SIM · Grupo Simec, S.A.B. de C.V.

Grupo Simec’s 2025 full-year results reflect sharp earnings compression driven almost entirely by foreign exchange volatility—not operational deterioration. Net income collapsed 86% year-on-year to Ps. 1,496 million, but this was overwhelmingly attributable to a Ps. 9.2 billion reversal in comprehensive financial results: the company swung from a Ps. 5,556 million net exchange gain in 2024 to a Ps. 3,607 million net exchange loss in 2025. Excluding this non-operational swing, underlying profitability held up remarkably well—gross profit declined only 2% to Ps. 7,508 million, gross margin expanded 200 bps to 25%, and EBITDA dipped just 1% to Ps. 6,287 million. This resilience stemmed from a 12% reduction in cost of sales—outpacing the 10% sales decline—driven by a 7% drop in average steel production costs, explicitly attributed to lower scrap prices. Shipments fell modestly (6%) and domestic sales held relatively steady (−7%), while export sales contracted more sharply (−14%), suggesting continued pressure in international markets. Quarterly trends reinforce the improvement: Q4 2025 gross margin jumped to 26% from 16% in Q4 2024, and operating profit surged 65% year-on-year, reflecting both lower input costs and stable pricing. The balance sheet remains exceptionally conservative—total debt is nominal (US$302,000 of legacy MTNs), with no new financing or leverage disclosed. Management did not issue forward guidance, but the sequential and year-on-year margin expansion in Q4 signals improving cost control and pricing discipline amid volatile FX conditions. Investors should monitor exchange rate exposure closely, as it remains the dominant driver of earnings variability—not core steel operations.