GUADALAJARA, Mexico, Oct. 26 /PRNewswire-FirstCall/ -- Grupo Simec, S.A.B. de C.V. (AMEX:SIM) ("Simec") announced today its results of operations for the nine-month period ended September 30, 2007.
Nine-Month Period Ended September 30, 2007 compared to Nine-Month Period Ended September 30, 2006 Net Sales Net sales decreased 2% to Ps. 18,035 million in the nine-month period ended September 30, 2007 compared to Ps. 18,365 million in the same period of 2006. Shipments of finished steel products decreased 2% to 2,017 thousand tons in the nine-month period ended September 30, 2007 compared to 2,050 thousand tons in the same period of 2006. Total sales outside of Mexico in the nine- month period ended September 30, 2007 decreased 3% to Ps. 12,594 million compared with Ps. 12,949 million in the same period of 2006, while total Mexican sales increased 0.5% from 5,416 million in the nine-month period ended September 30, 2006 to Ps. 5,441 million in the same period of 2007. The decrease in sales are due to lower shipments during the third quarter 2007, comparing with the second quarter of 2007 (44,000 ton decrease) and comparing against the third quarter of 2006 (a decrease of 45,000 tons) The decline of tons shipped can be explained by the two unexpected stoppages in the rolling lines of the plants in Guadalajara and Apizaco during the periods from July 5- 8, July 10-13 and September 10-15 as a result of the shortage in natural gas due to the explosions on the property of Petroleos Mexicanos Direct Cost of Sales Direct cost of sales remained stable from Ps. 14,823 million in the nine- month period ended September 30, 2006 to Ps. 14,860 million in the same period 2007. Direct cost of sales as a percentage of net sales represented at 82% for the nine-month period ended September 30, 2007 compared to 81% in the same period of 2006. The increase in the Direct Cost of Sales is due to two factors: 1) Increase in maintenance costs in the plants located in the United States. The increase was due to the rescheduling of the maintenance stoppages in the second week of August with employees from outside the company instead of during the first weekend of July with company employees, as they are normally scheduled. The rescheduling of the maintenance stoppages was made with the intention of having enough inventories that would permit us to perform our obligations to our customers in view of the termination of the labor agreement between the company and the unionized workers. A tentative agreement was reached on August 16, which was later ratified on September 27. The contract will have a duration of 5 years and will expire in 2012. 2) An increase in the labor costs per ton sold, due to the three unexpected stoppages in the rolling lines of the plants in Guadalajara and Apizaco during the periods from July 5-8, July 10-13 and September 10-15 as a result of the shortage in natural gas due to the explosions on the property of Petroleos Mexicanos.
Gross Profit Gross profit in the nine-month period ended September 30, 2007 decreased 10% to Ps. 3,175 million compared to Ps. 3,542 million in the same period 2006. Gross profit as a percentage of net sales for the nine-month period ended September 30, 2007 was 18% compared to 19% in the same period of 2006. The decline in gross profit is due to the decrease in sales and the increase in cost of goods sold due to the reasons previously mentioned.
Operating Expenses Operating expenses increased 3% to Ps. 1,057 million in the nine-month period ended September 30, 2007 compared to Ps. 1,022 million in the same period 2006 (depreciation and amortization increased Ps. 48 million in the nine-month period compared to the same period of 2006) but remained stable at 6% of net sales.
Operating Profit Operating profit decreased 16% from Ps. 2,520 million in the nine-month period ended September 30, 2006 to Ps. 2,118 million in the same period 2007. Operating profit as a percentage of net sales was 12% for the nine-month period ended September 30, 2007 compared to 14% in the same period of 2006. The decline in operating profit is due to the decrease in sales and the increase in cost of goods sold due to the reasons previously mentioned.
Integral Financial Cost Integral financial cost in the nine-month period ended September 30, 2007 represented a gain of Ps. 205 million compared with a expense of Ps. 9 million for the same period in 2006. Interest income was Ps. 234 million in the nine- month period ended September 30, 2007, compared with Ps. 39 million in the same period 2006 due to larger cash balances during this year partly reflecting our recent capital increase in February 2007. At the same time we registered an exchange loss of Ps. 2 million in the nine-month period ended September 30, 2007 compared with an exchange loss of Ps. 17 million in the same period of 2006, reflecting a 0.4% increase in the value of the peso versus the dollar in the nine-month period ended September 30, 2007.
Other Expenses (Income) net The company recorded other income, net of Ps. 45 million in the nine- month period ended September 30, 2007 compared to other income, net of Ps. 28 million for the same period of 2006.
Taxes and Profit Sharing Taxes and profit sharing in the nine-month period ended September 30, 2007 increased to Ps. 730 million compared to Ps. 356 million for the same period of 2006 due to an increase in deferred taxes during the nine-month period ended September 30, 2007. In the nine-month period ended September 30, 2006, we amortized Ps. 350 million of our deferred credit which is non-taxable income. This does not affect the cash flow.
Net Profit As a result of the foregoing, net profit decreased by 25% to Ps. 1,638 million in the nine-month period ended September 30, 2007 from Ps. 2,183 million in the same period of 2006.
Liquidity and Capital Resources At September 30, 2007 Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998 (accrued interest at September 30, 2006 was U.S. $357,201 dollars). At December 31, 2006, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998 (accrued interest at December 31, 2006 was U.S. $336,525 dollars).
Net resources provided by operations were Ps. 2,004 million in the nine- month period ended September 30, 2007 versus Ps. 1,411 million of net resources provided by operations in the same period of 2006. Net resources provided by financing activities were Ps. 2,343 million in the nine-month period ended September 30, 2007 (which amount includes the capital increase of Ps. 2,387 million in February 2007) versus Ps. 118 million of net resources used by financing activities in the same period of 2006. Net resources used in investing activities (to acquire property, plant and equipment, other non- current assets and liabilities) were Ps. 515 million in the nine-month period ended September 30, 2007 versus net resources provided by investing activities (to acquire property, plant and equipment, other non-current assets and liabilities and proceeds for insurance claims) of Ps. 197 million in the same period of 2006.
Comparative third quarter 2007 vs second quarter 2007 Net Sales
Net sales decreased 9% due to a decrease of 2% in prices and a 7% decrease in sales volume making net sales go from Ps. 6,228 million for the second quarter 2007 to Ps. 5,659 million for the third quarter 2007. Sales in tons of finished steel products decreased 7% to 635 thousand tons in the third quarter 2007 compared with 679 thousand tons in the second quarter 2007. The total sales outside of Mexico for the third quarter 2007 decreased to Ps. 3,983 million compared with Ps. 4,312 million for the second quarter 2007. Total Mexican sales decreased from Ps. 1,916 million in the second quarter 2007 to Ps. 1,676 millions in the third quarter 2007. The decrease in sales can be explained due to lower shipments during the third quarter 2007, comparing with the second quarter of 2007 (44,000 ton decrease) and comparing against the third quarter of 2006 (a decrease of 45,000 tons) The decline of tons shipped can be explained by the two unexpected stoppages in the rolling lines of the plants in Guadalajara and Apizaco due during the periods from July 5-8, July 10-13 and September 10-15 as a result of the shortage in natural gas due to the explosions on the property of Petroleos Mexicanos.
Direct Cost of Sales Direct cost of sales decreased 4% from Ps. 5,066 million in the second quarter 2007 to Ps. 4,870 million for the third quarter 2007. In the third quarter 2007, the direct cost of sales represented 86% of net sales compared to 81% for the second quarter 2007. The increase in the average cost of raw materials to produce steel products is due to two factors: 1) Increase in maintenance costs in the plants located in the United States. The increase was due to the rescheduling of the maintenance stoppages to the second week of August with employees from outside the company instead of doing them during the first weekend of July with company employees, as they are normally scheduled. The reprogramming of the maintenance stoppages was made with the intention of having enough inventories that would permit us to perform our obligations to our customers in view of the termination of the labor agreement between the company and the unionized workers. A tentative agreement was reached on August 16, which was later ratified on September 27. The contract will have duration of 5 years and will expire in 2012, 2) An increase in the labor costs per ton sold, due to the three unexpected stoppages in the rolling lines of the plants in Guadalajara and Apizaco during the periods from July 5- 8, July 10-13 and September 10-15 as a result of the shortage in natural gas due to the explosions on the property of Petroleos Mexicanos.
Gross Profit Gross profit for the third quarter 2007 decreased 32% to Ps. 789 million compared to Ps. 1,162 million in the second quarter 2007. Gross profit as a percentage of net sales for the third quarter 2007 was 14% compared with 19% for the second quarter 2007. The decline in gross profit is due to the decrease in sales and the increase in the average cost of raw materials to produce steel products due to the reasons previously mentioned.
Operating Expenses Operating expenses were Ps. 349 million in the third quarter 2007 compared to Ps. 349 million for the second quarter 2007. As a percentage of sales, operating expense represented 6% during the third quarter of 2007 compared to 6% in the second quarter of 2007.
Operating Profit Operating profit decreased 46% from Ps. 813 million in the second quarter 2007 to Ps. 440 million for the third quarter 2007. Operating profit as a percentage of net sales decreased to 8% in the third quarter 2007 from 13% in the second quarter 2007. This was due to a decrease of 7% in sales volume and an increase of 3% in the average cost of raw materials.
Integral Financial Cost Integral financial cost for the second quarter 2007 represented an income of Ps. 38 million compared with an income of Ps. 90 million for the third quarter 2007. Net interest income was Ps. 98 million in the third quarter 2007 compared with Ps. 88 million in the second quarter 2007, due to larger cash balances during this year partly reflecting our recent capital increase in February 2007.
Other Expenses (Income) net The company recorded other income, net of Ps. 27 million for the third quarter 2007 compared with other expenses, net of Ps. 9 million for the second quarter 2007.
Taxes and Profit Sharing Taxes and profit sharing for the third quarter 2007 were Ps. 196 million compared to Ps. 301 million for the second quarter 2007, due to an increase in deferred taxes which increased from Ps. 102 million registered in the second quarter 2007 compared to Ps. 241 million registered in the third quarter 2007. This does not affect the cash flow.
Net Profit As a result of the foregoing, net profit decreased by 33% to Ps. 361 million in the third quarter 2007 from Ps. 541 million in the second quarter 2007.
Comparative third quarter 2007 vs. third quarter 2006 Net Sales
Net sales decreased 2% from Ps. 5,774 million for the third quarter 2006 compared with Ps. 5,659 million for the same period 2007. Sales in tons of finished steel decreased 7% to 635 thousand tons in the third quarter 2007 compared with 680 thousand tons in the same period 2006. The total sales outside of Mexico for the third quarter 2007 increased 7% to Ps. 3,983 million compared with Ps. 3,724 million for the same period 2006. The total of national sales decreased 18% to 1,676 million in the third quarter of 2007 from Ps. 2,050 millions in the same period 2006. The decrease in sales can be explained due to lower shipments during the third quarter 2007, comparing with the second quarter of 2007 (44,000 ton decrease) and comparing against the third quarter of 2006 (a decrease of 45,000 tons) The decline of tons shipped can be explained by the three unexpected stoppages in the rolling lines of the plants in Guadalajara and Apizaco during the periods from July 5-8, July 10-13 and September 10-15 as a result of the shortage in natural gas due to the explosions on the property of Petroleos Mexicanos.
Direct Cost of Sales Direct cost of sales increased 6% from Ps. 4,589 million in the third quarter 2006 to Ps. 4,870 million for the same period 2007. With respect to sales, in the third quarter 2007, the direct cost of sales represents 86% compared to 79% for the same period 2006. The increase in the Direct Cost of Sales is due to two factors: 1) Increase in maintenance costs in the plants located in the United States. The increase was due to the rescheduling of the maintenance stoppages to the second week of August with employees from outside the company instead of during the first weekend of July with company employees, as they are normally scheduled. The rescheduling of the maintenance stoppages was made with the intention of having enough inventories that would permit us to perform our obligations to our customers in view of the termination of the labor agreement between the company and the unionized workers. A tentative agreement was reached on August 16, which was later ratified on September 27. The contract will have duration of 5 years and will expire in 2012. 2) An increase in the labor costs per ton sold, due to the three unexpected stoppages in the rolling lines of the plants in Guadalajara and Apizaco during the periods from July 5-8, July 10-13 and September 10-15 as a result of the shortage in natural gas due to the explosions on the property of Petroleos Mexicanos.
Gross Profit Gross profit for the third quarter 2007 decreased 33% to Ps. 789 million compared to Ps 1,185 million in the same period 2006. The gross profit as a percentage of net sales for the third quarter 2007 was 14% compared with 21% for the same period of 2006. The decline in gross profit is due to the decrease in sales and the increase in cost of goods sold due to the reasons previously mentioned.
Operating Expenses Operating expenses increased 9% to Ps. 349 million in the third quarter 2007 compared to Ps. 321 million for the same period 2006, the depreciation and amortization in the third quarter 2007 was Ps. 123 million compared toPs. 113 million in the same period of 2006. Operating expenses as a percentage of net sales represented 6% during the third quarter 2007 compared to 6% for the same period 2006.
Operating Profit Operating profit decreased 49% from Ps. 864 million in the third quarter 2006 to Ps. 440 million for the same period 2007. The operating profit as a percentage of net sales in the third quarter 2007 was 8% compared to 15% in the same period 2006. The decline in operating profit is due to the decrease in sales and the increase in cost of goods sold due to the reasons previously mentioned.
Integral Financial Cost Integral financial cost for the third quarter 2007 represented a gain of Ps. 90 million compared with the gain of Ps. 57 million for the same period 2006.
Other Expenses (Income) net The company recorded other income, net for Ps. 27 million for the third quarter 2007 compared with other expenses, net for Ps. 7 million for the same period 2006.
Taxes and Profit Sharing Taxes and profit sharing for the third quarter 2007 decreased to Ps. 196 million compared to Ps. 245 million for the same period 2006..
Net Profit As a result of the foregoing, net profit decreased by 35% to Ps. 361 million in the third quarter 2007 from Ps. 555 million in the third quarter 2006.
Millions of pesos Nine months ended Nine months ended 2007 vs
September 30, 2007 September 30, 2006 2006
Sales 18,035 18,365 -2%
Cost of Sales 14,860 14,823 0%
Gross Profit 3,175 3,542 -10%
Operating Expenses 1,057 1,022 3%
Operating Profit 2,118 2,520 -16%
EBITDA 2,492 2,846 -12%
Net Profit 1,638 2,183 -25%
Sales outside Mexico 12,594 12,949 -3%
Sales in Mexico 5,441 5,416 0.5%
Total sales (tons) 2,017 2,050 -2%
(Millions of pesos) 3Q '07 2Q '07 3Q '06 3Q'07 3Q'07
vs 2Q'07 vs 3Q'06
Sales 5,659 6,228 5,774 -9% -2%
Cost of Sales 4,870 5,066 4,589 -4% 6%
Gross Profit 789 1,162 1,185 -32% -33%
Operating Expenses 349 349 321 0% 9%
Operating Profit 440 813 864 -46% -49%
EBITDA 563 940 977 -40% -42%
Net Profit 361 543 555 -34% -35%
Sales outside Mexico 3,983 4,312 3,724 -8% 7%
Sales in Mexico 1,676 1,916 2,050 -13% -18%
Total sales (tons) 635 679 680 -6% -7%
Product Thousands Millions Average Thousands Millions Average
of tons of pesos price per of tons of pesos price per
nine nine ton nine nine nine ton nine
months months months months months months
ended ended ended ended ended ended
September September September September September September
30, 2007 30, 2007 30, 2007 30, 2006 30, 2006 30, 2006 SBQ 1,449 13,707 9,460 1,482 14,171 9,562
Light
Structural 217 1,682 7,751 215 1,503 6,991
Structural 171 1,377 8,053 152 1,182 7,776
Rebar 180 1,230 6,833 200 1,493 7,465
Others 0 39 - 1 16 -
Total 2,017 18,035 8,941 2,050 18,365 8,959
Product Thousands Millions Average Thousands Millions
of tons of pesos price per of tons of pesos
3Q '07 3Q'07 ton 3Q'07 2Q'07 2Q'07
SBQ 467 4,378 9,375 466 4,566
Light
Structural 60 482 8,033 95 752
Structural 50 395 7,900 60 494
Rebar 58 383 6,603 57 403
Others 0 21 0 1 13
Total 635 5,659 8,912 679 6,228
Product Average price Thousands Millions Average price
per ton of tons of pesos per ton
2Q'07 3Q'06 3Q'06 3Q'06
SBQ 9,798 512 4,416 8,625
Light
Structural 7,916 58 430 7,414
Structural 8,233 46 404 8,783
Rebar 7,070 64 517 8,078
Others 0 0 7 0
Total 9,172 680 5,774 8,491 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. DATASOURCE: Grupo Simec, S.A.B. de C.V.
CONTACT: José Flores, Grupo Simec, +52-33-3770-6734, or investors, Mario Padilla, +52-55-1165-1025
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