Mexican steel company Simec saw a 7.1% drop in net profits in the third quarter of this year, totaling $95.9 million. The decline is attributed to a 28.3% reduction in average steel prices and a slight 1.8% decrease in sales volume.
Simec, a prominent steel company with operations in Mexico, the U.S., and Brazil, reported a notable decline in its financial performance for the third quarter of the year. According to data submitted to the Mexican Stock Exchange, the company's net profit dropped 7.1% to $95.9 million.
The company identified two main factors responsible for the downturn. First, average steel prices experienced a sharp 28.3% decline, falling to $947 per metric ton. The most substantial decrease was observed in commercial profiles, where the average price dropped 31.4% to $847 per metric ton. Special steel prices also reduced by 19.2%, equating to $1,190 per metric ton.
In addition to falling prices, Simec's sales volume also took a hit, albeit a modest one. The company sold 531,000 metric tons of steel in the third quarter, which is 1.8% less than the same period last year. Specifically, the volume of special steel decreased by 8.8% to 155,000 metric tons, while the volume of commercial profiles slightly increased by 1.3% to 376,000 metric tons.
Commercial profiles constituted the majority of Simec's sales volume, contributing 70.8% to the total. This is noteworthy because the value of net sales decreased by 29.6%, moving from $13.4 billion in last year's third quarter to $503 million in the current year's July-September period.
Another financial metric that witnessed a drop was EBITDA, which decreased 27.2% to $111 million. This further paints a picture of a challenging quarter for the steel company.
In terms of geographical distribution, sales in Mexico made up 58% of the total with $1.0 billion, while Brazil and the United States contributed the remaining 42% with $722 million. This regional split indicates that despite its multinational operations, Simec largely depends on its domestic market.
Simec's third-quarter financials reflect a challenging period, with a decrease in both net profits and sales volume. The sharp decline in steel prices had a significant impact, but it wasn't the only contributing factor. Despite the setbacks, the company continues to generate substantial revenues from its Mexican operations. Moving forward, Simec needs to address these issues to stabilize its financial health.