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

Grupo Simec operates as a diversified manufacturer, processor and distributor of special bar quality steel and structural steel products with production and commercial operations in Mexico and Brazil. The steel industry is cyclical and sensitive to general economic conditions, with demand driven by industries such as construction, energy, metals service centers, appliance and automotive sectors. The industry has historically suffered from structural overcapacity globally, with current global steelmaking capacity exceeding global consumption, especially for long products. China is both the largest global steel consumer and the largest global steel producer, and the balance between its domestic production and consumption has been an important factor influencing global steel prices. The industry is significantly exposed to unfair trade practices including dumping, government subsidies, and other anti-competitive pricing strategies, particularly from producers in countries with centrally planned or state-supported economies such as China.

The company believes it was an important producer of SBQ products in Mexico in terms of shipped volume in 2025, 2024 and 2023, and an important producer of structural and light structural steel products in Mexico in terms of shipped volume in those same years. The company faces significant competition from other steel producers on price, quality and service, with markets described as highly competitive. The SBQ steel market is characterized as a niche market where specific industry experience is key to success. The company's quality of products and services, together with cost benefits generated by facility locations, has allowed it to develop long standing relationships with many SBQ clients, which include Mexico and U.S.-based automotive and industrial equipment manufacturers and their suppliers. Facilities located in the northwest and central parts of Mexico allow the company to serve the structural steel and construction markets in those regions and southern California with an advantage in the cost of freight over competitors that do not have production facilities in such regions.

The company generates revenue through the manufacture, processing and distribution of SBQ steel and structural steel products. The automotive market accounted for approximately 78% of net sales of SBQ products in 2025. The company's SBQ products are used across a broad range of highly-engineered end-user applications including axles, hubs and crankshafts for automobiles and light trucks, machine tools and off-highway equipment. Structural steel products are mainly used in the non-residential construction market and other construction applications. The company reports results in three segments: Mexico, United States and Brazil, though the United States segment is expected to be excluded from reportable segments in future years following the cessation of all steelmaking operations in the United States in August 2023.

In Mexican facilities, the company produces I-beams, channels, structural and commercial angles, hot rolled bars (round, square and hexagonals), flat bars, rebar, cold finished bars, wire rods and wire products. I-beams are I-shaped steel structural sections mainly used by the construction sector as structural supports. Channels, also known as U-beams, are steel structural sections mainly used by the construction sector as structure supports and for stocking systems. Angles are two equal-sided sections joined by their ends with a 90 degree angle, used mainly by construction and furniture industries as joist structures and framing systems. Hot rolled bars are round, square and hexagonal steel bars that can be made of special or commodity steel. In Brazil facilities, the company produces rebars, channels, structural and commercial angles. Until the cessation of operations in 2023, U.S. facilities produced hot-rolled bars, cold-finished bars, and other semi-finished products.

The company currently operates 12 steelmaking, processing, and finishing facilities with a combined annual crude steel installed production capacity of 6 million tons and a combined annual installed rolling capacity of 5.9 million tons. The company owns and operates a mini-mill in Guadalajara, Jalisco, Mexico; a mini-mill in Mexicali, Baja California, Mexico; two mini-mills in Apizaco, Tlaxcala, Mexico; a cold finishing facility in Cholula, Puebla, Mexico; a wire rod processing facility in Silao, Guanajuato, Mexico; two mini-mills in San Luis Potosí, San Luis Potosí, Mexico; two mini-mills in Pindamonhangaba, São Paulo, Brazil; a mini-mill in Cariacica, Espirito Santo, Brazil; and rolling and finishing facilities in Itauna, Minas Gerais, Brazil. On May 19, 2025, subsidiary GV do Brasil incorporated Siderúrgica Vale do Paraíba Ltda., with GV do Brasil holding 99% of the share capital comprising 49,500,000 shares with a unit value of R$1.00 (R$49,500,000 in the aggregate), and subsidiary Companhia Siderúrgica do Espírito Santo, S.A. holding the remaining 1%, comprising 500,000 shares (R$500,000 in the aggregate). On November 26, 2025, Metrolinx expropriated land in Hamilton, Ontario, Canada owned by subsidiary Republic Canadian Draw Inc. for an aggregate expropriation price of CAD$15,915,627, consisting of CAD$15,200,000 attributable to the market value of the land and CAD$715,627 in statutory damages compensation. Of this amount, CAD$226,825 was withheld in respect of outstanding property taxes. Metrolinx paid CAD$14,324,065 to Republic Canadian Draw Inc. on December 10, 2025, and the remaining CAD$1,591,562 is payable no later than July 31, 2026, subject to deduction of any environmental remediation costs.

In fiscal year 2025, total revenues were Ps. 37,025,141 thousand ¹, compared to Ps. 35,835,356 thousand ² in fiscal 2024. Net income was Ps. 5,119,746 thousand ³ in 2025 versus Ps. 5,148,093 thousand ⁴ in 2024. Basic earnings per share were Ps. 10.29 ⁵ in 2025 compared to Ps. 10.34 ⁶ in 2024. Diluted earnings per share were Ps. 10.29 ⁷ in 2025 versus Ps. 10.34 ⁸ in 2024. The company's controlling shareholder, Industrias CH, owned 51.31% ⁹ of shares as of December 31, 2025. Approximately 3.8% ¹⁰ of consolidated net sales were derived from exports to the United States, and the reimposition of Section 232 tariffs resulted in approximately Ps. 280.3 million ¹¹ in additional costs during the year.

The company currently estimates capital expenditures for the year 2026 will be approximately Ps. 2,653 million ¹² (U.S.$ 148 million ¹³), which consists of Ps. 1,331 million ¹⁴ (U.S.$ 74 million ¹⁵) of estimated capital expenditures in facilities in Mexico and Ps. 1,322 million ¹⁶ (U.S.$ 73.5 million ¹⁷) consisting of capital expenditures in facilities in Brazil. This estimate is subject to uncertainty and actual capital expenditures in 2026 may differ significantly from such estimate.

The company intends to continue to pursue acquisition opportunities that will allow for disciplined growth of the business and value creation for shareholders. The company also intends to pursue organic growth by reinvesting the cash generated by operating activities to expand the capacity and increase the efficiency of existing facilities. The growth strategy may include expanding existing facilities, building additional plants, acquiring additional steel production assets, entering into joint ventures or forming strategic alliances that are expected to expand or complement the existing business. Some of these acquisitions may be outside of Mexico, the United States, Canada and Brazil.

The company is continually working to reduce operating costs and non-operating expenses and plans to continue to do so by reducing overhead expenses and operating costs through sharing best practices among operating facilities and maintaining a conservative capital structure. The company prioritizes the production of high margin steel products over volume and utilization levels, basing production decisions on achieving relatively high margins.

The company's steel plants are large consumers of electricity and natural gas. The company buys electricity from IBERDROLA at preferential rates after successfully obtaining the Qualified User Registry. The company also pays special rates to Transamerica Natural Gas Mexico, Ienova Gas, Naturgy and Engie for natural gas used at facilities in Mexico. In Brazil and Mexico, the company enters into fixed-price contracts for energy and natural gas. The company cannot assure that these special rates will continue to be available in Mexico or that such rates may not increase significantly in the future.

Capital expenditures in 2025 amounted to approximately Ps. 2,892 million ¹⁸ (U.S.$161.1 million ¹⁹), which consisted of Ps. 838 million ²⁰ (U.S.$ 46.7 million ²¹) of capital expenditures in facilities in Mexico and Ps. 2,054 million ²² (U.S.$ 114.4 million ²³) consisting of capital expenditures in facilities in Brazil. Capital expenditures in 2024 amounted to approximately Ps. 2,127 million ²⁴ (U.S.$103.7 million ²⁵), which consisted of Ps. 195 million ²⁶ (U.S.$9.5 million ²⁷) of capital expenditures in facilities in Mexico and Ps. 1,932 million ²⁸ (U.S.$94.2 million ²⁹) of capital expenditures in facilities in Brazil. Capital expenditures in 2023 amounted to approximately Ps. 2,492 million ³⁰ (U.S.$147.5 million ³¹), which consisted of Ps. 210 million ³² (U.S.$12.4 million ³³) of capital expenditures in facilities in Mexico and Ps. 2,282 million ³⁴ (U.S.$135.1 million ³⁵) of capital expenditures in facilities in Brazil.

The company faces headwinds from the reinstatement of Section 232 tariffs on all steel imports by the United States, effective March 2025, with steel exports to the United States subject to a 25% tariff. The potential for additional reciprocal tariffs, changes to the USMCA framework scheduled for joint review in 2026, or retaliatory measures by Mexico or other trading partners could further affect cost structure, pricing, and competitiveness. In early 2025, increased low-priced steel exports from Asia, particularly from China, prompted growing concerns about unfair competition in countries such as Brazil and Mexico, with government authorities in both countries evaluating the imposition of anti-dumping duties or import quotas. The company is also exposed to the cyclical nature of the steel industry, with demand sensitive to general economic conditions and downturns in key end-use markets such as nonresidential construction.

The company faces constraints from adverse economic conditions in Mexico, which has historically experienced prolonged periods of economic crises characterized by exchange rate instability, high inflation, high domestic interest rates, changes in oil prices, economic contraction, a reduction of international capital flows, balance of payment deficits, a reduction of liquidity in the banking sector and high unemployment rates. Political, social and other developments in Mexico, including heightened criminal activity primarily due to drug cartels and related criminal organizations, could disrupt operations. The Mexican peso has been subject to significant devaluations against the U.S. dollar in the past and may be subject to significant fluctuations in the future. High inflation rates in Mexico could adversely affect business by reducing consumer purchasing power and increasing certain costs beyond levels that could be passed on to customers.

The company faces material risk from the reinstatement of Section 232 tariffs by the United States, with steel exports subject to a 25% tariff and approximately 3.8% ³⁶ of consolidated net sales derived from exports to the United States, resulting in approximately Ps. 280.3 million ³⁷ in additional costs during fiscal year 2025. The automotive market accounted for approximately 78% ³⁸ of net sales of SBQ products in 2025, creating significant concentration risk as customers in the automotive industry continually seek price reductions, which has adversely affected profit margins and is expected to continue doing so. The company's controlling shareholder, Industrias CH, owned 51.31% ³⁹ of shares as of December 31, 2025, enabling significant influence over business and policies including dividend timing and payment, with interests that may differ from other shareholders. The company faces risk from the cyclical nature of the steel industry and global production overcapacity, with current global steelmaking capacity exceeding global consumption especially for long products, and the potential for increased low-priced steel exports from China to depress market prices. Approximately 63% ⁴⁰ of employees in Mexico and 37% ⁴¹ of employees outside of Mexico are represented by labor unions, and strikes or work stoppages could disrupt operations.

Management's message emphasizes a strategy to further consolidate the company's position as a leading producer, processor and distributor of SBQ steel in North America, structural steel and rebar in Mexico and rebar in Brazil, while seeking to expand presence in the steel industry by identifying and pursuing growth opportunities and value enhancing initiatives. The four key strategic priorities emphasized are: improving cost structure by reducing overhead expenses and operating costs through sharing best practices among operating facilities and maintaining a conservative capital structure; focusing on high margin and value-added products over volume and utilization levels; building on strong customer relationships by maintaining strong customer service and proactively responding to changing customer needs; and pursuing strategic growth opportunities through acquisitions and organic growth by reinvesting cash generated by operating activities to expand capacity and increase efficiency of existing facilities. Management has determined that the Republic Steel facilities in the United States will remain inactive unless changes in prevailing economic conditions justify resuming operations, and management does not currently intend to sell the facilities.