Financial Performance - Net sales decreased by 24% from Ps. 54,159 million in 2022 to Ps. 41,217 million in 2023, with a 21% drop in average sales price[3]. - Shipments of finished steel products decreased by 4% to 2,176 thousand tons in 2023 compared to 2,255 thousand tons in 2022[3]. - Gross profit decreased from Ps. 14,475 million in 2022 to Ps. 10,629 million in 2023, representing 26% of net sales in 2023 compared to 27% in 2022[5]. - Operating income fell by 31% from Ps. 12,091 million in 2022 to Ps. 8,385 million in 2023, accounting for 20% of net sales in 2023[8]. - EBITDA decreased by 29% from Ps. 13,207 million in 2022 to Ps. 9,412 million in 2023[9]. - Net income decreased by 33% from Ps. 7,703 million in 2022 to Ps. 5,186 million in 2023[13]. - Total sales for the year 2023 were Ps. 41,217 million, a decrease of 24% compared to Ps. 54,159 million in 2022[38]. - The cost of sales for 2023 was Ps. 30,588 million, down 23% from Ps. 39,684 million in 2022[38]. - The company recorded a net profit of Ps. 1,365 million in Q4 2023, compared to a net loss of Ps. 334 million in Q4 2022[37]. - EBITDA for Q4 2023 was Ps. 1,914 million, down 18% from Ps. 2,322 million in Q4 2022[34]. - Revenue for the current quarter reached 8,815,349 thousand pesos, a decrease of 13.1% compared to 10,147,374 thousand pesos in the previous year[46]. - Gross profit for the current quarter was 2,532,661 thousand pesos, down from 2,706,412 thousand pesos, reflecting a gross margin of 28.7%[46]. - Operating profit for the current quarter was 1,708,873 thousand pesos, a decline of 16.2% from 2,039,431 thousand pesos in the previous year[46]. - Net profit for the current quarter was 5,179,801 thousand pesos, compared to 1,363,055 thousand pesos in the previous year, indicating a significant increase[48]. - Total comprehensive income for the current quarter was 2,190,042 thousand pesos, compared to a loss of 341,242 thousand pesos in the previous year[48]. Expenses and Costs - Comprehensive financial cost increased to a net expense of Ps. 1,900 million in 2023 from Ps. 1,089 million in 2022[11]. - Selling, general and administrative expenses decreased by 4% from Ps. 2,456 million in 2022 to Ps. 2,348 million in 2023[6]. - Comprehensive financial cost for Q4 2023 was a net expense of Ps. 582 million, significantly reduced from Ps. 1,026 million in Q4 2022[35]. - Income taxes for Q4 2023 were recorded at Ps. 236 million, a substantial decrease from Ps. 1,349 million in Q4 2022[36]. - Finance costs increased to 804,107 thousand pesos in the current quarter from 1,263,722 thousand pesos in the previous year, reflecting a rise in interest expenses[46]. Sales and Market Performance - Total sales outside of Mexico decreased by 31% to Ps. 16,891 million in 2023 compared to Ps. 24,515 million in 2022[3]. - Sales outside Mexico for 2023 were Ps. 16,891 million, a decrease of 31% from Ps. 24,515 million in 2022[38]. - Total domestic sales amounted to $24,325,625, with a volume of 1,181 units sold[150]. - Total foreign sales reached $14,464,882, with a volume of 910 units sold[150]. - The total sales from foreign subsidiaries were $2,426,310, with a volume of 85 units sold[150]. - The total consolidated sales for the quarter were $41,216,817[150]. Assets and Liabilities - Total assets reached $68.02 billion, with current assets at $44.83 billion[41]. - Total liabilities were recorded at $44.82 billion, indicating a significant leverage position[41]. - Total non-current assets were valued at $23.19 billion, with net receivables at $5.79 billion[41]. - The company has $1.08 billion in goodwill, reflecting its acquisitions strategy[41]. - The total equity stood at $23.20 billion, showcasing a strong capital base[41]. - The company has total liabilities amounting to 11,999,456 thousand pesos, with short-term liabilities at 11,884,766 thousand pesos[144]. - The total current and non-current liabilities are reported as 7,749,478 thousand pesos[144]. - Grupo Simec's total liabilities to total assets ratio is 0.26, which is below the 0.60 threshold[147]. - The current assets to current liabilities ratio is 3.29 times, indicating strong liquidity[146]. Shareholder Information - Total equity increased to $50,095,376 from $47,994,376, reflecting a growth of approximately 4.6% year-over-year[42]. - Shares repurchased totaled -4,355,320, slightly higher than -4,266,278 from the previous period[42]. - The company repurchased 36,023,685 shares, an increase from 35,573,326 shares in the previous year[46]. - The company repurchased shares amounting to 89,042 thousand pesos, slightly down from 90,129 thousand pesos in the previous year[53]. - The balance of retained earnings at the end of 2023 was reported at 43,287,744 thousand pesos, reflecting the company's accumulated performance[55]. Future Outlook and Strategy - The company is focusing on market expansion and new product development to drive future growth[41]. - Future guidance indicates a projected revenue growth of 10% year-over-year[41]. - The company plans to invest in new technologies and strategic partnerships to enhance its competitive edge[41]. Compliance and Accounting Practices - The company has maintained a consistent approach to its financial statements under IFRS, ensuring transparency and compliance with international standards[59]. - The company follows the average cost method for inventory valuation, ensuring that the cost does not exceed the market value or net realizable value[83]. - Current income tax is based on fiscal profits, differing from reported profits due to timing differences in tax treatment[102]. - Deferred tax assets and liabilities are recognized for temporary differences, with assets recognized only if future taxable profits are probable[103]. - Earnings per share are calculated by dividing net income attributable to controlling interest by the weighted average of common shares outstanding[104]. - Financial assets are classified into categories based on their nature and purpose, with loans and receivables stated at amortized cost[114]. Currency and Exchange Rates - The exchange rate for the Mexican peso against the U.S. dollar as of December 31, 2023, is 16.8935[79]. - Grupo Simec reported a net balance of 15,965,439 thousand pesos in its monetary foreign currency position as of Q4 2023[144]. Employee and Workforce Information - The number of employees decreased to 1,414 from 1,850 in the previous year, indicating a reduction in workforce[46]. - Employee benefits increased to $185,491 from $169,375, marking an increase of about 9.0%[42].

[Executive Summary](index=1&type=section&id=Executive%20Summary) Grupo Simec reported its operational results for the nine-month period ending September 30, 2023 - Grupo Simec announced its results of operations for the nine-month period ended September 30, 2023[1](index=1&type=chunk) [Results of Operations for the First Nine Months of 2023 (vs. 2022)](index=1&type=section&id=Results%20of%20Operations%20for%20the%20First%20Nine%20Months%20of%202023%20(vs.%202022)) This section analyzes Grupo Simec's financial performance for the first nine months of 2023 compared to the same period in 2022, highlighting key operational and financial metrics [Net Sales](index=1&type=section&id=Net%20Sales_9M_2023_vs_2022) Net sales for the first nine months of 2023 decreased by 26% to MXN 32,401 million, driven by a 23% drop in average selling price and a 5% reduction in shipment volumes Net Sales Performance (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Net Sales | 32,401 | 44,012 | (26%) | | Shipments (Thousands of Tons) | 1,640 | 1,720 | (5%) | | Sales Outside Mexico | 13,571 | 20,812 | (35%) | | Mexican Sales | 18,830 | 23,200 | (19%) | | Average Selling Price | - | - | (23%) | [Cost of Sales](index=1&type=section&id=Cost%20of%20Sales_9M_2023_vs_2022) Cost of sales decreased by 25% to MXN 24,305 million, primarily due to lower input prices, though it increased to 75% as a percentage of net sales Cost of Sales Performance (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Cost of Sales | 24,305 | 32,243 | (25%) | | Cost of Sales (% of Net Sales) | 75% | 73% | 2 pp | | Cost per Steel Ton | - | - | (21%) | [Gross Profit](index=1&type=section&id=Gross%20Profit_9M_2023_vs_2022) Gross profit declined by 31% to MXN 8,096 million, with the margin decreasing to 25% of net sales, reflecting lower prices and volumes Gross Profit Performance (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Gross Profit | 8,096 | 11,769 | (31%) | | Gross Profit (% of Net Sales) | 25% | 27% | (2 pp) | [General, Selling and Administrative Expenses](index=1&type=section&id=General,%20Selling%20and%20Administrative%20Expenses_9M_2023_vs_2022) Selling, general, and administrative expenses decreased by 8% to MXN 1,587 million, increasing to 5% as a percentage of net sales SG&A Expenses Performance (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | SG&A Expenses | 1,587 | 1,725 | (8%) | | SG&A Expenses (% of Net Sales) | 5% | 4% | 1 pp | [Other Income (Expenses), net](index=2&type=section&id=Other%20Income%20(Expenses),%20net_9M_2023_vs_2022) Other income, net, significantly increased to MXN 167 million for the first nine months of 2023 Other Income (Expenses), net (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Other Income (Expenses), net | 167 | 7 | 2286% | [Operating Income](index=2&type=section&id=Operating%20Income_9M_2023_vs_2022) Operating income decreased by 34% to MXN 6,676 million, with the margin declining to 21% of net sales due to lower prices and volumes Operating Income Performance (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Operating Income | 6,676 | 10,051 | (34%) | | Operating Income (% of Net Sales) | 21% | 23% | (2 pp) | [EBITDA](index=2&type=section&id=EBITDA_9M_2023_vs_2022) EBITDA decreased by 31% to MXN 7,499 million, primarily due to lower net income and a significant increase in comprehensive financial cost EBITDA Reconciliation (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | EBITDA | 7,499 | 10,885 | (31%) | | Net Income (for EBITDA calc) | 3,821 | 8,037 | (52%) | | Income Taxes (for EBITDA calc) | 1,541 | 1,950 | (21%) | | Comprehensive Financial Cost (for EBITDA calc) | 1,318 | 64 | 1959% | | Depreciation (for EBITDA calc) | 823 | 834 | (1%) | [Comprehensive Financial Cost](index=3&type=section&id=Comprehensive%20Financial%20Cost_9M_2023_vs_2022) Comprehensive financial cost significantly increased to an expense of MXN 1,318 million, driven by a substantial rise in exchange loss Comprehensive Financial Cost (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Comprehensive Financial Cost | 1,318 (expense) | 64 (expense) | 1959% | | Net Interest Income | 392 | 103 | 281% | | Exchange Loss | 1,754 | 198 | 786% | [Income Taxes](index=3&type=section&id=Income%20Taxes_9M_2023_vs_2022) Income tax expense decreased to MXN 1,541 million, including a lower deferred income tax of MXN 8 million Income Taxes (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Income Tax Expense | 1,541 | 1,950 | (21%) | | Deferred Income Tax | 8 | 47 | (83%) | [Net Income](index=3&type=section&id=Net%20Income_9M_2023_vs_2022) Net income significantly decreased by 52% to MXN 3,821 million, reflecting overall declines in sales and operating performance Net Income (9M 2023 vs. 9M 2022) | Metric | 9M 2023 (MXN Million) | 9M 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Net Income | 3,821 | 8,037 | (52%) | [Liquidity and Capital Resources](index=3&type=section&id=Liquidity%20and%20Capital%20Resources_9M_2023_vs_2022) As of September 30, 2023, total consolidated debt remained minimal at MXN 5.3 million, primarily from 8 7/8% medium-term notes Consolidated Debt (MTN's) (Sep 30, 2023 vs. Sep 30, 2022) | Metric | Sep 30, 2023 (MXN Million) | Sep 30, 2022 (MXN Million) | Change (%) | | :----- | :------------------------- | :------------------------- | :--------- | | Total Consolidated Debt (MTN's) | 5.3 | 6.1 | (13%) | | Accrued Interest (MTN's) | 14.2 | 14.0 | 1% | [Results of Operations for the Third Quarter of 2023 (vs. Second Quarter of 2023)](index=3&type=section&id=Results%20of%20Operations%20for%20the%20Third%20Quarter%20of%202023%20(vs.%20Second%20Quarter%20of%202023)) This section analyzes Grupo Simec's financial performance for the third quarter of 2023 compared to the second quarter of 2023, highlighting sequential trends [Net Sales](index=3&type=section&id=Net%20Sales_3Q_2023_vs_2Q_2023) Net sales decreased by 7% to MXN 9,454 million in 3Q 2023, primarily due to an 11% decrease in average selling price despite a 5% increase in shipment volumes Net Sales Performance (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Net Sales | 9,454 | 10,122 | (7%) | | Shipments (Thousands of Tons) | 531 | 505 | 5% | | Sales Outside Mexico | 3,932 | 4,458 | (12%) | | Mexican Sales | 5,522 | 5,664 | (3%) | | Average Selling Price | - | - | (11%) | [Cost of Sales](index=3&type=section&id=Cost%20of%20Sales_3Q_2023_vs_2Q_2023) Cost of sales decreased by 4% to MXN 7,177 million, mainly due to lower supply prices, but increased to 76% as a percentage of net sales Cost of Sales Performance (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Cost of Sales | 7,177 | 7,510 | (4%) | | Cost of Sales (% of Net Sales) | 76% | 74% | 2 pp | [Gross Profit](index=4&type=section&id=Gross%20Profit_3Q_2023_vs_2Q_2023) Gross profit decreased by 13% to MXN 2,277 million, with the margin declining to 24% of net sales due to lower average selling prices Gross Profit Performance (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Gross Profit | 2,277 | 2,612 | (13%) | | Gross Profit (% of Net Sales) | 24% | 26% | (2 pp) | [General, Selling and Administrative Expenses](index=4&type=section&id=General,%20Selling%20and%20Administrative%20Expenses_3Q_2023_vs_2Q_2023) Selling, general, and administrative expenses decreased by 6% to MXN 485 million, maintaining 5% of net sales SG&A Expenses Performance (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | SG&A Expenses | 485 | 515 | (6%) | | SG&A Expenses (% of Net Sales) | 5% | 5% | 0 pp | [Other (Expenses) Income, net](index=4&type=section&id=Other%20(Expenses)%20Income,%20net_3Q_2023_vs_2Q_2023) Other income, net, significantly decreased by 72% to MXN 24 million in 3Q 2023 Other Income (Expenses), net (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Other Income (Expenses), net | 24 | 85 | (72%) | [Operating Income](index=4&type=section&id=Operating%20Income_3Q_2023_vs_2Q_2023) Operating income decreased by 17% to MXN 1,816 million, with the operating margin declining to 19% of net sales Operating Income Performance (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Operating Income | 1,816 | 2,182 | (17%) | | Operating Income (% of Net Sales) | 19% | 22% | (3 pp) | [EBITDA](index=4&type=section&id=EBITDA_3Q_2023_vs_2Q_2023) EBITDA decreased by 15% to MXN 2,079 million, influenced by higher net income, lower income tax, and a shift in comprehensive financial cost to an income EBITDA Reconciliation (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | EBITDA | 2,079 | 2,460 | (15%) | | Net Income (for EBITDA calc) | 1,802 | 987 | 83% | | Income Taxes (for EBITDA calc) | 298 | 712 | (58%) | | Comprehensive Financial Cost (for EBITDA calc) | (283) (income) | 484 (expense) | N/A | | Depreciation (for EBITDA calc) | 264 | 279 | (5%) | [Comprehensive Financial Cost](index=5&type=section&id=Comprehensive%20Financial%20Cost_3Q_2023_vs_2Q_2023) Comprehensive financial cost shifted from an MXN 484 million expense to an MXN 283 million income, driven by a positive net exchange income Comprehensive Financial Cost (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change | | :----- | :-------------------- | :-------------------- | :------- | | Comprehensive Financial Cost | 283 (income) | 484 (expense) | Shift to income | | Net Interest Income | 28 | 175 | (84%) | | Net Exchange Income (Loss) | 255 (income) | (703) (loss) | Shift to income | [Income Taxes](index=5&type=section&id=Income%20Taxes_3Q_2023_vs_2Q_2023) Income tax expense substantially decreased to MXN 298 million in 3Q 2023, including a higher deferred income tax of MXN 8 million Income Taxes (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Income Tax Expense | 298 | 712 | (58%) | | Deferred Income Tax | 8 | 1 | 700% | [Net Income](index=5&type=section&id=Net%20Income_3Q_2023_vs_2Q_2023) Net income significantly increased by 83% to MXN 1,802 million, driven by favorable comprehensive financial cost and lower income taxes Net Income (3Q 2023 vs. 2Q 2023) | Metric | 3Q 2023 (MXN Million) | 2Q 2023 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Net Income | 1,802 | 987 | 83% | [Results of Operations for the Third Quarter of 2023 (vs. Third Quarter of 2022)](index=6&type=section&id=Results%20of%20Operations%20for%20the%20Third%20Quarter%20of%202023%20(vs.%20Third%20Quarter%20of%202022)) This section analyzes Grupo Simec's financial performance for the third quarter of 2023 compared to the same period in 2022, highlighting year-over-year quarterly trends [Net Sales](index=6&type=section&id=Net%20Sales_3Q_2023_vs_3Q_2022) Net sales decreased by 30% to MXN 9,454 million in 3Q 2023, primarily due to a 28% drop in average sales price and a 2% decrease in sales volume Net Sales Performance (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Net Sales | 9,454 | 13,433 | (30%) | | Shipments (Thousands of Tons) | 531 | 541 | (2%) | | Sales Outside Mexico | 3,932 | 6,559 | (40%) | | Mexican Sales | 5,522 | 6,874 | (20%) | | Average Sales Price | - | - | (28%) | [Cost of Sales](index=6&type=section&id=Cost%20of%20Sales_3Q_2023_vs_3Q_2022) Cost of sales decreased by 30% to MXN 7,177 million, mainly due to a 29% decrease in average raw material prices, maintaining 76% of net sales Cost of Sales Performance (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Cost of Sales | 7,177 | 10,271 | (30%) | | Cost of Sales (% of Net Sales) | 76% | 76% | 0 pp | | Average Cost of Raw Materials | - | - | (29%) | [Gross (Loss) Profit](index=6&type=section&id=Gross%20(Loss)%20Profit_3Q_2023_vs_3Q_2022) Gross profit decreased by 28% to MXN 2,277 million, maintaining a stable 24% gross profit margin despite lower sales prices and input costs Gross Profit Performance (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Gross Profit | 2,277 | 3,162 | (28%) | | Gross Profit (% of Net Sales) | 24% | 24% | 0 pp | [General, Selling and Administrative Expenses](index=6&type=section&id=General,%20Selling%20and%20Administrative%20Expenses_3Q_2023_vs_3Q_2022) Selling, general, and administrative expenses decreased by 18% to MXN 485 million, increasing to 5% as a percentage of net sales SG&A Expenses Performance (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | SG&A Expenses | 485 | 595 | (18%) | | SG&A Expenses (% of Net Sales) | 5% | 4% | 1 pp | [Other Income (Expenses), net](index=6&type=section&id=Other%20Income%20(Expenses),%20net_3Q_2023_vs_3Q_2022) Other income, net, significantly increased to MXN 24 million in 3Q 2023 Other Income (Expenses), net (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Other Income (Expenses), net | 24 | 5 | 380% | [Operating (Loss) Income](index=6&type=section&id=Operating%20(Loss)%20Income_3Q_2023_vs_3Q_2022) Operating income decreased by 29% to MXN 1,816 million, maintaining a stable 19% operating margin despite lower sales prices and input costs Operating Income Performance (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Operating Income | 1,816 | 2,572 | (29%) | | Operating Income (% of Net Sales) | 19% | 19% | 0 pp | [EBITDA](index=7&type=section&id=EBITDA_3Q_2023_vs_3Q_2022) EBITDA decreased by 27% to MXN 2,079 million, influenced by lower net income, a significant decrease in income taxes, and a shift in comprehensive financial cost EBITDA Reconciliation (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | EBITDA | 2,079 | 2,857 | (27%) | | Net Income (for EBITDA calc) | 1,802 | 1,940 | (7%) | | Income Taxes (for EBITDA calc) | 298 | 798 | (63%) | | Comprehensive Financial Cost (for EBITDA calc) | (283) (income) | (165) (income) | 72% | | Depreciation (for EBITDA calc) | 264 | 285 | (7%) | [Comprehensive Financial Cost](index=7&type=section&id=Comprehensive%20Financial%20Cost_3Q_2023_vs_3Q_2022) Comprehensive financial cost increased to a net income of MXN 283 million, primarily driven by a higher exchange income, despite a decrease in net interest income Comprehensive Financial Cost (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Comprehensive Financial Cost | 283 (income) | 165 (income) | 72% | | Net Interest Income | 28 | 104 | (73%) | | Exchange Income | 255 | 30 | 750% | [Income Taxes](index=7&type=section&id=Income%20Taxes_3Q_2023_vs_3Q_2022) Income tax expense significantly decreased to MXN 298 million in 3Q 2023, including a lower deferred income tax of MXN 8 million Income Taxes (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Income Tax Expense | 298 | 798 | (63%) | | Deferred Income Tax | 8 | 60 | (87%) | [Net Income (Loss)](index=8&type=section&id=Net%20Income%20(Loss)_3Q_2023_vs_3Q_2022) Net income decreased by 7% to MXN 1,802 million, influenced by favorable comprehensive financial cost and lower income taxes Net Income (3Q 2023 vs. 3Q 2022) | Metric | 3Q 2023 (MXN Million) | 3Q 2022 (MXN Million) | Change (%) | | :----- | :-------------------- | :-------------------- | :--------- | | Net Income | 1,802 | 1,940 | (7%) | [Consolidated Financial Highlights](index=8&type=section&id=Consolidated%20Financial%20Highlights) This section provides a summary of Grupo Simec's key consolidated financial performance metrics across various periods [Comparative Financial Summary](index=8&type=section&id=Comparative%20Financial%20Summary) The consolidated financial summary shows significant year-over-year declines in key metrics for 9M 2023, with mixed quarterly trends including an increase in net income QoQ Consolidated Financial Summary (Millions of Pesos) | Metric | Jan - Sep '23 | Jan - Sep '22 | 23 vs '22 (%) | 3Q'23 | 2Q '23 | 3Q '22 | 3Q´23 vs 2Q´23 (%) | 3Q´23 vs 3Q '22 (%) | | :-------------------------------- | :------------ | :------------ | :------------ | :---- | :---- | :---- | :------------------ | :------------------ | | Sales | 32,401 | 44,012 | (26%) | 9,454 | 10,122 | 13,433 | (7%) | (30%) | | Cost of Sales | 24,305 | 32,243 | (25%) | 7,177 | 7,510 | 10,271 | (4%) | (30%) | | Gross Profit | 8,096 | 11,769 | (31%) | 2,277 | 2,612 | 3,162 | (13%) | (28%) | | Selling, General and Administrative Expense | 1,587 | 1,725 | (8%) | 485 | 515 | 595 | (6%) | (18%) | | Other Income (Expenses), net | 167 | 7 | 2286% | 24 | 85 | 5 | (72%) | 380% | | Operating Profit | 6,676 | 10,051 | (34%) | 1,816 | 2,182 | 2,572 | (17%) | (29%) | | EBITDA | 7,499 | 10,885 | (31%) | 2,079 | 2,460 | 2,857 | (15%) | (27%) | | Net income | 3,821 | 8,037 | (52%) | 1,802 | 987 | 1,940 | 83% | (7%) | | Sales Outside Mexico | 13,571 | 20,812 | (35%) | 3,932 | 4,458 | 6,559 | (12%) | (40%) | | Sales in Mexico | 18,830 | 23,200 | (19%) | 5,522 | 5,664 | 6,874 | (3%) | (20%) | | Total Sales (Thousands of Tons) | 1,640 | 1,720 | (5%) | 531 | 505 | 541 | 5% | (2%) | | Cost by ton | 14,820 | 18,746 | (21%) | 13,516 | 14,871 | 18,985 | (9%) | (29%) | [Product Sales Volume and Price Analysis](index=9&type=section&id=Product%20Sales%20Volume%20and%20Price%20Analysis) For 9M 2023, total sales volume decreased by 5% with a 23% drop in average price per ton, showing varied performance across product categories and quarters Product Sales Volume and Price Analysis (Jan-Sep) | Product | Thousands of Tons (2023) | Millions of Pesos (2023) | Price per Ton (2023) | Thousands of Tons (2022) | Millions of Pesos (2022) | Price per Ton (2022) | | :---------------- | :----------------------- | :----------------------- | :------------------- | :----------------------- | :----------------------- | :------------------- | | Special Profiles | 479 | 10,795 | 22,537 | 573 | 16,502 | 28,799 | | Commercial Profiles | 1,161 | 21,606 | 18,610 | 1,147 | 27,510 | 23,984 | | Total | 1,640 | 32,401 | 19,757 | 1,720 | 44,012 | 25,588 | Product Sales Volume and Price Analysis (Quarterly) | Product | Thousands of Tons (3Q 2023) | Millions of Pesos (3Q 2023) | Price per Ton (3Q 2023) | Thousands of Tons (2Q 2023) | Millions of Pesos (2Q 2023) | Price per Ton (2Q 2023) | Thousands of Tons (3Q 2022) | Millions of Pesos (3Q 2022) | Price per Ton (3Q 2022) | | :---------------- | :-------------------------- | :-------------------------- | :-------------------- | :-------------------------- | :-------------------------- | :-------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Special Profiles | 155 | 3,468 | 22,374 | 151 | 3,549 | 23,503 | 170 | 4,706 | 27,682 | | Commercial Profiles | 376 | 5,986 | 15,920 | 354 | 6,573 | 18,568 | 371 | 8,727 | 23,523 | | Total | 531 | 9,454 | 17,804 | 505 | 10,122 | 20,044 | 541 | 13,433 | 24,830 | [Consolidated Financial Statements](index=10&type=section&id=Consolidated%20Financial%20Statements) This section presents Grupo Simec's consolidated financial statements, including the balance sheet, comprehensive income, cash flows, and changes in equity [Statements of Financial Position (Balance Sheet)](index=10&type=section&id=STATEMENTS%20OF%20FINANCIAL%20POSITION) Total assets slightly increased to MXN 68,678,320 thousand, while total liabilities decreased and total equity increased, reflecting a stronger financial position Consolidated Statements of Financial Position (Thousands of Pesos) | Account | Ending Current Quarter (2023) | Ending Previous Year (2022) | | :-------------------------------- | :---------------------------- | :---------------------------- | | TOTAL ASSETS | 68,678,320 | 67,632,903 | | TOTAL CURRENT ASSETS | 46,381,586 | 45,277,331 | | CASH AND CASH EQUIVALENTS | 23,509,444 | 21,546,386 | | TRADE RECEIVABLES, NET | 6,883,071 | 6,633,415 | | INVENTORIES | 11,946,989 | 12,791,311 | | TOTAL NON-CURRENT ASSETS | 22,296,734 | 22,355,572 | | PROPERTY, PLANT AND EQUIPMENT, NET | 17,247,513 | 16,782,893 | | TOTAL LIABILITIES | 18,222,151 | 19,638,527 | | TOTAL CURRENT LIABILITIES | 13,791,668 | 15,153,641 | | TRADE PAYABLES | 8,011,236 | 9,410,419 | | TOTAL NON-CURRENT LIABILITIES | 4,430,483 | 4,484,886 | | TOTAL EQUITY | 50,456,169 | 47,994,376 | | EQUITY ATTRIBUTABLE TO OWNERS OF PARENT | 50,426,095 | 47,956,729 | | RETAINED EARNINGS | 38,101,948 | 28,398,482 | | NET INCOME FOR THE PERIOD | 3,820,898 | 7,703,466 | [Statements of Comprehensive Income](index=12&type=section&id=STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) The consolidated statements show a significant decrease in 9M 2023 net profit due to lower revenue and higher finance costs, but 3Q 2023 net profit increased year-over-year Consolidated Statements of Comprehensive Income (Thousands of Pesos) | Account | ACCUMULATED (2023) | QUARTER (3Q 2023) | ACCUMULATED (2022) | QUARTER (3Q 2022) | | :-------------------------------- | :----------------- | :---------------- | :----------------- | :---------------- | | REVENUE | 32,401,468 | 9,454,493 | 44,011,873 | 13,432,955 | | COST OF SALES | 24,305,603 | 7,177,660 | 32,242,899 | 10,270,821 | | GROSS PROFIT | 8,095,865 | 2,276,833 | 11,768,974 | 3,162,134 | | GENERAL EXPENSES | 1,587,022 | 485,179 | 1,724,844 | 594,701 | | OPERATING PROFIT (LOSS) | 6,675,729 | 1,815,357 | 10,051,100 | 2,572,289 | | FINANCE INCOME (COSTS), NET | (1,317,838) | 282,535 | (63,610) | 164,458 | | PROFIT (LOSS) BEFORE INCOME TAX | 5,357,891 | 2,097,892 | 9,987,490 | 2,736,747 | | INCOME TAX EXPENSE | 1,541,475 | 297,967 | 1,950,394 | 798,246 | | NET PROFIT (LOSS) | 3,816,416 | 1,799,925 | 8,037,096 | 1,938,501 | | PROFIT (LOSS) ATTRIBUTABLE TO OWNERS OF PARENT | 3,820,898 | 1,801,650 | 8,037,100 | 1,939,515 | | BASIC EARNINGS (LOSS) PER SHARE | 7.68 | 3.62 | 16.15 | 3.90 | | TOTAL COMPREHENSIVE INCOME | 2,531,284 | 1,637,201 | 5,904,408 | (74,516) | [Statements of Cash Flows](index=14&type=section&id=STATEMENTS%20OF%20CASH%20FLOWS) Net cash flows from operating activities decreased for 9M 2023, with higher investing outflows and reduced financing outflows, leading to a lower net increase in cash Consolidated Statements of Cash Flows (Thousands of Pesos) | CONCEPTS | CURRENT YEAR (2023) | PREVIOUS YEAR (2022) | | :------------------------------------------ | :-------------------- | :-------------------- | | PROFIT (LOSS) BEFORE INCOME TAX | 5,357,891 | 9,987,490 | | NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES | 3,197,053 | 8,751,998 | | NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES | (558,909) | (407,835) | | NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES | (207,361) | (1,731,833) | | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 2,430,783 | 6,612,330 | | CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 21,546,386 | 15,130,192 | | CASH AND CASH EQUIVALENTS AT END OF PERIOD | 23,509,444 | 21,620,790 | [Statements of Changes in Equity](index=15&type=section&id=STATEMENTS%20OF%20CHANGES%20IN%20EQUITY) Total equity increased to MXN 50,456,169 thousand by 3Q 2023, primarily driven by retained earnings and net income, despite share repurchases Consolidated Statements of Changes in Equity (Thousands of Pesos) | CONCEPTS | BALANCE AT 1 JANUARY 2023 | REPURCHASE OF SHARES | COMPREHENSIVE INCOME | BALANCE AT 31 DECEMBER 2021 (sic, likely 30 Sep 2023) | | :------------------------------------------ | :------------------------ | :------------------- | :------------------- | :---------------------------------------------------- | | CAPITAL STOCK | 2,832,268 | | | 2,832,268 | | SHARES REPURCHASED | 4,266,278 | 69,491 | | 4,335,769 | | PREMIUM ON ISSUANCE OF SHARES | 4,575,233 | | | 4,575,233 | | RETAINED EARNINGS (ACCUMULATED LOSSES) | 38,101,948 | | 3,820,898 | 41,922,846 | | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 30,825 | | (1,540,776) | (1,540,776) | | EQUITY ATTRIBUTABLE TO OWNERS OF PARENT | 47,956,729 | (69,491) | 2,538,857 | 48,816,595 | | NON-CONTROLLING INTERESTS | 37,647 | | (7,573) | 31,048 | | TOTAL EQUITY | 47,994,376 | (69,491) | 2,531,284 | 50,456,169 | [Notes to the Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations of Grupo Simec's accounting policies, business nature, and other relevant financial information [Nature of Business and Relevant Events](index=17&type=section&id=1.%20Nature%20of%20business%20and%20relevant%20events) Grupo Simec manufactures and sells SBQ commercial and structural steel products for automotive and construction industries in Mexico, the US, and Canada, as a subsidiary of Industrias CH - Principal activities: Manufacture and sale of **SBQ commercial and structural steel products** for the automotive and construction industries[60](index=60&type=chunk) - Geographic markets: **Mexico, United States, and Canada**[60](index=60&type=chunk) - Parent company: **Industrias CH, S.A.B. de C.V.**[60](index=60&type=chunk) [Basis of Preparation](index=17&type=section&id=2.%20Basis%20of%20preparation) The interim, unaudited consolidated financial statements are prepared under IAS 34 and IFRS 1, based on historical cost with fair value for certain instruments, and include controlled entities [The Consolidated Financial Statements](index=17&type=section&id=a.%20The%20consolidated%20financial%20statements) This section details the preparation of interim consolidated financial statements, including adherence to IAS 34 and IFRS 1, consistent accounting policies, and elimination of intercompany transactions - Interim financial statements are unaudited and prepared under **IAS 34** (Interim Financial Reporting) and **IFRS 1** (First-time Adoption of IFRS)[61](index=61&type=chunk) - Accounting policies are consistent with those applied at **December 31, 2023**[62](index=62&type=chunk) - All intercompany transactions, balances, income, and expenses are **eliminated on consolidation**[64](index=64&type=chunk) [Historic Cost](index=17&type=section&id=b.%20Historic%20Cost) Financial statements are prepared on a historical cost basis, with certain financial instruments valued at fair value - Financial statements are prepared on the **historical cost basis**[65](index=65&type=chunk) - Certain financial instruments are valued at **fair value**[65](index=65&type=chunk) [Consolidated Base](index=17&type=section&id=c.%20Consolidated%20Base) This section outlines the consolidation principles, including the definition of control, the purchase method for acquisitions, and the recognition of goodwill and non-controlling interests - Consolidation includes Grupo Simec and entities it controls, defined by the power to govern financial and operating policies to obtain benefits[65](index=65&type=chunk) - Business acquisitions are recorded using the **purchase method**, with identifiable assets and liabilities recognized at fair value at the acquisition date[69](index=69&type=chunk)[70](index=70&type=chunk) - Goodwill is recognized as an asset, and non-controlling interests are initially appraised at fair value or proportional net value[71](index=71&type=chunk)[72](index=72&type=chunk) Consolidated Subsidiaries (as of Sep 30, 2023) | Subsidiaries established in Mexico: | Percentage of equity owned (2023) | | :------------------------------------------ | :-------------------------------- | | Compañía Siderúrgica de Guadalajara, S.A. de C.V. | 99.99% | | Arrendadora Simec, S.A. de C.V. | 100.00% | | Simec International, S.A. de C.V. | 100.00% | | ... (truncated for brevity) ... | | | Republic Steel (USA/Canada) | 50.22% | | Pacific Steel, Inc. (USA) | 100.00% | | Undershaft Investments, NV. (Curacao) | 100.00% | | GV do Brasil Industria e Comercio de Aco LTDA (Brazil) | 100.00% | [Summary of Significant Accounting Policies](index=20&type=section&id=3.%20Summary%20of%20significant%20account%20policies) This section details Grupo Simec's key accounting policies, covering foreign currency conversion, asset valuation, leasing, borrowing costs, intangible assets, impairment, provisions, retirement benefits, income taxes, financial instruments, and revenue recognition [Conversion of Financial Statements of Foreign Subsidiaries](index=20&type=section&id=a.%20Conversion%20of%20financial%20Statement%20of%20Foreign%20Subsidiaries) Foreign subsidiary financial statements are translated to Mexican pesos using IAS 21, with assets and liabilities at period-end rates and equity/income/expenses at historical rates - Foreign subsidiary financial statements are translated to Mexican pesos in accordance with **International Accounting Standard (IAS) 21**[82](index=82&type=chunk) - The functional currency for U.S. subsidiaries is the **U.S. dollar**, and for the Brazilian subsidiary, it is the **Brazilian real**[83](index=83&type=chunk) - Assets and liabilities are translated at the **balance sheet date exchange rate**; equity accounts, revenues, costs, and expenses use historical exchange rates[85](index=85&type=chunk) Relevant Exchange Rates (Mexican pesos per one U.S. dollar) | Date | Exchange Rate | | :------------------------ | :------------ | | March 31, 2023 | 18.0932 | | June 30, 2023 | 17.1187 | | September 30, 2023 | 17.61957 | | December 31, 2022 | 19.3615 | [Cash and Cash Equivalents](index=21&type=section&id=b.%20Cash%20and%20cash%20equivalents) Cash comprises non-interest-bearing bank deposits, while cash equivalents are short-term fixed income investments recorded at cost plus accrued yields - Cash consists of deposits in **non-interest-bearing bank accounts**[86](index=86&type=chunk) - Cash equivalents are **short-term fixed income investments** (original maturity less than three months) recorded at cost plus accrued yields, approximating fair value[86](index=86&type=chunk) [Allowances for Doubtful Accounts](index=21&type=section&id=c.%20Allowances%20for%20doubtful%20accounts) The allowance for doubtful accounts is calculated based on customer balances older than one year, those under litigation, or potential non-fulfillment losses - Allowance for doubtful accounts is computed considering customer balances older than one year, those under litigation, or possible loss for non-fulfillment[86](index=86&type=chunk) [Inventories and Cost of Sales](index=21&type=section&id=d.%20Inventories%20and%20cost%20of%20sales) Inventories are recorded at the lower of average cost and net realizable value, with a reserve for slow-moving items - Inventories are recorded at the lower of acquisition/production cost and net realizable value, using the **average cost method**[87](index=87&type=chunk) - A reserve is created for slow-moving inventory with turnover greater than one year[88](index=88&type=chunk) [Property, Plant and Equipment](index=21&type=section&id=e.%20Property%20Plant%20and%20equipment) Property, plant, and equipment are recorded at cost less impairment, depreciated straight-line over estimated useful lives, with land not depreciated - Property, plant, and equipment are recorded at **cost less any recognized impairment loss**[89](index=89&type=chunk) - Depreciation is recognized using the **straight-line method** over estimated useful lives, which are reviewed at the end of each year[89](index=89&type=chunk) - Land is not depreciated[89](index=89&type=chunk) Estimated Useful Lives of Main Assets | Asset Category | Years | | :-------------------------------- | :------ | | Buildings | 10 to 65 | | Machinery and equipment | 5 to 40 | | Transportation equipment | 4 | | Furniture, mixtures and computer equipment | 3 to 10 | [Leasing](index=22&type=section&id=f.%20Leasing) Financial leases transfer ownership risks and benefits, recognized at fair value or present value of minimum payments, while operating lease payments are expensed straight-line - Leases are classified as **financial leases** when they transfer substantially all risks and benefits of ownership; assets are recognized at fair value or present value of minimum lease payments[91](index=91&type=chunk) - Operating lease payments are charged to expense using the **straight-line method**[93](index=93&type=chunk) [Borrowing Cost](index=22&type=section&id=g.%20Borrowing%20Cost) Borrowing costs directly attributable to qualifying assets are capitalized, with other borrowing costs recognized in income as incurred - Borrowing costs directly attributable to qualifying assets (requiring substantial time for use/sale) are **capitalized**[94](index=94&type=chunk) - Income from temporary investment of specific borrowings for qualifying assets is deducted from eligible capitalization costs[94](index=94&type=chunk) - All other borrowing costs are recognized in income during the period they are incurred[95](index=95&type=chunk) [Intangible Assets](index=22&type=section&id=h.%20Intangible%20assets) Intangible assets with finite lives are amortized straight-line, while internally generated assets from development are recognized under specific criteria - Intangible assets with finite useful lives are recorded at cost less accumulated amortization and impairment losses, **amortized straight-line**[95](index=95&type=chunk) - Internally generated intangible assets from development activities are recognized only if technical feasibility, intent to use/sell, ability to use/sell, probable future economic benefits, availability of resources, and reliable expenditure valuation are demonstrated[96](index=96&type=chunk)[97](index=97&type=chunk)[102](index=102&type=chunk) [Goodwill](index=23&type=section&id=i.%20Goodwill) Goodwill from business combinations is recognized as an asset, allocated to cash-generating units, and subject to annual impairment reviews with no reversals - Goodwill arising from a business combination is recognized as an asset at the acquisition date less accumulated impairment losses[103](index=103&type=chunk) - Goodwill is allocated to cash-generating units and subject to annual impairment reviews; impairment losses cannot be reversed[103](index=103&type=chunk) [Impairment of Tangible and Intangible Assets Excluding Goodwill](index=23&type=section&id=j.%20Impairment%20of%20tangible%20and%20intangible%20assets%20excluding%20goodwill) Tangible and intangible assets are reviewed annually for impairment, with losses recognized immediately and reversals limited to the carrying amount without prior impairment - The Company reviews tangible and intangible assets (excluding goodwill) annually for impairment indications[103](index=103&type=chunk) - Recoverable amount is the higher of fair value less cost to sell and value in use; impairment losses are recognized immediately in profit or loss (unless revalued asset)[103](index=103&type=chunk) - Reversals of impairment losses are recognized, limited to the carrying amount that would have existed without prior impairment[103](index=103&type=chunk) [Provisions](index=24&type=section&id=k.%20Provisions) Provisions are recognized for present legal or assumed obligations from past events, with probable resource outflows and reliable estimates, and expected recoveries recognized as assets - Provisions are recognized when there is a present legal or assumed obligation from past events, a probable outflow of resources, and a reliable estimate of the amount[104](index=104&type=chunk) - The amount recognized is the best estimate of the expenditure required, discounted if using estimated cash flows[104](index=104&type=chunk) - Expected recoveries from third parties are recognized as assets if virtually certain[105](index=105&type=chunk) [Cost of Retirement Benefits](index=24&type=section&id=l.%20Cost%20of%20retirement%20benefits) Defined contribution plan costs are expensed as services are rendered, while defined benefit plan costs are determined using actuarial valuations and the projected unit credit method - Contributions to defined contribution plans are recognized as expenses when employees render services[105](index=105&type=chunk) - For defined benefit plans, costs are determined using the **projected unit credit method** with actuarial valuations[105](index=105&type=chunk) - The retirement benefit obligation is the present value of the defined benefit obligation, adjusted for unrecognized items, less the fair value of plan assets[106](index=106&type=chunk) [Income per Share](index=24&type=section&id=m.%20Income%20per%20share) Earnings per share are calculated by dividing net income attributable to controlling interests by the weighted average of common shares outstanding - Earnings per share are calculated by dividing net income attributable to controlling interests by the weighted average of common shares outstanding[109](index=109&type=chunk) [Income Taxes](index=24&type=section&id=n.%20Income%20Taxes) Income tax expense includes current and deferred taxes, with deferred tax assets recognized if future taxable profits are probable and offset when statutory rights exist - Income tax expense represents the sum of current income taxes payable and deferred income tax[109](index=109&type=chunk) - Current income tax is based on fiscal profits and cash flows, using enacted tax rates[107](index=107&type=chunk) - Deferred tax is recognized for temporary differences using the liability method; deferred tax assets are recognized if future taxable profits are probable[108](index=108&type=chunk) - Deferred tax assets and liabilities are offset when there is a statutory right and intent to settle on a net basis[113](index=113&type=chunk) [Foreign Currency Transaction](index=25&type=section&id=o.%20Foreign%20currency%20transaction) Foreign currency transactions are recorded at prevailing exchange rates, with monetary items converted at period-end rates and exchange differences recognized in the income statement - Transactions in foreign currencies are recorded at prevailing exchange rates; monetary items are converted at period-end rates[116](index=116&type=chunk) - Exchange rate differences are recognized in the income statement, with exceptions for certain asset-related loans, hedging, and foreign operation investments[117](index=117&type=chunk) [Financial Instruments](index=26&type=section&id=p.%20Financial%20Instruments) Financial assets and liabilities are initially measured at fair value, with transaction costs adjusted or expensed, and amortized cost computed using the effective interest rate method - Financial assets and liabilities are recognized when the Company is part of contractual provisions, initially measured at fair value[118](index=118&type=chunk) - Transaction costs are adjusted to fair value for initial recognition, or expensed immediately for assets/liabilities at fair value through income[118](index=118&type=chunk) - The effective interest rate method is used to compute amortized cost and allocate interest income/expense[118](index=118&type=chunk) [Financial Assets](index=26&type=section&id=q.%20Financial%20assets) Financial assets are classified, primarily as loans and receivables at amortized cost less impairment, and derecognized upon expiration of contractual rights or transfer of risks - Financial assets are classified into categories such as 'financial assets at fair value through income' and 'loans and charge receivable'[119](index=119&type=chunk) - The Company primarily holds loans and receivables, stated at amortized cost less any impairment[119](index=119&type=chunk) - Impairment is assessed when objective evidence suggests future cash flows are affected; losses are recognized directly or through an allowance for doubtful accounts[120](index=120&type=chunk)[125](index=125&type=chunk) - Financial assets are derecognized when contractual rights to cash flows expire or substantially all risks and benefits of ownership are transferred[127](index=127&type=chunk) [Financial Liabilities](index=27&type=section&id=s.%20Financial%20liabilities) Financial liabilities are classified, with other financial liabilities initially valued at fair value and subsequently at amortized cost, and derecognized upon fulfillment or expiration of obligations - Financial liabilities are classified as 'financial liabilities at fair value through income' or 'other financial liabilities'[129](index=129&type=chunk) - Other financial liabilities (including loans) are initially valued at fair value (net of transaction costs) and subsequently at amortized cost using the effective interest rate method[132](index=132&type=chunk) - Financial liabilities are derecognized if and only if the Company's obligations are fulfilled, cancelled, or expire[133](index=133&type=chunk) [Derivative Financial Instruments](index=28&type=section&id=t%20Derivative%20financial%20instruments) The Company uses derivative instruments like natural gas cash flow swaps to manage price fluctuations, recognizing fair value changes in income or other comprehensive income for effective hedges - The Company uses derivative financial instruments (e.g., natural gas cash flow swaps) to manage exposure to natural gas price fluctuations[133](index=133&type=chunk)[134](index=134&type=chunk) - Derivatives are initially recognized and remeasured at fair value; gains/losses are recognized in income unless designated as effective hedging instruments[133](index=133&type=chunk) - For cash flow hedges, the effective portion of fair value changes is recognized in other comprehensive income[136](index=136&type=chunk) - Hedge accounting is discontinued when the hedging relationship reverses, the instrument expires/sold, or no longer meets criteria[139](index=139&type=chunk) [Revenue Recognition](index=29&type=section&id=u.%20Revenue%20recognition) Revenue is recognized upon transfer of inventory risks and benefits to customers, typically at product delivery, representing goods sold less returns and discounts - Revenue is recognized when the risks and benefits of inventories are transferred to customers, usually coinciding with product delivery[140](index=140&type=chunk) - Net sales represent goods sold at list price, less returns and discounts[140](index=140&type=chunk) [Segments Information](index=29&type=section&id=V.%20Segments%20Information) Segment information is presented by region and business operation, aligning with management's decision-making framework - Segment information is presented in accordance with the region and business operation, aligning with management's decision-making information[140](index=140&type=chunk) [Earnings (Loss) Per Share](index=29&type=section&id=w.%20Earnings%20(loss)%20per%20share) Earnings per share are calculated by dividing net income or loss attributable to controlling interests by the weighted average number of shares outstanding - Earnings per share are calculated by dividing the net income or loss attributable to controlling interests by the weighted average number of shares outstanding[140](index=140&type=chunk) [Supplementary Financial Information](index=30&type=section&id=Supplementary%20Financial%20Information) This section provides additional financial details, including investments, credit breakdown, foreign currency position, debt instruments, revenue distribution, and capital stock analysis [Investments in Associates and Joint Ventures](index=30&type=section&id=INVESTMENTS%20IN%20ASSOCIATES%20AND%20JOINT%20VENTURES) The Company lists numerous subsidiaries and affiliates, primarily in steel manufacturing and related services, with ownership ranging from 50.22% to 100% Investments in Associates and Joint Ventures | Company Name | Principal Activity | % Ownership (2023) | Acquisition Cost | Current Value | | :------------------------------------------ | :------------------------------------------ | :----------------- | :--------------- | :------------ | | SIMEC INTERNATIONAL | FABRICACION Y VENTA DE PROD. DE ACERO | 99.99 | 0 | 0 | | ARRENDADORA SIMEC | FABRICACION Y VENTA DE PROD DE ACERO | 100.00 | 0 | 0 | | PACIFIC STEEL | COMPRA VENTA DE CHATARRA | 100.00 | 0 | 0 | | CIA SIDERURGICA DEL PACIFICO | ARRENDADORA DE INMUEBLES | 99.89 | 0 | 0 | | REPUBLIC STEEL | FABRICACION Y VENTA DE PROD DE ACERO | 50.22 | 0 | 0 | | GV DO BRASIL | FABRICACION Y VENTA DE PROD DE ACERO | 99.99 | 0 | 0 | | TOTAL INVESTMENT IN ASSOCIATES | | | 0 | 0 | [Breakdown of Credits](index=31&type=section&id=BREAKDOWN%20OF%20CREDITS) The Company has no bank loans, with its primary credit being MXN 5,321 thousand in medium-term notes and significant trade payables of MXN 7,664,858 thousand due within one year Breakdown of Credits (Thousands of Pesos) | Credit Type / Institution | Current Year | Until 1 Year | Until 2 Year | Until 3 Year | Until 4 Year | 5 Year or More | | :------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | :------------- | | TOTAL BANKS | 0 | 0 | 0 | 0 | 0 | 0 | | STOCK MARKET LISTED (Medium Term Notes) | 5,321 | 0 | 0 | 0 | 0 | 0 | | SUPPLIERS (Current) | 346,378 | 7,664,858 | 0 | 0 | 0 | 0 | | SUPPLIERS (Non-Current) | 80,791 | 0 | 0 | 0 | 0 | 0 | | TOTAL OTHER CURRENT AND NON-CURRENT LIABILITIES WITH COST | 0 | 0 | 0 | 0 | 0 | 0 | | GENERAL TOTAL | 346,378 | 7,664,858 | 80,791 | 0 | 0 | 0 | [Monetary Foreign Currency Position](index=32&type=section&id=MONETARY%20FOREIGN%20CURRENCY%20POSITION) As of 3Q 2023, Grupo Simec held a net monetary foreign currency balance of MXN 17,135,049 thousand, primarily a positive U.S. dollar position Monetary Foreign Currency Position (Thousands of Pesos) | FOREIGN CURRENCY POSITION | THOUSANDS OF DOLLARS | THOUSAND PESOS | TOTAL (THOUSAND PESOS) | | :------------------------ | :------------------- | :------------- | :--------------------- | | MONETARY ASSETS | 1,711,584 | 30,157,262 | 30,157,262 | | LIABILITIES | 739,079 | 13,022,213 | 13,022,213 | | NET BALANCE | 972,505 | 17,135,049 | 17,135,049 | [Debt Instruments and Financial Limitations](index=33&type=section&id=DEBT%20INSTRUMENTS) The Company has outstanding 8 7/8% medium-term notes with a remaining balance of MXN 5.3 million and has successfully met all related financial covenants - Remaining balance of 8 7/8% medium-term notes (MTN's) due 1998: **MXN 5.3 million ($302,000 USD)** as of September 30, 2023[150](index=150&type=chunk) - Financial covenant compliance: Current assets to current liabilities ratio is **3.36 times** (vs. 1.0 times or more required)[150](index=150&type=chunk) - Financial covenant compliance: Total liabilities to total assets ratio is **0.27** (vs. not more than 0.60 required)[150](index=150&type=chunk) - Financial covenant compliance: Operating income plus non-cash items is **54.39 times** (vs. 2.0 times or more required)[150](index=150&type=chunk) [Distribution of Revenue by Product](index=34&type=section&id=DISTRIBUTION%20OF%20REVENUE%20BY%20PRODUCT) For 9M 2023, domestic sales totaled MXN 18,830,285 thousand and foreign sales MXN 11,198,738 thousand, with Commercial Profiles being the largest contributor in both Distribution of Revenue by Product (Thousands of Pesos, Jan-Sep 2023) | Main Products or Product Line | Volume (Thousands of Tons) | Amount (Thousands of Pesos) | | :---------------------------- | :------------------------- | :-------------------------- | | DOMESTIC SALES | | | | Commercial Profiles | 633 | 13,252,201 | | Special Profiles | 236 | 5,578,084 | | TOTAL DOMESTIC SALES | 869 | 18,830,285 | | FOREIGN SALES | | | | Commercial Profiles | 529 | 8,354,395 | | Special Profiles | 159 | 2,844,343 | | TOTAL FOREIGN SALES | 688 | 11,198,738 | | FOREIGN SUBSIDIARIES | | | | Special Profiles | 83 | 2,372,445 | | TOTAL REVENUE | 1,640 | 32,401,468 | [Analysis of Paid Capital Stock](index=35&type=section&id=ANALYSIS%20OF%20PAID%20CAPITAL%20STOCK) As of the reporting date, Grupo Simec's total capital stock comprises 497,709,214 shares, divided into fixed and variable portions with corresponding capital social values Analysis of Paid Capital Stock | Category | Number of Shares | Capital Social (Pesos) | | :------------------------------------------ | :--------------- | :--------------------- | | Fixed Portion Mexican | 90,850,050 | 441,786 | | Variable Portion | 406,859,164 | 1,978,444 | | TOTAL NUMBER OF SHARES REPRESENTING THE CAPITAL STOCK | 497,709,214 | |

Financial Performance - Net sales decreased by 25% from Ps. 30,579 million in the first half of 2022 to Ps. 22,947 million in the first half of 2023, with shipments down 6% to 1,109 thousand tons[2] - Cost of sales decreased by 22% from Ps. 21,972 million in the first half of 2022 to Ps. 17,128 million in the first half of 2023, representing 75% of net sales in 2023 compared to 72% in 2022[3] - Gross profit fell by 32% from Ps. 8,607 million in the first half of 2022 to Ps. 5,819 million in the first half of 2023, with gross profit as a percentage of net sales at 25%[4] - Operating income decreased by 35% from Ps. 7,479 million in the first half of 2022 to Ps. 4,860 million in the first half of 2023, representing 21% of net sales[7] - EBITDA dropped by 32% from Ps. 8,029 million in the first half of 2022 to Ps. 5,419 million in the first half of 2023[9] - Net income decreased by 67% from Ps. 6,098 million in the first half of 2022 to Ps. 2,019 million in the first half of 2023[13] Quarterly Performance - In the second quarter of 2023, net sales decreased by 21% compared to the first quarter, from Ps. 12,825 million to Ps. 10,122 million[14] - Gross profit for the second quarter of 2023 decreased by 19% to Ps. 2,612 million from Ps. 3,207 million in the first quarter[16] - Net sales in the second quarter of 2023 decreased by 35% compared to the second quarter of 2022, from Ps. 15,547 million to Ps. 10,122 million[28] - Operating income fell to Ps. 2,182 million in Q2 2023, a 47% decrease from Ps. 4,154 million in Q2 2022, with operating income as a percentage of net sales dropping from 27% to 22%[33] - Net income decreased by 73% to Ps. 987 million in Q2 2023 from Ps. 3,604 million in Q2 2022[40] - EBITDA declined to Ps. 2,460 million in Q2 2023, down 44% from Ps. 4,424 million in Q2 2022[36] Financial Costs and Income - Comprehensive financial cost increased significantly to Ps. 1,600 million in the first half of 2023 from Ps. 228 million in the first half of 2022, primarily due to an exchange loss of Ps. 2,009 million[10] - Comprehensive financial cost for Q2 2023 was a net expense of Ps. 484 million, compared to a net income of Ps. 143 million in Q2 2022, driven by an exchange loss of Ps. 703 million[37] - Finance costs increased significantly to 2,048,810 thousand pesos in the current quarter from 282,175 thousand pesos in the previous year, indicating a rise in financial expenses[48] - The company reported a loss on foreign exchange of 2,008,806 thousand pesos in the current quarter, compared to a loss of 227,668 thousand pesos in the previous year[48] Assets and Liabilities - Total assets as of the current quarter were Ps. 66,773,506 thousand, a slight decrease from Ps. 67,632,903 thousand in the previous year[44] - Total liabilities decreased from Ps. 19,638,527 thousand in the previous year to Ps. 17,925,863 thousand in the current quarter[44] - The company has current assets to current liabilities ratio of 3.29 times, indicating strong liquidity[148] - Total liabilities to total assets ratio stands at 0.27, which is below the 0.60 threshold[148] - The company’s total liabilities amount to 11,809,083 thousand pesos, with short-term liabilities at 11,734,344 thousand pesos[143] Equity and Earnings - Net profit attributable to owners of the parent for the current quarter was 2,019,248 thousand pesos, compared to 986,545 thousand pesos in the same quarter last year, marking a 104.5% increase[48] - Basic earnings per share for the current quarter were 4.05 pesos, up from 1.98 pesos in the previous year[48] - Total comprehensive income for the current quarter was 894,083 thousand pesos, compared to 195,669 thousand pesos in the previous year[49] - Retained earnings increased to 38,101,948 thousand pesos from 28,398,482 thousand pesos year-over-year, reflecting a strong accumulation of profits[48] - Total equity attributable to owners of the parent rose to 48,816,595 thousand pesos, up from 47,956,729 thousand pesos in the previous year[48] Operational Insights - The company operates primarily in the manufacture and sale of special bar quality (SBQ) steel products for the automotive and construction industries in Mexico, the USA, and Canada[59] - The number of employees decreased to 1,575 from 1,850 in the previous year, indicating a reduction in workforce[48] - The company has significant investments in property, plant, and equipment, with current investments totaling 1,353,689 thousand pesos[53] Cash Flow and Investments - Net cash flows from operating activities decreased to 456,927 thousand pesos from 3,458,997 thousand pesos year-over-year[53] - Cash and cash equivalents at the end of the period are 20,860,744 thousand pesos, down from 21,546,386 thousand pesos at the beginning of the period[53] - The company reported a net cash outflow from investing activities of 452,122 thousand pesos, slightly higher than the previous year's outflow of 447,931 thousand pesos[53] - The company repurchased shares worth 40,816 thousand pesos during the current period, compared to 38,459 thousand pesos in the previous period[55] Accounting Policies - The company’s financial statements are prepared in accordance with IFRS, with the functional currency being the Mexican peso[80] - Revenue is recognized when risks and benefits of inventories are transferred to customers, typically coinciding with product delivery[137] - Earnings per share are calculated by dividing net income attributable to controlling interest by the weighted average of common shares outstanding[108] - Financial assets are classified into categories based on their nature and purpose, with loans and receivables stated at amortized cost[118] Foreign Exchange and Hedging - The exchange rate for the Mexican peso against the U.S. dollar was 17.1187 as of June 30, 2023, a decrease from 20.1927 on September 30, 2022[82] - The Company uses derivative financial instruments to manage exposure to natural gas price fluctuations, recognizing gains or losses in income unless designated as hedging instruments[131] - The effective portion of changes in the fair value of designated derivatives is recognized in other comprehensive income, while ineffective portions are recognized immediately in income[134] - The Company has discontinued hedge accounting when the hedging relationship is reversed or no longer meets criteria[137]

Industry Dynamics - The steel industry is highly cyclical, with global demand and production capacity significantly influencing prices, which have shown volatility in recent years [27]. - Competition in the steel industry is intense, with significant pressure on prices and profit margins due to overcapacity and consolidation among larger producers [34]. - The company is unable to predict the future prices of steel, which remain sensitive to macroeconomic fluctuations and global demand [27]. - The company faces significant competition in the steel industry, which exerts downward pressure on prices and profit margins [148]. Economic Conditions - The U.S. economy has shown strong recovery post-COVID-19, but ongoing challenges such as labor shortages and supply chain disruptions continue to impact growth [28]. - The Mexican economy contracted by 8.5% in 2020 and grew by 5% in 2021 and 3% in 2022, indicating volatility that could affect demand for the company's products [72]. - Adverse economic conditions in Mexico, including high inflation and reduced international capital flows, could negatively impact the company's financial performance [72]. - The Mexican Central Bank increased the reference rate to 11.25% on March 1, 2023, which may negatively impact business operations and the economy [80]. Operational Challenges - The COVID-19 pandemic has led to ongoing supply chain disruptions and increased costs, which may continue to affect the company's operations and financial condition [38]. - The company may face challenges in passing on increased raw material costs to customers, which could adversely affect profitability [29]. - The company’s manufacturing capacity is dependent on the operation of critical equipment, and unexpected breakdowns could disrupt production [50]. - The company has not obtained insurance against all risks, which could lead to significant losses in case of manufacturing interruptions [51]. Financial Performance - In 2022, the company reported net sales of Ps. 54.2 billion, gross profit of Ps. 14.5 billion, and net profit of Ps. 7.7 billion [123]. - In 2022, the cost of sales in Mexico was 70% of sales, while in the U.S. it was 98% and in Brazil it was 71%, with a consolidated cost of sales at 73% [165]. - Scrap metal accounted for approximately 60.5% of the consolidated manufacturing conversion cost in 2022, down from 70% in 2021 [167]. - The company has faced risks related to currency fluctuations, interest rates, and exchange control policies that could adversely affect financial performance [89]. Customer Concentration - Sales to the ten largest customers in the U.S. accounted for approximately 72.1% of consolidated revenues in 2022, indicating a high customer concentration risk [48]. - The company faces continued price reduction pressure from automotive customers, which adversely affects profit margins and requires cost reduction initiatives [70]. - Sales to the automotive market accounted for approximately 20% of the company's net sales of SBQ steel products in 2022, making it vulnerable to fluctuations in automotive manufacturing [69]. Regulatory Environment - The company is subject to risks from international trade restrictions, which could impact its ability to export products and affect profit margins [42]. - The U.S. government imposed tariffs of 66.7% on rebar imports from Deacero, S.A.P.I de C.V. and 20.58% on imports from other Mexican producers [43]. - The company is subject to the Mexican Antitrust Law, which may lead to increased regulatory scrutiny due to its growth strategy and significant market share in certain products [199]. - The company has faced anti-dumping duties, with a preliminary dumping rate of 66.7% imposed on its rebar exports to the U.S. as of January 2021, which was ratified in June 2022 [215]. Environmental Compliance - The company’s operations are subject to stringent environmental laws, and failure to comply could result in significant fines or operational shutdowns [54]. - Significant capital investments have been made to ensure compliance with environmental regulations, including the General Law of Ecological Balance and Environmental Protection (LGEEPA) and the Law on Wastes [195]. - The company has obtained all necessary environmental authorizations and permits to operate its facilities and believes it is in substantial compliance with applicable environmental legislation [195]. - Future changes in environmental laws could lead to additional capital expenditures beyond current expectations [179]. Strategic Growth - The company aims to improve its cost structure and focus on high-margin, value-added products as part of its business strategy [124][125]. - The company has pursued strategic growth opportunities through acquisitions and reinvestment in existing facilities to enhance capacity and efficiency [127]. - Future acquisitions and expansions will require significant capital, and the company may need to seek additional financing, potentially diluting shareholder value [40]. Labor Relations - Approximately 88% of non-Mexican and 46% of Mexican employees were union members as of December 31, 2022, which could impact labor relations and operational stability [46]. - The company is in compliance with Brazilian labor regulations, which limit collective bargaining agreements [217]. Market Position - The company is a significant producer of SBQ and structural steel products in Mexico and the U.S., with operations strategically located to serve key markets [101]. - The Brazilian steel industry is the 9th largest producer in the world, with significant competition from major players like ArcelorMittal and Gerdau [159]. - The company maintains long-term relationships with major customers, some lasting over 10 to 20 years [144]. Financial Stability - The closure of Silicon Valley Bank and other financial institutions has raised concerns about the stability of the financial system, potentially affecting the company's access to credit [65]. - Approximately 49% of the company's shares are owned by Industrias CH, which can exert significant influence over business decisions and policies [96]. - The market price of the company's ADRs fluctuated between $36.96 and $30.75 during Q1 2023, indicating high volatility that could affect investor returns [92].

Financial Performance - Net sales decreased by 1% from Ps. 55,620 million in 2021 to Ps. 55,112 million in 2022, with shipments of finished steel products down 10% to 2.255 million tons[2]. - Cost of sales increased by 2% from Ps. 39,968 million in 2021 to Ps. 40,753 million in 2022, representing 74% of net sales in 2022 compared to 72% in 2021[3]. - Gross profit decreased from Ps. 15,652 million in 2021 to Ps. 14,359 million in 2022, with gross profit as a percentage of net sales dropping from 28% to 26%[4]. - Operating income fell by 11% from Ps. 13,532 million in 2021 to Ps. 12,045 million in 2022, representing 22% of net sales in 2022 compared to 24% in 2021[7]. - EBITDA decreased by 11% from Ps. 14,707 million in 2021 to Ps. 13,162 million in 2022[8]. - Net income decreased by 9% from Ps. 9,444 million in 2021 to Ps. 8,639 million in 2022[12]. - Selling, general and administrative expenses increased by 18% from Ps. 2,043 million in 2021 to Ps. 2,401 million in 2022[5]. - Total sales for the year 2022 were Ps. 55,112 million, a decline of 1% from Ps. 55,620 million in 2021[41]. - Gross profit for the year 2022 decreased by 8% to Ps. 14,359 million from Ps. 15,652 million in 2021[41]. - Net profit for the current year amounted to 8,639,334 thousand pesos, a decline of 8.5% from 9,444,208 thousand pesos in the previous year[47]. - Operating profit for the current year was 12,045,036 thousand pesos, down from 13,532,122 thousand pesos in the previous year, indicating a decrease of 11.0%[48]. Sales and Market Performance - Total sales outside of Mexico decreased by 8% to Ps. 25,468 million in 2022, while total sales in Mexico increased by 6% to Ps. 29,644 million[2]. - Total income for Grupo Simec in Q4 2022 reached Ps. 55,620,356 thousand, with domestic sales contributing Ps. 28,044,620 thousand and foreign sales contributing Ps. 19,072,122 thousand[150]. - Sales outside Mexico for Q4 2022 were Ps. 4,657 million, a decrease of 26% compared to Ps. 6,279 million in Q4 2021[41]. - Grupo Simec's commercial profiles accounted for 18,723,229 thousand in domestic sales volume, while special profiles contributed 9,321,391 thousand[150]. - Foreign subsidiaries generated Ps. 8,503,614 thousand in sales from special profiles[150]. Cash Flow and Assets - Cash and cash equivalents rose to Ps. 23,343,154 thousand in Q4 2022, up from Ps. 15,130,192 thousand in Q4 2021[44]. - Net cash flows from operating activities increased to 11,118,962 thousand pesos, compared to 8,387,332 thousand pesos in the previous year, representing a 32.6% increase[51]. - Cash flows from investing activities showed a net outflow of 2,286,967 thousand pesos, significantly higher than the previous year's outflow of 1,009,673 thousand pesos[51]. - Total assets increased to Ps. 67,439,536 thousand in Q4 2022 from Ps. 57,342,572 thousand in the previous year[44]. - The company reported a net increase in cash and cash equivalents of 8,685,514 thousand pesos for the current year, compared to an increase of 7,215,717 thousand pesos in the previous year[51]. Equity and Liabilities - Total equity increased to 48,175,412 thousand pesos, up from 41,962,528 thousand pesos in the previous year, representing a growth of 14.5%[47]. - Total non-current liabilities were reported at 4,395,389 thousand pesos, slightly down from 4,480,580 thousand pesos in the previous year[46]. - The company reported no current liabilities with cost, indicating a favorable financial position[147]. - The total investment in associates is reported as zero, indicating no current financial investment in these entities[141]. Employee and Shareholder Information - The number of employees decreased to 1,850 from 1,890 in the previous year, reflecting a reduction of 2.1%[46]. - The company repurchased 35,573,326 shares, an increase from 35,128,483 shares in the previous year[46]. - The total number of shares representing the capital stock is 497,709,214[151]. - The nominal value of the shares is set at 0 Mexican pesos[151]. - The total amount of capital stock is 1,978,444 Mexican pesos[151]. Financial Reporting and Compliance - The company continues to adopt IFRS standards for its financial reporting, ensuring compliance and transparency in its financial statements[59]. - The company follows the average cost method for inventory valuation, ensuring that the recorded value does not exceed the market value or net realizable value[81]. - Current income tax is based on fiscal profits and cash flows, with liabilities computed using enacted tax rates[101]. - Deferred tax assets are recognized for deductible temporary differences, provided future taxable profits are probable[102]. Risk Management and Derivatives - The company utilizes derivative financial instruments to manage exposure to natural gas price fluctuations, which are critical for production[130]. - Derivative contracts are initially recognized at fair value and subsequently remeasured at fair value at the end of the reporting period[130]. - Gains and losses on ineffective portions of hedging instruments are recognized immediately in income[133]. - The effective portion of changes in fair value of derivatives designated as cash flow hedges is recognized in other comprehensive income[133].

Financial Performance - Net sales increased by 3% to Ps. 44,012 million in the first nine months of 2022 compared to Ps. 42,736 million in the same period of 2021, driven by a 17% increase in average selling price despite a 12% decrease in shipments[2] - Cost of sales rose by 5% to Ps. 32,243 million in the first nine months of 2022, with cost of sales as a percentage of net sales increasing from 72% in 2021 to 73% in 2022[3] - Gross profit decreased by 1% to Ps. 11,769 million in the first nine months of 2022, with gross margin declining from 28% in 2021 to 27% in 2022 due to lower shipment volumes[4] - Operating income fell by 3% to Ps. 10,051 million in the first nine months of 2022, representing 23% of net sales compared to 24% in the same period of 2021[7] - EBITDA decreased by 3% to Ps. 10,885 million in the first nine months of 2022, reflecting a decline in net income from Ps. 8,290 million in 2021 to Ps. 8,037 million in 2022[8] - In the third quarter of 2022, net sales decreased by 7% to Ps. 13,433 million compared to Ps. 14,122 million in the third quarter of 2021, with shipments of finished steel products down to 541 thousand tons[28] - Cost of sales in the third quarter of 2022 increased by 4% to Ps. 10,271 million, with cost of sales as a percentage of net sales rising from 70% in Q3 2021 to 76% in Q3 2022[29] - Gross profit for the third quarter of 2022 decreased by 25% to Ps. 3,162 million, with gross margin declining from 30% in Q3 2021 to 24% in Q3 2022[30] - Net income for the third quarter of 2022 was Ps. 1,940 million, a significant decrease from Ps. 3,604 million in the second quarter of 2022[26] - Selling, general and administrative expenses increased by 17% to Ps. 595 million in the third quarter of 2022 compared to Ps. 508 million in the same quarter of 2021[31] - Operating income decreased by 30% from Ps. 3,681 million in Q3 2021 to Ps. 2,572 million in Q3 2022, with operating income as a percentage of net sales dropping from 26% to 19%[33] - EBITDA fell by 28% from Ps. 3,974 million in Q3 2021 to Ps. 2,857 million in Q3 2022[35] - Net income decreased from Ps. 3,313 million in Q3 2021 to Ps. 1,940 million in Q3 2022, representing a decline of 41%[39] Assets and Liabilities - Total assets increased from Ps. 57,342,572 thousand in the previous year to Ps. 66,436,773 thousand in the current quarter[43] - Cash and cash equivalents grew from Ps. 15,130,192 thousand in the previous year to Ps. 21,620,790 thousand in the current quarter[43] - Total liabilities rose from Ps. 15,380,044 thousand in the previous year to Ps. 18,638,185 thousand in the current quarter[43] - Total equity increased to 47,798,588 thousand pesos from 41,962,528 thousand pesos, representing a growth of about 14%[44] - The company has current assets to current liabilities ratio of 3.22 times, exceeding the requirement of 1.0 times[144] - Total liabilities to total assets ratio stands at 0.28, well below the maximum limit of 0.60[144] - Monetary assets total 28,615,311 thousand pesos, while liabilities amount to 11,341,180 thousand pesos[141] - The company has secured a total of 863,109 thousand pesos in current and non-current liabilities[141] Cash Flow and Investments - Cash flows from operating activities improved to a net inflow of 8,751,998 thousand pesos, compared to a net outflow of 5,668,884 thousand pesos in the previous year[51] - Net cash flows used in investing activities decreased to 407,835 thousand pesos from 856,916 thousand pesos year-over-year, indicating a reduction in capital expenditures[51] - Net cash flows used in financing activities increased significantly to 1,731,833 thousand pesos from 113,728 thousand pesos, primarily due to share repurchases and interest expenses[51] - Cash and cash equivalents at the end of the period rose to 21,620,790 thousand pesos, up from 12,598,074 thousand pesos, reflecting strong liquidity[51] Shareholder Information - Net profit attributable to owners of the parent for the current year was 9,161,135 thousand pesos, compared to 9,007,130 thousand pesos in the previous year, reflecting an increase of about 1.7%[48] - The company repurchased 35,459,348 shares, up from 35,128,483 shares in the previous year, indicating an increase of about 0.9%[45] - The company has a total of 497,709,214 shares representing its capital stock[149] - The number of shares in series B 0 is 90,850,050, with a fixed portion of 406,859,164[149] Operational Overview - Grupo Simec focuses on manufacturing and selling special bar quality (SBQ) steel products for the automotive and construction industries in Mexico, the USA, and Canada[56] - The company reported a 50.22% equity ownership in Republic Steel, which decreased from 52.00% in the previous year[75] - The company has significant investments in associates and joint ventures, with ownership stakes ranging from 50.22% to 100% in various entities[139] Financial Management and Accounting Policies - The company follows the average cost method for inventory valuation, ensuring that the cost does not exceed the market value[83] - Borrowing costs directly attributable to qualifying assets are capitalized until the assets are ready for use or sale[90] - The company recognizes goodwill as an asset at the acquisition date, less accumulated impairment losses, and conducts annual impairment reviews for cash generating units[95] - Current income tax is based on fiscal profits and cash flows, with liabilities computed using tax rates enacted at the end of the reporting period[101] - Deferred tax assets are recognized for deductible temporary differences, provided it is probable that future taxable profits will be available[102] Market and Sales Performance - Total revenue for the current year reached 56,896,386 thousand pesos, an increase from 52,954,189 thousand pesos in the previous year, representing a growth of approximately 3.7%[48] - Domestic sales amounted to 23,200,432 thousand pesos, with commercial profiles contributing 15,854,911 thousand pesos[147] - Foreign sales totaled 15,495,398 thousand pesos, with commercial profiles accounting for 11,655,238 thousand pesos[147] - The total volume of sales across all categories was 1,720 units[147] - The company has not reported any market share percentage for its products[147] Risk Management - The Company uses derivative financial instruments to manage exposure to natural gas price fluctuations, which are recognized at fair value[129] - The effective portion of changes in the fair value of derivatives designated as cash flow hedges is recognized in other comprehensive income, with gains and losses on ineffective portions recognized immediately in income[132] - The Company assesses changes in cash flows from derivative financial instruments to ensure swaps effectively reduce exposure to natural gas price fluctuations[132]

Financial Performance - Net sales increased by 7% from Ps. 28,613 million in the first half of 2021 to Ps. 30,579 million in the first half of 2022, driven by a 24% increase in average sales price despite a 14% decrease in shipments[2] - Gross profit rose by 12% from Ps. 7,704 million in the first half of 2021 to Ps. 8,607 million in the first half of 2022, with gross profit as a percentage of net sales increasing from 27% to 28%[4] - Operating income increased by 12% from Ps. 6,690 million in the first half of 2021 to Ps. 7,479 million in the first half of 2022, representing 24% of net sales compared to 23% in the previous year[7] - Net income grew by 23% from Ps. 4,977 million in the first half of 2021 to Ps. 6,098 million in the same period of 2022[12] - EBITDA increased from Ps. 7,283 million in the first half of 2021 to Ps. 8,029 million in the first half of 2022[9] Quarterly Performance - In the second quarter of 2022, net sales increased by 3% to Ps. 15,547 million compared to the first quarter of 2022, despite a decrease in shipments from 623 thousand tons to 556 thousand tons[14] - Gross profit for the second quarter of 2022 increased by 24% to Ps. 4,764 million, with gross profit as a percentage of net sales rising from 26% to 31%[16] - The company recorded a net income of Ps. 3,604 million in Q2 2022, representing a 54% increase compared to Ps. 2,333 million in Q2 2021[40] - Operating income increased to Ps. 4,154 million in Q2 2022, up 7% from Ps. 3,878 million in Q2 2021, with an operating margin of 27% compared to 25% in the previous year[33] - EBITDA rose to Ps. 4,424 million in Q2 2022, a 6% increase from Ps. 4,170 million in Q2 2021[35] Expenses and Costs - Selling, general and administrative expenses rose by 15% from Ps. 984 million in the first half of 2021 to Ps. 1,130 million in the first half of 2022, representing 4% of net sales[5] - The cost of sales for Q2 2022 was Ps. 10,783 million, a decrease of 1% compared to Ps. 10,854 million in Q2 2021[41] Assets and Equity - The company’s total assets increased to Ps. 63,289,947 thousand in Q2 2022 from Ps. 57,342,572 thousand in the previous year[43] - Cash and cash equivalents rose to Ps. 17,906,550 thousand in Q2 2022, compared to Ps. 15,130,192 thousand in Q2 2021[43] - Total equity increased to 47,902,993 thousand pesos from 41,962,528 thousand pesos, showing a growth of approximately 14.2%[48] Shareholder Activity - The company repurchased 35,321,315 shares during the current period, compared to 35,128,483 shares in the previous period, indicating a slight increase in share repurchase activity[46] - The company repurchased shares worth 38,459 thousand pesos during the period, a decrease from 41,917 thousand pesos in the previous year[54] Tax and Income - The company recorded an income tax expense of Ps. 693 million in Q2 2022, down from Ps. 1,240 million in Q2 2021[38] - Basic earnings per share for the current quarter were 12.25 pesos, compared to 10.0 pesos in the previous year, marking an increase of 22.5%[48] Cash Flow - Cash flows from operating activities showed a net outflow of 4,341,676 thousand pesos, compared to an outflow of 4,142,787 thousand pesos in the previous year, indicating a decline in operational cash generation[53] - Net cash flows from investing activities were a negative 447,931 thousand pesos, an improvement from a negative 533,588 thousand pesos in the previous year[53] - The company reported a net increase in cash and cash equivalents of 2,918,100 thousand pesos, up from 2,468,061 thousand pesos in the previous year[53] Financial Ratios - The company has current assets to current liabilities ratio of 3.95 times, indicating strong liquidity[151] - Total liabilities to total assets ratio stands at 0.24, well below the 0.60 limit[151] - Operating income plus non-cash items is 148.38 times, significantly exceeding the required 2.0 times[151] Market and Sales - Sales in Mexico increased by 15% to Ps. 16,327 million in H1 2022, while total sales (in tons) decreased by 14% to 1,179 thousand tons[41] - The company is focusing on expanding its market share, particularly in the foreign sales segment[154] - Future guidance indicates a strategic emphasis on increasing both domestic and foreign sales volumes[154] Strategic Initiatives - New product lines are being developed to enhance the commercial profiles offered[154] - The company is exploring potential mergers and acquisitions to strengthen its market position[154] - Future outlook includes potential market expansion and product development strategies[153]

UNITED STATES OF AMERICA SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR GROUP SIMEC (Translation of registrant's name into English) UNITED MEXICAN STATES (Jurisdic ...

Financial Performance - Net sales increased by 55% from Ps. 35,869 million in 2020 to Ps. 55,620 million in 2021, driven by higher shipments and a 51% increase in average sales price[2] - Gross profit increased to Ps. 15,652 million in 2021, representing 28% of net sales, up from 19% in 2020[4] - Operating income surged by 161% from Ps. 5,185 million in 2020 to Ps. 13,532 million in 2021, with operating income as a percentage of net sales rising from 14% to 24%[7] - EBITDA increased by 122% to Ps. 14,707 million in 2021, compared to Ps. 6,637 million in 2020[8] - Net income rose by 238% from Ps. 2,798 million in 2020 to Ps. 9,444 million in 2021[12] - Total sales for the year 2021 reached Ps. 55,620 million, a 55% increase from Ps. 35,869 million in 2020[40] - Gross profit for 2021 was Ps. 15,652 million, representing a 135% increase from Ps. 6,657 million in 2020[40] - The company’s net income for the full year 2021 was Ps. 9,444 million, a 238% increase from Ps. 2,798 million in 2020[40] Sales and Shipments - Shipments of finished steel products rose by 3% to 2,504 thousand tons in 2021 compared to 2,441 thousand tons in 2020[2] - Total sales outside of Mexico increased by 55% to Ps. 27,576 million in 2021, while total sales in Mexico also rose by 55% to Ps. 28,044 million[2] - Total revenue for Grupo Simec in Q4 2021 reached Ps. 55,620,356 thousand, with domestic sales contributing Ps. 28,044,620 thousand and foreign sales contributing Ps. 19,072,122 thousand[152] Costs and Expenses - Cost of sales increased by 37% to Ps. 39,968 million in 2021, with cost of sales as a percentage of net sales decreasing from 81% in 2020 to 72% in 2021[3] - Selling, general and administrative expenses increased by 1% to Ps. 2,043 million in 2021, representing 4% of net sales[5] - The company incurred finance costs of 87,445 thousand pesos, a decrease from 416,910 thousand pesos in the previous year, reflecting a reduction of 79.0%[51] Profitability Metrics - Basic earnings per share for the current year were 20.41 pesos, a substantial rise from 5.94 pesos in the previous year, representing an increase of 244.4%[51] - Profit before income tax for the current year reached 13,835,636 thousand pesos, a significant increase from 4,875,927 thousand pesos in the previous year, representing a growth of approximately 184%[55] - Comprehensive financial cost improved to a net income of Ps. 304 million in 2021, compared to a net expense of Ps. 309 million in 2020[10] Cash Flow and Assets - Net cash flows from operating activities amounted to 8,387,332 thousand pesos, compared to 3,633,875 thousand pesos in the previous year, indicating a year-over-year increase of about 131%[55] - Cash flows from investing activities showed a net outflow of 1,009,673 thousand pesos, which is a decrease from the previous year's outflow of 832,671 thousand pesos[55] - The company reported a net increase in cash and cash equivalents of 7,215,717 thousand pesos, up from 715,474 thousand pesos in the previous year, reflecting a growth of over 909%[55] - Total assets at the end of Q4 2021 were Ps. 57,342,572 thousand, up from Ps. 45,438,156 thousand at the end of the previous year[44] Equity and Shareholder Information - Total equity increased to 41,962,528 thousand pesos from 33,181,119 thousand pesos, reflecting a growth of 26.5%[51] - The company repurchased shares worth 74,497 thousand pesos during the year, compared to 41,984 thousand pesos in the previous year, indicating an increase in share repurchase activity[57] - Total equity attributable to owners of the parent at the end of the year was 33,145,109 thousand pesos, an increase from 32,584,977 thousand pesos at the end of the previous year[59] Employee and Operational Metrics - The number of employees increased to 1,890 from 1,763, showing a growth of 7.2%[46] - The company reported a total of 2,504 sales transactions across various product lines in Q4 2021[152] Financial Reporting and Accounting Policies - The functional currency for the company is the Mexican peso, with U.S. subsidiaries using the U.S. dollar and Brazilian subsidiaries using the Brazilian real for financial reporting[82][83] - The company follows a practice of estimating allowances for doubtful accounts based on customer balances over one year old, which may lead to material differences in future results[86] - Inventories are recorded at the lower of acquisition cost and market value, with a reserve for slow-moving inventory established for products not consumed within one year[87][88] - Property, plant, and equipment are recorded at cost less impairment losses, with estimated useful lives ranging from 3 to 65 years depending on the asset type[90] Financial Instruments and Risk Management - The Company uses derivative financial instruments to manage exposure to natural gas price fluctuations, recognizing gains or losses immediately unless designated as hedging instruments[131] - The Company assesses the effectiveness of hedging instruments, considering them highly effective if they offset 80% to 125% of the changes in fair value or cash flows[135]

Financial Performance - Net sales increased by 55% from Ps. 35,869 million in 2020 to Ps. 55,622 million in 2021, driven by a 51% increase in average sales price and a 3% increase in shipments of finished steel products [2]. - Gross profit rose to Ps. 15,498 million in 2021, representing 28% of net sales, compared to Ps. 6,657 million and 19% in 2020 [4]. - Operating income surged by 158% from Ps. 5,185 million in 2020 to Ps. 13,380 million in 2021, with operating income as a percentage of net sales increasing from 14% to 24% [7]. - EBITDA increased by 119% to Ps. 14,542 million in 2021, compared to Ps. 6,637 million in 2020 [8]. - Net income rose by 246% from Ps. 2,957 million in 2020 to Ps. 10,227 million in 2021 [12]. - Total sales for the year 2021 were Ps. 55,622 million, a 55% increase from Ps. 35,869 million in 2020 [37]. - Gross profit for 2021 was Ps. 15,498 million, reflecting a 133% increase from Ps. 6,657 million in 2020 [37]. - Operating profit for the current year was 13,380,451 thousand pesos, compared to 5,185,011 thousand pesos in the previous year, marking an increase of around 158% [45]. - Net profit for the current year was 10,226,971 thousand pesos, compared to 2,957,393 thousand pesos in the previous year, indicating an increase of about 245% [44]. Cost and Expenses - Cost of sales increased by 37% from Ps. 29,212 million in 2020 to Ps. 40,124 million in 2021, with cost of sales as a percentage of net sales decreasing from 81% to 72% [3]. - Selling, general and administrative expenses increased by 3% to Ps. 2,087 million in 2021, representing 4% of net sales compared to 6% in 2020 [5]. - The average cost of finished steel produced increased by 34% in 2021, primarily due to higher scrap costs and supply costs [3]. Quarterly Performance - Operating income for Q4 2021 was Ps. 3,009 million, a significant increase from an operating profit of Ps. 1,401 million in Q4 2020, representing a change from an operating loss of 14% to a profit margin of 23% [31]. - Net income for Q4 2021 was Ps. 1,937 million, compared to a net loss of Ps. 498 million in Q4 2020, marking a turnaround in profitability [36]. - EBITDA for Q4 2021 reached Ps. 3,285 million, up 73% from Ps. 1,895 million in Q4 2020 [33]. Sales and Revenue - Total sales outside of Mexico increased by 55% to Ps. 27,576 million in 2021, while total sales in Mexico also increased by 55% to Ps. 28,046 million [2]. - Sales outside Mexico for 2021 were Ps. 27,576 million, also reflecting a 55% increase from Ps. 17,746 million in 2020 [37]. - Total income for Grupo Simec in Q4 2021 reached 55,621,967 thousand pesos, with domestic sales contributing 28,046,231 thousand pesos and foreign sales contributing 19,072,122 thousand pesos [141]. Assets and Equity - The company recorded a total asset value of Ps. 56,693,608 million at the end of the current quarter, up from Ps. 45,438,156 million the previous year [40]. - Total equity increased to 42,623,005 thousand pesos from 33,181,119 thousand pesos, showing a growth of about 28% [44]. - Total equity attributable to owners of the parent increased to 33,145,109 thousand pesos, up from 32,609,777 thousand pesos, reflecting a growth of approximately 1.6% [50]. Cash Flow and Investments - Cash and cash equivalents increased to Ps. 15,150,368 million, compared to Ps. 7,727,698 million in the previous year [40]. - Cash flows from operating activities showed a net outflow of 6,145,903 thousand pesos, compared to an outflow of 2,652,315 thousand pesos in the previous year, indicating a worsening cash flow situation [48]. - Net cash flows from investing activities were negative at 1,300,539 thousand pesos, increasing from a negative 832,671 thousand pesos in the previous year, reflecting higher investments in property, plant, and equipment [48]. - The company reported a net increase in cash and cash equivalents of 7,235,173 thousand pesos, up from 715,474 thousand pesos in the previous year, indicating improved liquidity [49]. Shareholder Actions - The company repurchased 35,128,483 shares during the current period, compared to 34,465,803 shares in the previous period [42]. - The company repurchased shares worth 74,497 thousand pesos during the year, compared to 41,984 thousand pesos in the previous year, indicating a strategy to enhance shareholder value [49]. - The company reported a basic earnings per share of 20.55 for the current quarter, compared to 5.94 in the same quarter last year, representing an increase of approximately 247% [44]. Financial Management - Comprehensive financial cost improved to a net income of Ps. 283 million in 2021 from a net expense of Ps. 309 million in 2020 [10]. - Comprehensive financial cost for Q4 2021 was a net income of Ps. 58 million, a significant improvement from a net expense of Ps. 1,288 million in Q4 2020 [34]. - The total liabilities to total assets ratio was maintained below 0.60, reflecting prudent financial management [138]. Compliance and Reporting - The financial statements were prepared under International Financial Reporting Standards (IFRS), ensuring compliance and transparency in financial reporting [54]. - The company recognizes provisional amounts for business acquisitions that are not completed by the end of the reporting period, allowing for adjustments based on new information obtained during the valuation period [67]. Employee and Operational Metrics - The number of employees increased to 1,890 from 1,763, indicating a growth of approximately 7% [42]. - The company has maintained its focus on manufacturing and selling special bar quality (SBQ) steel products for the automotive and construction industries in Mexico, the USA, and Canada, indicating a stable market presence [52].