CEO.CA Chairman's Briefing

GUADALAJARA, Mexico, Feb. 23, 2017 /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, 2016 and December 31, 2015.

Twelve-Month Period Ended December 31, 2016 compared to Twelve-Month Period Ended December 31, 2015

Net Sales
Net sales increased 5% by the combination of higher shipments of finished steel products by 4% and a higher average sales price compared the same period of 2015, the sales increased from Ps. 24,476 million in the twelve-month period ended December 31, 2015 to Ps. 25,642 million in the same period of 2016. Shipments of finished steel products increase 4% to 2 million 112 thousand tons in the twelve-month period ended December 31, 2016 compared to 2 million 026 thousand tons in the same period of 2015. Total sales outside of Mexico on the twelve-month period ended December 31, 2016 maintained to Ps. 10,355 million compared with Ps. 10,369 million in the same period of 2015. Total sales in Mexico increased 8% from Ps. 14,107 million in the twelve-month period ended December 31, 2015 to Ps. 15,287 million in the same period of 2016.  The increase in sales is due to higher shipments of finished steel products by 4% and a higher average sales price.

Cost of Sales
Cost of sales decreased 17% from Ps. 25,169 million in the twelve-month period ended December 31, 2015 to Ps. 21,003 million in the same period of 2016. Cost of sales as a percentage of net sales in twelve months ended on December 31 of 2016 represented 82% and 103% in the same period of 2015. The average cost of finished steel produced in the twelve-month period ended December 31, 2016 compared to the same period of 2015 decreased 20% due to lower costs of some supplies at year end.

Gross Profit
Gross profit of the Company in the twelve-month period ended December 31, 2016 was of Ps. 4,639 million compared to Ps. -693 million in the same period of 2015. Gross profit as a percentage of net sales represented 18% in the twelve-month period ended December 31, 2016 and -3% in the same period of 2015. The increase in the gross profit is due to lower cost of supplies on 2016, compared with the same period of 2015.

Operating Expenses
Selling, general and administrative expenses decreased 11% from Ps. 1,428 million in the twelve-month period ended December 31, 2015 to Ps. 1,277 million in the same period of 2016. Selling, general and administrative expenses as a percentage of net sales represented 6% during the twelve-month period ended December 31, 2015 and 5% in the same period of 2016.

Other Expenses (Income) net
The company recorded other income of Ps. 19 million in the twelve-month period ended December 31, 2015 compared to other net income of Ps. 12 million in the same period of 2016.

Operating Income
Operating income increased 261% from Ps. -2,102 million for the twelve-month period ended December 31, 2015 to Ps. 3,374 million in the same period of 2016. Operating income as a percentage of net sales represented -9% during the twelve-month period ended December 31, 2015 and 13% in the same period of 2016.

EBITDA
The EBITDA of the Company increased 671% from Ps. -841 million in the twelve-month prior ended December 31, of 2015, to Ps. 4,803 million in the same period of 2016.

Comprehensive Financial Cost 
Comprehensive financial cost in the twelve-month period ended December 31, 2016 represented a net income of Ps. 1,902 million compared with a net expense of Ps. 388 million in the same period of 2015. The net interest was an income of Ps. 70 million in 2016 compared with a net interest expense of Ps. 6 million in the twelve-month period ended December 31, 2015. As a result, we registered a net exchange income of Ps. 1,832 million in the twelve-month period ended December 31, 2016 compared with a net exchange loss of Ps. 382 million in the same period of 2015, reflecting a 19% decrease in the value of the peso versus the dollar in the twelve-month period ended December 31, 2016 compared to December 31, 2015.

Income Taxes
The Company have recorded an income net tax of Ps. 48 million in the twelve-month period ended December 31, 2016 (including the income of deferred income tax of Ps. 83 million) compared with a net expense tax of Ps. 771 million in the same period of 2015 (including the tax deferred income of Ps. 827 million).

Net Income (loss) (After Minority Interest)
As a result of the foregoing, net income increased by 263% from Ps. -3,261 million in the twelve-month period ended December 31, 2015 to a net income of Ps. 5,323 million in the same period of 2016. 

Liquidity and Capital Resources

As of December 31, 2016, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, Ps. 6.2 million (accrued interest on December 31, 2016 was U.S. $612,805 or Ps. 12.7 million).  As of December 31, 2015, Simec's total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes ("MTN's") due 1998, Ps. 5.2 million (accrued interest on December 31, 2015 was U.S. $584,159, or Ps. 10.1 million).

Comparative fourth quarter 2016 vs third quarter 2016

Net Sales
Net sales decreased 8% from Ps. 6,671 million in the third quarter of 2016 to Ps. 6,128 million for the fourth quarter of 2016. Sales in tons decreased from 529 thousand ton in the third quarter of 2016 to 434 thousand ton in the fourth quarter of the same period, a decrease of 18%. Total sales outside of Mexico for the fourth quarter of 2016 decreased 6% from Ps. 2,017 million in the third quarter to Ps. 1,890 million in the four quarter of 2016. Sales in Mexico decreased to Ps. 4,238 million in the fourth quarter of 2016 compared Ps. 4,654 million in the third quarter of 2016 a decrease of 9%. Prices of finished products sold in the fourth quarter of 2016 increased 12% compared with the third quarter of the same period.

Cost of Sales
Cost of sales decreased to Ps. 5,108 million in the fourth quarter of 2016 compared to Ps. 5,435 million for the third quarter of 2016. With respect to sales, in the fourth quarter of 2016, the cost of sales represented 83% and third quarter represented 81%. The average cost of sales by ton increased 15% in the fourth quarter of 2016 versus the third quarter of 2016.

Gross Profit
Gross profit of the Company for the fourth quarter of 2016 decreased 17% to Ps. 1,020 million compared to Ps. 1,236 million in the third quarter of 2016. The gross profit as a percentage of net sales for the fourth and third quarter of 2016 was of 19% and 17% respectively.

Operating Expenses
Selling, general and administrative expenses increased 9% to Ps. 344 million in the fourth quarter of 2016 compared to Ps. 317 million for the third quarter of 2016. Selling, general and administrative expenses as a percentage of net sales represented 6% during the fourth quarter of 2016 and 5% for the third quarter of 2016.

Other Expenses (Income) net
The company recorded other net expense of Ps. 189 million in the fourth quarter of 2016 compared to other net income of Ps. 69 million for the third quarter of 2016.

Operating (Loss) Income
Operating income was of Ps. 487 million in the fourth quarter of 2016 compared to an operating income of Ps. 988 million in the third quarter of 2016. The operating income as a percentage of net sales in the fourth quarter of 2016 represented 11% while the operating income for the third quarter of 2016 represented 14%.

EBITDA
The EBITDA was Ps. 1,321 million in the third quarter of 2016 compared to Ps. 1,015 million for the fourth quarter of 2016 due to the above explained.

Comprehensive Financial Income (Cost)
Comprehensive financial cost for the fourth quarter for 2016 was a net income of Ps. 692 million compared with a net income of Ps. 407 million for the third quarter of 2016. The net interest income in the fourth quarter was Ps. 16 million compared to Ps. 44 million in the third quarter of 2016. At the same time we registered an exchange net gain of Ps. 363 million in the third quarter of 2016 compared with an exchange net gain of Ps. 676 million in the fourth quarter of 2016.

Income Taxes
Income Taxes for the fourth quarter of 2016 had an expense net tax of Ps. 15 million (including an expense tax deferred for Ps. 7 million) compared to an income of Ps. 58 million for the third quarter of 2016, (including an income tax deferred of Ps. 25 million).

Net Income (loss) (After Minority Interest)
As a result of the foregoing, the Company had a net income of Ps. 1,163 million in the fourth quarter of 2016 compared to Ps. 1,452 million of net income in the third quarter of 2016.

Comparative fourth quarter 2016 vs fourth quarter 2015

Net Sales
Net sales increased 24% from Ps. 4,925 million for the fourth quarter of 2015 to Ps. 6,128 million for the fourth quarter of 2016. Sales in tons of finished steel in the fourth quarter of 2015 were 358 thousand tons versus to 434 thousand tons in the fourth quarter of 2016. Total sales outside of Mexico decrease 4% from Ps. 1,978 million for the fourth quarter of 2015 to Ps. 1,890 million in the fourth quarter of 2016. Sales in Mexico increased 44% from Ps. 2,947 million in the fourth quarter of 2015 to Ps. 4,238 million in the fourth quarter of 2016. The average sales prices of finished products sold in the fourth quarter of 2016 increased 3%, compared to the same period of 2015.

Cost of Sales
Cost of sales decreased 37% from Ps. 8,106 million in the fourth quarter of 2015 compared to Ps. 5,108 million for the fourth quarter of 2016. With respect to sales, the cost of sales represented 83% during the fourth quarter of 2016 and 165% during the fourth quarter of 2015. The average cost of steel products decreased 48% in the fourth quarter of 2016 versus the fourth quarter of 2015.

Gross Profit
Gross profit for the fourth quarter of 2016 increased 132% from Ps. -3,181 million in the fourth quarter of 2015 compared to Ps. 1,020 million in the fourth quarter of 2016. The gross profit as a percentage of net sales represented 17% during the fourth quarter of 2016 and -65% during the fourth quarter of 2015.

Operating Expenses
Selling, general and administrative expenses decreased 25% from Ps. 458 million in the fourth quarter of 2015 compared to Ps. 344 million for the fourth quarter of 2016. Selling, general and administrative expenses as a percentage of net sales represented 6% during the fourth quarter of 2016 and 9% during the fourth quarter of 2015.

Other Expenses (Income) net
The company recorded other expenses net of Ps. 83 million in the fourth quarter of 2015 compared with other expenses net of Ps. 189 million for the fourth quarter of 2016.

Operating (Loss) Income
Operating income was of Ps. 487 million in the fourth quarter of 2016 compared to an operating loss of Ps. 3,722 million in the fourth quarter of 2015. The operating income as a percentage of net sales in the fourth quarter of 2016 was 11%, compared to an operating loss of -76% in the fourth quarter of 2015.

EBITDA
The EBITDA from the fourth quarter of 2016 increased 131% from a loss of Ps 3,306 million in the fourth quarter of 2015 to a profit of Ps 1,015 million in the fourth quarter of 2016.

Comprehensive Financial Income (Cost)
Comprehensive financial cost for the fourth quarter of 2016 was a net income of Ps. 692 million compared with a net expense of Ps 348 million in the fourth quarter of 2015. Net interest income was of Ps. 16 million in the fourth quarter of 2016 compared with a net interest expense of Ps. 10 million in the fourth quarter of 2015. At the same time we registered a net exchange income of Ps. 676 million in the fourth quarter of 2016 compared with an exchange loss of Ps. 338 million in the fourth quarter of 2015.

Income Taxes
The Company recorded an expense net taxes for the fourth quarter of 2016 of Ps. 15 million (including an expense of deferred tax of Ps. 7 million), compared to an income taxes of Ps. 489 million for the fourth quarter of 2015, (including an income tax deferred of Ps. 665 million).

Net Income (loss) (After Minority Interest)
As a result of the foregoing, the Company recorded a net income of Ps. 1,163 million in the fourth quarter of 2016 compared to Ps. 3,581 million of net loss in the fourth quarter of 2015.

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.

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SOURCE Grupo Simec, S.A.B. de C.V.