Unassociated Document
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-11176

For the month of     October                 , 2006.
 
Group Simec, Inc.
(Translation of Registrant’s Name Into English)

Av. Lazaro Cardenas 601, Colonia la Nogalera, Guadalajara, Jalisco, Mexico 44440
(Address of principal executive office)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

  Form 20-F     x Form 40-F     o
  
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                o 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                o 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                o 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: October 30, 2006.   
By: /s/ Luis García Limón
 
 
Name:  Luis García Limón
Title:    Chief Executive Officer





PRESS RELEASE

GRUPO SIMEC ANNOUNCES RESULTS OF OPERATIONS FOR THE FIRST NINE MONTHS OF 2006

GUADALAJARA, MEXICO, October 27, 2006- Grupo Simec, S.A.B. de C.V. (AMEX-SIM) (“Simec”) announced today its results of operations for the nine-month period ended September 30, 2006. Net sales increased 113% to Ps. 17,688 million in the first nine months of 2006 (including Ps. 11,942 million generated by the newly acquired plants of PAV Republic, Inc. “Republic”), compared to Ps. 8,315 million in the same period of 2005, (including Ps. 2,943 million generated by the newly acquired plants of Republic). On July 22, 2005, Simec and its parent company Industrias CH, S.A. 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. 1,902 million in the first nine months of 2006, versus net income of Ps. 1,016 million in the first nine months of 2005.

Simec sold 2,049,646 metric tons of steel products during the nine-month period ended September 30, 2006 (including 1,258,429 metric tons sold by the newly acquired plants of Republic), an increase of 84% as compared to 1,115,054 metric tons in the same period of 2005 (including 308,719 metric tons sold by newly acquired plants of Republic). Exports (including sales by U.S. subsidiaries) of basic steel products were 1,338,025 metric tons in the nine-month period ended September 30, 2006 (including 1,258,429 metric tons sold by the newly acquired plants of Republic), versus 418,380 metric tons in the same period of 2005 (including 308,719 metric tons sold by newly acquired plants of Republic). Additionally, Simec sold 1,388 metric tons of billet in the nine-month period ended September 30, 2006, as compared to 13,305 metric tons of billet in the same period of 2005. Prices of finished products sold in the nine-month period ended September 30, 2006, increased 17% in real terms versus the same period of 2005.

Simec´s direct cost of sales increased 128% to Ps. 14,276 million in the nine-month period ended September 30, 2006 (including Ps. 10,731 million relating to the newly acquired plants of Republic), compared to Ps. 6,259 million in the same period of 2005 (including Ps. 2,726 million relating to the newly acquired plants of Republic). The average cost of raw materials increased 25% in real terms in the nine-month period ended September 30, 2006, versus the same period of 2005, primarily relating to the newly acquired plants of Republic.

Indirect manufacturing, selling, general and administrative expenses (including depreciation) were Ps. 985 million in the nine-month period ending September 30, 2006 (including Ps. 439 million relating to the newly acquired plants of Republic), compared to Ps. 690 million in the same period of 2005 (including Ps. 120 million relating to the newly acquired plants of Republic).

Simec's operating income increased 78% to Ps. 2,427 million during the first nine months of 2006 (including Ps. 771 million relating to the newly acquired plants of Republic), from Ps. 1,366 million in the first nine months of 2005 (including Ps. 97 million relating to the newly acquired plants of Republic). Operating income was 14% of net sales in the first nine months of 2006, compared to 16% of net sales in the first nine months of 2005.

Simec recorded financial income of Ps. 8 million in the nine-month period ended September 30, 2006, compared to financial expense of Ps. 89 million in the same period of 2005.

Simec recorded other income, net, from other financial operations of Ps. 27 million in the nine-month period ended September 30, 2006, compared to other income, net, of Ps. 16 million in the same period of 2005. In addition, Simec recorded a provision for income tax and employee profit sharing of Ps. 307 million in the nine-month period ended September 30, 2006, versus a provision of Ps. 249 million in the same period of 2005.

All figures have been prepared in accordance with Mexican generally accepted accounting principles and are stated in constant Pesos at September 30, 2006.

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

Certain statements in this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on Simec’s current expectations and involve risks and uncertainties that could cause Simec’s actual results to differ materially from those set forth in the statements. There can be no assurance that such expectations will prove to be correct. Actual results may differ materially from those expressed or implied in the forward-looking statements. Factors that could cause Simec’s results to differ materially from current expectations include, but are not limited to: factors relating to the steel industry; Simec’s ability to operate at high capacity levels; the costs of compliance with U.S. and Mexican environmental laws; the integration of recently acquired plants and operations; 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 other factors detailed in Simec’s annual report on SEC Form 20-F and other periodic reports filed with the SEC in the United States or with the CNBV in Mexico. In addition, these statements are based on a number of assumptions that are subject to change. Accordingly, actual results may differ. The inclusion of any projections herein should not be regarded as a representation by Simec that the projections will prove to be correct. We undertake no obligation to release any revisions to any forward-looking statements.

 

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: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
CONSOLIDATED FINANCIAL STATEMENT
AT SEPTEMBER 30 OF 2006 AND 2005
(thousands of Mexican pesos)

REF
S
CONCEPTS
CURRENT YEAR
PREVIOUS YEAR
   
AMOUNT
%
AMOUNT
%
s01
TOTAL ASSETS
17,007,148
100
15,310,418
100
           
s02
CURRENT ASSETS
9,138,060
54
7,377,490
48
s03
CASH AND SHORT-TERM INVESTMENTS
1,648,802
10
564,922
4
s04
ACCOUNTS AND NOTES RECEIVABLE (NET)
2,425,949
14
2,785,053
18
s05
OTHER ACCOUNTS AND NOTES RECEIVABLE
247,733
1
52,317
0
s06
INVENTORIES
4,388,239
26
3,779,049
25
s07
OTHER CURRENT ASSETS
427,337
3
196,149
1
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)
7,366,062
43
7,128,561
47
s13
LAND AND BUILDINGS
2,471,976
15
2,430,251
16
s14
MACHINERY AND INDUSTRIAL EQUIPMENT
7,450,545
44
6,614,632
43
s15
OTHER EQUIPMENT
188,435
1
162,436
1
s16
ACCUMULATED DEPRECIATION
2,916,317
17
2,444,314
16
s17
CONSTRUCTION IN PROGRESS
171,423
1
365,556
2
s18
OTHER INTANGIBLE ASSETS AND DEFERRED ASSETS (NET)
497,165
3
801,733
5
s19
OTHER ASSETS
5,861
0
2,634
0
           
s20
TOTAL LIABILITIES
4,909,193
100
5,027,522
100
           
s21
CURRENT LIABILITIES
2,708,158
55
2,328,188
46
s22
SUPPLIERS
1,708,665
35
1,369,966
27
s23
BANK LOANS
0
0
18,352
0
s24
STOCK MARKET LOANS
3,327
0
3,411
0
s25
TAXES PAYABLE
272,755
6
217,047
4
s26
OTHER CURRENT LIABILITIES
723,411
15
719,412
14
s27
LONG-TERM LIABILITIES
178,463
4
725,646
14
s28
BANK LOANS
0
0
725,646
14
s29
STOCK MARKET LOANS
0
0
0
0
s30
OTHER LOANS
178,463
4
0
0
s31
DEFERRED LIABILITIES
0
0
0
0
s32
OTHER NON-CURRENT LIABILITIES
2,022,572
41
1,973,688
39
 
 
       
s33
CONSOLIDATED STOCKHOLDERS’ EQUITY
12,097,955
100
10,282,896
100
           
s34
MINORITY INTEREST
2,240,566
19
1,290,718
13
s35
MAJORITY INTEREST
9,857,389
81
8,992,178
87
s36
CONTRIBUTED CAPITAL
4,523,828
37
5,583,672
54
S79
CAPITAL STOCK
3,575,911
30
3,539,184
34
s39
PREMIUM ON ISSUANCE OF SHARES
947,917
8
860,273
8
s40
CONTRIBUTIONS FOR FUTURE CAPITAL INCREASES
0
0
1,184,215
12
s41
EARNED CAPITAL
5,333,561
44
3,408,506
33
s42
RETAINED EARNINGS AND CAPITAL RESERVES
6,503,483
54
4,314,617
42
s44
OTHER ACCUMULATED COMPREHENSIVE RESULT
(1,169,922)
(10)
(906,111)
(9)
s80
SHARES REPURCHASED
0
0
0
0




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
1,648,802
100
564,922
100
s46
CASH
331,455
20
103,130
18
s47
SHORT-TERM INVESTMENTS
1,317,347
80
461,792
82
 
 
       
s07
OTHER CURRENT ASSETS
427,337
100
196,149
100
s81
DERIVATIVE FINANCIAL INSTRUMENTS
20,831
5
19,041
10
s82
DISCONTINUED OPERATIONS
0
0
0
0
s83
OTHER
406,506
95
177,108
90
           
s18
OTHER INTANGIBLE ASSETS AND DEFERRED ASSETS (NET)
497,165
100
801,733
100
s48
DEFERRED EXPENSES
390,480
79
567,287
71
s49
GOODWILL
35,438
7
173,818
22
s51
OTHER
71,247
14
60,628
8
           
s19
OTHER ASSETS
5,861
100
2,634
100
s84
INTANGIBLE ASSET FROM LABOR OBLIGATIONS
5,861
100
2,634
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
2,708,158
100
2,328,188
100
s52
FOREIGN CURRENCY LIABILITIES
1,861,675
69
1,448,714
62
s53
MEXICAN PESOS LIABILITIES
846,483
31
879,474
38
           
s26
OTHER CURRENT LIABILITIES
723,411
100
719,412
100
s88
DERIVATIVE FINANCIAL INSTRUMENTS
0
0
0
0
s89
INTEREST LIABILITIES
3,635
1
0
0
s68
PROVISIONS
361,130
50
0
0
s90
DISCONTINUED OPERATIONS
0
0
0
0
s58
OTHER CURRENT LIABILITIES
358,646
50
719,412
100
 
 
       
s27
LONG-TERM LIABILITIES
178,463
100
725,646
100
s59
FOREIGN CURRENCY LIABILITIES
178,463
100
725,646
100
s60
MEXICAN PESOS LIABILITIES
0
0
0
0
 
 
       
s31
DEFERRED LIABILITIES
0
0
0
0
s65
NEGATIVE GOODWILL
0
0
0
0
s67
OTHER
0
0
0
0
 
 
       
s32
OTHER NON CURRENT LIABILITIES
2,022,572
100
1,973,688
100
s66
DEFERRED TAXES
1,917,395
95
1,828,453
93
s91
OTHER LIABILITIES IN RESPECT OF SOCIAL INSURANCE
16,968
1
10,974
1
s92
DISCONTINUED OPERATIONS
0
0
0
0
s69
OTHER LIABILITIES
88,209
4
134,261
7
           
s79
CAPITAL STOCK
3,575,911
100
3,539,184
100
s37
CAPITAL STOCK (NOMINAL)
2,048,257
57
2,012,147
57
s69
RESTATEMENT OF CAPITAL STOCK
1,527,654
43
1,527,037
43




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
6,503,483
100
4,314,617
100
s93
LEGAL RESERVE
0
0
0
0
s43
RESERVE FOR REPURCHASE OF SHARES
89,179
1
89,179
2
s94
OTHER RESERVES
0
0
0
0
s95
RETAINED EARNINGS
4,512,165
69
3,209,123
74
s45
NET INCOME FOR THE YEAR
1,902,139
29
1,016,315
24
           
s44
OTHER ACCUMULATED COMPREHENSIVE RESULT
(1,169,922)
100
(906,111)
100
s70
ACCUMULATED MONETARY RESULT
0
0
0
0
s71
RESULT FROM HOLDING NON-MONETARY ASSETS
(278,226)
24
3,238
0
s96
CUMULATIVE RESULT FROM FOREIGN CURRENCY TRANSLATION
 
16,173
 
(1)
 
0
 
0
s97
CUMULATIVE RESULT FROM DERIVATIVE FINANCIAL INSTRUMENTS
 
14,338
 
(1)
 
12,858
 
(1)
s98
CUMULATIVE EFFECT OF DEFERRED INCOME TAXES
(922,207)
79
(922,207)
102
s99
LABOR OBLIGATION ADJUSTMENT
0
0
0
0
s100
OTHER
0
0
0
0





MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
BALANCE SHEETS
OTHER CONCEPTS
(thousands of Mexican pesos)

REF
S
CONCEPTS
CURRENT YEAR
PREVIOUS YEAR
   
AMOUNT
AMOUNT
       
S72
WORKING CAPITAL
6,429,902
5,049,302
S73
PENSIONS FUND AND SENIORITY PREMIUMS
0
0
S74
EXECUTIVES (*)
54
55
S75
EMPLOYERS (*)
1,135
1,179
S76
WORKERS (*)
3,114
3,199
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






MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
QUARTERLY STATEMENTS OF INCOME
FROM JANUARY 1 TO SEPTEMBER 30 OF 2006 AND 2005
(thousands of Mexican pesos)

REF
R
CATEGORIES
CURRENT YEAR
PREVIOUS YEAR
   
AMOUNT
%
AMOUNT
%
rt01
NET SALES
17,687,953
100
8,314,963
100
rt02
COST OF SALES
14,276,220
81
6,268,671
75
rt03
GROSS PROFIT
3,411,733
19
2,056,292
25
rt04
OPERATING EXPENSES
984,634
6
689,764
8
rt05
OPERATING INCOME
2,427,099
14
1,366,528
16
rt06
INTEGRAL FINANCING COST
(7,562)
0
88,699
1
rt07
INCOME AFTER INTEGRAL FINANCING COST
2,434,661
14
1,277,829
15
rt08
OTHER EXPENSE AND INCOME (NET)
(27,099)
0
(15,725)
0
rt44
SPECIAL ITEMS
0
0
0
0
rt09
INCOME BEFORE INCOME TAXES AND EMPLOYEES’ PROFIT SHARING
 
2,461,760
 
14
 
1,293,554
 
16
rt10
PROVISIONS FOR INCOME TAXES AND EMPLOYEES’ PROFIT SHARING
 
306,750
 
2
 
248,866
 
3
rt11
NET INCOME AFTER TAXES AND EMPLOYEES’ PROFIT SHARING
 
2,155,010
 
12
 
1,044,688
 
13
rt12
EQUITY IN NET INCOME OF NON-CONSOLIDATED SUBSIDIARIES AND ASSOCIATES
 
0
 
0
 
0
 
0
rt13
CONSOLIDATED NET INCOME FROM CONTINUING OPERATIONS
 
2,155,010
 
12
 
1,044,688
 
13
rt14
INCOME FROM DISCONTINUED OPERATIONS
0
0
0
0
rt15
CONSOLIDATED NET INCOME BEFORE EXTRAORDINARY ITEMS
 
2,155,010
 
12
 
1,044,688
 
13
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
2,155,010
12
1,044,688
13
rt19
NET INCOME OF MINORITY INTEREST
252,871
1
28,373
0
rt20
NET INCOME OF MAJORITY INTEREST
1,902,139
11
1,016,315
12





MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
17,687,953
100
8,314,963
100
rt21
DOMESTIC
5,216,549
29
4,708,391
57
rt22
FOREIGN
12,471,404
71
3,606,572
43
rt23
TRANSLATED INTO DOLLARS (***)
1,117,803
 
318,948
 
           
rt06
INTEGRAL FINANCING COST
(7,562)
100
88,699
100
rt24
INTEREST EXPENSE
8,906
(118)
16,660
19
rt42
LOSS (GAIN) ON RESTATEMENT OF UDI’S
0
0
0
0
rt45
OTHER FINANCE COSTS
0
0
0
0
rt26
INTEREST INCOME
37,313
(493)
18,294
21
rt46
OTHER FINANCIAL INCOME
0
0
0
0
rt25
FOREIGN EXCHANGE LOSS (GAIN) (NET)
14,172
(187)
71,813
81
rt28
RESULT FROM MONETARY POSITION
6,673
(88)
18,520
21
           
rt10
PROVISIONS FOR INCOME TAXES AND EMPLOYEES’ PROFIT SHARING
 
306,750
 
100
 
248,866
 
100
rt32
INCOME TAX
268,130
87
404,038
162
rt33
DEFERRED INCOME TAX
38,620
13
(155,172)
(62)
rt34
EMPLOYEES’ PROFIT SHARING EXPENSES
0
0
0
0
rt35
DEFERRED EMPLOYEES’ PROFIT SHARING
0
0
0
0

(***) THOUSANDS OF DOLLARS







MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
STATEMENTS OF INCOME
OTHER CONCEPTS
(thousands of Mexican pesos)

REF
R
CONCEPTS
CURRENT YEAR
PREVIOUS YEAR
   
AMOUNT
AMOUNT
       
r36
TOTAL SALES
18,253,617
8,803,276
r37
TAX RESULT FOR THE YEAR
0
0
r38
NET SALES (**)
22,573,344
10,161,230
r39
OPERATION INCOME (**)
2,666,558
1,914,768
r40
NET INCOME OF MAJORITY INTEREST (**)
2,188,776
1,329,765
r41
NET CONSOLIDATED INCOME (**)
2,431,079
1,358,138
r47
OPERATIVE DEPRECIATION AND AMORTIZATION
314,066
227,072

(**) RESTATED INFORMATION FOR THE LAST TWELVE MONTHS
 




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
STATEMENTS OF INCOME
FROM JULY 1 TO SEPTEMBER 30 OF 2006 AND 2005
(thousands of Mexican pesos)

REF
R
CATEGORIES
CURRENT YEAR
PREVIOUS YEAR
   
AMOUNT
%
AMOUNT
%
r01
NET SALES
5,653,640
100
4,677,368
100
r02
COST OF SALES
4,491,380
79
3,890,371
83
r03
GROSS PROFIT
1,162,260
21
786,997
17
r04
OPERATING EXPENSES
322,591
6
308,381
7
r05
OPERATING INCOME
839,669
15
478,616
10
r06
INTEGRAL FINANCING COST
17,820
0
52,994
1
r07
INCOME AFTER INTEGRAL FINANCING COST
821,849
15
425,622
9
r08
OTHER EXPENSE AND INCOME (NET)
57,057
1
(7,954)
0
r44
SPECIAL ITEMS
0
0
0
0
r09
INCOME BEFORE INCOME TAXES AND EMPLOYEES’ PROFIT SHARING
 
764,792
 
14
 
433,576
 
9
r10
PROVISIONS FOR INCOME TAXES AND EMPLOYEES’ PROFIT SHARING
 
47,269
 
1
 
940
 
0
r11
NET INCOME AFTER TAXES AND EMPLOYEES’ PROFIT SHARING
 
717,523
 
13
 
432,636
 
9
r12
EQUITY IN NET INCOME OF NON-CONSOLIDATED SUBSIDIARIES AND ASSOCIATES
 
0
 
0
 
0
 
0
r13
CONSOLIDATED NET INCOME FROM CONTINUING OPERATIONS
 
717,523
 
13
 
432,636
 
9
r14
INCOME FROM DISCONTINUED OPERATIONS
0
0
0
0
r15
CONSOLIDATED NET INCOME BEFORE EXTRAORDINARY ITEMS
 
717,523
 
13
 
432,636
 
9
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
717,523
13
432,636
9
r19
NET INCOME OF MINORITY INTEREST
76,881
1
28,373
1
r20
NET INCOME OF MAJORITY INTEREST
640,642
11
404,263
9






MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
5,653,640
100
4,677,368
100
r21
DOMESTIC
1,969,919
35
1,527,291
33
r22
FOREIGN
3,683,721
65
3,150,077
67
r23
TRANSLATED INTO DOLLARS (***)
359,005
6
279,593
6
           
r06
INTEGRAL FINANCING COST
17,820
100
52,994
100
r24
INTEREST EXPENSE
3,404
19
13,889
26
r42
LOSS (GAIN) ON RESTATEMENT OF UDI’S
0
0
0
0
r45
OTHER FINANCE COSTS
0
0
0
0
r26
INTEREST INCOME
16,661
93
6,915
13
r46
OTHER FINANCIAL INCOME
0
0
0
0
r25
FOREIGN EXCHANGE LOSS (GAIN) (NET)
33,072
186
35,239
66
r28
RESULT FROM MONETARY POSITION
(1,995)
(11)
10,781
20
           
r10
PROVISIONS FOR INCOME TAXES AND EMPLOYEES’ PROFIT SHARING
 
47,269
 
100
 
940
 
100
r32
INCOME TAX
(22,307)
(47)
89,633
9535
r33
DEFERRED INCOME TAX
69,576
147
(88,693)
(9435)
r34
EMPLOYEES’ PROFIT SHARING EXPENSES
0
0
0
0
r35
DEFERRED EMPLOYEES’ PROFIT SHARING
0
0
0
0

(***) THOUSANDS OF DOLLARS



 

MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
119,832
93,736






MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
2,155,010
1,044,688
c02
+ (-) ITEMS ADDED TO INCOME WHICH DO NOT REQUIRE CASH
353,618
71,900
c03
RESOURCES FROM NET INCOME FOR THE YEAR
2,508,628
1,116,588
c04
RESOURCES PROVIDED OR USES IN OPERATION
(709,451)
(2,872,825)
c05
RESOURCES PROVIDED BY (USED FOR) IN OPERATING ACTIVITIES
 
1,799,117
 
(1,756,237)
c06
RESOURCES PROVIDED BY (USED FOR) EXTERNAL FINANCING ACTIVITIES
 
(238,254)
 
1,851,935
c07
RESOURCES PROVIDED BY (USED FOR) INTERNAL FINANCING ACTIVITIES
 
124,371
 
1,184,215
c08
RESOURCES PROVIDED BY (USED FOR) INTERNAL FINANCING ACTIVITIES
 
(113,883)
 
3,036,150
c09
RESOURCES PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES
 
(249,695)
 
(1,251,248)
c10
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS
 
1,435,599
 
28,665
c11
CASH AND SHORT-TERM INVESTMENTS AT THE BEGINNING OF PERIOD
 
213,203
 
536,257
c12
CASH AND SHORT-TERM INVESTMENTS AT THE END OF PERIOD
1,648,802
564,922





MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
 
353,618
 
71,900
c13
DEPRECIATION AND AMORTIZATION FOR THE YEAR
314,066
227,072
c41
+ (-) OTHER ITEMS
39,552
(155,172)
       
c04
RESOURCES PROVIDED OR USED IN OPERATION
(709,451)
(2,872,825)
c18
+ (-) DECREASE (INCREASE) IN ACCOUNT RECEIVABLES
(98,937)
(1,765,212)
c19
+ (-) DECREASE (INCREASE) IN INVENTORIES
(661,548)
(2,582,747)
c20
+ (-) DECREASE (INCREASE) IN OTHER ACCOUNT RECEIVABLES
(41,416)
(34,197)
c21
+ (-) DECREASE (INCREASE) IN SUPPLIERS
271,322
746,453
c22
+ (-) DECREASE (INCREASE) IN OTHER LIABILITIES
(178,872)
762,878
       
c06
RESOURCES PROVIDED BY (USED FOR) EXTERNAL FINANCING ACTIVITIES
 
(238,254)
 
1,851,935
c23
+ BANK FINANCING
0
742,684
c24
+ STOCK MARKET FINANCING
(8)
0
c25
+ DIVIDEND RECEIVED
0
0
c26
OTHER FINANCING
178,463
1,270,257
c27
BANK FINANCING AMORTIZATION
(416,709)
(161,006)
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
 
124,371
 
1,184,215
c30
+ (-) INCREASE (DECREASE) IN CAPITAL STOCK
36,727
0
c31
(-) DIVIDENDS PAID
0
0
c32
+ PREMIUM ON ISSUANCE OF SHARES
87,644
0
c33
+ CONTRIBUTION FOR FUTURE CAPITAL INCREASES
0
1,184,215
c43
+ (-) OTHER ITEMS
0
0
       
c09
RESOURCES PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES
 
(249,695)
 
(1,251,248)
c34
+ (-) INCREASE (DECREASE) IN PERMANENT STOCK INVESTMENTS
 
0
 
0
c35
(-) ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT
(251,022)
(1,436,190)
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
1,327
184,942





MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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 (**)
$ 5.23
$ 9.82
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 (**)
$ 5.23
$ 9.82
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
$ 23.40
$ 65.19
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
2.21 times
0.78 times
d12
MARKET PRICE TO BASIC PROFIT PER ORDINARY SHARE
9.90 times
5.19 times
d13
MARKET PRICE TO BASIC PROFIT PER PREFERRED SHARE (**)
0.00 times
0.00 times

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





MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
12.18%
12.56%
p02
NET INCOME TO STOCKHOLDERS’ EQUITY (**)
22.20%
14.78%
p03
NET INCOME TO TOTAL ASSETS (**)
14.29%
8.87%
p04
CASH DIVIDENDS TO PREVIOUS YEAR NET INCOME
0.00%
0.00%
p05
INCOME DUE TO MONETARY POSITION TO NET INCOME
(0.30)%
(1.77)%
       
 
ACTIVITY
   
p06
NET SALES TO NET ASSETS (**)
1.32 times
0.66 times
p07
NET SALES TO FIXED ASSETS (**)
3.06 times
1.42 times
p08
INVENTORIES TURNOVER (**)
4.23 times
1.94 times
p09
ACCOUNTS RECEIVABLE IN DAYS OF SALES
32.20 days
78.63 days
p10
PAID INTEREST TO TOTAL LIABILITIES WITH COST (**)
19.60%
2.36%
       
 
LEVERAGE
   
p11
TOTAL LIABILITIES TO TOTAL ASSETS
28.86%
32.83%
p12
TOTAL LIABILITIES TO STOCKHOLDERS’ EQUITY
0.40 times
0.48 times
p13
FOREIGN CURRENCY LIABILITIES TO TOTAL LIABILITIES
41.55%
43.24%
p14
LONG-TERM LIABILITIES TO FIXED ASSETS
2.42%
10.17%
p15
OPERATING INCOME TO INTEREST PAID
272.52 times
82.02 times
p16
NET SALES TO TOTAL LIABILITIES (**)
4.59 times
2.02 times
       
 
LIQUIDITY
   
p17
CURRENT ASSETS TO CURRENT LIABILITIES
3.37 times
3.16 times
p18
CURRENT ASSETS LESS INVENTORY TO CURRENT LIABILITIES
1.75 times
1.54 times
p19
CURRENT ASSETS TO TOTAL LIABILITIES
1.86 times
1.46 times
p20
AVAILABLE ASSETS TO CURRENT LIABILITIES
60.88%
24.26%
       
 
CASH FLOW
   
p21
RESOURCES FROM NET INCOME TO NET SALES
14.18%
13.42%
p22
RESOURCES FROM CHANGES IN WORKING CAPITAL TO NET SALES
 
(4.01)%
 
(34.55)%
p23
RESOURCES GENERATED (USED) IN OPERATING TO INTEREST PAID
 
202.01 times
 
(105.41) times
p24
EXTERNAL FINANCING TO RESOURCES PROVIDED BY (USED FOR) FINANCING
 
209.20%
 
60.99%
p25
INTERNAL FINANCING TO RESOURCES PROVIDED (USED FOR) FINANCING
 
(109.20)%
 
39.00%
p26
RESOURCES PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES
 
100.53%
 
114.78%

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




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
DIRECTOR REPORT
CONSOLIDATED


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

Nine-Month Period Ended September 30, 2006 compared to Nine-Month Period Ended September 30, 2005

Net Sales
Net sales of Simec increased 113% to Ps. 17,688 million in the nine-month period ended September 30, 2006 (including the net sales generated by the newly acquired plants of Republic of Ps. 11,942 million), compared to Ps. 8,315 million in the same period of 2005 (including the net sales generated by the newly acquired plants of Republic of Ps. 2,943 million). Sales in metric tons of steel products increased 84% to 2,049,646 metric tons in the nine-month period ended September 30, 2006 (including 1,258,429 metric tons generated by the newly acquired plants of Republic) compared to 1,115,054 metric tons in the same period of 2005 (including 308,719 metric tons generated by the newly acquired plants of Republic). Exports (including sales by U.S. subsidiaries) of basic steel products increased 220% to 1,338,025 metric tons in the nine-month period ended September 30, 2006 (including 1,258,429 metric tons generated by the newly acquired plants of Republic) versus 418,380 metric tons in the same period of 2005 (including 308,719 metric tons generated by the newly acquired plants of Republic). Additionally, Simec sold 1,388 metric tons of billet in the nine-month period ended September 30, 2006, compared to 13,305 tons of billet in the same period of 2005. The average price of steel products increased 17% in real terms in the six-month period ended September 30, 2006 versus the same period of 2005.

Direct Cost of Sales
Simec´s direct cost of sales increased 128% to Ps. 14,276 million in the nine-month period ended September 30, 2006 (including Ps. 10,731 million relating to the newly acquired plants of Republic) compared to Ps. 6,259 million in the same period of 2005 (including Ps. 2,726 million relating to the newly acquired plants of Republic). Direct cost of sales as a percentage of net sales was 81% in the nine-month period ended September 30, 2006 compared to 75% in the same period of 2005. The average cost of raw materials used to produce steel products increased 25% in real terms in the nine-month period ended September 30, 2006 versus the same period of 2005, primarily generated by the newly acquired plants of Republic.

Marginal Profit
Simec´s marginal profit increased 66% to Ps. 3,412 million in the nine-month period ended September 30, 2006 (including Ps. 1,211 million relating to the newly acquired plants of Republic) compared to Ps. 2,056 million in the same period of 2005 (including Ps. 217 million relating to the newly acquired plants of Republic). As a percentage of net sales, marginal profit was 19% (7% excluding the marginal profit of Republic) in the nine-month period ended September 30, 2006 compared to 25% (3% excluding the marginal profit of Republic) in the same period of 2005.

Indirect Manufacturing, Selling, General and Administrative Expenses
Indirect manufacturing, selling, general, and administrative expenses (which include depreciation and amortization) increased 43% to Ps. 985 million in the nine-month period ended September 30, 2006 (including Ps. 439 million relating to the newly acquired plants of Republic) from Ps. 690 million in the same period of 2005 (including Ps. 120 million relating to the newly acquired plants of Republic). Depreciation and amortization expense, in the nine-month period ended September 30, 2006 increased to Ps. 314 million (including Ps. 113 million relating to the newly acquired plants of Republic) compared to Ps. 227 million in the same period of 2005 (including Ps. 29 million relating to the newly acquired plants of Republic).
 
Operating Income
Simec´s operating income increased 78% to Ps. 2,427 million in the nine-month period ended September 30, 2006 (including Ps. 771 million relating to the newly acquired plants of Republic) compared to Ps. 1,366 million in the same period of 2005 (including Ps. 97 million relating to the newly acquired plants of Republic). As a percentage of net sales, operating income decreased 2 percentage points from 16% in the nine-month period ended September 30, 2005 to 14% in the nine-month period ended September 30, 2006.
 
Financial Income (Expense)
Simec recorded financial income of Ps. 8 million in the nine-month period ended September 30, 2006 compared to financial expense of Ps. 89 million in the same period of 2005. Simec recorded an exchange loss of approximately Ps. 14 million in the nine-month period ended September 30, 2006 compared to an exchange loss of Ps. 72 million in the same period of 2005, reflecting a 2.2% decrease in the value of the peso versus the dollar in the nine-month period ended September 30, 2006 compared to a 3.7% increase in the value of the peso versus the dollar in the same period of 2005. Net interest income was Ps. 28 million in the nine-month period ended September 30, 2006 versus net interest income of Ps. 1 million in the same period of 2005. Simec recorded a loss from monetary position of Ps. 6 million in the nine-month period ended September 30, 2006 compared to a loss from monetary position of Ps. 18 million in the same period of 2005, reflecting the domestic inflation rate of 2.47% in the nine-month period ended September 30, 2006 as compared to 1.72% in the same period of 2005.

Other Income (Expense), Net
Simec recorded other income, net, of Ps. 27 million in the nine-month period ended September 30, 2006 compared to other income, net, of Ps. 16 million in the same period of 2005.

Income Tax and Employee Profit Sharing
Simec recorded a provision of Ps. 307 million for income tax and employee profit sharing in the nine-month period ended September 30, 2006 (including a decrease in the provision of Ps. 39 million with respect to deferred income tax) compared to a provision of Ps. 249 million in the same period of 2005 (including a decrease in the provision of Ps. 155 million with respect to deferred income tax).

Net Income Before Minority Interest
Simec recorded net income before minority interest of Ps. 2,155 million in the nine-month period ended September 30, 2006 compared to net income before minority interest of Ps. 1,045 million in the same period of 2005.

Minority Interest
Simec recorded minority interest of Ps. 253 million in the nine-month period ended September 30, 2006 versus Ps. 28 million recorded in the same period of 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. 1,902 million in the nine-month period of 2006 compared to net income of Ps. 1,016 million in the same period of 2005.

Deferred Taxes
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. 1,917 million at September 30, 2006 compared to Ps. 1,828 million at September 30, 2005. The effect on Simec’s consolidated statement of income in the nine-month period ended September 30, 2006 was a increase of Ps. 39 million in the provision for income tax and employee profit sharing compared to a decrease in the provision of Ps. 155 million in the same period of 2005. These provisions do not affect the cash flow of Simec.
 
INFORMATION CONCERNING LIQUIDITY AND CAPITAL RESOURCES AND DEBT OBLIGATIONS WITH BANKS AND COMMERCIAL CREDITORS

Liquidity and Capital Resources

At September 30, 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 September 30, 2006 was U.S. $329,997 dollars. At December 31, 2005, Simec’s total consolidated debt consisted of U.S. $38 million (Ps. 420 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 September 30, 2006, Republic repaid in full its outstanding bank debt, which had maturities through 2009.

Net resources provided by operations were Ps. 1,799 million in the six-month period ended September 30, 2006 versus Ps. 1,756 million of net resources provided by operations in the same period of 2005. Net resources used by financing activities were Ps. 114 million in the nine-month period ended September 30, 2006 (which amount includes the prepayment of Ps. 417 million (U.S. $37.7 million) of Republic’s bank debt and a capital contribution of certain minority shareholders of Simec of Ps. 124 million) versus Ps. 3,036 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-current assets and liabilities and Proceeds from insurance claim) were Ps. 250 million in the nine-month period ended September 30, 2006 versus net resources used in investing activities of Ps. 1,251 million in the same period of 2005.
 




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
FINANCIAL STATEMENT NOTES
    CONSOLIDATED

(1) Operations preparation bases and summary of significant accounting policies:
Grupo Simec, S.A. de C.V. and its Subsidiaries (“the Company”) are subsidiaries of Industrias CH, S.A. 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. 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.

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 June 30, 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 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 September 30, 2005 and at September 30, 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 September 30, 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 June 30, 2006 was U.S. $329,997 dollars. At December 31, 2005, Simec’s total consolidated debt consisted of U.S. $38 million (Ps. 420 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. 13,311 (U.S. $1,208,398) at September 30, 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. 1,500 per month.






MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
RELATIONS OF SHARES INVESTMENTS
CONSOLIDATED


COMPANY NAME
MAIN ACTIVITIES
NUMBER OF
SHARES
OWNERSHIP
SUBSIDIARIES
 
 
 
Cia. Siderúrgica de
Guadalajara
 
Sub-Holding
 
 
99.99
Administradora de Cartera de
Occidente
Administration of accounts receivable
 
 
99.99
Simec International
Production and sales of steel products
 
99.99
Arrendadora Simec
Production and sales of steel products
 
100.00
Controladora Simec
Sub-Holding
 
100.00
Pacific Steel
Scrap purchase
 
100.00
Cia. Siderúrgica del Pacífico
Rent of land
 
99.99
Coordinadora de Servicios Siderúrgicos de Calidad
 
Administrative services
 
 
100.00
Administradora de Servicios de la Industria Siderúrgica
 
Administrative services
 
 
99.99
Industrias del Acero y del Alambre
Sales of steel products
 
99.99
Procesadora Mexicali
Scrap purchase
 
99.99
Servicios Simec
Administrative services
 
100.00
Sistemas de Transporte de Baja California
 
 
100.00
Operadora de Metales
Administrative services
 
100.00
Operadora de Servicios Siderúrgicos de Tlaxcala
 
Administrative services
 
 
100.00
Administradora de Servicios Siderúrgicos de Tlaxcala
 
Administrative services
 
 
100.00
Operadora de Servicios de la Industria Siderúrgica
 
Administrative services
 
 
100.00
SimRep
Sub-Holding
 
100.00
PAV Republic
Production and sales of steel products
 
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: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
3,327
0
0
0
0
0
                             
                             
TOTAL STOCK EXCHANGE
   
0
0
0
0
0
0
3,327
0
0
0
0
0
                             
                             
                             
SUPPLIERS
                           
Various
   
332,812
0
0
0
0
0
1,375,853
0
0
0
0
0
                             
TOTAL SUPPLIERS
   
332,812
0
0
0
0
0
1,375,853
0
0
0
0
0
                             
                             
                             
OTHER CURRENT LIABILITIES AND OTHER CREDITS
                           
Various
   
200,730
0
0
0
0
0
157,916
0
0
0
0
0
                             
TOTAL OTHER CURRENT LIABILITIES AND OTHER CREDITS
   
200,730
0
0
0
0
0
157,916
0
178,463
0
0
0
                             
                             
TOTAL
   
533,542
0
0
0
0
0
1,537,096
0
178,463
0
0
0

NOTES: The exchange rate of the peso to the U.S. Dollar at September 30, 2006 was Ps. 11.0152
 




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
305,530
3,365,474
0
0
3,365,474
           
LIABILITIES POSITION
177,190
2,039,891
22
247
2,040,138
SHORT TERM LIABILITIES POSITION
160,988
1,861,428
22
247
1,861,675
LONG TERM LIABILITIES POSITION
16,202
178,463
0
0
178,463
           
NET BALANCE
128,340
1,325,583
(22)
(247)
1,325,336

NOTES
THE EXCHANGE RATE OF THE PESO TO THE U.S. DOLLAR AT JUNE 30, 2006 WAS PS. 11.3973





MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
912,170
1,001,804
0.59
5,875
FEBRUARY
1,762,423
862,009
900,414
0.15
1,378
MARCH
1,754,283
844,712
909,571
0.13
1,141
APRIL
1,767,088
1,342,592
424,496
0.15
622
MAY
1,952,871
1,725,270
227,601
(0.45)
(1,013)
JUNE
1,871,618
1,404,694
466,924
0.09
403
JULY
2,043,991
1,124,620
919,371
0.27
2,521
AUGUST
2,417,016
1,239,898
1,177,118
0.51
6,007
SEPTEMBER
2,730,360
1,120,243
1,610,117
1.01
16,254
ACTUALIZATION
     
0.00
245
CAPITALIZATION
     
0.00
0
FOREIGN CORPORATION
     
 
0.00
 
(26,760)
OTHER
     
0.00
0
           
TOTAL
       
6,673





MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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 3.37 times.
B) Accomplished the actual situation is 0.29
C) Accomplished the actual situation is 307.79

As of September 30, 2006, the remaining balance of the MTNs not exchanged amounts to Ps. 3,327 ($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: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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
 
83.33
MEXICALI MINI MILL
PRODUCTION AND SALES OF STEEL PRODUCTS
 
250
 
88.50
INDUSTRIAS DEL ACERO Y DEL ALAMBRE
 
SALE OF STEEL PRODUCTS
 
0
 
0
APIZACO AND CHOLULA PLANTS
PRODUCTION AND SALES OF STEEL PRODUCTS
 
460
 
93.17
CANTON CASTER FACILITY
PRODUCTION OF BILLET
787
53.30
LORAIN CASTER FACILITY
PRODUCTION OF BILLET
1,169
96.90
LORAIN HOT-ROLLING MILL
PRODUCTION AND SALES OF STEEL PRODUCTS
 
838
 
66.60
LACKAWANNA HOT-ROLLING MILL
PRODUCTION AND SALES OF STEEL PRODUCTS
 
544
 
87.80
MASSILLON COLD-FINISH FACILITY
PRODUCTION AND SALES OF STEEL PRODUCTS
 
125
 
74.90
GARY COLD-FINISH FACILITY
PRODUCTION AND SALES OF STEEL PRODUCTS
 
71
 
64.00
ONTARIO COLD-FINISH FACILITY
PRODUCTION AND SALES OF STEEL PRODUCTS
 
59
 
60.60







MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
MAIN RAW MATERIALS
CONSOLIDATED

 
DOMESTIC
 
MAIN SUPPLIERS
 
FOREIGN
 
MAIN SUPPLIERS
DOMESTIC SUBSTITUTION
COST PRODUCTION (%)
SCRAP
VARIOUS
SCRAP
VARIOUS
NO
45.65
ELECTRICITY
C.F.E
 
AEP, OHIO EDISON
NO
6.58
FERROALLOYS
MINERA AUTLAN
FERROALLOYS
GFM TRADING
YES
14.31
ELECTRODES
UCAR CARBON MEXICANA
ELECTRODES
SGL CARBON GROUP
 
YES
 
1.55
 




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
SELLS DISTRIBUTION BY PRODUCT
CONSOLIDATED

DOMESTIC SELLS

MAIN PRODUCTS
NET SALES
MAIN DESTINATION
 
VOLUME
AMOUNT
TRADEMARKS
COSTUMERS
STRUCTURAL PROFILES
131
995,961
   
COMMERCIAL PROFILES
83
568,597
   
REBAR
182
1,334,805
   
FLAT BAR
112
750,952
   
STEEL BARS
203
1,558,218
   
OTHER
0
7,620
   
BILLET
1
396
   
HOT-ROLLED BARS
       
COLD-FINISHED BARS
       
SEMI-FINISHED SEAMLESS TUBE ROUNDS
       
OTHER SEMI-FINISHED TRADE PRODUCTS
       
T O T A L
 
5,216,549
   
         
FOREIGN SALES
 
12,471,404
   
TOTAL
 
17,687,953
   





MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
SELLS DISTRIBUTION BY PRODUCT
CONSOLIDATED


FOREIGN SELLS

MAIN PRODUCTS
NET SELLS
MAIN
 
VOLUME
AMOUNT
TRADEMARKS
COSTUMERS
EXPORTS
       
STRUCTURAL PROFILES
21
142,323
   
COMMERCIAL PROFILES
16
103,691
   
REBAR
18
103,355
   
STEEL BARS
4
24,337
   
FLAT BAR
20
148,356
   
BILLET
1
7,345
   
 
FOREIGN SUBSIDIARIES
       
HOT-ROLLED BARS
740
7,542,008
   
COLD-FINISHED BARS
113
1,565,560
   
SEMI-FINISHED SEAMLESS TUBE ROUNDS
 
304
 
1,998,937
   
OTHER SEMI-FINISHED TRADE PRODUCTS
 
102
 
835,492
   
T O T A L
 
12,471,404
   
 




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
CONSOLIDATED
INTEGRATION OF THE PAID SOCIAL CAPITAL STOCK
CHARACTERISTICS OF THE SHARES

SERIES
NOMINAL
VALUE
VALIDCOUPON
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
 



MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
CONSTRUCTION IN PROGRESS

CONSOLIDATED


THE PROJECTS IN PROGRESS AT SEPTEMBER 30, 2006, ARE:

PROJECTS IN PROGRESS
TOTAL INVESTMENT
   
       
CASTER PROJECT IN CANTON AND
OTHER PROJECTS IN REPUBLIC
 
64,285
   
MEXICALI
41,383
   
VARIOUS PROJECTS IN TLAXCALA
52,968
   
VARIOUS PROJECTS IN GUADALAJARA AND MEXICALI
 
12,787
   
TOTAL INVESTMENT AT
SEPTEMBER 30, 2006
 
171,423
   
 




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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: 3 YEAR: 2006
GRUPO SIMEC, S.A. 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 September 30, appears pro forma for Simec for the period 2005, in order to be comparable against January 1 to September 30, 2006.

CONSOLIDATED EARNING STATEMENT
(Thousands of Pesos)
FROM JANUARY 1 TO SEPTEMBER 30 OF 2006
 
Simec without Republic
 
Republic
Consolidated
Simec
Earning Statement
Steel Sales (Metric Tons)
791,217
1,258,429
2,049,646
Net Sales
5,745,956
11,941,997
17,687,953
Cost of Sales
3,544,816
10,731,404
14,276,220
Gross Income
2,201,140
1,210,593
3,411,733
Operating Expenses
545,502
439,132
984,634
Operating Income
1,655,638
771,461
2,427,099
Total Financing Cost
18,522
(26,084)
(7,562)
Other Financial Operations
(6,941)
(20,158)
(27,099)
Income Taxes
(4,738)
311,488
306,750
Net Income Before Minority Interest
 
1,648,795
 
506,215
 
2,155,010
Minority Interest
0
252,871
252,871
Net Income
1,648,795
253,344
1,902,139





CONSOLIDATED PRO FORMA EARNING STATEMENT
(Thousands of Pesos)
FROM JANUARY 1 TO SEPTEMBER 30 OF 2005

 
 
Simec without Republic
 
 
Republic
Consolidated
Simec
Earning Statement
Steel Sales (Metric Tons)
806,335
1,271,259
2,077,594
Net Sales
5,371,832
12,652,104
18,023,936
Cost of Sales
3,532,826
11,207,833
14,740,659
Gross Income
1,839,006
1,444,271
3,283,277
Operating Expenses
570,052
708,911
1,278,963
Operating Income
1,268,954
735,360
2,004,314
Total Financing Cost
59,885
109,658
169,543
Other Financial Operations
(8,710)
(37,414)
(46,124)
Income Taxes
215,738
240,658
456,396
Net Income Before Minority Interest
 
1,002,041
 
422,458
 
1,424,499
Minority Interest
0
210,299
210,299
Net Income
1,002,041
212,159
1,214,200

The earnings statement Pro forma for the period January 1 to September 30 2005, includes the information of Republic corresponded to the previous owners.
 




MEXICAN STOCK EXCHANGE
SIFIC / ICS
STOCK EXCHANGE CODE: SIMEC
  QUARTER: 3 YEAR: 2006
GRUPO SIMEC, S.A. DE C.V.  
CONSOLIDATED


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

LUIS GARCIA LIMON 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 THIRD QUARTER REPORT.

       
ING LUIS GARCIA LIMON
C.P. JOSE FLORES FLORES
CHIEF EXECUTIVE OFFICER
CHIEF FINANCIAL OFFICER
       
       
 
GUADALAJARA, JAL, AT OCTOBER 27 OF 2006