GUADALAJARA, Mexico, July 18 /PRNewswire-FirstCall/ -- Grupo Simec, S.A.B. de C.V. (AMEX-SIM) ("Simec") announced today its results of operations for the six-month period ended June 30, 2007.
Six-Month Period Ended June 30, 2007, compared to Six-Month Period Ended June 30, 2006 Sales volume during the first six months of 2007 remained stable, increasing 1% compared with the same period of the previous year. Although steel prices decreased in comparison to the same period of the previous year, the cost of sales also decreased principally because of productivity improvements in the plants of Republic as well as continued synergies from its acquisition. As a result, Simec obtained an increase of 1% in gross profit and 3% in EBITDA.
Net Sales Net sales decreased 2% to Ps. 12,174 million in the six-month period ended June 30, 2007, compared to Ps. 12,375 million in the same period of 2006. Shipments of finished steel products increased 1% to 1,383 thousand tons in the six-month period ended June 30, 2007, compared to 1,369 thousand tons in the same period of 2006. Total sales outside of Mexico in the six-month period ended June 30, 2007, decreased 7% to Ps. 8,471 million, compared with Ps. 9,066 million in the same period of 2006, while total Mexican sales increased 12% from 3,308 million in the six-month period ended June 30, 2006, to Ps. 3,703 million in the same period of 2007. Our Mexican sales increased while our non-Mexican sales decreased principally due to different price levels in the two markets. The average price of steel products decreased 3% in real terms in the six-month period ended June 30, 2007, compared to the same period in 2006.
Direct Cost of Sales Direct cost of sales decreased 2% from Ps. 10,058 million in the six-month period ended June 30, 2006, to Ps. 9,827 million in the same period 2007. Direct cost of sales as a percentage of net sales remained stable at 81% for both periods. The decrease in cost is attributable mainly to a decrease of 3% in the average cost of raw materials used to produce steel products in real terms in the six-month period ended June 30, 2007, versus the same period of 2006.
Gross Profit Gross profit in the six-month period ended June 30, 2007, increased 1% to Ps. 2,347 million, compared to Ps. 2,317 million in the same period 2006. Gross profit as a percentage of net sales remained stable at 19% for both periods. This was principally due to an increase of 1% in sales volume and a decrease of 3% in the average cost of raw materials.
Operating Expenses Operating expenses increased 1% to Ps. 696 million in the six-month period ended June 30, 2007, compared to Ps. 690 million in the same period 2006, but remained stable at 6% of net sales.
Operating Profit Operating profit increased 1% from Ps. 1,627 million in the six-month period ended June 30, 2006, to Ps. 1,651 million in the same period 2007. Operating profit as a percentage of net sales was 14% for the six-month period ended June 30, 2007, compared to 13% in the same period of 2006. This was due principally to an increase of 1% in sales volume and a decrease of 3% in the average cost of raw materials.
Integral Financial Cost Integral financial cost in the six-month period ended June 30, 2007, represented a gain of Ps. 113 million, compared with a gain of Ps. 47 million for the same period in 2006. Interest income was Ps.133 million in the six- month period ended June 30, 2007, compared with Ps. 21 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. 30 million in the six-month period ended June 30, 2007 compared with an exchange gain of Ps. 19 million in the same period of 2006, reflecting a 0.1% increase in the value of the peso versus the dollar in the six-month period ended June 30, 2007.
Other Expenses (Income) net The company recorded other income net of Ps. 18 million in the six-month period ended June 30, 2007, compared to other income net for Ps. 34 million for the same period of 2006.
Taxes and Profit Sharing Taxes and profit sharing in the six-month period ended June 30, 2007, increased to Ps. 526 million compared to Ps. 109 million for the same period of 2006, due to an increase in differed taxes during the first quarter 2007. In the six-month period ended June 30, 2006, we amortized Ps. 350 million of our deferred credit which is non-taxable income.
Net Profit Net profit decreased by 21% to Ps. 1,256 million in the six-month period ended June 30, 2007, from Ps. 1,599 million in the same period of 2006. The decrease is principally due to the fact that we did not amortize the deferred credit as we did in the same period of 2006.
Liquidity and Capital Resources At June 30, 2007, Simec had no consolidated debt other than US $302,000 of its 8 7/8 medium term notes that remain outstanding.
Net resources provided by operations were Ps. 1,124 million in the six- month period ended June 30, 2007, versus Ps. 808 million of net resources provided by operations in the same period of 2006. Net resources provided by financing activities were Ps. 2,336 million in the six-month period ended June 30, 2007, (which amount includes the capital increase of Ps. 2,346 million in February 2007) versus Ps. 298 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. 340 million in the six-month period ended June 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 claim) of Ps. 258 million in the same period of 2006.
Comparative second quarter 2007 vs. first quarter 2007 Net sales in the second quarter of 2007 increased 1% compared with the first quarter of 2007, mainly during as a result of an increase in steel prices. Direct cost of sales increased 3% and operating expenses decreased 3%, the reason why Simec registered a decrease of 6% in its operating profit and 5% in its EBITDA. In the second quarter of 2007, net income decreased 26% compared with the first quarter of 2007, due mainly to reduced income from operations and an increase in deferred taxes.
Net Sales Net sales increased 1% due to a increase of 7% in prices and a 5% decrease in sales volume, causing net sales go from Ps. 6,047 million for the first quarter 2007 to Ps. 6,127 million for the second quarter 2007. Sales in tons of finished steel products decreased 4% to 679 thousand tons in the second quarter 2007, compared with 704 thousand tons in the first quarter 2007. The total sales outside of Mexico for the second quarter 2007 increased to Ps. 4,243 million, compared with Ps. 4,228 million for the first quarter 2007. Total Mexican sales increased from Ps. 1.819 million in the first quarter 2007 to Ps.1,884 millions in the second quarter 2007. The average price of steel products increased 7% in real terms in the second quarter of 2007 compared to the first quarter of 2007.
Direct Cost of Sales Direct cost of sales increased 3% from Ps. 4,843 million in the first quarter 2007 to Ps. 4,984 million for the second quarter 2007. In the second quarter 2007, the direct cost of sales represented 81% of net sales compared to 81% for the first quarter 2007. The average cost of raw materials used to produce steel products increased 8% in real terms in the second quarter 2007 compared to the first quarter 2006, primarily resulting from increased raw materials costs.
Gross Profit Gross profit for the second quarter 2007 decreased 5% to Ps. 1,143 million, compared to Ps. 1,204 million in the first quarter 2007. Gross profit as a percentage of net sales for the second quarter 2007 was 19%, compared with 20% for the first quarter 2007. The increase in gross profit was to an increase of 7% in prices, a 4% decrease in sales volume and an increase of 8% in the average cost of raw materials.
Operating Expenses Operating expenses decreased 3% to Ps. 343 million in the second quarter 2007, compared to Ps. 353 million for the first quarter 2007. As a percentage of sales, operating expenses represented 6% during the second quarter of 2007, compared to 6% in the first quarter of 2007.
Operating Profit Operating profit decreased 8% from Ps. 851 million in the first quarter 2007, to Ps. 800 million for the second quarter 2007. Operating profit as a percentage of net sales decreased to 13% in the second quarter 2007, from 14% in the first quarter 2007. This was due to a decrease of 4% in sales volume, a 7% increase in prices and an increase of 8% 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. 75 million for the first quarter 2007. Net interest income was Ps. 87 million in the second quarter 2007, compared with Ps. 46 million in the first 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 expenses net of Ps. 9 million for the second quarter 2007, compared with other income net of Ps. 27 million for the first quarter 2007.
Taxes and Profit Sharing Taxes and profit sharing for the second quarter 2007 were Ps. 296 million, compared to Ps. 230 million for the first quarter 2007.
Net Profit Net profit decreased by 26% to Ps. 533 million in the second quarter 2007, from Ps. 723 million in the first quarter 2007. We attribute the decrease in the second quarter of 2007 mainly to a decrease in sales volume, increase in prices, an increase in the average cost of raw materials and the increase in the tax provision.
Comparative second quarter 2007 vs. second quarter 2006 During the second quarter 2007 Simec had a decrease of 7% in its net sales and 1% in its sales volume compared with the same period of 2006. This decrease is due to the fact that during the second quarter 2006 there was an increase in steel prices, the increase in the second quarter 2007 did not reach the levels of the second quarter 2006. Simec decreased its cost of sales 4% and its operating expenses 4%. In spite of the concerted effort of Simec to reduce the cost of sales, it was not sufficient to offset the decrease in prices. Thus Simec recorded a decrease of 20% in its operating profit and a decrease of 15% in its EBITDA.
Net Sales Net sales decreased 7% from Ps. 6,557 million for the second quarter 2006, compared with Ps. 6,127 million for the same period 2007. Sales in tons of finished steel decreased 1% to 679 thousand tons in the second quarter 2007, compared with 689 thousand tons in the same period 2006. The total sales outside of Mexico for the second quarter 2007 decreased 9% to Ps. 4,243 million compared with Ps. 4,647 million for the same period 2006 , this decrease was principally to the minor volume of sales for 7 thousand tons (decrease of 18 thousand tons from our Republic facilities and increase of 11 thousand tons from our plants in Mexico). The total of national sales decreased 1% to 1,910 million in 2006, from Ps. 1,884 millions in the same period 2006. The average price of steel products decreased 5% in real terms in the second quarter 2007 compared to the same period in 2006.
Direct Cost of Sales Direct cost of sales decreased 4% from Ps. 5,202 million in the second quarter 2006 to Ps. 4,984 million for the same period 2007. With respect to sales, in the second quarter 2007, the direct cost of sales represents 81% compared to 79% for the same period 2006. The decrease in cost is attributed mainly to a decrease of 3% in the average cost of raw materials used to produce steel products in real terms in the second quarter 2007 versus the same period of 2006.
Gross Profit Gross profit for the second quarter 2007 decreased 16% to Ps. 1,143 million, compared to Ps 1,355 million in the same period 2006. The gross profit as a percentage of net sales for the second quarter 2007 was 19% compared with 21% for the same period of 2006. The decrease in gross profit was due to a decrease of 5% in prices, a 1% decrease in sales volume and a decrease of 3% in the average cost.
Operating Expenses Operating expenses decreased 4% to Ps. 343 million in the second quarter 2007, compared to Ps. 359 million for the same period 2006. Operating expenses as a percentage of net sales represented 6% during the second quarter compared to 5% of the same period.
Operating Profit Operating profit decreased 20% from Ps. 996 million in the second quarter 2006 to Ps. 800 million for the same period 2007. The operating profit as a percentage of net sales in the second quarter 2006 was 15% compared to 13% in the same period 2007. This was due to a decrease in sales volume, decrease in prices and an increase in the average cost of raw materials.
Integral Financial Cost Integral financial cost for the second quarter 2007 represented a gain of Ps. 38 million, compared with the gain of Ps. 52 million for the same period 2006.
Other Expenses (Income) net The company recorded other expenses net of Ps.9 million for the second quarter 2007, compared with other income net of Ps. 22 million for the same period 2006.
Taxes and Profit Sharing Taxes and profit sharing for the second quarter 2007 increased to Ps. 296 million compared to Ps. 11 million for the same period 2006. In the second quarter of 2006 we amortized Ps. 350 million of our deferred credit which is non-taxable income and in the second quarter of 2007 we did not have deferred credit.
Net Profit Net profit decreased by 50% to Ps. 1,059 million in the second quarter 2007, from Ps. 533 million in the second quarter 2006. The decrease occurred principally because in the six-month period ended June 30, 2007, we did not have the amortization of the deferred credit and in the same period of 2006 we amortized Ps. 350 million, the decrease in sales volume, decrease in prices and an increase in the average cost of raw materials also contributed to the decrease.
Six months Six months 2007 vs 2006
ended June 30, 2007 ended June 30, 2006
Sales 12,174 12,375 -2%
Cost of Sales 9,827 10,058 -2%
Gross Profit 2,347 2,317 1%
Operating Expenses 696 690 1%
Operating Profit 1,651 1,627 2%
EBITDA 1,898 1,838 3%
Net Profit 1,043 1,398 -25%
Sales outside Mexico 8,471 9,067 -7%
Sales in Mexico 3,703 3,308 12%
Total sales (tons) 1,383 1,369 1%
(Millions of pesos) 2Q07 1Q07 2Q06 1Q07 vs. 2Q07 vs. 1Q07 2Q06
Sales 6,127 6,047 6,557 1% -7%
Cost of Sales 4,984 4,843 5,202 3% -4%
Gross Profit 1,143 1,204 1,355 -5% -16%
Operating Expenses 343 353 359 -3% -4%
Operating Profit 800 851 996 -6% -20%
EBITDA 925 973 1,093 -5% -15%
Net Profit 533 723 1,059 -26% -50%
Sales outside Mexico 4,242 4,228 4,647 0% -9%
Sales in Mexico 1,885 1,819 1,910 4% -1%
Total sales (tons) 679 704 689 -4% -1%
Thousands Millions Average Thousands Millions Average
of tons of pesos price of tons of pesos price
six six per ton six six six per ton six
months months months months months months
ended ended ended ended ended ended
June 30, June 30, June 30, June 30, June 30, June 30,
Product 2007 2007 2007 2006 2006 2006
SBQ 982 9,178 9,346 970 9,587 9,884
Light
Structural 157 1,180 7,516 157 1,055 6,720
Structural 121 965 7,975 106 764 7,208
Rebar 122 833 6,828 136 960 7,059
Others 1 18 -- -- 9 -
Total 1,383 12,174 8,803 1,369 12,375 9,039 Average
Thousands Millions price Thousands Millions
of tons of pesos per ton of tons of pesos
Product 2Q07 2Q07 2Q07 1Q07 1Q07
SBQ 466 4,491 9,637 516 4,686
Light
Structural 95 741 7,800 62 440
Structural 60 486 8,100 61 479
Rebar 58 396 6,828 64 437
Others 0 13 0 1 5
Total 679 6,127 9,024 704 6,047
Average price Thousands Million Average price
per ton of tons of pesos per ton
1Q07 2Q06 2Q06 2Q06
SBQ 9,081 473 4,938 10,440
Light
Structural 7,097 75 543 7,240
Structural 7,852 53 410 7,736
Rebar 6,828 88 666 7,568
Other 0 0 0 0
Total 8,589 689 6,557 9,517
Any forward-looking information contained herein is inheritely 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 forword-looking information contained herein. DATASOURCE: Grupo Simec, S.A.B. de C.V.
CONTACT: Jose Flores Flores, Grupo Simec, +011-5233-377-6734
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