Grupo Simec(SIM) - 2023 Q2 - Quarterly Report

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]