit	8,385		12,091		(31 %)
EBITDA	9,412		13,207		(29 %)
Net income	5,186		7,703		(33 %)
Sales Outside Mexico	16,891		24,515		(31 %)
Sales in Mexico	24,326		29,644		(18 %)
Total Sales (Tons)	2,176		2,255		(4 %)
Cost by ton	14,057		17,598		(20 %)

 

Quarter
(million of pesos)	4Q'23	3Q '23	4Q '22	4Q´23vs 3Q´23	4Q´23 vs 4Q '22
Sales	8,815	9,454	10,147	(7 %)	(13 %)
Cost of Sales	6,282	7,177	7,441	(12 %)	(16 %)
Gross Profit	2,533	2,277	2,706	11 %	(6 %)
Selling, General and Adm. Expenses	761	485	732	57 %	4 %
Other Income (Expenses), net	(63)	24	65	(363 %)	(197 %)
Operating Profit	1,709	1,816	2,039	(6 %)	(16 %)
EBITDA	1,914	2,079	2,322	(8 %)	(18 %)
Net Income	1,365	1,802	(334)	(24 %)	(509 %)
Sales Outside Mexico	3,320	3,932	3,704	(16 %)	(10 %)
Sales in Mexico	5,495	5,522	6,443	(0 %)	(15 %)
Total Sales (Tons)	536	531	535	1 %	0 %
Cost per Ton	11,720	13,516	13,908	(13 %)	(16 %)

 

Product	Thousands of Tons Jan-Dec 2023	Millions of Pesos Jan-Dec 2023	Average Price per Ton Jan-Dec 2023	Thousands of Tons Jan – Dec 2022	Millions of Pesos Jan- Dec 2022	Average Price per Ton  Jan-Dec 2022
Special Profiles	597	13,101	21,945	723	20,073	27,763
Commercial Profiles	1,579	28,116	17,806	1,532	34,086	22,249
Total Tons	2,176	41,217	18,942	2,255	54,159	24,017

 

Product	Thousands of Tons Oct-Dec 2023	Millions of Pesos Oct-Dec 2023	Average Price per Ton Oct-Dec 2023	Thousands of Tons Jul-Sep 2023	Millions of Pesos Jul-Sep 2023	Average Price per Ton Jul-Sep 2023	Thousands of Tons Oct-Dec 2022	Millions of Pesos Oct-Dec 2022	Average Price per Ton Oct-Dec 2022
Special Profiles	153	2,762	18,052	155	3,468	22,374	150	3,571	23,807
Commercial Profiles	383	6,053	15,804	376	5,986	15,920	385	6,576	17,081
Total Tons	536	8,815	16,446	531	9,454	17,804	535	10,147	18,966

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: 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

How did Grupo Simec's net sales perform in the twelve-month period ended December 31, 2023?

Grupo Simec's net sales decreased by 24% in the twelve-month period ended December 31, 2023 compared to the same period in 2022.

What was the change in gross profit for Grupo Simec in the twelve-month period ended December 31, 2023?

Grupo Simec's gross profit decreased by 27% in the twelve-month period ended December 31, 2023 compared to the same period in 2022.

How did Grupo Simec's operating income change in the twelve-month period ended December 31, 2023?

Grupo Simec's operating income decreased by 31% in the twelve-month period ended December 31, 2023 compared to the same period in 2022.

What was the percentage change in EBITDA for Grupo Simec in the twelve-month period ended December 31, 2023?

Grupo Simec's EBITDA decreased by 29% in the twelve-month period ended December 31, 2023 compared to the same period in 2022.

How did Grupo Simec's net income change in the twelve-month period ended December 31, 2023?

Grupo Simec's net income decreased by 33% in the twelve-month period ended December 31, 2023 compared to the same period in 2022.

What was the change in sales outside Mexico for Grupo Simec in the twelve-month period ended December 31, 2023?

Sales outside Mexico for Grupo Simec decreased by 31% in the twelve-month period ended December 31, 2023 compared to the same period in 2022.

How did Grupo Simec's total debt compare between December 31, 2023, and December 31, 2022?

Grupo Simec's total debt remained stable between December 31, 2023, and December 31, 2022.

What was the change in net sales for Grupo Simec in the fourth quarter of 2023 compared to the fourth quarter of 2022?

Net sales for Grupo Simec decreased by 7% in the fourth quarter of 2023 compared to the fourth quarter of 2022.

How did Grupo Simec's gross profit change in the fourth quarter of 2023 compared to the fourth quarter of 2022?

Grupo Simec's gross profit decreased by 6% in the fourth quarter of 2023 compared to the fourth quarter of 2022.