Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)

Yes  [_]         No  [X]

Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)

Yes  [_]         No  [X]

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  [_]         No  [X]

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_______________________.)

---

 

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRUPO SIMEC, S.A.B. de C.V.

(Registrant)

Date: February 26, 2007.                                                         By: /s/ Luis García Limón       

Name: Luis García Limón

Title: Chief Executive Officer

 

 

---

 

PRESS RELEASE

GRUPO SIMEC ANNOUNCES PRELIMINARY (UNAUDITED) RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006

GUADALAJARA, MEXICO, February 26, 2007- Grupo Simec, S.A.B. de C.V. (AMEX-SIM) (“Simec”) announced today its preliminary (unaudited) results of operations for the year ended December 31, 2006. Net sales increased 69% to Ps. 22,699 million in 2006 (including Ps. 14,983 million generated by the plants of PAV Republic, Inc. “Republic”), compared to Ps. 13,404 million in 2005 (including Ps. 6,472 million generated by the plants of Republic), due to the inclusion for the full year 2006 of net sales generated by the plants of Republic as well as to an increase in the average sales prices of finished products in Mexico. On July 22, 2005, Simec and its parent company Industrias CH, S.A.B. de C.V. (“ICH”) acquired 100% of Republic’s stock. Simec, ICH’s largest subsidiary, acquired 50.2% of Republic’s stock, and ICH purchased the remaining 49.8%. Simec recorded net income of Ps. 2,442 million in 2006, compared to net income of Ps. 1,341 million in 2005.

Simec sold 2,681,052 metric tons of steel products during 2006 (including 1,625,069 metric tons sold by the plants of Republic), an increase of 57% as compared to 1,711,315 metric tons in 2005 (including 674,957 metric tons sold by the plants of Republic). Exports (including sales by non-Mexican subsidiaries) of basic steel products were 1,736,872 metric tons in 2006 (including 1,625,069 metric tons sold by the plants of Republic), as compared to 809,083 metric tons in 2005 (including 674,957 metric tons sold by the plants of Republic). Prices of finished products sold in 2006 increased approximately 9% in real terms compared to 2005.

Simec´s direct cost of sales increased 72% to Ps. 18,444 million in 2006 (including Ps. 13,621 million relating to the plants of Republic), compared to Ps. 10,721 million in 2005 (including Ps. 6,101 million relating to the plants of Republic). The average cost of raw materials increased 11% in real terms in 2006 as compared to 2005, primarily due to the inclusion for the full year 2006 of the higher raw material costs of the plants of Republic.

Indirect manufacturing, selling, general and administrative expenses (including depreciation) were Ps. 1,315 million in 2006 (including Ps. 581 million relating to the plants of Republic), compared to Ps. 1,052 million in 2005 (including Ps. 280 million relating to the plants of Republic).

Simec's operating income increased 80% to Ps. 2,940 million during 2006 (including Ps. 781 million relating to the plants of Republic), from Ps. 1,631 million in 2005 (including Ps. 91 million relating to the plants of Republic). Operating income was 13% of net sales in 2006, compared to 12% of net sales in 2005.

Simec recorded financial expense of Ps. 48 million in 2006 compared to financial expense of Ps. 149 million in 2005. Simec recorded an exchange loss of approximately Ps. 36 million in 2006 compared to an exchange loss of Ps. 78 million in 2005, reflecting a 1% decrease in the value of the peso compared to the dollar in 2006 compared to a 4.3% increase in the value of the peso versus the dollar in 2005. Net interest income was Ps. 45 million in 2006 compared to net interest expense of Ps. 16 million in 2005. Simec recorded a loss from monetary position of Ps. 57 million in 2006 compared to a loss from monetary position of Ps. 55 million in 2005, reflecting the domestic inflation rate of 4.05% in 2006 as compared to a 3.33% inflation rate in 2005.

Simec recorded other income, net, from other financial operations of Ps. 54 million in 2006, compared to other income, net, of Ps. 57 million in 2005. In addition, Simec recorded a provision for income tax and employee profit sharing of Ps. 504 million in 2006, compared to a provision of Ps. 198 million in 2005.

 

 

---

 

All figures have been prepared in accordance with Mexican generally accepted accounting principles and are stated in constant Pesos at December 31, 2006.

On February 8, 2007, Simec concluded its global public offering of 52,173,915 Series B Shares at Ps. 45.70 per share or US$ 12.50 per ADS (each ADS representing 3 Series B Shares). Simec granted the underwriters an option for 30 days to purchase up to 7,826,085 additional Series B Shares to cover over-allotments, if any.

The proceeds of the sale of the ADSs and Series B Shares will be used for general corporate purposes, including investments in fixed assets aimed at increasing installed capacity in the United States, Canada, and Mexico as well as possibly potential acquisitions intended to increase market share and complement Simec’s business strategy.

A registration statement relating to these securities was filed with and declared effective by the U.S. Securities and Exchange Commission and the Comisión Nacional Bancaria y de Valores.

About Simec

Simec is a Mexico-based mini-mill steel producer and manufactures a broad range of non-flat structural steel products and is the largest producer of special bar quality (SBQ) steel in North America and, through Republic, is the leading producer of SBQ steel in the United States.

Cautionary Note Regarding Forward-Looking Statements

This release contains certain statements regarding Simec’s business that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this release, the words “anticipates”, “plans”, “believes”, “estimates”, “intends”, “expects”, “projects” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain those words. These statements, including but not limited to Simec’s statements regarding its strategy for raw material acquisition, products and markets, production processes and facilities, sales and distribution and exports, growth and other trends in the steel industry and various markets, operations and liquidity and capital resources are based on management’s beliefs, as well as on assumptions made by, and information currently available to, management, and involve various risks and uncertainties, some of which are beyond its control. Simec’s actual results could differ materially from those expressed in any forward-looking statement. In light of these risks and uncertainties there can be no assurance that forward-looking statements will prove to be accurate. Factors that might cause actual results to differ from forward-looking statements include, but are not limited to,

·	factors relating to the steel industry (including the cyclicality of the industry, finished product prices, worldwide production capacity, the high degree of competition from Mexican and foreign producers and the price of ferrous scrap, iron ore and other raw materials);

·	Simec’s ability to operate at high capacity levels;

·	The costs of compliance with U.S. and Mexican environmental laws;

·	The integration of the Mexican steel manufacturing facilities located in Apizaco and Cholula, as well as the recently acquired Republic facilities in the United States;

·	Future capital expenditures and acquisitions;

·	Future devaluations of the peso;

·	The imposition by Mexico of foreign exchange controls and price controls;

·	The influence of economic and market conditions in other countries on Mexican securities; and

·	The factors discussed in “Risk Factors” in Simec’s recent registration statement on SEC Form F-1.

 

 

---

 

Forward-looking statements speak only as of the date they were made, and Simec undertakes no obligation to update publicly or to revise any forward-looking statements because of new information, future events or other factors.

For more information, please contact:                                                    José Flores Flores

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

Calzada Lazaro Cardenas 601

44440 Guadalajara, Jalisco, México

+52 33 1057 5734

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

CONSOLIDATED FINANCIAL STATEMENT

AT DECEMBER 31 OF 2006 AND 2005

(thousands of Mexican pesos)

REF S		CONCEPTS	CURRENT YEAR		PREVIOUS YEAR
			AMOUNT	%	AMOUNT	%
s01		TOTAL ASSETS	17,363,567	100	15,081,365	100
s02		CURRENT ASSETS	9,523,314	55	7,006,962	46
s03		CASH AND SHORT-TERM INVESTMENTS	2,126,609	12	216,491	1
s04		ACCOUNTS AND NOTES RECEIVABLE (NET)	2,117,042	12	2,362,892	16
s05		OTHER ACCOUNTS AND NOTES RECEIVABLE	256,047	1	346,003	2
s06		INVENTORIES	4,919,594	28	3,784,154	25
s07		OTHER CURRENT ASSETS	104,022	1	297,422	2
s08		LONG-TERM	0	0	0	0
s09		ACCOUNTS AND NOTES RECEIVABLE (NET)	0	0	0	0
s10		INVESTMENT IN SHARES OF NON-CONSOLIDATED SUBSIDIARIES AND ASSOCIATES	0	0	0	0
s11		OTHER INVESTMENTS	0	0	0	0
s12		PROPERTY, PLANT AND EQUIPMENT (NET)	7,374,326	42	7,434,782	49
s13		LAND AND BUILDINGS	2,487,647	14	2,490,734	17
s14		MACHINERY AND INDUSTRIAL EQUIPMENT	7,756,935	45	6,780,114	45
s15		OTHER EQUIPMENT	188,325	1	186,226	1
s16		ACCUMULATED DEPRECIATION	3,181,656	18	2,601,816	17
s17		CONSTRUCTION IN PROGRESS	123,075	1	579,524	4
s18		OTHER INTANGIBLE ASSETS AND DEFERRED ASSETS (NET)	460,064	3	633,522	4
s19		OTHER ASSETS	5,863	0	6,099	0
s20		TOTAL LIABILITIES	4,769,908	100	5,127,423	100
s21		CURRENT LIABILITIES	2,798,927	59	2,807,014	55
s22		SUPPLIERS	1,783,712	37	1,459,505	28
s23		BANK LOANS	0	0	18,358	0
s24		STOCK MARKET LOANS	3,286	0	3,387	0
s25		TAXES PAYABLE	185,585	4	54,612	1
s26		OTHER CURRENT LIABILITIES	826,344	17	1,271,152	25
s27		LONG-TERM LIABILITIES	0	0	404,776	8
s28		BANK LOANS	0	0	404,776	8
s29		STOCK MARKET LOANS	0	0	0	0
s30		OTHER LOANS	0	0	0	0
s31		DEFERRED LIABILITIES	0	0	215,144	4
s32		OTHER NON-CURRENT LIABILITIES	1,970,981	41	1,700,489	33
s33		CONSOLIDATED STOCKHOLDERS’ EQUITY	12,593,659	100	9,953,942	100
s34		MINORITY INTEREST	2,216,422	18	1,868,748	19
s35		MAJORITY INTEREST	10,377,237	82	8,085,194	81
s36		CONTRIBUTED CAPITAL	4,593,803	36	4,467,500	45
S79		CAPITAL STOCK	3,631,235	29	3,593,937	36
s39		PREMIUM ON ISSUANCE OF SHARES	962,568	8	873,563	9
s40		CONTRIBUTIONS FOR FUTURE CAPITAL INCREASES	0	0	0	0
s41		EARNED CAPITAL	5,783,434	46	3,617,694	36
s42		RETAINED EARNINGS AND CAPITAL RESERVES	6,862,824	54	4,672,354	47
s44		OTHER ACCUMULATED COMPREHENSIVE RESULT	(1,079,390)	(9)	(1,054,660)	(11)
s80		SHARES REPURCHASED	0	0	0	0

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

CONSOLIDATED FINANCIAL STATEMENT

BREAKDOWN OF MAIN CONCEPTS

(thousands of Mexican pesos)

REF S		CONCEPTS	CURRENT YEAR		PREVIOUS YEAR
			AMOUNT	%	AMOUNT	%
s03		CASH AND SHORT-TERM INVESTMENTS	2,126,609	100	216,491	100
s46		CASH	381,332	18	74,381	34
s47		SHORT-TERM INVESTMENTS	1,745,277	82	142,110	66
s07		OTHER CURRENT ASSETS	104,022	100	297,422	100
s81		DERIVATIVE FINANCIAL INSTRUMENTS	0	0	59,419	20
s82		DISCONTINUED OPERATIONS	0	0	0	0
s83		OTHER	104,022	100	238,003	80
s18		OTHER INTANGIBLE ASSETS AND DEFERRED ASSETS (NET)	460,064	100	633,522	100
s48		DEFERRED EXPENSES	403,547	88	559,991	88
s49		GOODWILL	0	0	0	0
s51		OTHER	56,517	12	73,531	12
s19		OTHER ASSETS	5,863	100	6,099	100
s84		INTANGIBLE ASSET FROM LABOR OBLIGATIONS	5,863	100	6,099	100
s85		DERIVATIVE FINANCIAL INSTRUMENTS	0	0	0	0
s50		DEFERRED TAXES	0	0	0	0
s86		DISCONTINUED OPERATIONS	0	0	0	0
s87		OTHER	0	0	0	0
s21		CURRENT LIABILITIES	2,798,927	100	2,807,014	100
s52		FOREIGN CURRENCY LIABILITIES	2,106,993	75	2,027,398	72
s53		MEXICAN PESOS LIABILITIES	691,934	25	779,616	28
s26		OTHER CURRENT LIABILITIES	826,344	100	1,271,152	100
s88		DERIVATIVE FINANCIAL INSTRUMENTS	0	0	0	0
s89		INTEREST LIABILITIES	6,609	1	0	0
s68		PROVISIONS	12,429	2	15,722	1
s90		DISCONTINUED OPERATIONS	0	0	0	0
s58		OTHER CURRENT LIABILITIES	807,306	98	1,255,430	99
s27		LONG-TERM LIABILITIES	0	0	404,776	100
s59		FOREIGN CURRENCY LIABILITIES	0	0	404,776	100
s60		MEXICAN PESOS LIABILITIES	0	0	0	0
s31		DEFERRED LIABILITIES	0	0	215,144	100
s65		NEGATIVE GOODWILL	0	0	215,144	100
s67		OTHER	0	0	0	0
s32		OTHER NON CURRENT LIABILITIES	1,970,981	100	1,700,489	100
s66		DEFERRED TAXES	1,885,876	96	1,564,192	92
s91		OTHER LIABILITIES IN RESPECT OF SOCIAL INSURANCE	13,014	1	16,388	1
s92		DISCONTINUED OPERATIONS	0	0	0	0
s69		OTHER LIABILITIES	72,091	4	119,909	7
s79		CAPITAL STOCK	3,631,235	100	3,593,937	100
s37		CAPITAL STOCK (NOMINAL)	2,048,257	56	2,012,147	56
s69		RESTATEMENT OF CAPITAL STOCK	1,582,978	44	1,581,790	44

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

CONSOLIDATED FINANCIAL STATEMENT

BREAKDOWN OF MAIN CONCEPTS

(thousands of Mexican pesos)

REF S		CONCEPTS	CURRENT YEAR		PREVIOUS YEAR
			AMOUNT	%	AMOUNT	%
s42		RETAINED EARNINGS AND CAPITAL RESERVES	6,862,824	100	4,672,354	100
s93		LEGAL RESERVE	0	0	0	0
s43		RESERVE FOR REPURCHASE OF SHARES	193,566	3	90,556	2
s94		OTHER RESERVES	0	0	0	0
s95		RETAINED EARNINGS	4,478,788	65	3,258,664	70
s45		NET INCOME FOR THE YEAR	2,190,470	32	1,323,134	28
s44		OTHER ACCUMULATED COMPREHENSIVE RESULT	(1,079,390)	100	(1,054,660)	100
s70		ACCUMULATED MONETARY RESULT	0	0	0	0
s71		RESULT FROM HOLDING NON-MONETARY ASSETS	(151,883)	(14)	(159,950)	15
s96		CUMULATIVE RESULT FROM FOREIGN CURRENCY TRANSLATION	8,920	(1)	0	0
s97		CUMULATIVE RESULT FROM DERIVATIVE FINANCIAL INSTRUMENTS	0	0	41,717	(4)
s98		CUMULATIVE EFFECT OF DEFERRED INCOME TAXES	(936,427)	87	(936,427)	89
s99		LABOR OBLIGATION ADJUSTMENT	0	0	0	0
s100		OTHER	0	0	0	0

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

BALANCE SHEETS

OTHER CONCEPTS

(thousands of Mexican pesos)

REF S		CONCEPTS	CURRENT YEAR	PREVIOUS YEAR
			AMOUNT	AMOUNT
S57		OTHER CURRENT LIABILITIES WITH COST	232,912	0
S63		OTHER LOANS WITH COST	0	0
S72		WORKING CAPITAL	6,724,387	4,199,948
S73		PENSIONS FUND AND SENIORITY PREMIUMS	0	0
S74		EXECUTIVES (*)	54	51
S75		EMPLOYERS (*)	1,137	1,161
S76		WORKERS (*)	2,862	3,148
S77		COMMON SHARES (*)	421,214,706	137,929,599
S78		REPURCHASED SHARES (*)	0	0
S101		RESTRICTED CASH	0	0
S102		NET DEBT OF NON CONSOLIDATED COMPANIES	0	0

(*) THESE ITEMS SHOULD BE EXPRESSED IN UNITS

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

QUARTERLY STATEMENTS OF INCOME

FROM JANUARY 1 TO DECEMBER 31 OF 2006 AND 2005

(thousands of Mexican pesos)

REF R		CATEGORIES	CURRENT YEAR		PREVIOUS YEAR
			AMOUNT	%	AMOUNT	%
rt01		NET SALES	22,699,331	100	13,404,645	100
rt02		COST OF SALES	18,443,654	81	10,721,275	80
rt03		GROSS PROFIT	4,255,677	19	2,683,370	20
rt04		OPERATING EXPENSES	1,315,268	6	1,052,497	8
rt05		OPERATING INCOME	2,940,409	13	1,630,873	12
rt06		INTEGRAL FINANCING COST	48,116	0	149,556	1
rt07		INCOME AFTER INTEGRAL FINANCING COST	2,892,293	13	1,481,317	11
rt08		OTHER EXPENSE AND INCOME (NET)	(53,551)	0	(57,364)	0
rt44		SPECIAL ITEMS	0	0	0	0
rt09		INCOME BEFORE INCOME TAXES AND EMPLOYEES’ PROFIT SHARING	2,945,844	13	1,538,681	11
rt10		PROVISIONS FOR INCOME TAXES AND EMPLOYEES’ PROFIT SHARING	504,121	2	197,465	1
rt11		NET INCOME AFTER TAXES AND EMPLOYEES’ PROFIT SHARING	2,441,723	11	1,341,216	10
rt12		EQUITY IN NET INCOME OF NON-CONSOLIDATED SUBSIDIARIES AND ASSOCIATES	0	0	0	0
rt13		CONSOLIDATED NET INCOME FROM CONTINUING OPERATIONS	2,441,723	11	1,341,216	10
rt14		INCOME FROM DISCONTINUED OPERATIONS	0	0	0	0
rt15		CONSOLIDATED NET INCOME BEFORE EXTRAORDINARY ITEMS	2,441,723	11	1,341,216	10
rt16		EXTRAORDINARY ITEMS, NET EXPENSES (INCOME)	0	0	0	0
rt17		CUMULATIVE EFFECT FROM ACCOUNTING CHANGE, NET	0	0	0	0
rt18		NET CONSOLIDATED INCOME	2,441,723	11	1,341,216	10
rt19		NET INCOME OF MINORITY INTEREST	251,253	1	18,082	0
rt20		NET INCOME OF MAJORITY INTEREST	2,190,470	10	1,323,134	10

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

QUARTERLY STATEMENTS OF INCOME

BREAKDOWN OF MAIN CONCEPTS

(thousands of Mexican pesos)

REF R		CONCEPTS	CURRENT YEAR		PREVIOUS YEAR
			AMOUNT	%	AMOUNT	%
rt01		NET SALES	22,699,331	100	13,404,645	100
rt21		DOMESTIC	7,288,530	32	6,083,840	45
rt22		FOREIGN	15,410,801	68	7,320,805	55
rt23		TRANSLATED INTO DOLLARS (***)	1,412,750		653,202
rt06		INTEGRAL FINANCING COST	48,116	100	149,556	100
rt24		INTEREST EXPENSE	14,973	31	41,244	28
rt42		LOSS (GAIN) ON RESTATEMENT OF UDI’S	0	0	0	0
rt45		OTHER FINANCE COSTS	0	0	0	0
rt26		INTEREST INCOME	60,257	125	24,985	17
rt46		OTHER FINANCIAL INCOME	0	0	0	0
rt25		FOREIGN EXCHANGE LOSS (GAIN) (NET)	36,110	75	77,822	52
rt28		RESULT FROM MONETARY POSITION	57,290	119	55,475	37
rt10		PROVISIONS FOR INCOME TAXES AND EMPLOYEES’ PROFIT SHARING	504,121	100	197,465	100
rt32		INCOME TAX	518,667	103	81,542	41
rt33		DEFERRED INCOME TAX	(14,546)	(3)	115,492	58
rt34		EMPLOYEES’ PROFIT SHARING EXPENSES	0	0	431	0
rt35		DEFERRED EMPLOYEES’ PROFIT SHARING	0	0	0	0

(***) THOUSANDS OF DOLLARS

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

STATEMENTS OF INCOME

OTHER CONCEPTS

(thousands of Mexican pesos)

REF R		CONCEPTS	CURRENT YEAR	PREVIOUS YEAR
			AMOUNT	AMOUNT
r36		TOTAL SALES	23,339,455	14,151,008
r37		TAX RESULT FOR THE YEAR	0	0
r38		NET SALES (**)	22,699,331	13,404,645
r39		OPERATION INCOME (**)	2,940,409	1,630,873
r40		NET INCOME OF MAJORITY INTEREST (**)	2,190,470	1,323,134
r41		NET CONSOLIDATED INCOME (**)	2,441,723	1,341,216
r47		OPERATIVE DEPRECIATION AND AMORTIZATION	432,391	336,673

(**) RESTATED INFORMATION FOR THE LAST TWELVE MONTHS

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

STATEMENTS OF INCOME

FROM OCTOBER 1 TO DECEMBER 31 OF 2006 AND 2005

(thousands of Mexican pesos)

REF R		CATEGORIES	CURRENT YEAR		PREVIOUS YEAR
			AMOUNT	%	AMOUNT	%
r01		NET SALES	4,737,215	100	4,960,800	100
r02		COST OF SALES	3,946,153	83	4,365,595	88
r03		GROSS PROFIT	791,062	17	595,205	12
r04		OPERATING EXPENSES	315,372	7	352,042	7
r05		OPERATING INCOME	475,690	10	243,163	5
r06		INTEGRAL FINANCING COST	38,631	1	59,482	1
r07		INCOME AFTER INTEGRAL FINANCING COST	437,059	9	183,681	4
r08		OTHER EXPENSE AND INCOME (NET)	(26,032)	(1)	(41,395)	(1)
r44		SPECIAL ITEMS	0	0	0	0
r09		INCOME BEFORE INCOME TAXES AND EMPLOYEES’ PROFIT SHARING	463,091	10	225,076	5
r10		PROVISIONS FOR INCOME TAXES AND EMPLOYEES’ PROFIT SHARING	155,550	3	40,075	1
r11		NET INCOME AFTER TAXES AND EMPLOYEES’ PROFIT SHARING	307,541	6	185,001	4
r12		EQUITY IN NET INCOME OF NON-CONSOLIDATED SUBSIDIARIES AND ASSOCIATES	0	0	0	0
r13		CONSOLIDATED NET INCOME FROM CONTINUING OPERATIONS	307,541	6	185,001	4
r14		INCOME FROM DISCONTINUED OPERATIONS	0	0	0	0
r15		CONSOLIDATED NET INCOME BEFORE EXTRAORDINARY ITEMS	307,541	6	185,001	4
r16		EXTRAORDINARY ITEMS, NET EXPENSES (INCOME)	0	0	0	0
r17		CUMULATIVE EFFECT FROM ACCOUNTING CHANGE, NET	0	0	0	0
r18		NET CONSOLIDATED INCOME	307,541	6	185,001	4
r19		NET INCOME OF MINORITY INTEREST	(5,538)	0	(13,320)	0
r20		NET INCOME OF MAJORITY INTEREST	313,079	7	198,321	4

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

STATEMENTS OF INCOME

BREAKDOWN OF MAIN CONCEPTS

(thousands of Mexican pesos)

REF R		CONCEPTS	CURRENT YEAR		PREVIOUS YEAR
			AMOUNT	%	AMOUNT	%
r01		NET SALES	4,737,215	100	4,960,800	100
r21		DOMESTIC	1,991,124	42	1,302,469	26
r22		FOREIGN	2,746,091	58	3,658,331	74
r23		TRANSLATED INTO DOLLARS (***)	294,947		334,254
r06		INTEGRAL FINANCING COST	38,631	100	59,482	100
r24		INTEREST EXPENSE	5,929	15	24,326	41
r42		LOSS (GAIN) ON RESTATEMENT OF UDI’S	0	0	0	0
r45		OTHER FINANCE COSTS	0	0	0	0
r26		INTEREST INCOME	22,366	58	6,408	11
r46		OTHER FINANCIAL INCOME	0	0	0	0
r25		FOREIGN EXCHANGE LOSS (GAIN) (NET)	19,545	51	4,896	8
r28		RESULT FROM MONETARY POSITION	35,523	92	36,668	62
r10		PROVISIONS FOR INCOME TAXES AND EMPLOYEES’ PROFIT SHARING	155,550	100	40,075	100
r32		INCOME TAX	8,020	5	16,407	41
r33		DEFERRED INCOME TAX	147,530	95	23,237	58
r34		EMPLOYEES’ PROFIT SHARING EXPENSES	0	0	431	1
r35		DEFERRED EMPLOYEES’ PROFIT SHARING	0	0	0	0

(***) THOUSANDS OF DOLLARS

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

QUARTERLY STATEMENTS OF INCOME

OTHER CONCEPTS

(thousands of Mexican pesos)

REF R		CONCEPTS	CURRENT YEAR	PREVIOUS YEAR
C			AMOUNT	AMOUNT
rt47		OPERATIVE DEPRECIATION AND AMORTIZATION	118,326	106,081

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

STATEMENTS OF CHANGES IN FINANCIAL POSITION

FROM JANUARY 1 TO SEPTEMBER 30 OF 2006 AND 2005

(thousands of pesos)

REF C		CONCEPTS	CURRENT YEAR	PREVIOUS YEAR
			AMOUNT	AMOUNT
c01		CONSOLIDATED NET INCOME	2,441,723	1,341,216
c02		+ (-) ITEMS ADDED TO INCOME WHICH DO NOT REQUIRE CASH	417,845	388,108
c03		RESOURCES FROM NET INCOME FOR THE YEAR	2,859,568	1,729,324
c04		RESOURCES PROVIDED OR USES IN OPERATION	(460,855)	310,280
c05		RESOURCES PROVIDED BY (USED FOR) IN OPERATING ACTIVITIES	2,398,713	2,039,604
c06		RESOURCES PROVIDED BY (USED FOR) EXTERNAL FINANCING ACTIVITIES	(423,235)	(1,101,286)
c07		RESOURCES PROVIDED BY (USED FOR) INTERNAL FINANCING ACTIVITIES	126,303	0
c08		RESOURCES PROVIDED BY (USED FOR) INTERNAL FINANCING ACTIVITIES	(296,932)	(1,101,286)
c09		RESOURCES PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES	(191,663)	(1,266,363)
c10		NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS	1,910,118	(328,045)
c11		CASH AND SHORT-TERM INVESTMENTS AT THE BEGINNING OF PERIOD	216,491	544,536
c12		CASH AND SHORT-TERM INVESTMENTS AT THE END OF PERIOD	2,126,609	216,491

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

STATEMENTS OF CHANGES IN FINANCIAL POSITION

BREAKDOWN OF MAIN CONCEPTS

(thousands of pesos)

REF C		CONCEPTS	CURRENT YEAR	PREVIOUS YEAR
			AMOUNT	AMOUNT
c02		+ (-) ITEMS ADDED TO INCOME WHICH DO NOT REQUIRE CASH	417,845	388,108
c13		DEPRECIATION AND AMORTIZATION FOR THE YEAR	432,391	336,673
c41		+ (-) OTHER ITEMS	(14,546)	(51,435)
c04		RESOURCES PROVIDED OR USED IN OPERATION	(460,855)	310,280
c18		+ (-) DECREASE (INCREASE) IN ACCOUNT RECEIVABLES	245,850	(133,709)
c19		+ (-) DECREASE (INCREASE) IN INVENTORIES	(1,135,440)	632,234
c20		+ (-) DECREASE (INCREASE) IN OTHER ACCOUNT RECEIVABLES	283,356	(267,123)
c21		+ (-) DECREASE (INCREASE) IN SUPPLIERS	324,207	(396,875)
c22		+ (-) DECREASE (INCREASE) IN OTHER LIABILITIES	(178,828)	475,753
c06		RESOURCES PROVIDED BY (USED FOR) EXTERNAL FINANCING ACTIVITIES	(423,235)	(1,101,286)
c23		+ BANK FINANCING	(101)	422,863
c24		+ STOCK MARKET FINANCING	0	0
c25		+ DIVIDEND RECEIVED	0	0
c26		OTHER FINANCING	0	132,847
c27		BANK FINANCING AMORTIZATION	(423,134)	(1,656,996)
c28		(-) STOCK MARKET FINANCING AMORTIZATION	0	0
c29		(-) OTHER FINANCING AMORTIZATION	0	0
c42		+ (-) OTHER ITEMS	0	0
c07		RESOURCES PROVIDED BY (USED FOR) INTERNAL FINANCING ACTIVITIES	126,303	0
c30		+ (-) INCREASE (DECREASE) IN CAPITAL STOCK	37,298	0
c31		(-) DIVIDENDS PAID	0	0
c32		+ PREMIUM ON ISSUANCE OF SHARES	89,005	0
c33		+ CONTRIBUTION FOR FUTURE CAPITAL INCREASES	0	0
c43		+ (-) OTHER ITEMS	0	0
c09		RESOURCES PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES	(191,663)	(1,266,363)
c34		+ (-) INCREASE (DECREASE) IN PERMANENT STOCK INVESTMENTS	0	0
c35		(-) ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT	(387,949)	(441,187)
c36		(-) INCREASE IN CONSTRUCTION PROGRESS	0	0
c37		+ SALE OF OTHER PERMANENT INVESTMENTS	0	0
c38		+ SALE OF TANGIBLE FIXED ASSETS	0	0
c39		+ (-) OTHER ITEMS	196,286	(825,176)

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

DATA PER SHARE

CONSOLIDATED

REF D		CATEGORIES	QUARTER OF PRESENT FINANCIAL YEAR	QUARTER OF PREVIOUS FINANCIAL YEAR
d01		BASIC PROFIT PER ORDINARY SHARE (**)	$   5.21	$   9.59
d02		BASIC PROFIT PER PREFERRED SHARE (**)	$   0.00	$   0.00
d03		DILUTED PROFIT PER ORDINARY SHARE (**)	$   0.00	$   0.00
d04		CONTINUING OPERATING PROFIT PER COMMON SHARE (**)	$   5.21	$   9.59
d05		EFFECT OF DISCONTINUED OPERATIONS ON CONTINUING OPERATING PROFIT PER SHARE (**)	$   0.00	$   0.00
d06		EFFECT OF EXTRAORDINARY PROFIT AND LOSS ON CONTINUING OPERATING PROFIT PER SHARE (**)	$   0.00	$   0.00
d07		EFFECT BY CHANGES IN ACCOUNTING POLICIES ON CONTINUING OPERATING PROFIT PER SHARE (**)	$   0.00	$   0.00
d08		CARRYING VALUE PER SHARE	$ 24.64	$ 58.62
d09		CASH DIVIDEND ACCUMULATED PER SHARE	$   0.00	$   0.00
d10		DIVIDEND IN SHARES PER SHARE	0.00 shares	0.00 shares
d11		MARKET PRICE TO CARRYING VALUE	2.12 times	0.77 times
d12		MARKET PRICE TO BASIC PROFIT PER ORDINARY SHARE	10.02 times	4.73 times
d13		MARKET PRICE TO BASIC PROFIT PER PREFERRED SHARE (**)	0.00 times	0.00 times

(**) TO CALCULATE THE DATE PER SHARE USE THE NET INCOME FOR THE LAST TWELVE MONTHS.

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

RATIOS

CONSOLIDATED

REF P		CATEGORIES	QUARTER OF PRESENT FINANCIAL YEAR	QUARTER OF PREVIOUS FINANCIAL YEAR
		YIELD
p01		NET INCOME TO NET SALES	10.75%	10.00%
p02		NET INCOME TO STOCKHOLDERS’ EQUITY (**)	21.10%	16.36%
p03		NET INCOME TO TOTAL ASSETS (**)	14.06%	8.89%
p04		CASH DIVIDENDS TO PREVIOUS YEAR NET INCOME	0.00%	0.00%
p05		INCOME DUE TO MONETARY POSITION TO NET INCOME	(2.34)%	(4.13)%
		ACTIVITY
p06		NET SALES TO NET ASSETS (**)	1.30 times	0.88 times
p07		NET SALES TO FIXED ASSETS (**)	3.07 times	1.80 times
p08		INVENTORIES TURNOVER (**)	3.74 times	2.83 times
p09		ACCOUNTS RECEIVABLE IN DAYS OF SALES	29.19 days	55.18 days
p10		PAID INTEREST TO TOTAL LIABILITIES WITH COST (**)	0.06%	9.67%
		LEVERAGE
p11		TOTAL LIABILITIES TO TOTAL ASSETS	27.47%	33.99%
p12		TOTAL LIABILITIES TO STOCKHOLDERS’ EQUITY	0.37 times	0.51 times
p13		FOREIGN CURRENCY LIABILITIES TO TOTAL LIABILITIES	44.17%	47.43%
p14		LONG-TERM LIABILITIES TO FIXED ASSETS	0.00%	5.44%
p15		OPERATING INCOME TO INTEREST PAID	196.38 times	39.54 times
p16		NET SALES TO TOTAL LIABILITIES (**)	4.75 times	2.61 times
		LIQUIDITY
p17		CURRENT ASSETS TO CURRENT LIABILITIES	3.40 times	2.49 times
p18		CURRENT ASSETS LESS INVENTORY TO CURRENT LIABILITIES	1.64 times	1.14 times
p19		CURRENT ASSETS TO TOTAL LIABILITIES	1.99 times	1.36 times
p20		AVAILABLE ASSETS TO CURRENT LIABILITIES	75.97%	7.71%
		CASH FLOW
p21		RESOURCES FROM NET INCOME TO NET SALES	12.59%	12.90%
p22		RESOURCES FROM CHANGES IN WORKING CAPITAL TO NET SALES	(2.03)%	2.31%
p23		RESOURCES GENERATED (USED) IN OPERATING TO INTEREST PAID	160.20 times	49.45 times
p24		EXTERNAL FINANCING TO RESOURCES PROVIDED BY (USED FOR) FINANCING	142.53%	100.00%
p25		INTERNAL FINANCING TO RESOURCES PROVIDED (USED FOR) FINANCING	(42.53)%	0.00%
p26		RESOURCES PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES	202.41%	34.83%

(**) IN THESE RATIOS FOR THE DATA TAKE INTO CONSIDERATION THE LAST TWELVE MONTHS

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

DIRECTOR REPORT

CONSOLIDATED

GLOBAL PUBLIC OFFERING

 

On February 8, 2007, Simec concluded its global public offering of 52,173,915 Series B Shares at Ps. 45.70 per share or US$ 12.50 per ADS (each ADS representing 3 Series B Shares). Simec granted the underwriters an option for 30 days to purchase up to 7,826,085 additional Series B Shares to cover over-allotments, if any.

 

The proceeds of the sale of the ADSs and Series B Shares will be used for general corporate purposes, including investments in fixed assets aimed at increasing installed capacity in the United States, Canada, and Mexico as well as possibly potential acquisitions intended to increase market share and complement Simec’s business strategy.

 

A registration statement relating to these securities was filed with and declared effective by the U.S. Securities and Exchange Commission and the Comisión Nacional Bancaria y de Valores.

 

INFORMATION CONCERNING LIQUIDITY AND CAPITAL RESOURCES AND DEBT OBLIGATIONS WITH BANKS AND COMMERCIAL CREDITORS

 

Liquidity and Capital Resources

 

At December 31, 2006 Simec’s total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes (“MTN's”) due 1998 (accrued interest at December 31, 2006 was U.S. $336,525 dollars. At December 31, 2005, Simec’s total consolidated debt consisted of U.S. $38 million (Ps. 427 million), of which $33.4 million was debt held by GE Capital, $4.3 million dollars held by the Ohio Department of Development Loan, and U.S. $302,000 of 8 7/8% medium-term notes (“MTN's”) due 1998 (accrued interest at December 31, 2005 was U.S. 309,311 dollars).

 

On July 22, 2005, Simec and its parent company, Industrias CH, S.A. de C.V. (“ICH”), acquired 100% of the stock of PAV Republic, Inc. (“Republic”). Simec, ICH’s largest subsidiary, acquired 50.2% of Republic’s stock, through its majority owned subsidiary, SimRep Corporation, and ICH purchased the remaining 49.8% through SimRep Corporation.. Simec financed its portion of the U.S. $229 million purchase price principally from a loan it received through ICH that has since been repaid in full. At December 31, 2006, Republic repaid in full its outstanding bank debt, which had maturities through 2009.

 

Net resources provided by operations were Ps. 2,399 million in 2006 versus Ps. 2,040 million of net resources provided by operations in 2005. Net resources used by financing activities were Ps. 297 million in 2006 (which amount includes the prepayment of Ps. 423 million (U.S. $37.7 million) of Republic’s bank debt and a capital contribution of certain minority shareholders of Simec of Ps. 126 million) versus Ps. 1,101 million of net resources used by financing activities in the same period of 2005. Net resources used in investing activities (to acquire property, plant and equipment, other non-

 

 

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current assets and liabilities and Proceeds from insurance claim) were Ps. 192 million in 2006 versus net resources used in investing activities of Ps. 1,266 million in 2005.

 

MANAGEMENT´S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Year Ended December 31, 2006 compared to Year Ended December 31, 2005

 

Net Sales

Net sales of Simec increased 69% to Ps. 22,699 million in 2006 (including net sales of Ps. 14,983 million generated by Republic), compared to Ps. 13,404 million in 2005 (including net sales of Ps. 6,472 million generated by Republic from July 22 to December 31, 2005). Net sales, excluding sales of Republic increased 11% from Ps. 6,932 million to Ps. 7,716 million due to higher prices for our basic steel products (the average price increased 10% in real terms in 2006 compared to 2005). Sales in metric tons of steel products increased 57% to 2,681,052 metric tons in 2006 (including 1,625,069 metric tons generated by Republic) compared to 1,711,315 metric tons in 2005 (including 674,957 metric tons generated by Republic since its acquisition). Sales outside of Mexico (including sales by U.S. subsidiaries) of basic steel products increased 115% to 1,736,872 metric tons in 2006 (including 1,625,069 metric tons generated by Republic) compared to 809,083 metric tons in 2005 (including 674,957 metric tons generated by Republic since its acquisition). Simec sell billet only when we cannot use it in our steel production process. Additionally, Simec sold 1,388 metric tons of billet in 2006, compared to 14,487 tons of billet in 2005. The average price of steel products increased 9% in real terms in 2006 compared to 2005. We attribute this increase to higher prices prevailing in the Mexican steel markets.

 

Direct Cost of Sales

Simec’s direct cost of sales increased 72% to Ps. 18,444 million in 2006 (including Ps. 13,621 million relating to Republic) compared to Ps. 10,721 million in 2005 (including Ps. 6,101 million relating to Republic since its acquisition). Direct cost of sales, excluding Republic, increased 4% to Ps. 4,823 million in 2006 compared to Ps. 4,620 million in 2005. The average cost of raw materials used to produce steel products increased 4% in real terms in 2006 compared to 2005. Direct cost of sales as a percentage of net sales was 81% in 2006 compared to 80% in 2005. The average cost of raw materials used to produce steel products increased 11% in real terms in 2006 compared to 2005, primarily resulting from increased raw materials costs at Republic.

 

Marginal Profit

Simec’s marginal profit increased 59% to Ps. 4,255 million in 2006 (including Ps. 1,362 million relating to Republic) compared to Ps. 2,683 million in 2005 (including Ps. 371 million relating to Republic since its acquisition). As a percentage of net sales, marginal profit was 19% in 2006 compared to 20% in 2005. This decrease is the result of the higher cost of sales prevailing at our Republic facilities.

 

Indirect Manufacturing, Selling, General and Administrative Expenses

Indirect manufacturing, selling, general, and administrative expenses (which include depreciation and amortization) increased 25% to Ps. 1,315 million in 2006 (including Ps. 581 million relating to Republic) from Ps. 1,052 million in 2005 (including Ps. 280 million relating to Republic since its acquisition). Indirect manufacturing, selling, general and administrative expenses (which include depreciation and amortization), exclusive of Republic, increased 107% from Ps. 280 million to Ps. 581

 

 

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million, due to the inclusion for the full period in the year ended December 31, 2006, compared to the period of July 22 to December 31, 2005. Depreciation and amortization expense, in 2006 increased to Ps. 432 million (including Ps. 173 million relating to Republic) compared to Ps. 337 million in 2005 (including Ps. 71 million relating to Republic). We attribute this increase to the inclusion for the full period of our Republic facilities.

 

Operating Income

Simec’s operating income increased 80% to Ps. 2,940 million in 2006 (including Ps. 781 million relating to Republic) compared to Ps. 1,631 million in 2005 (including Ps. 91 million relating to Republic). Operating income, exclusive of Republic increased 758% to Ps. 781 million from Ps. 91 million reflecting the inclusion for the full period in the year ended December 31, 2006, compared to the period of July 22 to December 31, 2005. As a percentage of net sales, operating income increased from 12% in 2005 to 13% in 2006.

 

Financial Income (Expense)

Simec recorded financial expense of Ps. 48 million in 2006 compared to financial expense of Ps. 149 million in 2005. Simec recorded an exchange loss of approximately Ps. 36 million in 2006 compared to an exchange loss of Ps. 78 million in 2005, reflecting a 1% decrease in the value of the peso compared to the dollar in 2006 compared to a 4.3% increase in the value of the peso versus the dollar in 2005. Net interest income was Ps. 45 million in 2006 versus net interest expense of Ps. 16 million in 2005. Simec recorded a loss from monetary position of Ps. 57 million in 2006 compared to a loss from monetary position of Ps. 55 million in 2005, reflecting the domestic inflation rate of 4.05% in 2006 as compared to a 3.33% inflation rate in 2005.

 

Other Income (Expense), Net

Simec recorded other income, net, of Ps. 54 million in 2006 compared to other income, net, of Ps. 57 million in 2005.

 

Income Tax and Employee Profit Sharing

Simec recorded an income tax provision of Ps. 504 million for income tax and employee profit sharing in 2006 (including a decrease in the provision of Ps. 15 million with respect to deferred income tax) compared to a provision of Ps. 198 million in 2005 (including an increase in the provision of Ps. 115 million with respect to deferred income tax).

 

Minority Interest

Simec recorded minority interest of Ps. 251 million in 2006 compared to Ps. 18 million in 2005. The minority interest reflects the 49.8% interest in Republic held by ICH.

Net Income

As a result of the foregoing, Simec recorded net income of Ps. 2,191 million in 2006 compared to net income of Ps. 1,323 million in 2005. We attribute this increase primarily to net income from our Republic facilities and higher net income at our facilities in Mexico.

 

Pronouncements Applicable to Mexican GAAP

In 1999, the Mexican Institute of Public Accountants issued Bulletin D-4, “Accounting for Income and Asset Taxes and Employee Profit Sharing”, which is effective for all fiscal years beginning January 1, 2000. Bulletin D-4 establishes financial accounting and reporting standards for the effects of asset tax, income tax and employee profit sharing that result from enterprise activities during the current and preceding years. Simec's long-term liability resulting from the adoption of this Bulletin was Ps. 1,886 million at December 31, 2006 compared to Ps. 1,564 million at December 31, 2005. The effect on

 

 

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Simec’s consolidated statement of income in 2006 was a decrease of Ps. 15 million in the provision for income tax and employee profit sharing compared to an increase in the provision of Ps. 115 million in the same period of 2005. These provisions do not affect the cash flow of Simec.

 

 

 

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

FINANCIAL STATEMENT NOTES

    CONSOLIDATED

(1) Operations preparation bases and summary of significant accounting policies:

GRUPO SIMEC, S.A.B. de C.V. and its Subsidiaries (“the Company”) are subsidiaries of Industrias CH, S.A.B. de C.V. (“ICH”), and their main activities consist of the manufacturing and sale of steel products primarily destined for the construction sector of Mexico and other countries.

Significant accounting policies and practices followed by the Companies which affect the principal captions of the financial statements are described below:

a. Financial statement presentation - The consolidated financial statements have been prepared in accordance with principles generally accepted in Mexico, which include the recognition of the effects of inflation on the financial information and the presentation in constant Mexican pesos.

b. Principles of Consolidation - As part of the financial debt restructuring agreement into during 1997, Compañía Siderúrgica de Guadalajara, S.A. de C.V. (“CSG”) assumed all of the debt of the Company in return for an equity interest in its subsidiaries. As a result of the above, the Company is the principal shareholder of CSG, and CSG is the principal shareholder of the other subsidiaries that GRUPO SIMEC, S.A.B. de C.V. (“Simec") controlled before the restructuring.

The main subsidiaries of CSG are the following:

° Compañía Siderúrgica de California, S.A. de C.V.

° Industrias del Acero y del Alambre, S.A. de C.V.

° Pacific Steel Inc.

° SimRep Corporation and PAV Republic and Subsidiaries

All significant intercompany balances and transactions have been eliminated in consolidation.

c. Cash and cash equivalents - The Company considers short-term investments with original maturities not greater than three months to be cash equivalent. Cash equivalents include temporary investments and Mexican Government Treasury Bonds, and are stated at market value, which approximates cost plus earned interest. Any increase in market value is credited to operations for the period.

d. Inventories - The inventories are originally stated at average cost and subsequently adjusted to replacement value at the balance sheet date. The replacement values do not exceed market and are determined as follows:

Billet finished goods and work in process - At the latest production cost for the month.

Raw materials - According to purchase prices prevailing in the market at the balance sheet date.

Materials, supplies and rollers - At historical cost, restated by applying the steel industry inflation index.

 

 

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The Company presents as non-current inventories the rollers and spare parts, which according to historical data and production trends will not be used within a one-year period.

e.- Derivative financial instruments-- The Company is using derivative financial instruments for hedging risks associated with natural gas prices and conducted studies on historical consumption, future requirements and commitments; thus it avoided exposure to risks other than the normal operating risks. Management of the Company examines its financial risks by continually analyzing price, credit and liquidity risks.

The Company uses futures contracts for hedging risks from fluctuations in natural gas prices, which are based on demand and supply at the principal international markets.

As applicable, the Company recognized the fair value of instruments either as liabilities or assets. Such fair value and thus, the value of these assets or liabilities were restated at each month’s-end. The Company opted for the early adoption of Bulletin C-10 “Derivative Financial Instruments and Hedging”; therefore, at December 31, 2003 the fair value of natural gas in force during 2004, 2005 and 2006 and which effective portions will not be offset against the asset risks until consumed, were recognized within the comprehensive income account in stockholders’ equity.

f. Property, plant and equipment - Property, plant and equipment of domestic origin are restated by using factors derived from The National Consumer Price Index (“NCPI”) from the date of their acquisition, and imported machinery and equipment are restated by applying devaluation and inflation factors of the country of origin. Depreciation recorded in the consolidated statement of income (loss) is computed based upon the estimated useful life and the restated cost of each asset. In addition, Financial expense incurred during the construction period is capitalized as construction in progress. The capitalized amounts are restated using a factor derived from the NCPI cumulative from the date of capitalization through period-end and are amortized over the average depreciation period of the corresponding assets. The estimated useful lives of assets as of December 31, 2006 are as follows:

 

		Years
Buildings		15 to 50
Machinery and equipment		10 to 40
Buildings and improvements (Republic)		10 to 25
Land improvements (Republic)		5 to 25
Machinery and equipment (Republic)		5 to 20

 

g. Other assets - Organization and pre-operating expenses are capitalized and restated using a factor derived from the NCPI cumulative from the date of generation through period-end, and their amortization is calculated by the straight-line method over a period of 20 years.

h. Seniority premiums and severance payments - According to Federal Labor Law, employees are entitled to seniority premiums after fifteen years or more of services. These premiums are recognized as expenses in the years in which the services are rendered, using actuarial calculations based on the projected unit credit method, and since 1996 by applying real interest and salary increases.

Any other payments to which employees may be entitled in case of separation, disability or death, are charged to operations in the period in which they become payable.

i. Pension plan - Until 1995, the Company provided pension benefits for all personnel with a minimum of 10 years of service and 35 years of age. The Company had established an irrevocable trust for its contributions, which were based on actuarial calculations. In December 1995, the board of directors of the Company, in

 

 

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agreement with the trade union, discontinued these benefits and related contributions to the trust fund. This decision was made because of the new Mexican pension fund system, Administradoras de Fondos para el Retiro, which establishes similar benefits for the employees. The balance of the trust fund will be applied to the retirement benefits of qualifying employees until the fund is exhausted due to the irrevocable status of the fund.

The Company does not have any contractual obligation regarding the payment of pensions of retirements.

j. Cost of sales - Cost of sales related to sales of inventory items is recorded at standard cost, which approximates the replacement cost at the date of sale.

k. Income tax and employee profit sharing - In 1999, the Mexican Institute of Public Accountants issued Bulletin D-4, “Accounting for Income and Asset Taxes and Employee Profit Sharing”, which is effective for all fiscal years beginning January 1, 2000. Bulletin D-4 establishes financial accounting and reporting standards for the effects of asset tax, income tax and employee profit sharing that result from enterprise activities during the current and preceding years.

The Company and its subsidiaries are included in the consolidated tax returns of the company's parent.

l. Foreign currency transactions and exchange differences - All transactions in foreign currency are recorded at the exchange rates prevailing on the date of their execution or liquidation. Foreign currency denominated assets and liabilities are translated at the exchange rates prevailing at the balance sheet date. Any exchange differences incurred with regard to assets or liabilities denominated in foreign currency are charged to operations of the period and are included in financial income (expense) in the accompanying consolidated statements of income (loss).

For consolidation purposes, the financial statements of the subsidiaries abroad, SimRep and subsidiaries, Pacific Steel and Undershaft Investment, were translated into pesos in conformity with Mexican accounting Bulletin B-15, Transactions in Foreign Currency and Translation of Financial Statements of Foreign Operations.

The subsidiary SimRep was considered as a foreign entity for translation purposes; therefore the financial statements as reported by the subsidiary abroad were adjusted to conform with Mexican GAAP, which includes the recognition of the effects of inflation as required by Mexican accounting Bulletin B-10, applying inflation adjustment factors derived from the U.S. Consumer Price Index (CPI) published by the U.S. labor department, The financial information already restated to include inflationary effects, is translated to Mexican pesos as follows:

-By applying the prevailing exchange rate at the consolidated balance sheet date for monetary and non-monetary assets and liabilities.

-By applying the prevailing exchange rate for stockholders’ equity accounts, at the time capital contributions were made and earnings were generated.

-By applying the prevailing exchange rate at the consolidated balance sheet date for revenues and expenses during the reporting period.

-The related effect of translation is recorded in stockholders’ equity under the caption Equity adjustments for non monetary assets.

-The resulting amounts were restated applying adjustment factors derived from the NCPI, in conformity with Mexican accounting Bulletin B-10.

The subsidiaries Pacific Steel and Undershaft Investment, were considered an “integral part of the operations” of the Company; and the financial statements of such subsidiaries were translated into Mexican pesos as follows:

By applying the prevailing exchange rate at the consolidated balance sheet date for monetary items.

 

 

---

 

 

By applying the prevailing exchange rate at the time the non-monetary assets and capital are generated, and the weighted average exchange rate of the period for income statement items.

 

The related effect of translation is recorded in the statement of operations as part of the caption Comprehensive financing cost.

 

The resulting amounts were restated applying adjustment factors derived from the Mexican NCPI, in conformity with Mexican accounting Bulletin B-10.

m. Geographic concentration of credit risk - The Company sells its products primarily to distributors for the construction industry with no specific geographic concentration. Additionally, no single customer accounted for a significant amount of the Company's sales, and there were no significant accounts receivable from a single customer or affiliate at December 31, 2005 and at December 31, 2006, direct sales to two customers accounted for approximately 10% and 16.6% of the Republic’s sales. The Company performs evaluations of its customers' credit histories and establishes and allowance for doubtful accounts based upon the credit risk of specific customers and historical trends.

 

n. Other income (expenses) - Other income (expenses) shown in the consolidated statements of operations primarily includes other financial operations.

o. Gain on monetary position - The gain on monetary position in the consolidated statements of income (loss) is determined by applying to net monetary assets or liabilities at the beginning of each month the factor of inflation derived from the NCPI and is restated at period-end with the corresponding factor.

p. Restatement of capital stock and retained earnings (losses) - This is determined by multiplying capital stock contributions and retained earnings (losses) by factors derived from the NCPI, which measure the cumulative inflation from the date when capital stock contributions were made and earnings (losses) were generated, through the latest period-end.

q. Effect of restatement of stockholders’ equity - The effect resulting from restating stockholders’ equity includes the accumulated effect from holding non-monetary assets, which represents the change in the specific price level of those assets compared to the change in the NCPI.

(2) Financial Debt:

At December 31, 2006 Simec’s total consolidated debt consisted of U.S. $302,000 of 8 7/8% medium-term notes (“MTN's”) due 1998 (accrued interest at December 31, 2006 was U.S. $336,525 dollars. At December 31, 2005, Simec’s total consolidated debt consisted of U.S. $38 million (Ps. 427 million), of which $33.4 million was debt held by GE Capital, $4.3 million dollars held by the Ohio Department of Development Loan, and U.S. $302,000 of 8 7/8% medium-term notes (“MTN's”) due 1998 (accrued interest at December 31, 2005 was U.S. 309,311 dollars).

(3) Commitments and contingent liabilities:

a. Pacific Steel, Inc. (a wholly-owned subsidiary located in the U.S.A.) has been named in various claims and suits relating to the generation, storage, transport, disposal and cleanup of materials classified as hazardous waste. The Company has accrued approximately Ps. 11,635 (U.S. $1,069,322) at December 31, 2006, (included in accrued liabilities) relating to these actions; the reduction of this reserve from previous levels reflects clean-up activities undertaken by Simec. Management believes the ultimate liability with respect to this matter will not exceed the amounts that have been accrued.

b. The Company is subject to various other legal proceeding and claims, which have arisen, in the ordinary course of its business. It is the opinion of management that their ultimate resolution will not have a material adverse effect on the Company’s consolidated financial position or consolidated results of operations.

 

 

---

 

 

c. Compañía Siderúrgica de Guadalajara, S.A. de C.V. has entered into a gas and liquid oxygen purchase agreement with Praxair de México, S.A. de C.V., under which it is committed to acquire monthly over a fifteen-year period beginning January 1, 1989, a certain amount of product. At present required purchases amount to Ps. 1,800 per month.

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

RELATIONS OF SHARES INVESTMENTS

CONSOLIDATED

COMPANY NAME	MAIN ACTIVITIES	NUMBER OF SHARES	OWNERSHIP
SUBSIDIARIES
Cia. Siderúrgica de Guadalajara	Sub-Holding	0	99.99
Simec International	Production and sales of steel products	0	99.99
Arrendadora Simec	Production and sales of steel products	0	100.00
Controladora Simec	Sub-Holding	0	100.00
Pacific Steel	Scrap purchase	0	100.00
Cia. Siderúrgica del Pacífico	Rent of land	0	99.99
Coordinadora de Servicios Siderúrgicos de Calidad	Administrative services	0	100.00
Administradora de Servicios de la Industria Siderúrgica	Administrative services	0	99.99
Industrias del Acero y del Alambre	Sales of steel products	0	99.99
Procesadora Mexicali	Scrap purchase	0	99.99
Servicios Simec	Administrative services	0	100.00
Sistemas de Transporte de Baja California	Freight services	0	100.00
Operadora de Metales	Administrative services	0	100.00
Operadora de Servicios Siderúrgicos de Tlaxcala	Administrative services	0	100.00
Administradora de Servicios Siderúrgicos de Tlaxcala	Administrative services	0	100.00
Operadora de Servicios de la Industria Siderúrgica	Administrative services	0	100.00
SimRep	Sub-Holding	0	100.00
PAV Republic	Production and sales of steel products	0	100.00
TOTAL INVESTMENT IN SUBSIDIARIES
ASSOCIATES		0	0.00
TOTAL INVESTMENT IN ASSOCIATES			0.00
OTHER PERMANENT INVESTMENTS			0.00
TOTAL

 

NOTES

---

 

 

 MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

CREDITS BREAK DOWN

(THOUSANDS OF MEXICAN PESOS)

CONSOLIDATED

 

	Amortization			Rate of		Denominated in Pesos (Thousands of Pesos)																	Denominated in Foreign Currency (Thousands of Pesos)
Credit Type / Institution	Date			Interest		Time Interval																	Time Interval
						Current			Until 1			Until 2			Until 3			Until 4			Until 5		Current			Until 1			Until 2			Until 3			Until 4			Until 5
						Year			Year			Years			Years			Years			Years or		Year			Year			Years			Years			Years			Years or
																					More																	More
BANKS
With Warranty							0			0			0			0			0			0		0			0			0			0			0			0
TOTAL BANKS							0			0			0			0			0			0		0			0			0			0			0			0
LISTED IN THE STOCK EXCHANGE
UNSECURED DEBT
Medium Term Notes		15/12/1998			9.33		0			0			0			0			0			0		3,286			0			0			0			0			0
TOTAL STOCK EXCHANGE							0			0			0			0			0			0		3,286			0			0			0			0			0
SUPPLIERS
Various							0			350,766			0			0			0			0		0			1,432,946			0			0			0			0
TOTAL SUPPLIERS							0			350,766			0			0			0			0		0			1,432,946			0			0			0			0
OTHER CURRENT LIABILITIES AND OTHER CREDITS
Various							0			155,583			0			0			0			0		0			651,723			0			0			0			0
TOTAL OTHER CURRENT LIABILITIES AND OTHER CREDITS							0			155,583			0			0			0			0		0			651,723			0			0			0			0
TOTAL							0			506,349			0			0			0			0		0			2,087,955			0			0			0			0

NOTES: The exchange rate of the peso to the U.S. Dollar at december 31, 2006 was Ps. 10.881

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

MONETARY FOREIGN CURRENCY POSITION

(Thousands of Mexican Pesos)

  CONSOLIDATED

	DOLLARS		OTHER CURRENCIES		TOTAL
FOREIGN CURRENCY POSITION	THOUSANDS OF DOLLARS	THOUSANDS OF PESOS	THOUSANDS OF DOLLARS	THOUSANDS OF PESOS	THOUSANDS OF PESOS
TOTAL ASSETS	318,666	3,467,402	0	0	3,467,402
LIABILITIES POSITION	193,629	2,106,879	10	114	2,106,993
SHORT TERM LIABILITIES POSITION	193,629	2,106,879	10	114	2,106,993
LONG TERM LIABILITIES POSITION	0	0	0	0	0
NET BALANCE	125,037	1,360,523	(10)	(114)	1,360,409

NOTES

THE EXCHANGE RATE OF THE PESO TO THE U.S. DOLLAR AT DECEMBER 31, 2006 WAS PS. 10.881

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

RESULT FROM MONETARY POSITION

(Thousands of Mexican Pesos)

CONSOLIDATED

MONTH	MONETARY ASSETS	MONETARY LIABILITIES	ASSET (LIABILITY ) MONETARY POSITION	MONTHLY INFLATION	MONTHLY (PROFIT) AND LOSS
JANUARY	1,913,974	2,098,521	(184,547)	0.59	(1,082)
FEBRUARY	1,762,423	2,377,236	(614,813)	0.15	(941)
MARCH	1,754,283	2,363,620	(609,337)	0.13	(765)
APRIL	1,767,088	2,932,555	(1,165,467)	0.15	(1,709)
MAY	1,952,871	2,640,775	(687,904)	(0.45)	3,062
JUNE	1,871,618	2,351,653	(480,035)	0.09	(415)
JULY	2,043,991	2,068,467	(24,476)	0.27	(67)
AUGUST	2,417,016	2,155,158	261,858	0.51	1,336
SEPTEMBER	2,730,360	1,987,524	742,836	1.01	7,499
OCTOBER	2,967,687	2,051,508	916,179	0.44	4,005
NOVEMBER	2,948,777	1,924,988	1,023,789	0.52	5,372
DECEMBER	3,237,595	2,208,820	1,028,775	0.58	5,951
ACTUALIZATION				0.00	550
CAPITALIZATION				0.00	0
FOREIGN CORPORATION				0.00	(18,160)
OTHER				0.00	52,654
TOTAL					57,290

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

DEBT INSTRUMENTS

CONSOLIDATED

FINANCIAL LIMITED BASED IN ISSUED DEED AND/OR TITLE

MEDIUM TERM NOTES

A) Current assets to current liabilities must be 1.0 times or more.

B) Total liabilities to total assets do not be more than 0.60.

C) Operating income plus items added to income which do not require using cash must be 2.0 times or more.

This notes was offered in the international market.

 

ACTUAL SITUATION OF FINANCIAL LIMITED

MEDIUM TERM NOTES

A) Accomplished the actual situation is 3.40 times.

B) Accomplished the actual situation is 0.27

C) Accomplished the actual situation is 225.26

As of December 31, 2006, the remaining balance of the MTNs not exchanged amounts to Ps. 3,286 ($302,000 dollars).

C.P. José Flores Flores

Chief Financial Officer

 

BONDS AND/OR MEDIUM TERM NOTES CERTIFICATE

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

PLANTS, COMMERCE CENTERS OR DISTRIBUTION CENTERS

CONSOLIDATED

PLANT OR CENTER	ECONOMIC ACTIVITY	PLANT CAPACITY	UTILIZATION (%)
GUADALAJARA MINI MILL	PRODUCTION AND SALES OF STEEL PRODUCTS	480	84.85
MEXICALI MINI MILL	PRODUCTION AND SALES OF STEEL PRODUCTS	250	89.52
INDUSTRIAS DEL ACERO Y DEL ALAMBRE	SALE OF STEEL PRODUCTS	0	0
APIZACO AND CHOLULA PLANTS	PRODUCTION AND SALES OF STEEL PRODUCTS	460	92.37
CANTON CASTER FACILITY	PRODUCTION OF BILLET	787	47.90
LORAIN CASTER FACILITY	PRODUCTION OF BILLET	1,169	90.70
LORAIN HOT-ROLLING MILL	PRODUCTION AND SALES OF STEEL PRODUCTS	838	68.40
LACKAWANNA HOT-ROLLING MILL	PRODUCTION AND SALES OF STEEL PRODUCTS	544	74.70
MASSILLON COLD-FINISH FACILITY	PRODUCTION AND SALES OF STEEL PRODUCTS	125	76.60
GARY COLD-FINISH FACILITY	PRODUCTION AND SALES OF STEEL PRODUCTS	71	58.50
ONTARIO COLD-FINISH FACILITY	PRODUCTION AND SALES OF STEEL PRODUCTS	59	65.60

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

MAIN RAW MATERIALS

CONSOLIDATED

DOMESTIC	MAIN SUPPLIERS	FOREIGN	MAIN SUPPLIERS	DOMESTIC SUBSTITUTION	COST PRODUCTION (%)
PLANTS IN USA		SCRAP	VARIOUS	NO	9.70
SCRAP	VARIOUS	PLANTS IN MEXICO		NO	47.83
PLANTS IN USA		COKE	VARIOUS	NO	7.30
PLANTS IN USA		PELLETS	VARIOUS	NO	18.80
FERROALLOYS	VARIOUS	PLANTS IN MEXICO		YES	7.67
PLANTS IN USA		FERROALLOYS	VARIOUS	NO	4.30
ELECTRODES	VARIOUS	PLANTS IN MEXICO	VARIOUS	YES	2.00
PLANTS IN USA		ELECTRODES	VARIOUS	NO	1.40

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

SELLS DISTRIBUTION BY PRODUCT

 

CONSOLIDATED

DOMESTIC SELLS

MAIN PRODUCTS	NET SALES		MAIN DESTINATION
	VOLUME	AMOUNT	TRADEMARKS		COSTUMERS
STRUCTURAL PROFILES	177	1,389,110
COMMERCIAL PROFILES	96	674,184
REBAR	227	1,653,701
FLAT BAR	145	984,791
STEEL BARS	295	2,250,617
OTHER	1	20,342
BILLET	0	402
HOT-ROLLED BARS	39	300,944
COLD-FINISHED BARS	1	14,439
SEMI-FINISHED SEAMLESS TUBE ROUNDS
OTHER SEMI-FINISHED TRADE PRODUCTS
T O T A L		7,288,530
FOREIGN SALES		15,410,801
TOTAL		22,699,331

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

SELLS DISTRIBUTION BY PRODUCT

 

CONSOLIDATED

FOREIGN SELLS

MAIN PRODUCTS

NET SELLS

MAIN

	VOLUME	AMOUNT	TRADEMARKS		COSTUMERS
EXPORTS
STRUCTURAL PROFILES	27	185,240
COMMERCIAL PROFILES	21	140,010
REBAR	33	188,518
STEEL BARS	26	194,423
FLAT BAR	4	28,833
BILLET	1	7,463
FOREIGN SUBSIDIARIES
HOT-ROLLED BARS	871	8,861,435
COLD-FINISHED BARS	146	1,963,638
SEMI-FINISHED SEAMLESS TUBE ROUNDS	353	2,279,768
OTHER SEMI-FINISHED TRADE PRODUCTS	215	1,561,473
T O T A L		15,410,801

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

CONSOLIDATED

INTEGRATION OF THE PAID SOCIAL CAPITAL STOCK

CHARACTERISTICS OF THE SHARES

SERIES

NOMINAL VALUE

VALID COUPON

NUMBER OF SHARES

CAPITAL STOCK (Thousands of Pesos)

				FIXED PORTION	VARIABLE PORTION	MEXICAN	FREE SUBSCRIPTION	FIXED	VARIABLE
B				90,850,050	330,364,656	0	421,214,706	441,786	1,606,471
TOTAL				90,850,050	330,364,656	0	421,214,706	441,786	1,606,471

TOTAL NUMBER OF SHARES REPRESENTING THE PAID-IN CAPITAL STOCK ON THE DATE OF SENDING THE INFORMATION :      421,214,706

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

CONSTRUCTION IN PROGRESS

CONSOLIDATED

THE PROJECTS IN PROGRESS AT DECEMBER 31, 2006, ARE:

PROJECTS IN PROGRESS	TOTAL INVESTMENT
PROJECTS IN REPUBLIC	51,173
PROJECTS IN MEXICALI	7,392
PROJECTS IN TLAXCALA	64,510
TOTAL INVESTMENT AT DECEMBER 31, 2006	123,075

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

INFORMATION RELATED TO BULLETIN B-15

(FOREIGN CURRENCY TRANSLATION)

CONSOLIDATED

Foreign currency transactions and exchange differences - All transactions in foreign currency are recorded at the exchange rates prevailing on the date of their execution or liquidation. Foreign currency denominated assets and liabilities are translated at the exchange rates prevailing at the balance sheet date. Any exchange differences incurred with regard to assets or liabilities denominated in foreign currency are charged to operations of the period and are included in financial income (expense) in the accompanying consolidated statements of income (loss).

The financial statements of foreign subsidiaries are translated into Mexican pesos in conformity with Bulletin B-15 “Transactions in Foreign Currency and Translation of Financial Statements of Foreign Operations”.

Pacific Steel and Undershaft investments are considered to be “integrated foreign operations”, as defined in Bulletin B-15, and accordingly such financial statements were translated as follows:

 

-	Monetary items at the exchange rate at the balance sheet date.

-	Non-monetary items and stockholders’ equity at the exchange rate prevailing at the date the transactions occurred.

-	Income and expense items at an appropriate average exchange rate.

-	The resulting foreign currency translation differences are included in the financial income (expense) in the statement of income (loss).

-	All resulting Mexican peso amounts are restated for the effects of inflation in accordance with the dispositions of Bulletin B-10 using the NCPI, where such effects are considered significant.

SimRep and subsidiaries are considered to be “foreign operations”, as defined in Bulletin B-15, and accordingly such financial statements were translated as follows:

 

-	Monetary and non-monetary items at the exchange rate at the balance sheet date.

-	Income and expense items at the exchange rate at the balance sheet date.

-	The resulting foreign currency translation differences are included in the stockholders’ equity.

-	All resulting Mexican peso amounts are restated for the effects of inflation in accordance with the dispositions of Bulletin B-10 using the NCPI, where such effects are considered significant.

 

 

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

FINANCIAL STATEMENT NOTES

CONSOLIDATED

PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

On July 22, 2005, Simec and its parent company, Industrias CH, S.A. de C.V. (“ICH”), acquired 100% of the stock of PAV Republic, Inc. (“Republic”). Simec, ICH’s largest subsidiary, acquired 50.2% of Republic’s stock, through its majority owned subsidiary, SimRep Corporation, and ICH purchased the remaining 49.8% through SimRep Corporation.. Simec financed its portion of the U.S. $229 million purchase price principally from a loan it received through ICH that has since been repaid in full. At June 30, 2006, Republic repaid in full its outstanding bank debt, which had maturities through 2009. Simec began to operate the plants of Republic on July 22, 2005 and, as a result the operation is reflected in Simec’s financial results as of such date.

According with the rules set forth in articles 35 and 81 of the Dispositions of General Character Applicable to Registrants and Other participants of the Mexican Stock Market, the following consolidated earning statements from January 1 to December 31, appears pro forma for Simec for the period 2005, in order to be comparable against January 1 to December 31, 2006.

CONSOLIDATED EARNING STATEMENT

(Thousands of Pesos)

FROM JANUARY 1 TO DECEMBER 31 OF 2006

 

	Simec without Republic	Republic	Consolidated Simec Earning Statement
Steel Sales (Metric Tons)	1,055,983	1,625,069	2,681,052
Net Sales	7,716,759	14,982,572	22,699,331
Cost of Sales	4,823,030	13,620,624	18,443,654
Gross Income	2,893,729	1,361,948	4,255,677
Operating Expenses	734,435	580,833	1,315,268
Operating Income	2,159,294	781,115	2,940,409
Total Financing Cost	65,482	(17,366)	48,116
Other Financial Operations	(36,892)	(16,659)	(53,551)
Income Taxes	193,708	310,413	504,121
Net Income Before Minority Interest	1,936,996	504,727	2,441,723
Minority Interest	0	251,253	251,253
Net Income	1,936,996	253,474	2,190,470

 

 

---

CONSOLIDATED PRO FORMA EARNING STATEMENT

(Thousands of Pesos)

FROM JANUARY 1 TO DECEMBER 31 OF 2005

	Simec without Republic	Republic	Consolidated Simec Earning Statement
Steel Sales (Metric Tons)	1,047,358	1,635,954	2,683,312
Net Sales	7,006,143	16,130,613	23,136,756
Cost of Sales	4,656,513	14,526,421	19,182,934
Gross Income	2,349,630	1,604,192	3,953,822
Operating Expenses	772,095	866,174	1,638,269
Operating Income	1,577,535	738,018	2,315,553
Total Financing Cost	109,375	132,719	242,094
Other Financial Operations	(8,252)	(38,363)	(46,615)
Income Taxes	170,843	232,717	403,560
Net Income Before Minority Interest	1,305,569	410,945	1,716,514
Minority Interest	336	204,570	204,906
Net Income	1,305,233	206,375	1,511,608

The earnings statement Pro forma for the period January 1 to December 31 2005, includes the information of Republic corresponded to the previous owners.

---

MEXICAN STOCK EXCHANGE

SIFIC / ICS

STOCK EXCHANGE CODE: SIMEC	QUARTER: 4     YEAR: 2006
GRUPO SIMEC, S.A.B. DE C.V.

 

CONSOLIDATED

DECLARATION OF THE COMPANY OFFICIALS RESPONSIBLE FOR THE INFORMATION CONTAINED IN THIS REPORT.

LUIS GARCIA LIMON, LOURDES IVONNE MASSIMI MALO AND JOSE FLORES FLORES CERTIFY THAT BASED ON OUR KNOWLEDGE, THIS REPORT DOES NOT CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE HEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH SUCH STATEMENTS WERE MADE, NOT MISLEADING WITH RESPECT TO THE PERIOD COVERED BY THIS FOURTH QUARTER REPORT.

ING LUIS GARCIA LIMON	LIC. IVONNE MASSIMI MALO	C.P. JOSE FLORES FLORES
CHIEF EXECUTIVE OFFICER	COPORATIVE LEGAL MANAGER	CHIEF FINANCIAL OFFICER

 

GUADALAJARA, JAL, AT FEBRUARY 26 OF 2007