SIM

Business Context and Reporting Period

Company: GRUPO SIMEC, S.A.B. De C.V. (Simec Group Corporation)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Accounting Basis: International Financial Reporting Standards (IFRS)
Reporting Currency: Mexican Pesos (Ps.)

Simec is a diversified manufacturer, processor, and distributor of Special Bar Quality (SBQ) steel and structural steel products with operations in Mexico and Brazil. The company ceased all steelmaking operations in the United States in August 2023; the U.S. segment now reflects only residual wind-down activities and expenses. As of December 31, 2025, the company operates 12 facilities with a combined annual crude steel capacity of 6 million tons.

Key Financial Metrics (2025)

Note: Debt consists primarily of legacy medium-term notes from 1998 totaling approximately Ps. 5.4 million ($302k USD) for which holders could not be identified.

Material Changes vs. Prior Period

• Revenue Decline: Net sales decreased 10% to Ps. 30.3 billion, driven by a 6% drop in shipment volumes (1.93 million tons vs. 2.06 million tons) and a 4% decline in average selling prices.
• Foreign Exchange Impact: A significant foreign exchange loss of Ps. 3.6 billion was recorded in 2025 due to a 14% appreciation of the Mexican peso against the U.S. dollar. This contrasts sharply with a Ps. 5.6 billion foreign exchange gain in 2024.
• Segment Performance:
  • Mexico: Reported a net loss of Ps. 517 million (vs. Ps. 9.8 billion profit in 2024), primarily due to FX losses and lower automotive demand.
  • Brazil: Reported net income of Ps. 2.36 billion (vs. Ps. 1.75 billion in 2024), benefiting from lower scrap costs and improved gross margins (30% vs. 24%).
  • United States: Reported a net loss of Ps. 210 million, reflecting ongoing wind-down costs for idled facilities.
• Capital Expenditures: Increased to Ps. 2.89 billion in 2025 (vs. Ps. 2.13 billion in 2024), with Ps. 2.05 billion allocated to Brazil for capacity expansion.

Guidance, Outlook, and Risks

Outlook and Capital Plan:

• Management estimates 2026 capital expenditures at approximately Ps. 2.65 billion (Ps. 1.33 billion in Mexico, Ps. 1.32 billion in Brazil).
• First quarter 2026 net sales increased 3% compared to Q1 2025, with finished product prices up 1%.
• The company expects a positive financial impact from the continued closure of U.S. operations, which historically required subsidies.

Key Risks and Contingencies:

• Trade Policy: U.S. exports to the U.S. are subject to a 25% Section 232 tariff, reducing export volumes from ~3,000 tons/month to ~300 tons/month. The company is shifting product mix to mitigate this.
• Environmental Liabilities: Ongoing remediation obligations at former U.S. facilities (Pacific Steel and Republic Steel). A lawsuit by BNSF Railway seeks indemnification for remediation costs. Reserves for environmental liabilities were approximately $0.8 million USD.
• Raw Material Volatility: Scrap metal prices decreased 14% in 2025, but natural gas prices increased 63.5%.
• Legal Proceedings: Pending tax assessments in Ohio and ongoing anti-dumping reviews for rebar exports to the U.S. (current rate 2.11%).

Investor Verification Checklist

• FX Sensitivity: Verify the impact of peso appreciation on future earnings, given the company's net monetary asset position in U.S. dollars.
• U.S. Wind-Down Costs: Confirm the timeline and total cost to fully close U.S. operations and resolve environmental liabilities (Pacific Steel/Republic Steel).
• Brazil Expansion ROI: Assess the return on the significant capital expenditures (Ps. 2.05 billion in 2025) directed toward Brazilian capacity expansion.
• Tariff Exposure: Monitor the status of Section 232 tariffs and potential retaliatory measures affecting Mexican steel exports.
• Inventory Valuation: Review the valuation of idle inventory (specifically coke inventory valued at Ps. 1.16 billion) at the non-operational U.S. Lorain facility.