Grupo Simec SA De CV (SIM) Risk Factors

Economic conditions in Mexico are highly correlated with economic conditions in the United States due to the physical proximity and the high degree of economic activity between the two countries. As a result, political developments in the United States, including changes in the American administration and governmental policies, can also have an impact on the exchange rate between the U.S. dollar and the Mexican peso, economic conditions in Mexico and the global capital markets. In addition, because the Mexican economy is heavily influenced by the U.S. economy, policies that may be adopted by the U.S. government that are unfavorable to Mexico may adversely affect economic conditions in Mexico. The macroeconomic environment in which we operate is beyond our control and the future economic environment may be less favorable than in recent years. The risks associated with current and potential changes in the Mexican and United States political environment and economies are significant and could have an adverse effect on our financial condition and results of operations.

The stock market in general and the market prices of the ADSs on NYSE American, in particular, are or will be subject to fluctuation, and changes in these prices may be unrelated to our operating performance. During the third quarter of 2024, the market price of our ADSs fluctuated from a high of $30.47 per ADS to a low of $26.00 per ADS, and the price of our ADSs continues to fluctuate. We anticipate that the market prices of our securities will continue to be subject to wide fluctuations. The market price of our securities may be subject to a number of factors, including: - announcements of new products by us or others;         - announcements by us of significant acquisitions, strategic partnerships, in-licensing, joint ventures or capital commitments;         - the developments of the businesses and projects of our various subsidiaries;         -   expiration or terminations of licenses, research contracts or other collaboration agreements;         - public concern as to the safety of the products we sell;          - the volatility of market prices for shares of companies with whom we compete;- developments concerning intellectual property rights or regulatory approvals;         - variations in our and our competitors' results of operations;         - changes in revenues, gross profits and earnings announced by us;         - changes in estimates or recommendations by securities analysts, if the ADSs are covered by analysts;         - fluctuations in the share price of our publicly traded subsidiaries;         - changes in government regulations or patent decisions; and         - general market conditions and other factors, including factors unrelated to our operating performance. These factors may materially and adversely affect the market price of our securities and result in substantial losses by our investors.

We depend on the performance of our executive officers and key employees. Our senior management has significant experience in the steel industry, and the loss of any member of senior management or our inability to attract and retain additional senior management could materially and adversely affect our business, results of operations, prospects and financial condition. We believe that the SBQ steel market is a niche market where specific industry experience is key to success. We depend on the knowledge of our business and the SBQ steel industry of our senior management team. In addition, we attribute much of the success of our growth strategy to our ability to retain most of the key senior management personnel of the companies and businesses that we have acquired. Competition for qualified personnel is significant, and we may not be able to find replacements with sufficient knowledge of, and experience in, the SBQ steel industry for our existing senior management or any of these individuals if their services are no longer available. Our business could be adversely affected if we cannot attract or retain senior management or other necessary personnel.

A challenge that we and other suppliers of intermediary products used in the manufacture of automobiles face is continued price reduction pressure from our customers in the automobile manufacturing business. Downward pricing pressure has been a characteristic of the automotive industry in recent years and it is migrating to all our vehicular markets. Virtually all automobile manufacturers have aggressive price reduction initiatives that they impose upon their suppliers, and such actions are expected to continue in the future. In the face of lower prices to customers, we must continue to reduce our operating costs in order to maintain profitability. We have taken and continue to take steps to reduce our operating costs to offset customer price reductions; however, price reductions are adversely affecting our profit margins and are expected to do so in the future. If we are unable to offset customer price reductions through improved operating efficiencies, new manufacturing processes, sourcing alternatives, technology enhancements and other cost reduction initiatives, or if we are unable to avoid price reductions from our customers, our results of operations could be adversely affected.

We cannot assure you that the ADSs will not be delisted from the NYSE American, which could negatively impact the price of the ADSs and our ability to access capital markets. The listing standards of the NYSE American provide that a company, in order to qualify for continued listing, must maintain a minimum share price of $1.00 and satisfy standards relative to minimum shareholders' equity, minimum market value of publicly held shares and various additional requirements. If we fail to comply with all listing standards applicable to issuers listed on the NYSE American, the ADSs may be delisted. If the ADSs are delisted, it could reduce the price of the ADSs and the levels of liquidity available to our shareholders. In addition, the delisting of the ADSs could materially and adversely affect our access to the capital markets and any limitation on liquidity or reduction in the price of the ADSs could materially and adversely affect our ability to raise capital. Delisting from the NYSE American could also result in other negative consequences, including the potential loss of confidence by suppliers, customers and employees, the loss of institutional investor interest and fewer business development opportunities.

In connection with the preparation of our financial statements as of and for each of the years ended in December 31, 2021, and December 31, 2020, we and our auditors identified material weaknesses in our internal controls over financial reporting in our Mexico, Brazil and United States segments including in relation to inadequate control monitoring, identified control deficiencies not being resolved in a timely manner, lack of an appropriate disaster recovery plan, and lack of a documented plan with respect to the continuity of operations in the event of a disruption of the information technology environment. For more information on country segment specific deficiencies, see "Item 15-Controls and Procedures" in our Form 20-F for the year-ended December 31, 2021, filed with the SEC on May 24, 2022. Effective internal controls are necessary for us to provide reliable financial reports. We have taken a number of measures to remediate the past material weaknesses and to continue to evaluate steps to enhance our internal controls. However, these remediation measures have been and may continue to be time consuming and costly and we cannot be certain that these initiatives will ultimately have the intended effects. If we identify additional material weaknesses, we may be unable to provide required financial information in a timely and reliable manner and may incorrectly report financial information. If our financial statements continue to not be filed on a timely basis, we could be subject to sanctions or additional investigations by the SEC or other regulatory authorities. In addition, the existence of material weaknesses in our internal controls over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the price of our securities. We cannot assure you that the measures we have taken and plan to take in the future will prevent the identification of any additional material weaknesses or that restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal controls over financial reporting. Even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements. For details about our internal control deficiencies and remediation, see Items 15.B. "Controls and Procedures-Management's Annual Report on Internal Control Over Financial Reporting – Material Weaknesses," 15.C. "Attestation Report of the Independent Registered Public Accounting Firms," 15.D. "Changes in Internal Control over Financial Reporting," and 8 "Financial Information-Legal Proceedings."

A decision by the U.S. Federal Reserve to increase interest rates on banks' reserves may lead to a general increase in interest rates in the United States. This, in turn, may redirect the flow of capital away from emerging markets and into the United States, because investors may be able to obtain greater risk-adjusted returns in larger or more developed economies rather than in Mexico. Thus, companies in emerging market economies such as Mexico could find it more difficult and expensive to borrow capital and refinance existing debt. This may negatively affect our potential for economic growth and could have a material adverse effect on our business and financial condition.

In many applications, steel competes with other materials that may be used as steel substitutes, such as aluminum, concrete, composites, glass, plastics and wood. Increased use or availability of such materials in substitution for steel products could significantly reduce demand and market prices for steel products, which could in turn have an adverse impact on our business, results of operation and financial condition.