Grupo Simec Announces Results of Operations For The First Nine Months Of 2005

Monitor this Company



    GUADALAJARA, Mexico, Oct. 26 - Grupo Simec, S.A. de C.V. (Amex: SIM) ("Simec") announced today its results of operations for the nine-month period ended September 30, 2005. Net sales increased 99% to Ps. 7,988 million in the first nine months of 2005 compared to Ps. 4,017 million in the same period of 2004, primarily due to the inclusion of net sales generated by the newly acquired plants in Apizaco and Cholula of Ps. 2,119 million and Ps. 2,827 million generated by the newly acquired plants of PAV Republic, Inc. ("Republic"). Simec recorded net income of Ps. 976 million in the first nine months of 2005 versus net income of Ps. 1,079 million for the first nine months of 2004.

    On July 22, 2005 Simec and its parent company Industrias CH, S.A. de C.V. ("ICH") acquired 100% of the stock of Republic. Simec, ICH's largest subsidiary, acquired 50.2% of Republic's stock, and ICH purchased the remaining 49.8%. The cash purchase price of U.S. $229 million was financed by internally generated funds. At September 30, 2005, the total amount of Republic's liabilities was of U.S. $66 million (Ps. 715 million), with a weighted average cost per year of 6.02%. With the acquisition of Republic, Simec has become the largest producer of special bar quality (SBQ) steel in North America. On September 10, 2004 Simec completed the acquisition of the property, plant and equipment and inventories, and assumed liabilities associated with seniority premiums of employees of the Mexican steel-making facilities of Industrias Ferricas del Norte, S.A. (Corporacion Sidenor of Spain) located in Apizaco, Tlaxcala and Cholula, Puebla. Simec's total investment in this transaction was approximately U.S. $135 million, funded with internally generated resources of Simec and capital contributions from its parent company ICH of U.S. $19 million for capital stock issued in the second quarter of 2005. Simec began to operate the plants on August 1, 2004, and, as a result, the operations of both plants are reflected in Simec's financial results as of such date. Simec sold 1,115,054 metric tons of basic steel products during the nine-month period ended September 30, 2005 (including 324,026 metric tons produced by the newly acquired plants in Apizaco and Cholula and 308,719 metric tons produced by the newly acquired plants of Republic), an increase of 105% as compared to 542,705 metric tons in the same period of 2004. Exports (including sales by U.S. subsidiaries) of basic steel products were 418,380 metric tons in the first nine months of 2005 (including 17,626 metric tons produced by the newly acquired plants in Apizaco and Cholula and 308,719 metric tons generated by the newly acquired plants of Republic) versus 70,112 metric tons in the same period of 2004. Additionally Simec sold 13,305 metric tons of billet in the nine-month period ended September 30, 2005 as compared to 40,791 metric tons of billet in the same period of 2004. Prices of finished products (excluding the sales of Republic) sold in the first nine months of 2005 decreased 8.5% in real terms versus the same period of 2004.

    Simec's direct cost of sales was Ps. 6,013 million in the nine-month period ended September 30, 2005 (including Ps. 1,540 million relating to the newly acquired plants in Apizaco and Cholula and Ps. 2,619 million relating to the newly acquired plants of Republic, including U.S. $17.6 million, Ps. 191 million, of costs related to the application of the Financial Accounting Standard Board "FASB" 141) this provision do not affect the cash flow of Simec, or 75% of net sales, versus Ps. 2,288 million, or 57% of net sales, for the 2004 period. The average cost of raw materials used to produce steel products (excluding the production of Republic) increased 5.6% in real terms in the nine-month period ended September 30, 2005 versus the same period of 2004, primarily as a result of increases in the price of scrap and certain other raw materials.

    Indirect manufacturing, selling, general and administrative expenses (including depreciation) were Ps. 663 million during the nine-month period ended September 30, 2005 (including Ps. 184 million relating to the newly acquired plants in Apizaco and Cholula and Ps. 115 million relating to the newly acquired plants of Republic), compared to Ps. 420 million in the same period of 2004 (including Ps. 54 million relating to the newly acquired plants in Apizaco and Cholula) .

    Simec's operating income increased 0.2% to Ps. 1,312 million during the nine-month period ended September 30, 2005 (including Ps. 395 million relating to the newly acquired plants in Apizaco and Cholula and Ps. 94 million relating to the newly acquired plants of Republic) from Ps. 1,309 million in the first nine months of 2004 (including Ps. 135 million relating to the newly acquired plants in Apizaco and Cholula). Operating income was 16% of net sales in the nine-month period ended September 30, 2005 compared to 33% of net sales in the same period of 2004.

    Simec recorded other income, net, from other financial operations of Ps. 15 million in the nine-month period ended June 30, 2005 compared to other income, net, of Ps. 17 million in the same period of 2004. In addition, Simec recorded a provision for income tax and employee profit sharing of Ps. 239 million in the nine-month period ended September 30, 2005 versus a provision of Ps. 231 million in the same period of 2004.

    Simec recorded financial expense of Ps. 85 million in the nine-month period ended September 30, 2005 compared to financial expense of Ps. 16 million in the same period of 2004 as a result of (i) net interest income of Ps. 2 million in the nine-month period ended September 30, 2005 compared to Ps. 4 million of net interest income in the same period of 2004, (ii) an exchange loss of Ps. 69 million in the nine-month period ended September 30, 2005 compared to an exchange gain of Ps. 12 million in the same period of 2004 and an increase of 3.7% in the value of the peso versus the dollar in the nine-month period ended September 30, 2005 compared to a decrease of 1.6% in the value of the peso versus the dollar in the nine-month period ended September 30, 2004 and (iii) a loss from monetary position of Ps. 18 million in the nine-month period ended September 30, 2005 compared to a loss from monetary position of Ps. 32 million in the nine-month period ended September 30, 2004, reflecting the domestic inflation rate of 1.7% in the nine-month period ended September 30, 2005 compared to the domestic inflation rate of 3.4% in the same period in 2004 and lower debt levels during the 2005 period.

    At September 30, 2005, Simec's total consolidated debt consisted of approximately $66.3 million of U.S. dollar-denominated debt. At December 31, 2004, Simec had outstanding approximately $13.9 million of U.S. dollar- denominated debt, including a refinanced letter of credit for U.S. $13.6 million.

    All figures were prepared in accordance with Mexican generally accepted accounting principles and are stated in constant Pesos at September 30, 2005.

    Simec is a mini-mill steel producer in Mexico and manufactures a broad range of non-flat structural steel products.
Monitor this Company :
You will receive an email alert whenever there is a news item concerning this company.
Name Your Company
Email Address Position/Role


2001 - 2016 Lexdon Business Library
About TrustBase
Privacy Policy