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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>UNITED STATES OF AMERICA</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>SECURITIES AND EXCHANGE COMMISSION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Washington, D.C. 20549</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FORM <ix:nonNumeric contextRef="c0" name="dei:DocumentType">20-F</ix:nonNumeric></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement"><span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span></ix:nonNumeric><b>
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport">&#9746;</ix:nonNumeric> ANNUAL REPORT
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>For the fiscal year ended <ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-year-en" name="dei:DocumentPeriodEndDate"><ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-en" name="dei:CurrentFiscalYearEndDate">December 31</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:DocumentFiscalYearFocus">2022</ix:nonNumeric></ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport">&#9744;</ix:nonNumeric> TRANSITION REPORT
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>OR</b></p><div>

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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(Exact name of registrant as specified in its charter)</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>GROUP SIMEC</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(Translation of registrant&#8217;s name into English)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>UNITED <span style="-sec-ix-hidden: hidden-fact-0">MEXICAN</span> STATES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(Jurisdiction of incorporation or organization)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine1">Calzada L&#225;zaro C&#225;rdenas 601<br/>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(Address of principal executive offices)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(Name, telephone, e-mail and/or facsimile number
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 50%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Securities registered or to be registered pursuant
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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; width: 32%; font-size: 10pt; text-align: center"><span style="font-size: 10pt"><b>Title of Each Class</b></span></td> <td style="width: 2%; font-size: 10pt">&#160;</td> <td style="border-bottom: black 1.5pt solid; text-align: center; vertical-align: bottom; width: 32%"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Trading Symbol(s)</b></p></td> <td style="width: 2%; font-size: 10pt">&#160;</td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; width: 32%; font-size: 10pt; text-align: center"><span style="font-size: 10pt"><b>Name of Each Exchange on Which Registered</b></span></td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom"> <ix:nonNumeric contextRef="c0" name="dei:Security12bTitle"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">American Depositary Shares (each representing one Series B share)</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Series B Common Stock</p></ix:nonNumeric></td> <td style="font-size: 10pt">&#160;</td> <td style="vertical-align: top; font-size: 10pt; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:TradingSymbol"><span style="font-size: 10pt">SIM</span></ix:nonNumeric></td> <td style="font-size: 10pt">&#160;</td> <td style="vertical-align: top"> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:SecurityExchangeName">NYSE</ix:nonNumeric> American</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">NYSE American*</p></td></tr> </table><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">*</span></td><td><span style="font-size: 10pt">Not for trading, but only in
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Securities registered or to be registered pursuant
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act: None</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate the number of outstanding shares of each
of the issuer&#8217;s classes of capital or common stock as of the close of the period covered by the annual report:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Series B Common Stock &#8212; <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">462,135,888</ix:nonFraction> shares
as of December 31, 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 50%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
<ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric>&#160;<span style="font-family: Times New Roman, Times, Serif">&#9746;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934. Yes&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span> <ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric>&#160;<span style="font-family: Times New Roman, Times, Serif">&#9746;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. <ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric>&#160;<span style="font-family: Times New Roman, Times, Serif">&#9746;</span>&#160; No&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (&#167;232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
<ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric>&#160;<span style="font-family: Times New Roman, Times, Serif">&#9746;</span> No&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of &#8220;large
accelerated filer,&#8221; &#8220;accelerated filer,&#8221; and &#8220;emerging growth company&#8221; in Rule 12b-2 of the Exchange Act.:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 28%"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory">Large accelerated filer</ix:nonNumeric>&#160;&#160;&#160;&#160;<span style="font-family: Times New Roman, Times, Serif">&#9746;</span></span></td> <td style="width: 33%; text-align: center"><span style="font-size: 10pt">Accelerated filer&#160;&#160;&#160;&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="width: 39%; text-align: center"><span style="font-size: 10pt">Non-accelerated filer&#160;&#160;&#160;&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td></tr> <tr style="vertical-align: top"> <td>&#160;</td> <td style="text-align: center">&#160;</td> <td style="text-align: center"><span style="font-size: 10pt">Emerging growth company&#160;&#160;&#160;&#160;<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityEmergingGrowthCompany"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards<sup>&#8224;</sup> provided pursuant to Section&#160;13(a)
of the Exchange Act.&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><sup>&#160;</sup></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><sup>&#8224;</sup>The term &#8220;new or revised
financial accounting standard&#8221; refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards
Codification after April&#160;5, 2012.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
has filed a report on and attestation to its management&#8217;s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.&#160;<ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:IcfrAuditorAttestationFlag"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant&#8217;s
executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b). <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 25%"><span style="font-size: 10pt">U.S. GAAP <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="text-align: center; width: 60%"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:DocumentAccountingStandard">International Financial Reporting Standards</ix:nonNumeric> as issued<br/>
by the International Accounting Standards Board <span style="font-family: Times New Roman, Times, Serif">&#9746;</span></span></td> <td style="text-align: center; width: 15%"><span style="font-size: 10pt">Other <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If &#8220;Other&#8221; has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
Item 18&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
No&#160;<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="text-transform: uppercase"><b>Table
of Contents</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="width: 8%; padding-bottom: 1.5pt">&#160;</td>
    <td style="width: 84%; padding-bottom: 1.5pt; text-align: justify">&#160;</td>
    <td style="width: 8%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Page</b></span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><a href="#a_001"><span style="font-size: 10pt"><b>PART I</b></span></a></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">1</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 1.</span></td>
    <td style="text-align: justify"><a href="#a_002"><span style="font-size: 10pt">Identity of Directors, Senior Management and Advisers</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">1</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 2.</span></td>
    <td style="text-align: justify"><a href="#a_003"><span style="font-size: 10pt">Offer Statistics and Expected Timetable</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">1</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 3.</span></td>
    <td style="text-align: justify"><a href="#a_004"><span style="font-size: 10pt">Key Information</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">1</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 4.</span></td>
    <td style="text-align: justify"><a href="#a_005"><span style="font-size: 10pt">Information on the Company</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">15</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-align: justify"><span style="font-size: 10pt">Item 4A.</span></td>
    <td style="padding-bottom: 1.5pt; text-align: justify"><a href="#a_006"><span style="font-size: 10pt">Unresolved Staff Comments</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">39</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 5.</span></td>
    <td style="text-align: justify"><a href="#a_007"><span style="font-size: 10pt">Operating and Financial Review and Prospects</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">39</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 6.</span></td>
    <td style="text-align: justify"><a href="#a_008"><span style="font-size: 10pt">Directors, Senior Management and Employees</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">66</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 7.</span></td>
    <td style="text-align: justify"><a href="#a_009"><span style="font-size: 10pt">Major Shareholders and Related Party Transactions</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">74</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 8.</span></td>
    <td style="text-align: justify"><a href="#a_010"><span style="font-size: 10pt">Financial Information</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">77</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 9.</span></td>
    <td style="text-align: justify"><a href="#a_011"><span style="font-size: 10pt">The Offer and Listing</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">82</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 10.</span></td>
    <td style="text-align: justify"><a href="#a_012"><span style="font-size: 10pt">Additional Information</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">82</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 11.</span></td>
    <td style="text-align: justify"><a href="#a_013"><span style="font-size: 10pt">Quantitative and Qualitative Disclosures About Market Risk</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">97</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 12.</span></td>
    <td style="text-align: justify"><a href="#a_014"><span style="font-size: 10pt">Description of Securities Other than Equity Securities</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">98</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_015"><span style="font-size: 10pt"><b>PART II</b></span></a></td>
    <td style="text-align: center"><b>100</b></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 13.</span></td>
    <td style="text-align: justify"><a href="#a_016"><span style="font-size: 10pt">Defaults, Dividends Arrearages and Delinquencies</span></a></td>
    <td style="text-align: center">100</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 14.</span></td>
    <td style="text-align: justify"><a href="#a_017"><span style="font-size: 10pt">Material Modifications to the Rights of Security Holders and Use of Proceeds</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">100</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 15.</span></td>
    <td style="text-align: justify"><a href="#a_018"><span style="font-size: 10pt">Controls and Procedures</span></a></td>
    <td style="text-align: center">100</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16.</span></td>
    <td style="text-align: justify"><a href="#a_019"><span style="font-size: 10pt">Reserved</span></a></td>
    <td style="text-align: center">102</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16A.</span></td>
    <td style="text-align: justify"><a href="#a_020"><span style="font-size: 10pt">Audit Committee Financial Expert</span></a></td>
    <td style="text-align: center">102</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16B.</span></td>
    <td style="text-align: justify"><a href="#a_021"><span style="font-size: 10pt">Code of Ethics</span></a></td>
    <td style="text-align: center">102</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16C.</span></td>
    <td style="text-align: justify"><a href="#a_022"><span style="font-size: 10pt">Principal Accountant Fees and Services</span></a></td>
    <td style="text-align: center">102</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16D.</span></td>
    <td style="text-align: justify"><a href="#a_023"><span style="font-size: 10pt">Exemptions from the Listing Standards for Audit Committees</span></a></td>
    <td style="text-align: center">103</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16E.</span></td>
    <td style="text-align: justify"><a href="#a_024"><span style="font-size: 10pt">Purchases of Equity Securities by the Issuer and Affiliated Purchasers</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">103</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16F.</span></td>
    <td style="text-align: justify"><a href="#a_025"><span style="font-size: 10pt">Change in Registrant&#8217;s Certifying Accountant</span></a></td>
    <td style="text-align: center">103</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16G.</span></td>
    <td style="text-align: justify"><a href="#a_026"><span style="font-size: 10pt">Corporate Governance</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">104</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16H.</span></td>
    <td style="text-align: justify"><a href="#a_027"><span style="font-size: 10pt">Mine Safety Disclosure</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">104</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 16I.</span></td>
    <td style="text-align: justify"><a href="#a_028"><span style="font-size: 10pt">Disclosure Regarding Foreign Jurisdictions that Prevent Inspections</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">104</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_029"><span style="font-size: 10pt"><b>PART III</b></span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>105</b></span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 17.</span></td>
    <td style="text-align: justify"><a href="#a_030"><span style="font-size: 10pt">Financial Statements</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">105</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 18.</span></td>
    <td style="text-align: justify"><a href="#a_031"><span style="font-size: 10pt">Financial Statements</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">105</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Item 19.</span></td>
    <td style="text-align: justify"><a href="#a_032"><span style="font-size: 10pt">Exhibits</span></a></td>
    <td style="text-align: center"><span style="font-size: 10pt">105</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->i<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CERTAIN TERMS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Grupo Simec, S.A.B. de C.V.
is a corporation (<i>sociedad an&#243;nima burs&#225;til de capital variable</i>) organized under the laws of the United Mexican States
(&#8220;Mexico&#8221;). Unless the context requires otherwise, when used in this annual report, the terms &#8220;we,&#8221; &#8220;our,&#8221;
&#8220;the company,&#8221; &#8220;our company&#8221; and &#8220;us&#8221; refer to Grupo Simec, S.A.B. de C.V., together with its consolidated
subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">References in this annual
report to &#8220;U.S. dollars&#8221; or &#8220;U.S.$&#8221; are to the lawful currency of the United States of America. References in
this annual report to &#8220;pesos&#8221; or &#8220;Ps.&#8221; are to the lawful currency of Mexico. References in this annual report
to &#8220;real&#8221; are to the lawful currency of Brazil. References to &#8220;tons&#8221; in this annual report refer to tons; a metric
ton equals 1,000 kilograms or 2,204 pounds. We publish our financial statements in pesos.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The terms &#8220;special bar
quality steel&#8221; or &#8220;SBQ steel&#8221; refer to steel that is hot rolled or cold finished into round square, or hexagonal steel
bars that generally contain higher proportions of alloys than lower quality grades of steel. SBQ steel is produced with precise chemical
specifications and generally is made to order following client specifications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This annual report contains
translations of certain peso amounts to U.S. dollars at specified rates solely for your convenience. These translations do not mean that
the peso amounts actually represent such dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise
indicated, we have translated these U.S. dollar amounts from pesos at the exchange rate of Ps. 19.3615 per U.S.$1.00, the interbank transactions
rate in effect on December 31, 2022. On April 28, 2023, the interbank transactions rate for the peso was Ps. 18.1030 per U.S.$1.00.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FORWARD LOOKING STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This annual report contains
certain statements regarding our business that may constitute &#8220;forward looking statements&#8221; within the meaning of the safe
harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. When used in this annual report, the words &#8220;anticipates,&#8221;
&#8220;plans,&#8221; &#8220;believes,&#8221; &#8220;estimates,&#8221; &#8220;intends,&#8221; &#8220;expects,&#8221; &#8220;projects&#8221;
and similar expressions are intended to identify forward looking statements, although not all forward looking statements contain those
words. These statements, including, but not limited to, our statements regarding the ongoing effects of the coronavirus (COVID-19) pandemic
on both our projected customer demand and supply chain, as well as our operations and financial performance, our strategy for raw material
acquisition, products and markets, production processes and facilities, sales and distribution and exports, growth and other trends in
the steel industry and various markets, operations and liquidity and capital resources, are based on management&#8217;s beliefs, as well
as on assumptions made by, and information currently available to, management, and involve various risks and uncertainties, some of which
are beyond our control. Our actual results could differ materially from those expressed in any forward looking statement. In light of
these risks and uncertainties, we cannot assure you that forward looking statements will prove to be accurate. Factors that might cause
actual results to differ materially from forward looking statements include, but are not limited to, the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the overall global economic
environment and risks associated with the COVID-19 pandemic;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">factors relating to the steel
industry (including the cyclicality of the industry, finished product prices, worldwide production capacity, the high degree of competition
from Mexican, U.S. and foreign producers and the price of ferrous scrap, iron ore and other raw materials);</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">our inability to operate at
high capacity levels;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the costs of compliance with
Mexican, Brazilian and U.S. environmental laws;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">future capital expenditures
and acquisitions;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">future devaluations of the peso
and the real;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the imposition by Mexico and
Brazil of foreign exchange controls and price controls;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the influence of economic and
market conditions in other countries on Mexican securities; and</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the factors discussed in Item
3.D &#8211; &#8220;Risk Factors&#8221; below.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Forward looking statements
speak only as of the date of this filing, and we undertake no obligation to publicly update or to revise any forward looking statements
after the date of this annual report because of new information, future events or other factors. In light of the risks and uncertainties
described above, the forward looking events and circumstances discussed in this annual report might not occur.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 4; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>PART
I&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><div><a id="a_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 1. Identity of Directors, Senior Management and Advisers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 2. Offer Statistics and Expected Timetable</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 3. Key Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"><b>A. Reserved</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Capitalization and Indebtedness</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. Reasons for the Offer and Use of Proceeds</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. Risk Factors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investing in our series B
shares and ADSs involves a high degree of risk. You should consider carefully the following risks, as well as all the other information
presented in this annual report, before making an investment decision. Any of the following risks, if they were to occur, could materially
and adversely affect our business, results of operations, prospects and financial condition. Additional risks and uncertainties not currently
known to us or that we currently deem immaterial may also materially and adversely affect our business, results of operations, prospects
and financial condition. In either event, the market price of our series B shares and ADSs could decline significantly, and you could
lose all or substantially all of your investment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risks Related to Our Business</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Our results of operations are significantly influenced by the
cyclical nature of the steel industry.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The steel industry is highly
cyclical and sensitive to regional and global macroeconomic conditions. Global demand for steel as well as global production capacity
levels significantly influence prices for our products, and changes in global demand or supply for steel in the future will likely impact
our results of operations. Steel prices are sensitive to macroeconomic fluctuations in the global economy, and substantial price decreases
during periods of economic weakness have not always been offset by price increases during periods of economic strength. The steel industry
has suffered in the past, especially during downturn cycles, from substantial over-capacity relative to local demand. Currently, as a
result of the increase in steel production capacity in recent years, there are signs of excess capacity in steel markets, which is impacting
the profitability of the steel industry. During 2020, global steel prices decreased, a trend which accelerated due to the global COVID-19
pandemic. In 2022 and 2021, global steel prices increased after a global economic recovery. We cannot give you any assurance as to prices
of steel in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The U.S. economy has experienced
a strong recovery from the conditions experienced at the onset of the COVID-19 pandemic, but new variants of COVID-19 and the continued
abatement of the COVID-19 pandemic, labor shortages, supply chain disruptions, new or proposed legislation related to governmental spending,
inflation and increases in interest rates have impacted, and will continue to impact, economic growth. Even with this economic recovery,
challenges from global production overcapacity in the steel industry and ongoing uncertainties, both in the United States and in other
regions of the world, remain. We are unable to predict with certainty the duration of current economic conditions or the magnitude and
timing of changes in economic activity. Future economic downturns, prolonged slow growth or stagnation in the economy, a sector-specific
slowdown in one of our key end-use markets, such as nonresidential construction, or changes in inflation could materially adversely affect
our business, results of operations, financial condition and cash flows, especially in light of the capital-intensive nature of our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may not be able to pass along price increases
for raw materials to our customers to compensate for fluctuations in price and supply.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prices for raw materials necessary
for production of our steel products have fluctuated significantly in the past and may do so in the future. Significant increases in raw
material prices could adversely affect our gross profit. During periods when prices for scrap metal, iron ore, ferroalloys, coking coal
and other raw materials have increased, our industry has historically sought to maintain profit margins by passing along increased raw
material costs to customers by means of price increases. For example, prices of scrap metal in 2018 increased approximately 19%, in 2019
decreased approximately 20%, in 2020 increased approximately 9%, in 2021 increased approximately 62.6% and 0.5% in 2022; while prices
of ferroalloys in 2018 increased approximately 10%, in 2019 increased approximately 1%, in 2020 decreased approximately 20%, in 2021 increased
approximately 32.9% and 36.4% in 2022. We may not be able to pass along these and other cost increases in the future and, therefore, our
profitability may be materially and adversely affected. Even when we can successfully increase our prices, interim reductions in profit
margins frequently occur due to a time lag between the increase in raw material prices and the market acceptance of higher selling prices
for finished steel products. We cannot assure you that our customers will agree to pay increased prices for our steel products that compensate
us for increases in our raw material costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We purchase our raw materials
either in the open market or from certain key suppliers. Both scrap metal and ferroalloy prices are negotiated on a monthly basis with
our suppliers and are subject to market conditions. We cannot assure you that we will be able to continue to find suppliers of these raw
materials in the open market, that the prices of these materials will not increase or that the quality will remain the same. In addition,
if any of our key suppliers fails to deliver or we fail to renew our supply contracts, we could face limited access to some raw materials,
or higher costs and delays resulting from the need to obtain our raw materials requirements from other suppliers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The energy costs involved in our production
processes are subject to fluctuations that are beyond our control and could significantly increase our costs of production.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Energy costs constitute a
significant component of our costs of operations. Our energy cost was 12.6% of our manufacturing costs for 2022 compared to 10.8% for
2021, 11.1% for 2020, 14.3% for 2019 and 12.4% for 2018. Our energy costs are driven by the dependence of our production processes on
adequate supplies of electricity and natural gas. A substantial increase in the cost of electricity or natural gas could have a material
adverse effect on our gross profit. In addition, a disruption or curtailment in supply could have a material adverse effect on our production
and sales. Prices for electricity increased approximately 14% in 2018, in 2019 increased approximately 1%, in 2020 decreased approximately
9.8%, in 2021 increased approximately 2.8% and 7.7% in 2022; and prices for natural gas increased approximately 28% in 2018 and increased
approximately 1.8% in 2019, decreased approximately 18% in 2020, increased approximately 37% in 2021 and 54.3% in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We pay special rates to the
Mexican federal electricity commission (<i>Comisi&#243;n Federal de Electricidad</i> or &#8220;CFE&#8221;) for electricity. We also
pay special rates to Pemex, Gas y Petroqu&#237;mica B&#225;sica, (&#8220;PEMEX&#8221;), the national oil company of Mexico, for natural
gas used at our facilities in Mexico. We cannot assure you that these special rates will continue to be available to us or that these
rates may not increase significantly in the future, particularly in light of recent energy reforms in Mexico. In accordance with the energy
reform in Mexico, the Republic&#8217;s Congress approved the Law of the Electricity Industry and the Regulation of the Law of the Electricity
Industry, which regulate some articles of the Constitution of the United Mexican States and have the purpose of regulating the planning
and control of the National Electric System (SEN), the Public Service of Transmission and Distribution (T&amp;D) of electric energy and
other activities of the electric industry. The Mexican State will establish and execute the policies, regulation and surveillance of the
electricity industry through the Secretary of Energy (SENER), which is empowered to establish, conduct and coordinate the country&#8217;s
energy policies in matters of electricity, direct the process of planning and preparation of the SEN development program, establishing
the criteria for granting Clean Energy Certificates, monitoring the operation of the Wholesale Electricity Market (the Market) and the
determinations of the National Center for Energy Control (CENACE), among others. The Energy Regulatory Commission (CRE) is empowered to
grant qualified user generation permits, among others, to determine the consideration methodologies applicable to Exempt Generators, to
issue and apply the tariff regulation to which the T&amp;D, the operation of the Providers of Basic Services, the operation of CENACE
and Related Services not included in the Market, as well as the final rates of the Basic Supply that are not determined by the Federal
Executive, authorize the contract models that CENACE enters into with Market Participants, among others. In the United States of America,
we have contracts in place with special rates from the electric utilities. We cannot assure you that these special rates will continue
to be available to us or that these rates may not increase significantly in the future. In certain deregulated electric markets in the
United States of America, we have third party electric generation contracts under a fixed price arrangement. These contracts mitigate
our price risk for electric generation from the volatility in the electric markets. In addition, we purchase natural gas from various
suppliers in the United States of America and Canada. These purchase prices are generally established as a function of monthly New York
Mercantile Exchange settlement prices. We also contract with different natural gas transportation and storage companies to deliver the
natural gas to our facilities. In addition, we enter into futures contracts to fix and reduce volatility of natural gas prices both in
Mexico and the United States of America, as appropriate. As of December 31, 2022, we have not entered into derivative financial instruments
in Mexico, the United States of America or Brazil. We have not always been able to pass the effect of increases in our energy costs on
to our customers and we cannot assure you that we will be able to pass the effect of these increases on to our customers in the future.
We also cannot assure you that we will be able to maintain futures contracts to reduce volatility in natural gas prices. Changes in the
price or supply of electricity or natural gas would materially and adversely affect our business and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We face significant competition from other
steel producers, which may adversely affect our profitability and market share.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Competition in the steel industry
is intense, which exerts a downward pressure on prices, and, due to high start-up costs, the economics of operating a steel mill on a
continuous basis may encourage mill operators to establish and maintain high levels of output even in times of low demand, which further
decreases prices and profit margins. The recent trend of consolidation in the global steel industry may further increase competitive pressures
on independent producers of our size, particularly if large steel producers formed through consolidations, which have access to greater
resources than us, adopt predatory pricing strategies that decrease prices and profit margins. If we are unable to remain competitive
with these producers, our profitability and market share would likely be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A number of our competitors
in Mexico, the United States of America, Brazil and Canada have undertaken modernization and expansion plans, including the installation
of production facilities and manufacturing capacity for certain products that compete with our products. As these producers become more
efficient, we will face increased competition from them and may experience a loss of market share. In each of Mexico, the United States
of America and Brazil, we also face competition from international steel producers. Increased international competition, especially when
combined with excess production capacity, would likely force us to lower our prices or to offer increased services at a higher cost to
us, which could materially reduce our profit margins.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Competition from other materials could significantly reduce demand
and market prices for steel products.</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In many applications, steel
competes with other materials that may be used as steel substitutes, such as aluminum (particularly in the automobile industry), cement,
composites, glass, plastic and wood. Additional substitutes for steel products could significantly reduce demand and market prices for
steel products and thereby affect our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>A sudden slowdown in consumption in, or
increase in exports from, China could have a significant impact on international steel prices, affecting our profitability.</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As demand for steel has surged
in China, steel production capacity in that market has also increased, and China is now the largest worldwide steel producing country,
accounting for approximately half the worldwide steel production. Due to the size of the Chinese steel market, a slowdown in steel consumption
in that market, could cause a sizable increase in the volume of Chinese steel offered in the international steel markets, exerting a downward
pressure on sales and margins of steel companies operating in other markets and regions, including us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The COVID-19 pandemic, as well as similar
epidemics and other public health emergencies in the future, could have a material adverse effect on our business, results of operations,
financial condition and cash flows.</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">The COVID-19 pandemic is continuing to impact countries,
communities, supply chains and markets, though to a generally lesser extent than during 2020-2022. Responses by individuals, governments
and businesses to ever-changing developments in the COVID-19 pandemic and efforts to reduce its spread, including quarantines, travel
restrictions, business closures, and mandatory stay-at-home or work-from-home orders, while largely lifted during 2022, could be reinstituted
in the event novel strains or new variants prove resistant to existing vaccines. We continue to be subject to risks arising out of the
turbulence of the economic recovery associated with the COVID-19 pandemic, including inflationary pressures, which have generally increased
the costs of our labor, raw materials, energy supplies and other production inputs, adversely impacting our results of operations and
profitability. Despite our widespread vaccination efforts, we remain subject to the ongoing risk that a portion of our workforce or on-site
contractors in the United States, Mexico and Brazil could suffer illness or otherwise be unable to perform their ordinary work functions
due to adverse developments in the COVID-19 pandemic or other infectious disease outbreak. In addition, we have experienced, and may continue
to experience, supply chain disruptions or operational issues with our vendors or logistics providers, as our suppliers and contractors
face similar challenges related to the COVID-19 pandemic, including as a result of new or continued pandemic lockdowns in China. Because
the prolonged COVID-19 pandemic and resulting economic volatility continues to evolve, we cannot predict the full extent to which our
businesses, results of operations, financial condition or liquidity will ultimately be impacted. To the extent the COVID-19 pandemic adversely
affects our businesses, it may also have the effect of exacerbating many of the other risks described in Item 3.D. &#8220;Risk Factors.&#8221;,
any of which could have a material adverse effect on us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Implementing our growth strategy, which may include additional
acquisitions, may adversely affect our operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As part of our growth strategy,
we may seek to expand our existing facilities, build additional plants, acquire additional steel production assets, enter into joint ventures
or form strategic alliances that we expect will expand or complement our existing business. If we undertake any of these transactions,
they will likely involve some or all of the following risks:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">disruption of our ongoing business;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">diversion of our resources and
of management&#8217;s time;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">decreased ability to maintain
uniform standards, controls, procedures and policies;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">difficulty managing the operations
of a larger company;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">increased likelihood of involvement
in labor, commercial or regulatory disputes or litigation related to the new enterprise;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">potential liability to joint
venture participants or to third parties;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">difficulty competing for acquisitions
and other growth opportunities with companies having greater financial resources; and</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">difficulty integrating the acquired
operations and personnel into our existing business.</span></td>
</tr></table><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We will require significant
capital for acquisitions and other strategic plans, as well as for the maintenance of our facilities and compliance with environmental
regulations. We may not be able to fund our capital requirements from operating cash flow and we may be required to issue additional equity
or debt securities or obtain additional credit facilities, which could result in additional dilution to our shareholders. We cannot assure
you that adequate equity or debt financing would be available to us on favorable terms or at all. If we are unable to fund our capital
requirements, we may not be able to implement our growth strategy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We intend to continue to pursue
a growth strategy, the success of which will depend in part on our ability to acquire and integrate additional facilities. Some of these
acquisitions may be outside of Mexico, the United States of America, Canada and Brazil. Acquisitions involve special risks, in addition
to those described above, that could adversely affect our business, financial condition and results of operations, including the assumption
of legacy liabilities and the potential loss of key employees. We cannot assure you that any acquisition we make will not materially and
adversely affect us or that any such acquisition will enhance our business. We are unable to predict the likelihood of any additional
acquisitions being proposed or completed in the near future or the terms of any such acquisitions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Tariffs, anti-dumping and countervailing
duty claims imposed in the future could harm our ability to export our products outside of Mexico, and changes in Mexican tariffs on steel
imports could adversely affect the profitability and market share of our Mexican steel business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">International trade-related
administrative proceedings, legal actions and restrictions pose a constant risk for our international operations and sales throughout
the world. Countries may impose restrictive import duties and other restrictions on imports under various national trade laws. The timing
and nature of the imposition of trade-related restrictions potentially affecting our exports are unpredictable. Trade restrictions on
our exports could adversely affect our ability to sell products abroad and, as a result, our profit margins, financial condition and overall
business could suffer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">One significant source of
trade restrictions results from the imposition of &#8220;anti-dumping&#8221; and &#8220;countervailing&#8221; duties, as well as &#8220;safeguard
measures.&#8221; These duties can severely limit or altogether prevent exports to relevant markets. For example, in October 2014, the
United States of America International Trade Commission (USITC) determined that the U.S. steel industry was materially injured by imports
of steel concrete reinforcing bars from Mexico that are sold in the United States of America at less than fair value, and from Turkey,
that are subsidized by the government of Turkey. As a result of the USITC&#8217;s affirmative determinations, the U.S. Department of Commerce
issued an anti-dumping duty order on imports of this product from Mexico and a countervailing duty order on imports of this product from
Turkey. The U.S. government imposed tariffs of 66.7% against imports for rebar from Deacero, S.A.P.I de C.V. and us and tariffs of 20.58%
for rebar imports from all other producers in Mexico, including Simec. On January 6, 2021, a preliminary dumping rate of 66.7% was imposed
on our exports of rebar to the United States of America; following the U.S. Department of Commerce&#8217;s physical review carried out
at our San Luis Potos&#237; plant, arguing deficiencies and adverse facts during the information process. Such dumping rate was ratified
on June 1, 2022. A preliminary dumping rate of 6.35% was imposed and will be ratified in the first half of 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many of our products are subject
to existing duties, tariffs, anti-dumping duties and quotas that may limit the quantity of some types of goods that we import into the
United States of America. Furthermore, certain of our competitors may be better positioned than us to withstand or react to border taxes,
tariffs or other restrictions on global trade and as a result we may lose market share to such competitors. Due to broad uncertainty regarding
the timing, content and extent of any regulatory changes in the U.S. or elsewhere, we cannot predict the impact, if any, that these changes
could have to our business, financial condition and results of operations. See &#8220;Risks Related to Mexico&#8212;Developments in other
countries could adversely affect the Mexican economy, our financial performance and the price of our shares.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We and our auditors identified material
weaknesses in our internal controls over financial reporting for 2020 and 2021, which resulted in our conducting a thorough review and
implementing remedial measures in 2020 and 2021.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with the preparation
of our financial statements as of and for each of the years ended December 31, 2020 and 2021, we and our auditors identified material
weaknesses (as defined under standards established by the U.S. Public Company Accounting Oversight Board) in our internal controls over
financial reporting for the years 2020 and 2021. A material weakness is a deficiency, or combination of deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis. In 2020 and 2021, the Company made progress addressing the deficiencies. In 2022,
we believe that all material weaknesses have been addressed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For details about our internal
control deficiencies and remediation, see Items 15.B. &#8220;Controls and Procedures&#8212;Management&#8217;s Annual Report on Internal
Control Over Financial Reporting &#8211; Material Weaknesses,&#8221; 15.C. &#8220;Attestation Report of the Independent Registered Public
Accounting Firms,&#8221; 15.D. &#8220;Changes in Internal Control over Financial Reporting,&#8221; and 8 &#8220;Financial Information-Legal Proceedings.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The operation of our facilities depends
on good labor relations with our employees.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, approximately
88% of our non-Mexican and 46% of our Mexican employees were members of unions. The compensation terms of our labor contracts are adjusted
on an annual basis, and all other terms of the labor contracts are renegotiated every two years. In addition, collective bargaining agreements
are typically negotiated on a facility-by-facility basis for our Mexican facilities. Any failure to reach an agreement on new labor contracts
or to negotiate these labor contracts could result in strikes, boycotts or other labor disruptions. These potential labor disruptions
could have a material and adverse effect on our business. Labor disruptions or significant negotiated wage increases could reduce our
sales or increase our costs, which could in turn have a material adverse effect on our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Operations at our Lackawanna, New York,
facility depend on our continuing right to use certain property and assets of an adjoining facility and the termination of any such rights
would interrupt our operations and have a material adverse effect on our results of operations and financial condition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The operations of our Lackawanna
facility depend upon certain service and utility arrangements and understandings with third parties relating to, among other things, our
use of industrial water, compressed air, sanitary sewer and electrical power. We have entered into a written agreement, subject to automatic
one-year renewals and terminable by either party, for the provision of compressed air to our Lackawanna facility and an option to purchase
the equipment at various times and at stated prices. The water pump that services our plant is located on property owned and maintained
by another third party, which also continues to furnish industrial water to us on a month-to-month basis. The electric system which services
the compressed air equipment, as well as the electric system which services the property on which the compressed air equipment is located,
is routed through our electric meter located at a substation on adjacent property owned by the third party providing the compressed air
to our facility. In the event of a termination of any of our rights, either due to a failure to negotiate a satisfactory outcome with
the third parties providing these services or for any other reason, we could be required to cease all or substantially all of our operations
at the Lackawanna facility. Because we produce certain types of products in our Lackawanna facility that we do not produce in our other
facilities, an interruption of production at our Lackawanna facility would result in a substantial loss of revenue and could damage our
relationships with customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our sales in the United States of America
are concentrated and could be significantly reduced if one of our major customers reduced its purchases of our products or was unable
to fulfill its financial obligations to us.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our sales in the United States
of America are concentrated among a relatively small number of customers. Any of our major customers can stop purchasing our products
or significantly reduce their purchases at any time. During 2022, 2021, 2020, 2019, and 2018, sales to our ten largest customers in the
United States of America accounted for approximately 72.1%, 66.6%, 68%, 65% and 68.4% of our consolidated revenues in the United States
of America, respectively, and approximately 10.8%, 14.8%, 15.5%, 20.8% and 13.8% of our total consolidated revenues, respectively. A disruption
in sales to one or more of our largest customers would adversely affect our cash flow and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot assure you that
we will be able to maintain our current level of sales to our largest customers or that we will be able to sell our products to other
customers on terms that are favorable to us or at all. The loss of, or substantial decrease in the amount of purchases by, or a write-off
of any significant receivables from, any of our major customers would materially and adversely affect our business, results of operations,
liquidity and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Unanticipated problems with our manufacturing
equipment and facilities could have an adverse impact on our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our capacity to manufacture
steel products depends on the suitable operation of our manufacturing equipment, including blast furnaces, electric arc furnaces, continuous
casters, reheating furnaces and rolling mills. Breakdowns requiring significant time and/or resources to repair, as well as the occurrence
of unexpected adverse events, such as fires, explosions or adverse meteorological conditions, could cause production interruptions that
could adversely affect our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not obtained insurance
against all risks, and do not maintain insurance covering losses resulting from catastrophes or business interruptions (such as interruptions
attributable to the COVID-19 pandemic). In the event we are not able to quickly and cost-effectively remedy problems creating any significant
interruption of our manufacturing capabilities, our operations could be adversely affected. In addition, in the event any of our plants
were destroyed or significantly damaged or their production capabilities otherwise significantly decreased, we would likely suffer significant
losses, and capital investments necessary to repair any destroyed or damaged facilities or machinery would adversely affect our profitability,
liquidity and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we are unable to obtain or maintain quality
and environmental management certifications for our facilities, we may lose existing customers and fail to attract new customers.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Most of our automotive parts
customers in Mexico and the United States of America require that we have ISO 9001, TS 16949 and ISO 14001 certifications. All of the
Mexican and U.S. facilities that sell to automotive parts customers are currently certified, as required. If the foregoing certifications
are canceled, approvals are withdrawn or necessary additional standards are not obtained in a timely fashion, our ability to continue
to serve our targeted market, retain our customers or attract new customers may be impaired. For example, our failure to maintain these
certifications could cause customers to refuse shipments, which could materially and adversely affect our revenues and results of operations.
We cannot assure you that we will be able to maintain these required certifications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the SBQ steel market, all
participants must satisfy quality audits and obtain certifications in order to obtain the status of &#8220;approved supplier.&#8221; The
automotive industry has put these stringent conditions in place for the production of auto parts to assure vehicle quality and safety.
We currently are an approved supplier for our automotive parts customers. Maintaining these certifications is key to preserving our market
share, because they can be a barrier to entry in the SBQ steel market, and we cannot assure you that we will be able to do so.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Failure to comply with environmental laws
and regulations may result in fines, penalties or other significant liabilities or prevent us from operating our facilities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operations are subject
to a broad range of environmental laws and regulations governing our impact on air, water, soil and groundwater and exposure to hazardous
substances. The costs of complying with and the imposition of liabilities pursuant to, environmental laws and regulation can be significant.
Despite our efforts to comply with environmental laws and regulations, environmental incidents or events that negatively affect the operations
of our facilities may occur. In addition, we cannot assure you that we will at all times operate in compliance with environmental laws
and regulations. If we fail to comply with these laws and regulations, we may be assessed fines or penalties, be required to make large
expenditures to comply with such laws and regulations, or be forced to shut down non-compliant operations and face lawsuits by third parties.
In addition, environmental laws and regulations are becoming increasingly stringent and it is possible that future laws and regulations
may require us to undertake material environmental compliance expenditures and require modifications in our operations. Furthermore, we
need to maintain existing and obtain future environmental permits in order to operate our facilities. The failure to obtain necessary
permits or consents or the loss of any permits could result in significant fines or penalties or prevent us from operating our facilities.
We may also be subject, from time to time, to legal proceedings brought by private parties or governmental agencies with respect to environmental
matters, including matters involving alleged property damage or personal injury that could result in significant liability. Certain of
our facilities in the United States of America have been the subject of administrative action by federal, state and local environmental
authorities. See Item 8. &#8220;Financial Information&#8212;Legal Proceedings.&#8221;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Greenhouse gas policies and regulations,
particularly any binding restriction on emissions of greenhouse gases such as carbon dioxide, could negatively impact our steelmaking
operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our steel making operations
in the United States of America, Brazil and Mexico use electric arc furnaces where carbon dioxide generation is primarily linked to energy
use. In the United States of America, the Environmental Protection Agency has issued rules imposing inventory and reporting obligations
to which some of our facilities are subject, and has also issued rules that will affect preconstruction permits for our facilities where
increases in greenhouse gas pollutants are contemplated. The U.S. Congress has debated various measures for regulating greenhouse gas
emission (such as carbon dioxide) and may enact them in the future. Such laws and regulations may also result in higher costs for coking
coal, natural gas and electricity generated by carbon-based systems (such as coal-fired electric generating facilities). Such future laws
and regulations, whether in the form of a cap-and-trade emissions permit system, a carbon tax or other regulatory regime may have a negative
effect on our operations. Climate change policy is evolving at regional, national and international levels, and political and economic
events may significantly affect the scope and timing of climate change measures that are ultimately put in place. As signatories to the
United Nations Framework Convention on Climate Change (the &#8220;UNFCCC&#8221;), Mexico became subject to the Paris Agreement to fight
climate change, which was approved at the 21th session of the UNFCCC conference in 2015. The United States of America is also a member
of the Paris Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we are required to remediate contamination
at our facilities, we may incur significant liabilities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain of our U.S. facilities
are currently engaged in the investigation and/or remediation of environmental contamination. Most of these investigations relate to legacy
activities by prior owners. We may in the future be subject to similar investigations or required to undertake similar remediation measures
at other facilities. We recognize a liability for environmental remediation when it becomes probable that such remediation will be required
and the amount can be reasonably estimated. As estimated costs to remediate change, or when new liabilities become probable, we adjust
the record liabilities accordingly. However, due to the numerous variables associated with the judgments and assumptions that are part
of these estimates and changes in governmental regulations and environmental technologies over time, we cannot assure you that our environmental
reserves will be adequate to cover such liabilities or that our environmental expenditures will not differ significantly from our estimates
or materially increase in the future. Failure to comply with any legal obligations requiring remediation of contamination could result
in liabilities, imposition of cleanup liens and fines, and we could incur large expenditures to bring our facilities into compliance.
See Item 8. &#8220;Financial Information&#8212;Legal Proceedings.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We could incur losses due to product liability claims.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We could experience losses
from defects or alleged defects in our steel products that subject us to claims for monetary damages. For example, many of our products
are used in automobiles and it is possible that a defect in a vehicle could result in product liability claims against us. In accordance
with normal commercial sales, some of our products include warranties that they meet certain agreed upon manufacturing specifications.
We cannot assure you that future product liability claims will not be brought against us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We depend on our senior management and their
unique knowledge of our business and of the SBQ steel industry, and we may not be able to replace key executives if they leave.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Our tax liability may increase if the tax laws and regulations
in countries in which we operate change or become subject to adverse interpretations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Taxes payable by companies
in the countries in which we operate are substantial and include income tax, value-added tax, excise duties, profit taxes, payroll-related
taxes, property taxes and other taxes. Tax laws and regulations in some of these countries may be subject to change, varying interpretation
and inconsistent enforcement. Ineffective tax collection systems and continuing budget requirements may increase the likelihood of the
imposition of onerous taxes and penalties which could have a material adverse effect on our financial condition and results of operations.
In addition to the usual tax burden imposed on taxpayers, these conditions create uncertainty as to the tax implications of various business
decisions. This uncertainty could expose us to significant fines and penalties and to enforcement measures despite our best efforts at
compliance, and could result in a greater than expected tax burden. In addition, many of the jurisdictions in which we operate, including
Mexico, have adopted transfer pricing legislation. If tax authorities impose significant additional tax liabilities as a result of transfer
pricing adjustments, it could have a material adverse effect on our financial condition and results of operations. It is possible that
tax authorities in the countries in which we operate will introduce additional tax raising measures. The introduction of any such provisions
may affect our overall tax efficiency and may result in significant additional taxes becoming payable. Any such additional tax exposure
could have a material adverse effect on our financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we are unable to protect our information
systems against data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are increasingly dependent
on information technology networks and systems to process, transmit and store electronic information. In particular, we depend on our
information technology infrastructure for digital marketing activities and electronic communications among us and our clients, suppliers
and also among our subsidiaries and facilities. Security breaches or infrastructure flaws can create system disruptions, shutdowns or
unauthorized disclosures of confidential information. If we are unable to prevent such breaches or flaws, our operations could be disrupted,
or we may suffer financial damage or loss because of lost or misappropriated information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cyber threats are rapidly
evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly
sophisticated. Cyber threats and cyber-attackers can be sponsored by countries or sophisticated criminal organizations or be the work
of a single &#8220;hacker&#8221; or small groups of &#8220;hackers.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Insider or employee cyber
and security threats are increasingly a concern for all companies, including ours. Nevertheless, as cyber threats evolve, change and become
more difficult to detect and successfully defend against, one or more cyber-attacks might defeat our or a third-party service provider&#8217;s
security measures in the future and obtain the personal information of customers or employees. Employee error or other irregularities
may also result in a defeat of security measures and a breach of information systems. Moreover, hardware, software or applications we
use may have inherent defects of design, manufacture or operations or could be inadvertently or intentionally implemented or used in a
manner that could compromise information security. A security breach and loss of information may not be discovered for a significant period
of time after it occurs. While we have no knowledge of a material security breach to date, any compromise of data security could result
in a violation of applicable privacy and other laws or standards, the loss of valuable business data, or a disruption of our business.
A security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information could
give rise to unwanted media attention, materially damage to our customer relationships and reputation, and result in fines, fees, or liabilities,
which may not be covered by our insurance policies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to Global Economic Conditions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The COVID-19 pandemic, as well as similar
epidemics and other public health emergencies in the future, could have a material adverse effect on our business, results of operations,
financial condition and cash flows.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The ongoing global pandemic
resulting from the spread of COVID-19 has had a significant effect on economies, businesses and individuals around the world. Efforts
by governments around the world, including in the U.S., Brazil and Mexico, to contain COVID-19 have involved, among other things, border
closings and other significant travel restrictions; mandatory stay-at-home and work-from-home orders; mandatory business closures; public
gathering limitations; and prolonged quarantines. These efforts and other governmental, business and individual responses to the COVID-19
pandemic have led to significant disruptions to commerce, supply chains, credit losses, lower consumer demand for goods and services and
general uncertainty regarding the near-term and long-term effects of COVID-19 on the domestic and international economy and on public
health. Global steel production has been and will continue to be affected by volatility in the market due to the COVID-19 pandemic and
uncertainty remains around the potential emergence of new and more contagious variants of the virus and the effectiveness of vaccine programs.
These developments and other consequences of the COVID-19 outbreak have and could continue to materially adversely affect our results
of operations, financial condition and cash flows. In addition, the COVID-19 pandemic or other public health emergencies could negatively
affect our internal controls over financial reporting as a portion of our workforce may be required to work from home in the future and,
therefore, new processes, procedures, and controls may be required to respond to changes in our business environment. The effects of the
COVID-19 pandemic may also have the effect of exacerbating many of the other risks described in this Item 3.D. &#8220;Risk Factors.&#8221;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Global economic conditions which have been
impacted by the Russian invasion of Ukraine and the failure of Silicon Valley Bank, have in the past, and may
continue to, significantly impact our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The corresponding reduction
in demand across the economy in general and in the automotive, construction and manufacturing sectors due to the global pandemic has reduced
demand for steel products in North America and globally. These economic conditions significantly impacted, and will continue to significantly
impact, our business and results of operations. Although the reasons mentioned before, demand, production levels and prices in certain
segments and markets have recovered and stabilized to a certain degree in 2022. On February 24, 2022, Russia invaded Ukraine, which, due
to geopolitical reasons, increased the uncertainty and could delay the global economic recovery. An increase in price of certain commodities
has been the major impact of this fact.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2023, Silicon Valley
Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance
Corporation, or FDIC, as receiver. In the same month, each of Signature Bank and Silvergate Capital Corp. were swept into receivership.
In the same month, each of Signature Bank and Silvergate Capital Corp. were also placed in receivership. Although we did not have any
cash balances on deposit with these banks and are not a borrower or party to any agreement with these banks, investor concerns regarding
the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates
or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources potentially
making it more difficult to acquire financing. If global macroeconomic conditions deteriorate, the outlook for steel producers would be
adversely affected. It is difficult to predict the duration or severity of a new global economic downturn, or to what extent it will affect
us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An unsustainable recovery
and persistently weak economic conditions in our key markets could depress demand for our products and adversely affect our business and
results of operations. We sell our products to the automotive and construction-related industries, both of which reported substantially
lower customer demand during and after the latest global recession and have recently exhibited reduced demand for steel products due to
the ongoing financial recession. Our operating levels in recent years declined compared to pre-recession levels. In 2020, 2021 and 2022
we experienced a decrease in our sales to the automotive industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Moreover, if the global economic
downturn continues for a prolonged period, or a new global financial crisis occurs, we may face increased risk of insolvency and other
credit related issues of our customers and suppliers, as we faced with our customers and suppliers particularly in industries that were
hard hit by the latest recession, such as automotive, construction and appliance. Also, there is the possibility that our suppliers face
similar risks. The decrease in available credit may increase the risk default of our clients and that our suppliers might delay the raw
materials delivery. The impact of global economic conditions on these industries may have a significant effect on our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Finally, if global economic
conditions continue to deteriorate, we may be required to undertake asset impairments, as we have been required to undertake in the past.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Because a significant portion of our sales
are to the automotive industry, a decrease in automotive manufacturing could reduce our cash flows and adversely affect our results of
operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sales of our products to the
automotive market (either directly to automotive assemblers and manufacturers or indirectly through distributors, component suppliers,
and steel service centers) accounted for approximately 20% of our net sales of our SBQ steel products in 2022. Demand for our products
is affected by, among other things, the relative strength or weakness of the North American automotive industry. Any reduction in vehicles
manufactured in North America, the principal market for our SBQ steel products, has had and will continue to have an adverse effect on
our results of operations. Developments affecting the North American automotive industry may adversely affect us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our customers in the automotive industry
continually seek to obtain price reductions from us, which may adversely affect our results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Sales may fall as a result of fluctuations
in industry inventory levels.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Inventory levels of steel
products held by companies that purchase our products can vary significantly from period to period. These fluctuations can temporarily
affect the demand for our products, as customers draw from existing inventory during periods of low investment in construction and the
other industry sectors that purchase our products and accumulate inventory during periods of high investment and, as a result, these companies
may not purchase additional steel products or maintain their current purchasing volume. Accordingly, we may not be able to increase or
maintain our current levels of sales volumes or prices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;<b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to Mexico</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Adverse economic conditions in Mexico may
adversely affect our financial performance.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A substantial portion of our
operations are conducted in Mexico and our business is affected by the performance of the Mexican economy. The Mexican economy, as measured
by gross domestic product, was growing 2% in 2018, contracted by 0.1% in 2019, contracted by 8.5% in 2020 and grew by 5% in 2021 and 3%
in 2022 (according to figures of the <i>Instituto Nacional de Estad&#237;stica y Geograf&#237;a</i> (INEGI)). Mexico has historically
experienced prolonged periods of economic crises, caused by internal and external factors over which we have no control. Those periods
have been 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. Decreases in the growth rate of the Mexican economy, or periods of negative growth, or increases in inflation may result in lower
demand for our products. The Mexican government recently cut spending in response to a downward trend in international crude oil prices,
and it may further cut spending in the future. These cuts could adversely affect the Mexican economy and, consequently, our business,
financial condition, operating results and prospects. We cannot assure you that economic conditions in Mexico will not worsen, or that
those conditions will not have an adverse effect on our financial performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Political, social and other developments
in Mexico could adversely affect our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Political, social and other
developments in Mexico may adversely affect our business. Social unrest, such as strikes, suspension of labor, demonstrations, acts of
violence and terrorism in the Mexican states in which we operate could disrupt our financial performance. Additionally, the Mexican government
has exercised, and continues to exercise, significant influence over the economy. Accordingly, Mexican federal governmental actions and
policies concerning the economy, the regulatory framework, the social or political context, and state-owned and stated controlled entities
or industries could have a significant impact on private sector companies and on market conditions, prices and returns of Mexican securities.
In the past, governmental actions have involved, among other measures, increases in interest rates, changes in tax policies, price controls,
currency devaluations, capital controls and limits on imports.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Mexican government has exercised, and
continues to exercise, significant influence over the Mexican economy.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Mexican federal government
has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican federal governmental actions
and policies concerning the economy, state-owned enterprises and state controlled, funded or influenced financial institutions could have
a significant impact on private sector entities in general and on us in particular, and on market conditions, prices and returns on securities
of Mexican companies. The Mexican federal government occasionally makes significant changes in policies and regulations, and may do so
again in the future. Actions to control inflation and other regulations and policies have involved, among other measures, increases in
interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Tax legislation
in Mexico is subject to continuous change and we cannot assure you whether the Mexican government may maintain existing political, social,
economic or other policies, or whether changes may have a material adverse effect on our financial performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Violence in Mexico may adversely impact the Mexican economy and
have a negative effect on our financial performance.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mexican drug related violence
and other organized crime have escalated significantly since 2006, when the Mexican federal government began increasing the use of the
army and police to fight drug trafficking. Drug cartels have carried out attacks largely directed at competing drug cartels and law enforcement
agents; however, they also target companies and their employees, including companies&#8217; industrial properties, including through extortion,
theft from trucks or industrial sites, kidnapping and other forms of crime and violence. This increase in violence and criminal activity
has led to increased costs for companies in the form of stolen products and added security and insurance. Corruption and links between
criminal organizations and authorities also create conditions that affect our business operations, as well as extortion and other acts
of intimidation, which may have the effect of limiting the level of action taken by federal and local governments in response to such
criminal activity. We cannot assure you that the levels of violent crime in Mexico, over which we have no control, will not have an adverse
effect on the country&#8217;s economy and, as a result, on our financial performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Depreciation of the Mexican peso relative to the U.S. dollar
could adversely affect our financial performance.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The peso historically has
been subject to significant depreciation against the U.S. dollar. Depreciation of the Mexican peso relative to the U.S. dollar decreases
a portion of our revenues in U.S. dollar terms, as well as increases the cost of a portion of the raw materials we require for production
and any debt obligations denominated in U.S. dollars, and thereby may negatively affect our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Mexican Central Bank may
from time to time participate in the foreign exchange market to minimize volatility and support an orderly market. The Mexican Central
Bank and the Mexican government have also promoted market-based mechanisms for stabilizing foreign exchange rates and providing liquidity
to the exchange market, such as using over-the-counter derivatives contracts and publicly-traded futures contracts on the Chicago Mercantile
Exchange. However, the Peso is currently subject to significant fluctuations against the U.S. dollar and may be subject to such fluctuations
in the future. In 2019, the exchange rate registered a low of Ps. 18.76 to U.S.$1.00 and a high of Ps. 20.12 to U.S.$1.00. In 2020, the
exchange rate registered a low of Ps. 18.57 to U.S.$1.00 and a high of Ps. 24.86 to U.S.$1.00. In 2021, the exchange rate registered a
low of Ps.19.58 to U.S. $1.00 and a high of Ps. 21.82. In 2022, the exchange rate registered a low of Ps.19.14 to U.S. $1.00 and a high
of Ps. 21.38.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A severe depreciation of the
Mexican peso may also result in disruption of the international foreign exchange markets and may limit our ability to transfer and to
convert Mexican pesos into U.S. dollars and other currencies. While the Mexican government does not currently restrict, and since 1982
has not restricted the right or ability of Mexican or foreign persons or entities to convert Mexican pesos into U.S. dollars or to transfer
other currencies out of Mexico, the Mexican government could impose restrictive exchange rate policies in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Currency fluctuations or restrictions
on transfer of funds outside Mexico may have an adverse effect on our financial performance, and could adversely affect the U.S. dollar
value of the price of our Series B shares and the ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Changes in the reference rate
set by the Mexican Central Bank may negatively affect our business and operations. The Mexican Central Bank has increased the reference
rate during the last two years. On March 1, 2023, reference rate was increased to 11.25%. Future changes by the Mexican Central Bank of
the reference rate or by U.S. Federal Reserve of the target range for the federal funds rate in the United States of America may negatively
impact the Mexican economy or the value of securities issued by Mexican companies including as a result of any precipitous unwinding of
investments in emerging markets, depreciations and increased volatility in the value of their currency and higher interest rates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>High inflation rates in Mexico may affect demand for our products
and result in cost increases.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mexico has historically experienced
high annual rates of inflation. However, the Mexican economy has been in a non-inflationary environment given the low inflation rates
of recent years. The annual rate of inflation, as measured by changes in the Mexican national consumer price index (<i>&#205;ndice Nacional
de Precios al Consumidor</i>) published by the INEGI was 4.8% for 2018, 2.8% for 2019, 3.2% for 2020, 7.4% for 2021 and 7.8% for 2022.
High inflation rates could adversely affect our business and results of operations by reducing consumer purchasing power, thereby adversely
affecting demand for our products, increasing certain costs beyond levels that we could pass on to consumers, and by decreasing the benefit
to us of revenues earned if the inflation rate exceeds the growth in our pricing levels.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Developments in other countries could adversely
affect the Mexican economy, our financial performance and the price of our shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Mexican economy and the
market value of Mexican companies may be, to varying degrees, affected by economic and market conditions globally, in other emerging market
countries and major trading partners, in particular the United States of America. Although economic conditions in other countries may
differ significantly from economic conditions in Mexico, investors&#8217; reactions to adverse developments in other countries may have
an adverse effect on the market value of securities of Mexican issuers or of Mexican assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, in recent years
economic conditions in Mexico have become increasingly correlated with economic conditions in the United States of America and Canada
as a result of the Tratado entre Mexico, Estados Unidos y Canada (TMEC) or the United States of America, Mexico and Canada Agreement (USMCA)
which entered into effect on July 1, 2020; increased economic activity between the three countries, and the remittance of funds from Mexican
immigrants working in the United States of America to Mexican residents. Adverse economic conditions in the US, changes to the TMEC and
other related events could have an adverse effect on the Mexican economy. We cannot assure that events in other countries, the United
States of America or another event could negatively impact our financial situation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Moreover, the financial recession
originated by the effects to stop the COVID-19 pandemic, the recent confrontation between the United States of America and China, the
negative effect on the worldwide markets due to the recent Russian invasion of Ukraine and the recent changes in credit conditions, may
also affect the global and Mexican economies. We cannot assure you that events in other emerging market countries, in the United States
of America or elsewhere will not adversely affect our financial performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We could be adversely affected by violations
of the Mexican Federal Anticorruption Law in Public Contracting, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery
laws.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Mexican Federal Anticorruption
Law (<i>Ley Federal de Anticorrupci&#243;n en Contrataciones P&#250;blicas</i>), the U.S. Foreign Corrupt Practices Act and similar
worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to government officials
and other persons for the purpose of obtaining or retaining business. There can be no assurance that our internal control policies and
procedures will protect us from reckless or criminal acts committed by our employees or agents. Violations of these laws, or allegations
of such violations, could disrupt our business and could have an adverse effect on our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our financial statements are prepared in
accordance with IFRS and therefore are not directly comparable to financial statements of other companies prepared under U.S. GAAP or
other accounting principles.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All Mexican companies listed
on the Mexican Stock Exchange must prepare their financial statements in accordance with IFRS which differs in certain significant respects
from U.S. GAAP. Items on the financial statements of a company prepared in accordance with IFRS may not reflect its financial position
or results of operations in the way they would be reflected had such financial statements been prepared in accordance with U.S. GAAP.
Accordingly, Mexican financial statements and reported earnings are likely to differ from those of companies in other countries in this
and other respects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Mexico has different corporate disclosure
and accounting standards than those in the United States of America and other countries.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A principal objective of the
securities laws of the United States of America, Mexico and other countries is to promote full and fair disclosure of all material corporate
information, including accounting information. However, there may be different or less publicly available information about issuers of
securities in Mexico than is regularly made available by public companies in countries with more highly developed capital markets, including
the United States of America. The disclosure standards imposed by the Mexican Stock Exchange may be different than those imposed by securities
exchanges in other countries or regions such as the United States of America. As a foreign private issuer, we are not subject to U.S.
proxy rules and are exempt from certain reports under the U.S. Securities Exchange Act of 1934 (the &#8220;Exchange Act&#8221;), as we
are not required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S.
domestic reporting companies whose securities are registered under the Exchange Act. These exemptions and leniencies will reduce the frequency
and scope of information and protections available to you in comparison to those applicable to a U.S. domestic reporting company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risks Related to Brazil</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Brazilian political and economic conditions, and the Brazilian
government&#8217;s economic and other policies, may negatively affect our business, operations and financial condition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Brazilian economy has
been characterized by frequent and occasionally extensive intervention by the Brazilian government and unstable economic cycles. The Brazilian
government has often changed monetary, taxation, credit, tariff and other policies to influence the course of Brazil&#8217;s economy.
The Brazilian government&#8217;s actions to control inflation and implement other policies have at times involved wage and price controls,
blocking access to bank accounts, imposing capital controls and limiting imports into Brazil.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our results of operations and financial condition
may be adversely affected by factors such as:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">fluctuations in exchange rates;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">exchange control policies;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">interest rates;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">inflation;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">tax policies;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">expansion or contraction of
the Brazilian economy, as measured by rates of growth in gross domestic product (&#8220;GDP&#8221;);</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">changes in labor regulation;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">energy shortages;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">social and political instability;</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">liquidity of domestic capital
and lending markets; and</span></td>
</tr></table><div>
</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="text-align: justify; width: 0.5in"></td><td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">other political, diplomatic,
social and economic developments in or affecting Brazil.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risks Related to Ownership of our ADRs</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are a foreign private issuer under the
rules and regulations of the SEC and are therefore exempt from a number of rules under the Exchange Act and are permitted to file less
information with the SEC than a domestic U.S. reporting company, which reduces the level and amount of disclosure that you receive.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a foreign private issuer
under the rules and regulations of the SEC and are therefore exempt from a number of rules under the Exchange Act and are permitted to
file less information with the SEC than a domestic U.S. reporting company, which reduces the level and amount of disclosure that you receive.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a foreign private issuer
whose ADRs are listed on the NYSE American, we are permitted to follow certain home country corporate governance practices instead of
certain requirements of the NYSE American. Among other things, as a foreign private issuer we may also follow home country practice with
regard to, the composition of the board of directors, director nomination procedure, compensation of officers and quorum at shareholders&#8217;
meetings. See Item 10.B &#8220;Memorandum and Articles of Association.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The market price of our ADRs has been, and
may continue to be, highly volatile, and such volatility could cause the market price of our ADRs to decrease and could cause you to lose
some or all of your investment in our ADRs.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The stock market in general
and the market prices of the ADRs 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 first quarter of 2023, the market price of our ADRs fluctuated from a high of
$36.96 per ADR to a low of $30.75 per ADR, and the price of our ADRs 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:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">
    <p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">expiration or terminations of licenses, research contracts or other collaboration agreements;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">public concern as to the safety of the products we sell;&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the volatility of market prices for shares of companies with whom we compete;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">variations in our and our competitors&#8217; results of operations;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">changes in revenues, gross profits and earnings announced by us;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">changes in estimates or recommendations by securities analysts, if the ADSs are covered by analysts;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">fluctuations in the share price of our publicly traded subsidiaries;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">changes in government regulations or patent decisions; and</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">general market conditions and other factors, including factors unrelated to our operating performance.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These factors may materially
and adversely affect the market price of our securities and result in substantial losses by our investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our controlling shareholder, Industrias
CH, S.A.B. de C.V. (&#8220;Industrias CH&#8221;), is able to exert significant influence on our business and policies and its interests
may differ from those of other shareholders.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Industrias CH, which is controlled
by the chairman of our board of directors, Rufino Vigil Gonz&#225;lez, owns approximately 49% of our shares as of April 28, 2023. Industrias
CH nominated all current members of our board of directors and can exercise substantial influence and control over our business and policies,
including the timing and payment of dividends. Industrias CH&#8217;s interests may differ significantly from those of other shareholders.
Furthermore, as a result of Industrias CH&#8217;s significant equity position, there is currently limited liquidity in our series B shares
and the ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mr. Sergio Vigil Gonz&#225;lez
is the chief executive officer of Industrias CH, and he also functions in a senior management role for the Company, although he holds
no formal title at the Company.&#160;In this function, Mr. Vigil directs business strategies for the Company, negotiates potential acquisitions
and directs intercompany loans, among other things.&#160;Our board of directors is aware of Mr. Vigil&#8217;s role at the Company, and
our board of directors authorizes him by specific authority as a signatory of the Company. Mr. Vigil is the brother of our controlling
shareholder and chairman of our board of directors, Rufino Vigil Gonz&#225;lez.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We have had a number of related party transactions
with our affiliates.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Historically, we have engaged
in a number and variety of transactions with our affiliates, including entities that Industrias CH owns or controls. While we believe
that these transactions were made on terms that were not less favorable to us than those obtainable on an arm&#8217;s-length basis, there
was no independent determination of that fact. We expect that in the future we will continue to enter into transactions with our affiliates,
and some of these transactions may be significant. See Item 7.B &#8220;Related Party Transactions.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;<b><i>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 the capital
markets.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 the
capital markets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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&#8217; 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 4. Information on the Company</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. History and Development of the Company</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a diversified manufacturer,
processor and distributor of SBQ steel and structural steel products with production and commercial operations in the United States of
America, Mexico and Brazil. We believe that, in 2018, 2019, 2020, 2021 and 2022, we were an important producer of SBQ products in both
the United States of America and Mexico, in each case in terms of shipped volume. We also believe that in 2018, 2019, 2020, 2021 and 2022,
we were an important producer of structural and light structural steel products in Mexico in terms of shipped volume.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our 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. Our structural steel products are mainly used in the non-residential construction market and
other construction applications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We focus on the Mexican and
U.S. specialty steel markets by providing high value-added products and services from our strategically located plants. The quality of
our products and services, together with cost benefits generated by our facility locations, has allowed us to develop long standing relationships
with many of our SBQ clients, which include Mexico and U.S.-based automotive and industrial equipment manufacturers and their suppliers.
In addition, our facilities located in the northwest and central parts of Mexico allow us to serve the structural steel and construction
markets in those regions and southwest California with an advantage in the cost of freight over competitors which do not have production
facilities in such regions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our legal name is Grupo Simec,
S.A.B. de C.V. and our commercial name for advertising and publicity purposes is Simec. We are a <i>sociedad an&#243;nima burs&#225;til
de capital variable</i>, organized under the laws of Mexico. We are domiciled in the city of Guadalajara, Jalisco, and our principal administrative
office is located at Calzada L&#225;zaro C&#225;rdenas 601, Guadalajara, Jalisco, Mexico 44440. Our telephone number is +52-33-3770-6700.
The address of our website is www.gsimec.com.mx.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The SEC maintains a website
(http://www.sec.gov), which contains reports, information statements and other information regarding issuers that file electronically
with the SEC.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Our History</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our steel operations commenced
in 1969 when a group of families from Guadalajara, Jalisco, formed Compa&#241;&#237;a Sider&#250;rgica de Guadalajara, S.A. de C.V.
(&#8220;CSG&#8221;), a mini-mill steel company. In 1980, Grupo Sidek, S.A. de C.V. (&#8220;Sidek&#8221;), our former parent company, was
incorporated and became the holding company of CSG. In 1990, Sidek consolidated its steel and aluminum operations into a separate subsidiary,
Grupo Simec, S.A. de C.V., a Mexican corporation with limited liability, organized under the laws of Mexico.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2001, Sidek consummated
the sale of its entire approximate 62% controlling interest in our company to Industrias CH. Industrias CH subsequently increased its
equity position in us through various conversions of debt to equity and capital contributions and currently holds, together with its direct,
wholly-owned subsidiaries, approximately 82.5% of our series B shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2004, we acquired
the Mexican steel-making facilities of Industrias Ferricas del Norte S.A. (Corporaci&#243;n Sidenor of Spain, or &#8220;Grupo Sidenor&#8221;)
located in Apizaco, Tlaxcala and Cholula, Puebla. We refer to this acquisition as the &#8220;Atlax Acquisition.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2005, we and Industrias
CH acquired 100% of the capital stock of Republic, a U.S. producer of SBQ steel. We acquired 50.2% of Republic&#8217;s stock through our
majority-owned subsidiary, SimRep, and Industrias CH purchased the remaining 49.8% through SimRep. Industrias CH currently owns 0.59%
of the capital stock, and Grupo Simec the remaining 99.41%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 30, 2008, we acquired
Aceros DM and certain affiliated companies (&#8220;Grupo San&#8221;), a long products steel mini-mill and the second-largest corrugated
rebar producer in Mexico. Grupo San&#8217;s operations are based in San Luis Potos&#237;, Mexico. Its plants have a production capacity
of 700 thousand tons of finished products annually.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 3, 2010, we formed
a Brazilian entity denominated GV do Brazil Ind&#250;stria e Com&#233;rcio de A&#231;o Ltda. On August 5, 2011, we acquired 1,300,000
square meters of land on Pindamonhangaba, S&#227;o Paulo State, Brazil, for the construction of a new steel facility. In November 2015,
our steel plant in Brazil started operations. This facility has a production capacity of 450,000 tons of finished goods of rebar and wire,
and 800 employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 16, 2015, we entered
into a cooperation agreement with the government of the State of Tlaxcala, Mexico, to build a new steel facility on land adjacent to our
existing plant in Tlaxcala with a production capacity of 600,000 tons of bar quality steel (SBQ). We started steelmaking operations at
this facility in July 2018.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 1, 2018, Grupo Simec,
S.A.B de C.V. entered into a contract with Arcelor Mittal Brasil, S.A. for the acquisition of the steel products plants of Cariacica,
in Esp&#237;ritu Santo, and the transfer of the lease contract and subsequent purchase for the plant in Itauna, in Minas Gerais, both
in Brazil. The production capacity of the Cariacica plant is 600,000 tons of liquid steel per year and 348,000 tons of rolled steel products
per year and the production capacity of the Itauna plant is 120,000 tons of rolled steel products per year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 1, 2019, Grupo
Simec, S.A.B. de C.V. increased its equity position to 99.41% in SimRep Corporation, by acquiring 83,862 ordinary shares, priced at U.S.$3.454
each, as repayment of outstanding debt, for a total subscription of U.S.$290 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 11, 2021, the fixed
assets of a wire production plant in Silao, Guanajuato, were purchased; which is operated by CHQ Wire M&#233;xico, S.A. de C.V. (formerly
Malla San 1, S.A. de C.V.).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2021, a turnkey contract
was signed between Republic and GV Do Brasil, for the construction of a plant in Pindamonghangaba. This project has an assigned budget
of 200 million dollars.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2021, a turnkey contract
was signed between Republic and Companhia Siderurgica Do Spirito Santo, for the construction of a rolling mill. This project has an assigned
budget of 108.5 million dollars.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Principal Capital Expenditures</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We continually seek to improve
our operating efficiency and increase sales of our products through capital investments in new equipment and technology. These capital
expenditures are financed primarily with funds that we segregate monthly from the results of operations generated by each facility.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently estimate capital
expenditures for the year 2023 will be approximately Ps. 1,525.3 million (U.S.$788 million), which consists of Ps. 121.2 million (U.S.$6.3
million) of estimated capital expenditures in our facilities in Mexico and Ps. 1,404.1 million (U.S.$72.5 million) consisting of capital
expenditures in our facilities in Brazil. This estimate is subject to uncertainty and actual capital expenditures in 2022 may differ significantly
from such estimate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">In 2022, we spent Ps. 187.2
million (U.S.$9.7 million) on capital improvements at our facilities in Mexico and Ps. 1,404.1 million (U.S.$72.5 million) on capital
investments at our steel facilities in Brazil.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2021, we spent Ps. 119.1
million (U.S.$5.54 million) on capital investments for Republic&#8217;s facilities. We spent Ps. 1,079.6 million (U.S.$52.6 million) on
capital improvements at our facilities in Mexico, including Ps. 420 million (U.S.$20.5 million) at the Apizaco facility, Ps. 428.3 million
(U.S.$20.9 million) at the Mexicali facility, Ps. 3 million (U.S.$0.1 million) at the Guadalajara facility, and Ps. 200 million (U.S.$9.7
million) at the San Luis facilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2020, we spent Ps. 49.5
million (U.S.$2.5 million) on capital investments for Republic&#8217;s facilities, including Ps. 10.8 million (U.S.$0.5 million) at the
Lorain, Ohio facility, Ps. 8.6 million (U.S.$0.4 million) at the Lackawanna, New York facility, Ps. 21.5 million (U.S.$1.1 million) at
the Canton, Ohio facility and Ps. 8.6 million (U.S.$0.4 million) at the Massillon, Ohio facility. We spent Ps. 270.2 million (U.S.$13.6
million) on capital improvements at our facilities in Mexico, including Ps. 180 million (U.S.$9 million) at the Apizaco facility, Ps.
32.2 million (U.S.$1.6 million) at the Mexicali facility, Ps. 15 million (U.S.$0.7 million) at the Guadalajara facility, and Ps. 43 million
(U.S.$2.1 million) at the San Luis facilities. We also spent Ps. 631.5 million (U.S.$31.6 million) on capital investments at our steel
facility in Pindamonhangaba, Sao Paulo State, Brazil.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. Business Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the United States of America,
Mexico and Brazil, we own and operate 19 state-of-the-art steel making, processing and/or finishing facilities with a combined annual
crude steel installed production capacity of 6.0 million tons and a combined annual installed rolling capacity of 5.8 million tons. We
own both mini-mill and integrated steel making facilities, which give us the flexibility to optimize our production and reduce production
costs based on the relative prices of raw materials (e.g., scrap for mini-mills and iron ore for blast furnace).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently own and operate:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">a mini-mill in Guadalajara,
Jalisco, Mexico;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">a mini-mill in Mexicali, Baja
California Norte, Mexico;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">two mini-mills in Apizaco, Tlaxcala,
Mexico;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">a cold finishing facility in
Cholula, Puebla, Mexico;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">two mini-mills in San Luis Potos&#237;,
San Luis Potos&#237;, Mexico;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">a mini-mill in Canton, Ohio,
an integrated facility in Lorain, Ohio and value-added rolling and finishing facilities in Lorain and Massillon, Ohio; Lackawanna, New
York and Solon, Ohio, all of which we own through our majority-owned subsidiary, Republic; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">a mini-mill and rebar and wire
rod rolling mill in Pindamonhangaba, S&#227;o Paulo (Brazil), a mini-mill in Cariacica, Espirito Santo (Brazil) and we own and operate
rolling and finishing facilities in Itauna, Minas Gerais (Brazil).</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022, we had net sales
of Ps. 54.2 billion, gross profit of Ps. 14.5 billion and net profit of Ps. 7.7 billion. In 2022, approximately 11% of our consolidated
sales were in our segment in the United States of America, approximately 57% were in our segment in Mexico and approximately 32% were
in our segment in Brazil.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Business Strategy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We seek to further consolidate
our position as a leading producer, processor and distributor of SBQ steel in North America and structural steel in Mexico. We also seek
to expand our presence in the steel industry by identifying and pursuing growth opportunities and value-enhancing initiatives. Our strategy
includes:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Improving our cost structure.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are continually working
to reduce our operating cost and non-operating expenses and plan to continue to do so by reducing overhead expenses and operating costs
through sharing best practices among our operating facilities and maintaining a conservative capital structure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Focusing on high margin and value-added products.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We prioritize the production
of high margin steel products over volume and utilization levels. We plan to continue to base our production decisions on achieving relatively
high margins.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Building on our strong customer relationships.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We intend to strengthen our
long-standing customer relationships by maintaining strong customer service and proactively responding to changing customer needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Pursuing strategic growth opportunities.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have successfully grown
our business by acquiring, integrating and improving under-performing operations. In addition, we intend to continue to pursue acquisition
opportunities that will allow for disciplined growth of our business and value creation for our shareholders. We also intend to pursue
organic growth by reinvesting the cash generated by our operating activities to expand the capacity and increase the efficiency of our
existing facilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Our Products</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We produce a wide range of
value-added SBQ steel, long steel and medium-sized structural steel products. In our Mexican facilities, we produce I-beams, channels,
structural and commercial angles, hot rolled bars (round, square and hexagonals), flat bars, rebars, cold finished bars and wire rods.
In our U.S. facilities, we produce hot rolled bars, cold finished bars, semi-finished tube rounds and other semi-finished trade products.
In our Brazil facilities, we produce rebars, I-beams, channels, structural and commercial angles. The following is a description of these
products and their main uses:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>I-beams</i>. I-beams, also
known as standard beams, are &#8220;I&#8221; form steel structural sections with two equal parallel sides joined together by the center
with a transversal section, forming 90&#186; angles. We produce I-beams in our Mexican and Brazil facilities and they are mainly used
by the industrial construction sector as structure supports.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>Channels</i>. Channels, also
known as U-Beams because of their &#8220;U&#8221; form, are steel structural sections with two equal parallel sides joined together by
its ends with a transversal section, forming 90&#186; angles. We produce channels in our Mexican and Brazil facilities, and they are
mainly used by industrial construction sector as structure supports and for stocking systems.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>Angles</i>. Angles are two
equal sided sections joined by their ends with a 90&#186; angle, in an &#8220;L&#8221; form. We produce angles in our Mexican and Brazil
facilities, and they are used mainly by the construction and furniture industries as joist structures and framing systems.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>Hot rolled bars</i>. Hot
rolled bars are round, square and hexagonal steel bars that can be made of special or commodity steel. The construction, auto part and
furniture industries mainly use the round and square bars. The hexagonal bars are made of special steel and are mainly used by the hand
tool industry. We produce the steel sections in our Mexican and U.S. facilities.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>Flat bars</i>. Flat bars
are rectangular steel sections that can be made of special or commodity steel. We produce flat bars at our Mexican facilities. The auto
part industry mainly uses special steel as springs, and the construction industry uses the commodity steel flat bars as supports.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>Rebar</i>. Rebar is reinforced,
corrugated round steel bars with sections from 0.375 to 1.5 inches in diameter, and we produced rebar in our Mexican facilities and in
our Brazil facilities. Rebar is only used by the construction industry to reinforce concrete. Rebar is considered a commodity product
due to its general acceptance by most consumers of industry standard specifications.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>Cold-finished bars</i>. Cold-finished
bars are round and hexagonal SBQ steel bars transformed through a diameter reduction process. This process consists of (1) reducing the
cross-sectional area of a bar by drawing the material through a die without any pre-heating or (2) turning or &#8220;peeling&#8221; the
surface of the bar. The process changes the mechanical properties of the steel, and the finished product is accurate to size, free from
scale with a bright surface finish. We produce these bars in our Mexican and U.S. facilities, primarily to supply the auto part industry.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth, for the periods
indicated, our sales volume for basic steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Steel Product Sales Volume</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 22; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Sales and Distribution</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We sell and distribute our
steel products throughout North America. We also export steel products from Mexico to Central and South America and Europe. In 2022, approximately
20% of our steel product sales in tons represented SBQ steel products, of which we sold 45% to the auto part industry, 46% to service
centers and the remaining 9% to other industries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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compared to 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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Brazil and other countries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Steel Product Sales By Region</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During 2022, approximately
7.1% of our sales by volume came from the U.S. segment, with almost 100% of such sales representing SBQ product and 36.7% of our sales
by volume came from the Brazil segment. The Mexican segment represents approximately 56.2 of our sales by volume, with SBQ products representing
approximately 26.6% of such sales and the remainder representing commercial steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A significant portion of our
sales in the United States of America and Canadian markets came from contractual long-term agreements that establish minimum quantities
and prices, which are adjustable based on fluctuations of prices of key production materials. The remainder of our sales in the United
States of America and Canadian markets were spot sales either directly to end customers through our sales force or through independent
distributors. We sell to customers in the United States of America and Canadian markets through a staff of professional sales representatives
and sales technicians located in the major manufacturing centers of the Midwest, Great Lakes and Southeast regions of the United States
of America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We sell to the Mexican market
through a group of approximately 100 independent distributors, who also carry other steel companies&#8217; product lines, and through
our wholly-owned distribution center in Guadalajara. Our sales force and distribution center are an important source of information concerning
customer needs and market developments. By working through our distributors, we believe that we have established and can maintain market
leadership with small-and mid-market end-users throughout Mexico. We believe that our domestic customers are highly service-conscious.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 23; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We distribute our exports
outside North America primarily through independent distributors who also carry other product lines.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During 2022 and 2021, we received
orders for our products in our Mexican facilities on average approximately two weeks before producing those products. We generally filled
orders for our U.S. and Canadian SBQ steel products within one to 12 weeks of the order depending on the product, customer needs and other
production requirements. Customer orders are generally cancelable without penalty prior to finishing size rolling and depending on customers&#8217;
changing production schedules. Accordingly, we do not believe that backlog is a significant factor in our business. A substantial portion
of our production is ordered by our customers prior to production.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In our Republic plants, we
have long-term relationships with most of our major customers, in some cases for 10 to 20 years or longer. Our major direct and indirect
customers span throughout numerous market sectors including automotive, manufacturing, industrial equipment and defense.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our U.S. facilities are strategically
located to serve the majority of consumers of SBQ products in the United States of America. Our U.S. facilities ship products between
their mills and finished products to customers by rail and truck. Customer needs and location, determine the type of transportation used
for deliveries. The proximity of our rolling mills and cold finishing plants to our U.S. customers allows us to provide competitive rail
and truck freight rates and flexible deliveries in order to satisfy just-in-time and other customer manufacturing requirements. We believe
that the ability to meet the product delivery requirements of our customers in a timely and flexible fashion is a key to attracting and
retaining customers as more SBQ product consumers reduce their in-plant raw material inventory. We optimize freight costs by using our
significantly greater scale of operations to maintain favorable transportation arrangements, continuing to combine orders in shipments
whenever possible and &#8220;backhauling&#8221; scrap and other raw materials.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our first plant in Brazil
began production in June 2015 with 30,000 tons and 4,000 tons sold in the same year, all of which correspond to rebar. Sales have increased
since 2015, and by consolidating the expansion within the Brazilian territory, we have reached sales of approximately 828,000 tons for
2022, increasing the variety of products offered in the market. Our main objective is to sell our products through independent distributors,
aimed at the construction market by providing the highest quality service and products, a key factor in attracting and retaining customers.
Our sales policy in Brazil has been well accepted by our customers, and our sales increased steadily, creating an opportunity in the Brazilian
steel market. Our steel production decreased 3.3% in 2022 compared with 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our major customers in 2022
include: Pires Do Rio Cibraco Comercio e Industria de Ferro e Aco, Ltda., Marson Distribuicao, Ltda, Aco e Aco Vergalhoes Ltda, Udiaco
Comercio e Industria de Ferro e Aco Ltda, UK Industria de Molas e Grampos, Ltda, SAE Towers Brasil Torres Trans, Ltda, Comercio de Ferro
Arevalo &amp; Junior Eireli, Arcelor Mittal Brasil, SA, Aco Fera Com Ferro e Aco Ltda, Cedisa Central de Aco, SA, Automolas Equipamentos
Ltda, Fama Do Brasil, S A, MKRAFT Comercio de Metais Ltda and, RDG Acos Do Brasil, SA.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Competition</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Competition in the steel industry
is significant. Competition in the steel industry exerts a downward pressure on prices, and, due to high start-up costs, the economics
of operating a steel mill on a continuous basis may encourage mill operators to establish and maintain high levels of output even in times
of low demand, which further decreases prices and profit margins. The recent trend of consolidation in the global steel industry may further
increase competitive pressures on independent producers of our size, particularly if large steel producers formed through consolidations,
which have access to greater resources than us, adopt predatory pricing strategies that decrease prices and profit margins. If we are
unable to remain competitive with these producers, our profitability and market share would likely be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A number of our competitors
in the United States of America, Mexico and Brazil have undertaken modernization and expansion plans, including the installation of production
facilities and manufacturing capacity for certain products that compete with our products. As these producers become more efficient, we
will face increased competition from them and may experience a loss of market share. In each of Mexico, Brazil and the United States of
America, we also face competition from international steel producers. Increased international competition, especially when combined with
excess production capacity, would likely force us to lower our prices or to offer increased services at a higher cost to us, which could
materially reduce our profit margins.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Mexico</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We compete in the Mexican
domestic market and in its export markets for non-flat steel products primarily on the basis of price and product quality. In addition,
we compete in the domestic market based upon our responsiveness to customer delivery requirements. The flexibility of our production facilities
allows us to respond quickly to the demand for our products. We also believe that the geographic locations of our various facilities throughout
Mexico and variety of products help us to maintain our competitive market position in Mexico and in the southwestern United States of
America. We believe that our Mexicali mini-mill, one of the closest mini-mills to the southern California market, is competitive in terms
of production and transportation costs in northwestern Mexico and southern California.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that our competitors&#8217;
closest plants to the southern California market are: Nucor Corporation, located in Plymouth, Utah; Commercial Metals Company, located
in Meza, Arizona; Thyssenkrupp Steel North America, Inc., located in Santa Fe Springs, California; Deacero, S.A. de C.V. (&#8220;Deacero&#8221;),
located in Saltillo, Coahuila, M&#233;xico and Gerdau Corsa, S.A.P.I. de C.V. (&#8220;Gerdau Corsa&#8221;), located in Tijuana, Baja
California, Mexico. We believe that we have an advantage over certain competitors due to the labor cost in our Mexican operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022, we sold approximately
266,840 tons of I-beams, channels and angles at least three inches in width which represented approximately 12.7% of our total finished
product sales for the year. In 2021, we sold approximately 275,545 tons of I-beams, channels and angles at least three inches in width
which represented approximately 11% of our total finished product sales for the year. We believe that the domestic competitors in the
Mexican market for structural steel are Gerdau Corsa, Deacero, Grupo Acerero, S.A. de C.V., Grupo Collado, S.A. de C.V. and Sider&#250;rgica
del Golfo, S.A. de C.V. (a wholly-owned subsidiary of Industrias CH). We estimate that our share of Mexican production of structural steel
was 12.7% in 2021 and 14.8% in 2021, according to information provided by the C&#225;mara Nacional de la Industria del Hierro y del
Acero (CANACERO).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022, we sold approximately
626,864 tons of hot rolled and cold finished steel bars and 817,917 tons in 2021. Our other major product lines are rebar and light structural
steel (angles less than three inches in width and flat bar), for which our share of domestic production was 12.8% and 16.6%, respectively,
in 2022 and 14.3% and 16.1%, respectively, in 2021. Rebar and light structural steel together accounted for approximately 1,124,562 tons,
or 49.9%, of our total production of finished steel products in Mexico, the United States of America and Brazil in 2022. Rebar and light
structural steel together accounted for approximately 1,187,206 tons, or 47.4% of our total production of finished steel products in Mexico,
the United States of America and Brazil in 2021. We compete in the Mexican market with a number of producers of these products, including
Deacero, Talleres y Aceros, S.A., Grupo Acerero, S.A. de C.V., ArcelorMittal Lazaro Cardenas, S.A. de C.V., Ternium Mexico, S.A. de C.V.,
Grupo Acerero Fonderia, Suacero, S.A. de C.V. and Gerdau Corsa.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that we have been
able to maintain our domestic market share and profitable pricing levels in Mexico in part because the central Mexico sites of the Guadalajara,
Apizaco, Cholula and San Luis facilities afford us cost advantages relative to certain U.S. producers when shipping to customers in central
and southern Mexico, and our flexible production facility has given us the ability to ship specialty products in relatively small quantities
with short lead times. The Mexicali mini-mill has helped to increase sales in northwestern Mexico and the southwestern United States of
America because its proximity to these areas reduces our freight costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>United States of America and Canada</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the United States of America,
we compete primarily with both domestic SBQ steel producers and importers. Our U.S. domestic competition for hot-rolled engineered bar
products is both large U.S. domestic steelmakers and specialized mini-mills. Non-U.S. competition may impact segments of the SBQ market,
particularly where certifications are not required, and during periods when the U.S. dollar is strong compared with foreign currencies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The principal areas of competition
in our markets are product quality and range, delivery reliability, service and price. Special chemistry and precise processing requirements
characterize SBQ steel products. Maintaining high standards of product quality, while keeping production costs low, is essential to our
ability to compete in our markets. The ability of a manufacturer to respond quickly to customer orders currently is, and is expected to
remain, important as customers continue to reduce their in-plant raw material inventory.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe our principal competitors
in the United States of America market, depending on the product, include Nucor, Corporation, Charter Steel, Steel Dynamics, Cascade Rolling
Mills, Commercial Metals Company, Vinton Steel and Gerdau.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Brazil</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our main competitors in the
Brazilian market are ArcelorMittal Brazil, CSN, Gerdau, Sinobras, Usiminas, Ternium Do Brasil, Vallourec and Villares Metals.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Brazilian steel industry
is comprised of 12 business groups operating 31 mills in 10 Brazilian states, making Brazil the 9th largest producer in the world.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The main competitors in Brazil
are:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">Gerdau A&#231;os Especiais
(Usina Pindamonhangaba)</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">Gerdau A&#231;os Especiais
(Usina Mogi das Cruzes)</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">ArcelorMittal A&#231;os Longos
(Piracicaba)</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">Usiminas (Cubat&#227;o)</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">Gerdau A&#231;os Longos (Usina
S&#227;o Paulo)</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">Gerdau A&#231;os Longos (Usina
Ara&#231;ariguama)</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">Villares Metals</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Certifications</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">ISO is a worldwide federation
of national standards bodies which have united to develop internationally accepted standards so that customers and manufacturers have
a system in place to provide a product of known quality and standards. The standards set by ISO cover every aspect of quality from management
responsibility to service and delivery. We believe that adhering to the stringent ISO procedures not only creates efficiency in manufacturing
operations, but also positions us to meet the strict standards that our customers require. We are engaged in a total quality program designed
to improve customer service, overall personnel qualifications and team work. The facilities at Apizaco and Cholula have received ISO/TS
16949:2009 certification from International Quality Certifications, effective until September 2024.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All of Republic Steel&#8217;s
plants are certified to ISO9001:2015 and IATF16949:2016. Our plants in Canton, Ohio, Lackawanna, New York, and Massillon, Ohio, are certified
to IATF16949, effective until January 2024. The plant in Solon, Ohio, is certified to ISO 9001:2015, and the current certification is
effective until January 2024. The IATF 16949:2016 standard, developed by the International Automotive Task Force, is the result of the
harmonization of the supplier quality requirements of vehicle manufacturers worldwide and provides for a single quality management system
of continuous improvement, defect prevention and reduction of variation and waste in the supply chain. It places greater emphasis on management&#8217;s
commitment to quality and customer focus. ISO 9001 is a set of international quality control standards for management and practices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Through these certifications,
Republic&#8217;s Environmental, Health &amp; Safety Management System is structured upon training, communication, employee participation,
document control, objective and target setting, and management&#8217;s periodic reviews to implement our commitments to environmental
protection and providing a safe and clean workplace.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Raw Materials</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prices for raw materials necessary
for production of our steel products have fluctuated significantly in the past and significant increases in raw material prices could
adversely affect our profit margins. During periods when prices for scrap metal, iron ore, ferroalloys, coking coal and other raw materials
have increased, our industry has historically sought to maintain profit margins by passing along increased raw materials costs to customers
by means of price increases. For example, prices of scrap metal increased approximately 19.4% in 2018, decreased 20% in 2019, increased
9% in 2020, increased 62% in 2021 and increased 0.5% in 2022, and prices of ferroalloys increased approximately 9.7% in 2018, decreased
approximately 1% in 2019, decreased 20% in 2020, increased 32.9% in 2021 and increased 36.4% in 2022. We may not be able to pass along
these and other cost increases in the future and even when we can successfully increase our prices, interim reductions in profit margins
frequently occur due to a time lag between the increase in raw material prices and the market acceptance of higher selling prices for
finished steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We purchase our raw material
requirements either in the open market or from certain key suppliers. If any of our key suppliers fails to deliver or we fail to renew
our supply contracts, we could face limited access to some raw materials, or higher costs and delays resulting from the need to obtain
our raw materials requirements from other suppliers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022, our cost of sales
in Mexico, as a percentage of sales in Mexico, was 70%, compared to our U.S. operations where our cost of sales, as a percentage of sales
in the United States of America, was 98%, as a percentage of sales in Brazil, was 71% and our consolidated cost of sales, as a percentage
of consolidated sales, was 73%. The higher cost of sales of facilities is mainly a result of higher labor costs prevailing in our U.S.
operations, and the higher costs of the raw materials that our U.S. operations use in the production of SBQ steel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Scrap metal, electricity,
ferroalloys, electrodes and refractory products are the principal materials that we use to manufacture our steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Scrap metal</i>. Scrap
metal is among the most important components for our steel production and accounted for approximately 60.5% of our consolidated manufacturing
conversion cost in 2022 (62% of the manufacturing conversion cost in our Mexico operations, 31% of the manufacturing conversion cost in
our U.S. operations and 66% in our Brazil operations), compared to 70% of our consolidated manufacturing conversion cost in 2021 (67%
of the manufacturing conversion cost in our Mexico operations, 43% of the manufacturing conversion cost in our U.S. operations and 72%
in our Brazil operations). Scrap metal is principally generated from automobile, industrial, naval and railroad industries. The market
for scrap metal is influenced by availability, freight costs, speculation by scrap brokers and other conditions largely beyond our control.
Fluctuations in scrap costs directly influence the cost of sales of finished goods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We purchase raw scrap from
dealers in Mexico and the San Diego area, and we process the raw scrap into refined scrap metal at our Guadalajara, San Luis, Mexicali
and Apizaco facilities. We meet our refined scrap metal requirements through: (i) our wholly-owned scrap processing facilities, which
in the aggregate provided us with approximately 11.5% and 15.9% of our refined scrap tonnage in 2022 and 2021, respectively, and (ii)
purchases from third party scrap processors in Mexico and the southwestern United States of America, which, in the aggregate, provided
us with approximately 87.3% and 1.2%, respectively, in 2021 and approximately 82.2% and 1.9%, respectively, in 2020 of our refined scrap
metal requirements. We are a large scrap collector in the Mexicali, Tijuana and Hermosillo regions, and, by primarily dealing directly
with small Mexican scrap collectors, we believe we have been able to purchase scrap at prices lower than those in the international and
Mexican markets. We purchase scrap on the open market through a number of brokers or directly from scrap dealers for our U.S. facilities.
We purchase scrap on the open market through a number of brokers or directly from scrap dealers for our Brazil facilities. We do not depend
on any single scrap supplier to meet our scrap requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Ferroalloys, Electrodes
and Refractory Products</i>. In our Mexican operations, ferroalloys, electrodes and refractory products collectively accounted for approximately
14% of our manufacturing conversion cost in 2022, compared to 10% in 2021, in our U.S. and Canadian facilities accounted for 19% of our
manufacturing conversion cost in 2022, compared to 9% in 2021 and in our Brazil facilities accounted for approximately 9% of our manufacturing
conversion cost in 2022 compared to 7% in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ferroalloys are essential
for the production of steel and are added to the steel during manufacturing process to reduce undesirable elements and to enhance its
hardness, durability and resistance to friction and abrasion. For our Mexican operations, we buy most of our manganese ferroalloys from
Compa&#241;&#237;a Minera Autl&#225;n, S.A., Autl&#225;n Metal Services, S.A. de C.V., Elmet, S.A. de C.V., Marco Metales de Mexico,
S. de R.L. de C.V., Metaloides, S.A. de C.V., Micro Abrasivos, S.A. de C.V.and Distribuidora de Aleaciones y Metales, S.A. de C.V. Our
U.S. facilities purchase most of their ferroalloys from Affival Inc., Kennecott Molybdenum Company, Vale Americas Inc., Minerais U.S.
LLC, Greenwich Metals Inc. and BPI Inc. Our Brazil facilities purchase most of their ferroalloys from Multiligas Eireli. Ltda, Comercial
Cometa Industria y Comercio Ltda., Fertileg Ferro Liga Ltda, Granha Ligas Ltda., and Cia de Ferro Ligas de Bahia Ferbasa.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For our Mexican operations,
we obtain electrodes used to melt raw materials (scrap metal) from Jilin Carbon Co. Ltd., Interfer Edelsthal H. Mbh, Duracarbon Latinoamerica
LCC, FRC Global Inc, CNBM International Corp, Dalian Xihua Refractories Materials Co., and HEG Limited. Our U.S. facilities purchase most
of their electrodes from Sangraf International and Starex Inc. Our Brazil facilities purchase most of their electrodes from Jilin Carbon
Import Cimm Group Co. Ltd and Export Company and Dura Carbon Singapur.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Refractory products include
firebricks, which line and insulate furnaces, ladles and other transfer vessels. We purchase our refractory products for our Mexican operations
from Vesuvius de M&#233;xico, S.A. de C.V., Magnesita Refractories M&#233;xico, S.A. de C.V., Magna Refractarios M&#233;xico, S.A.
de C.V., FRC Global Inc, Puyang Refractories group Co. Ltd. Kumas, Manyezit Sanayi A.S., Calderys France S.A.S., and Rectix Materiales
Refractarios, S.A. de C.V.. Our U.S. facilities purchase most of their refractory products from RHI US, Inc., Vesuvius USA, Corp., Magna
a Division of Timab, Vibrantz Minerias LLC, Harbison-Walker Refractories Company and FRC Global Inc. Our Brazil facilities purchase most
of their refractory products from Magnesitas Navarrasm S.A., Vesivius and Magnesita Refractaries Mexico S.A. de C.V.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Electricity. </i>In 2022
and 2021, electricity accounted for approximately for 8% and 7% of our consolidated manufacturing conversion cost, respectively. Electricity
accounted for 7% and 7% in 2022 and 2021 of our manufacturing conversion in our Mexico facilities and is supplied by the Comisi&#243;n
Federal de Electricidad (CFE) for basic service and Iberdrola for qualified service. It accounted for 9% in 2022 and 4% in 2021 of the
manufacturing conversion cost in our U.S. operations and is supplied by American Electric Power Company, Archer Energy, National Grid,
The Illumination Company, New York Power and Ohio Edison. It accounted for 5% and 8% in 2022 and 2021, respectively, of the manufacturing
conversion cost in our Brazil operations and is supplied by Ecom Energia Ltda.,&#160;Comercializadora de Energiaeletrica Ltda. and Comerc
Ltda. We, like most high volume users of electricity in Mexico, pay special rates to CFE for electricity. Energy prices in Mexico have
historically been very volatile and subject to dramatic price increases in short periods of time. In the late 1990s, the CFE began to
charge for electricity usage based on the time of use during the day and the season (summer or winter). As a result, we have modified
our production schedule in order to reduce electricity costs by limiting production during periods when peak rates are in effect. We cannot
assure that any future cost increases will not have a material adverse effect on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Natural Gas. </i>Natural
gas (including &#8220;combustoleo&#8221; fuel oil which is an oil derivative that is less refined than gasoline and diesel fuel oil that
can be used instead of gasoline in our Mexicali plant) consisted of approximately 5% of our consolidated manufacturing conversion cost
(3% of the manufacturing conversion cost of our Mexican operations, 6% of the manufacturing conversion cost of our U.S. operations and
4% of our Brazil operations) in 2022 and approximately 3% of our consolidated manufacturing conversion cost (2% of the manufacturing conversion
cost of our Mexican operations, 1% of the manufacturing conversion cost of our U.S. operations and 2% of our Brazil operations) in 2021.
In previous years we have entered into natural gas cash-flow exchange contracts or swaps where we receive a floating price and pay a fixed
price to hedge our risk of from fluctuations in natural gas prices. Fluctuations in natural gas prices from volume consumed are recognized
as part of our operating costs. As applicable, we recognized the fair value of instruments either as liabilities or assets. We periodically
evaluated the changes in the cash flows of derivative instruments to analyze if the swaps are highly effective for mitigating the exposure
to natural gas price fluctuations. At December 31, 2022 and 2021, we did not have natural gas cash-flow exchange contracts or swaps. For
the derivatives that qualified for hedge accounting, their fair value was adjusted through the stockholders&#8217; equity under the caption
fair value of derivative financial instruments until such time as the related item in the derivative hedges is recognized as income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not enter into contracts for speculation
purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Regulation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>U.S. Operations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our U.S. operations are subject
to U.S. federal, state and local environmental laws and administrative regulations concerning, among other things the management of hazardous
materials and the discharge of pollutants to the atmosphere and to surface waters. Our U.S. operations have been the subject of administrative
action by federal, state (or provincial) and local environmental authorities. The resolution of any of these claims may result in significant
liabilities. See Item 3.D. &#8220;Risk Factors&#8212;Risk Factors Related to our Business&#8212;In the event of environmental violations
at our facilities we may incur significant liabilities&#8221; and Item 8. &#8220;Financial Information&#8212;Legal Proceedings.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Environmental Matters</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to a broad range of environmental
laws and regulations, including those governing the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">discharges to the air, water
and soil;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the handling and disposal of
solid and hazardous wastes;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the release of petroleum products,
hazardous substances, hazardous wastes, or toxic substances to the environment; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the investigation and remediation
of contaminated soil, sediment and groundwater.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We monitor our compliance
with these laws and regulations through our environmental management system, and believe that we currently are in substantial compliance
with them, although we cannot assure you that we will at all times operate in compliance with all such laws and regulations. If we fail
to comply with these laws and regulations, we may be assessed fines or penalties or be subject to injunctive relief which could have a
material adverse effect on us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Future changes in the applicable
environmental laws and regulations, or changes in the regulating agencies&#8217; approach to enforcement or interpretation of their regulations,
could cause us to make additional capital expenditures beyond what we currently anticipate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Lorain, Ohio plant (which
is not currently in operation) and our Canton, Ohio facility each are subject to the Maximum Achievable Control Technology (&#8220;MACT&#8221;)
standard for Electric Arc Furnaces as an &#8220;area source.&#8221; Revisions of this standard are under development and, when promulgated,
may impose additional restrictions on our Lorain and Canton operations including those relating to mercury emissions and control.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our steelmaking operations
in the United States of America, Brazil and in Mexico use electric arc furnaces where carbon dioxide generation is primarily linked to
energy use. In the United States of America, the federal Environmental Protection Agency has issued rules imposing inventory and reporting
obligations to which some of our facilities are subject, and has also issued rules that will affect preconstruction permits for our facilities
where increases in greenhouse gas pollutants are contemplated. The U.S. Congress has debated various measures for regulating greenhouse
gas emission (such as carbon dioxide) and may enact them in the future. Such laws and regulations may also result in higher costs for
coking coal, natural gas and electricity generated by carbon-based systems (such as coal-fired electric generating facilities). Such future
laws and regulations, whether in the form of cap-and-trade emissions permit system, a carbon tax or other regulatory regime may have a
negative effect on our operations. Climate change policy is evolving at regional, national and international levels, and political and
economic events may significantly affect the scope and timing of climate change measures that are ultimately put in place. As signatories
to the UNFCCC, Mexico became subject to the Paris Agreement to fight climate change, which was taken by the parties at the 21th session
of the UNFCCC conference of the Parties in 2015. In August 2017, the U.S. State Department officially informed the United Nations of the
United States of America withdrawal from the Paris Agreement. Following the 2020 U.S. presidential election, the U.S. formally rejoined
the Paris Agreement in February 2021. As a result, some of our significant facilities may ultimately be subject to future regional, provincial
and/or federal climate change regulations to manage greenhouse emissions. More stringent greenhouse policies and regulations could adversely
affect our business and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Various federal, state (or
provincial) and local laws, regulations and ordinances govern the removal, encapsulation or disturbance of asbestos-containing materials
(&#8220;ACMs&#8221;). These laws, regulations and ordinances may impose liability for the release of ACMs and may permit third parties
to seek recovery from owners or operators of facilities at which ACMs were or are located for personal injury associated with exposure
to ACMs. We are aware of the presence of ACMs at our facilities, but we currently believe that such materials are being managed in accordance
with applicable law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the United States of America,
the federal Environmental Protection Agency has in the past introduced regulation regarding the phasing out of polychlorinated biphenyl
(&#8220;PCB&#8221;) containing fluid in equipment that we currently use at many of our U.S. facilities. If any such rules are enacted,
our facilities may be required to reduce the levels of PCBs in our equipment, which will in turn may require us to incur costs for the
removal and disposal of PCB containing oils, sampling and possible replacement of equipment in the event PCB levels cannot be reduced
to acceptable levels.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Also in the United States
of America, more stringent standards for particulate matter were promulgated in 2012. As these new more stringent standards were implemented
through the different state programs, we experienced higher costs associated with any preconstruction permitting of new or modified sources
at our U.S. facilities in 2014 and subsequent years. These costs were related to extensive dispersion modeling and/or pre-construction
monitoring not previously required.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Mexican Operations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to Mexican
federal, state and municipal laws, administrative regulations and Mexican Official Rules (<i>Normas Oficiales Mexicanas) </i>relating
to a variety of environmental matters, anti-trust matters, trade regulations, and tax and employee matters.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Among other matters, Mexican
tax returns are open for review generally for a period of five years, and, according to Mexican tax law, the purchaser of a business may
become jointly and severally liable for unpaid tax liabilities of the business prior to its acquisition, which may have an impact on the
liabilities and contingencies derived from any such acquisitions. Although we believe that we are in compliance with all material Mexican
federal, state and municipal laws, administrative regulations and Mexican Official Rules, we cannot assure you that the interpretation
of the Mexican authorities of the laws and regulations affecting our business or the enforcement thereof will not change in a manner that
could increase our costs of doing business or could have a material adverse effect on our business, results of operations, financial condition
or prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Environmental Matters</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to various Mexican federal, state
and municipal laws, administrative regulations and Mexican Official Rules (<i>Normas Oficiales Mexicanas) </i>relating to the protection
of human health, the environment and natural resources.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The major federal environmental
laws applicable to our operations, among others, are: (i) the General Law of Ecological Balance and Environmental Protection (<i>Ley General
del Equilibrio Ecol&#243;gico y la Protecci&#243;n al Ambiente </i>or &#8220;LGEEPA&#8221;) and its regulations, which are administered
and overseen by the Ministry of the Environment and Natural Resources (<i>Secretar&#237;a de Medio Ambiente y Recursos Naturales </i>or
&#8220;SEMARNAT&#8221;) and enforced by the Ministry&#8217;s enforcement branch, the Federal Attorney&#8217;s Office for the Protection
of the Environment (<i>Procuradur&#237;a Federal de Protecci&#243;n al Ambiente </i>or <i>&#8220;</i>PROFEPA&#8221;); (ii) the General
Law for the Prevention and Integral Management of Waste (<i>Ley General para la Prevenci&#243;n y Gesti&#243;n Integral de los Residuos
</i>or the &#8220;Law on Wastes&#8221;), which is also administered by SEMARNAT and enforced by PROFEPA; (iii) the National Waters Law
(<i>Ley de Aguas Nacionales</i>) and its regulations, which are administered and enforced by the National Waters Commission (<i>Comisi&#243;n
Nacional de Agua), </i>also a branch of SEMARNAT<i>; </i>and <i>(iv) the Federal Law on Environmental Responsibility (Ley Federal de Responsabilidad
Ambiental), which is also administered by SEMARNAT and enforced by PROFEPA.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the foregoing,
Mexican Official Rules, which are technical standards issued by applicable regulatory authorities pursuant to the General Normalization
Law (<i>Ley General de Metrolog&#237;a y Normalizaci&#243;n</i>) and to other laws that include the environmental laws described above,
establish standards relating to air emissions, waste water discharges, the generation, handling and disposal of hazardous wastes and noise
control, among others. Mexican Official Rules regarding soil contamination and waste management were enacted in order to protect these
potential contingencies. Although not enforceable, the internal administrative criteria on soil contamination established by PROFEPA is
widely used as guidance in cases where soil remediation, restoration or clean-up is required.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">LGEEPA sets forth the legal
framework applicable to the generation and handling of hazardous wastes and materials, the release of contaminants into the air, soil
and water, as well as the environmental impact assessment of the construction, development and operation of different projects, sites,
facilities and industrial plants similar to the ones owned and/or operated by us and our subsidiaries. In addition to LGEEPA, the Law
on Wastes regulates the generation, handling, transportation, storage and final disposal of hazardous waste.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">LGEEPA also mandates that
companies that contaminate soil be responsible for the clean-up. Furthermore, the Law on Wastes provides that owners and lessors of real
property with soil contamination are jointly and severally liable for the remediation of such contaminated sites, irrespective of any
recourse or other actions such owners and lessors may have against the contaminating party, and aside from the criminal or administrative
liability to which the contaminating party may be subject. The Law on Wastes also restricts the transfer of contaminated sites.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">PROFEPA can bring administrative,
civil and criminal proceedings against companies that violate environmental laws, regulations and Mexican Official Rules, and has the
power to impose a variety of sanctions. These sanctions may include, among others, monetary fines, revocation of authorizations, concessions,
licenses, permits or registries, administrative arrests, seizure of contaminating equipment, and in certain cases, temporary or permanent
closure of facilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, as part of its
inspection authority, PROFEPA is entitled to periodically visit the facilities of companies whose activities are regulated by Mexican
environmental legislation, and verify compliance. Similar rights are granted to state environmental authorities pursuant to applicable
state environmental laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Companies in Mexico are required
to obtain proper authorizations, concessions, licenses, permits and registrations from competent environmental authorities for the performance
of activities that may have an impact on the environment or may constitute a source of contamination. Such companies in Mexico are also
required to comply with a variety of reporting obligations that include, among others, providing PROFEPA and SEMARNAT with periodic reports
regarding compliance with various environmental laws. Among other permits, the operations and related activities of the steel industry
are subject to the prior obtainment of an environmental impact authorization granted by SEMARNAT.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that we have obtained
all the necessary authorizations, concessions, general operating licenses, permits and registries from the applicable environmental authorities
to duly operate our facilities, plants and sites, and sell our products and that we are in material compliance with applicable environmental
legislation. We, through our subsidiaries, have made significant capital investments to assure our production and operation facilities
comply with requirements of federal, state and municipal law and administrative regulation, and to remain in compliance with our current
authorizations, concessions, licenses, permits and registries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mexican environmental laws
and administrative regulations have become increasingly stringent over the last decade, and this trend is likely to continue, influenced
recently by the North American Agreement on Environmental Cooperation entered into by Mexico, the United States of America and Canada
in connection with the USMCA. In this regard, any obligation to remedy environmental damages caused by us or any contaminated sites owned
or leased by us could require significant unplanned capital expenditures and be materially adverse to our financial condition and results
of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Water</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In Mexico, the National Waters
Law regulates water resources. In addition, the Mexican Official Rules govern the quality of water. A concession granted by the National
Waters Commission is required for the use and exploitation of national waters. Some of our facilities in Mexico have renewable concessions
to use and exploit underground waters from wells in order to meet the water requirements of our production processes. We pay the National
Waters Commission duties per cubic meter of water extracted under our concessions. We believe we are in substantial compliance with all
the requirements imposed by each of the concessions we have obtained.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the National Waters
Law, companies that discharge waste into national water bodies must comply with certain requirements, including maximum permissible contamination
or pollution levels. Periodic reports on water quality must be provided by dischargers to applicable authorities. Liability may result
from the contamination of underground waters or recipient water bodies. We believe that we are in substantial compliance with all water
and waste water legislation applicable to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Antitrust Matters</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are also subject to the
Mexican Antitrust Law (<i>Ley Federal de Competencia Econ&#243;mica</i>), which regulates monopolies and monopolistic practices in Mexico
and requires Mexican government approval of certain mergers, acquisitions and joint ventures. We believe that we are currently in material
compliance with the Mexican Antitrust Law. However, due to our growth strategy of acquiring new businesses and assets and because we are
a large manufacturer with a significant share of the markets in Mexico with respect to certain of our products, we may be subject to greater
regulatory scrutiny in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Measurements Law</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mexico&#8217;s Ministry of
Economy (<i>Secretar&#237;a de Econom&#237;a</i>), through the General Rules Department (<i>Direcci&#243;n General de Normas </i>or
&#8220;DGN&#8221;), promulgates regulations regarding many products that we manufacture. Specifically, pursuant to the Measurements Law
(<i>Ley Federal sobre Metrolog&#237;a y Normalizaci&#243;n</i>), the DGN issues specifications on the quality and safety standards
for our product lines. We believe that all of our products are in material compliance with all applicable DGN regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Brazil operations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We produce according to technical
specifications of the Brazilian standard ABNT NBR 7480:2007 for steel bars and wires designed for the reinforcement for concrete structures.
Our products are also registered with the Brazilian National Institute of Metrology, Quality and Technology (INMETRO), in accordance with
Resolution CONMETRO No. 05, dated May 6, 2008, and comply with conformity assessment regulations, including Ordinance No. 73, dated March
17, 2010, and with compulsory product certification regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have received environmental
permits from the Sao Paulo State, for which hydrological studies and feasibility of groundwater have been conducted, such permits include
a license granted by the Ministry of Environment of Sao Paulo and an operations license granted by the Ministry of Environment CETESBE
Sao Paulo State Companhia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Trade Regulation Matters</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have experienced significant
competition from imports into Mexico in the past as a result of excess worldwide steel production capacity, particularly in periods of
economic slowdown, and as a consequence of the Peso&#8217;s appreciation, making imports cheaper and more competitive in peso terms. In
2003, imports declined as international market conditions improved and the peso weakened. Recently, the Mexican government, at the request
of CANACERO, has taken several measures to prevent unfair trade practices such as dumping the steel import market. The overall climate
for imports in Mexico is influenced by the free trade agreements that Mexico has entered into with other countries, as well as the level
of tariffs and anti-dumping duties (some of which are described below).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have benefited from the
free trade agreements that Mexico has entered into. Specifically, we have directly benefited from our ability to export finished steel
products directly to export markets and compete with similar products manufactured in those markets. We have also indirectly benefited
from increased demand from our domestic customers who similarly manufacture their products to foreign markets under free trade agreements.
Nevertheless, we cannot assure you that the trade agreements affecting our business or the enforcement thereof will not change in a manner
that could have a material adverse effect on our business, results of operations, financial condition or prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>United States of America-Mexico-Canada Agreement
(USMCA), previously North American Free Trade Agreement (NAFTA)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">NAFTA became effective on
January 1, 1994. NAFTA provided for the progressive elimination over a period of ten years of the 10% duties formerly in effect on most
steel products imported into Mexico from the United States of America and Canada, including those that compete with our main product lines.
After a 13-month negotiation period, on September 30, 2018, the United States of America, Mexico and Canada signed the United States of
America-Mexico-Canada Agreement (the USMCA), which replaced NAFTA on July 1, 2020. See &#8220;Item 3.D. Risk Factors&#8212;Risks Related
to Mexico&#8212;Developments in other countries could adversely affect the Mexican economy, our financial performance and the price of
our shares.&#8221; The new agreement has benefits on custom expenses, an orderly economic competition, clear rules for investment and
its protection.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mexican-European Community
Free Trade Agreement</i>. The Mexican-European Free Trade Agreement, or &#8220;MEFTA,&#8221; became effective on July 1, 2000, and taxes
applying to a large quantity of imported goods were eliminated or reduced. The goal of this trade agreement is to establish a bilateral
and preferential, progressive and reciprocal framework to encourage the development of trade in goods and services, taking into account
the sensitivity of certain products and services sectors, and in accordance with relevant rules of the World Trade Organization (WTO).
The Joint Council is responsible for deciding the arrangements and timetable for the liberalization of duties and non-duty barriers to
trade in goods, in accordance with the relevant WTO rules. This agreement was modified in 2018.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mexico-Japan Economic Association
(the &#8220;Association&#8221;)</i>. On January 1, 2004, Japan and the other members of the G-7, agreed to reduce the steel tariffs to
zero percent, so Mexico has benefited from this rate since such date. However, Mexico is sensitive to the steel exports coming from Japan,
so the Association was negotiated in the following terms: (i) the specialized steel that is not produced in Mexico, and that is used to
produce vehicles, spare parts, electronics, machinery and heavy equipment, was released from any tariffs, as from the effective date of
the Association, (ii) the steel products coming from Japan currently have a zero percent rate, and (iii) the products to be imported from
the under the programs established by the Association, will pay the tariffs pursuant to the fixed tariffs established in such Sector Programs,
so the electronic and vehicles industries will be exempted as of the effective date of the Association.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Other Trade Agreements</i>.
In the last several years, Mexico has signed other free trade agreements with Israel (2000), Iceland, Norway, Liechtenstein and Switzerland
(2001), and with the following Latin American countries: Chile (1992 and amended in 1999); Venezuela and Colombia (1995); Costa Rica (1995);
Bolivia (1995); Nicaragua (1998); Honduras, El Salvador and Guatemala (2001); and Uruguay (2003). We do not anticipate any significant
increase in competition in the Mexican steel market as a result of these trade agreements due to their minimal steel production or, in
the case of Venezuela and Chile, minimal share of the Mexican market. Venezuela stepped off the free trade agreement with Mexico and Colombia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP).</i> On February 4, 2016, Mexico, along with Australia, Brunei, Canada, Chile, United
States of America, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam, signed the Transpacific Partnership Trade Agreement, in
the City of Auckland, New Zealand, which was intended to grant Mexican products access to six markets (Australia, Brunei, Malaysia, New
Zealand, Singapore and Vietnam) with approximately 155 million of potential consumers, which were not covered by any other trade agreement.
In January 2017, the United States of America withdrew from the agreement, after which the remaining 11 countries reached a revised agreement
and renamed it the CPTPP. On December 30, 2018, it became effective without U.S. participation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The CPTPP eliminates or reduces
tariff and non-tariff barriers across substantially all trade in goods and services and covers the full spectrum of trade, including goods
and services trade and investment, so as to create new opportunities and benefits for the businesses, workers, and consumers of the countries&#8217;
members. The CPTPP is intended to facilitate the development of production and supply chains, and seamless trade, enhancing efficiency
and supporting the goal of creating and supporting jobs, raising living standards, enhancing conservation efforts, and facilitating cross-border
integration, as well as opening domestic markets. The CPTPP is intended to promote innovation, productivity, and competitiveness by addressing
new issues, including the development of the digital economy, and the role of state-owned enterprises in the global economy. Finally,
the CPTPP includes new elements that seek to ensure that economies at all levels of development and businesses of all sizes can benefit
from trade. It also includes specific commitments on development and trade capacity building.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Dumping and Countervailing Duties</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are or have been a party
to, or have been affected by, numerous steel dumping and countervailing duty claims. Many of these claims have been brought by Mexican
steel producers against international steel companies, while others have been brought against Mexican steel companies. In certain instances,
such cases have resulted in duties being imposed on certain imported steel products and, in a few instances, duties have been imposed
on Mexican steel exports. In the aggregate, these duties have not had a material impact on our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 11, 2013, the
United States of America International Trade Commission (USITC) started an official anti-dumping investigation against rebar exports from
Mexico and Turkey promoted by Nucor, Gerdau, Commercial Metals, and Cascade Steel Buyer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 14, 2014, the USITC
determined that the U.S. steel industry was materially injured by imports of steel concrete reinforcing bar from Mexico that are sold
in the United States of America at less than fair value and from Turkey that are subsidized by the government of Turkey. As a result of
the USITC&#8217;s affirmative determinations, the U.S. Department of Commerce issued an anti-dumping duty order on imports of this product
from Mexico and a countervailing duty order on imports of this product from Turkey. The U.S. government imposed tariffs of 66.7% against
imports for rebar from Deacero, S.A.P.I de C.V. and us and tariffs of 20.58% for rebar imports from all other producers in Mexico, which
tariffs were rescinded in June 2017.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 6, 2021, a preliminary
dumping rate of 66.7% was imposed on our exports of rebar to the United States of America; following the U.S. Department of Commerce&#8217;s
physical review carried out at our San Luis Potos&#237; plant, arguing deficiencies and adverse facts during the information process.
Such dumping rate was ratified in June 1, 2022. A preliminary dumping rate of 6.35% was imposed and will be ratified in the first half
of 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 19, 2023, the International
Trade Practices Unit (UPCI) published the final resolution of the China wire rod countervailing duty examination, extending the countervailing
duty on wire rod imports from China for 5 years. And on February 24, 2023, the UPCI published the final resolution imposing countervailing
duties on imports of type I and II steel beams from Spain, Germany and the United Kingdom.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Labor. </i>In July 2017,
the Brazilian government issued Law No.13,467 (Labor Reform Law), which resulted in significant changes to labor regulations. This law
extends the workday from 8 hours to 12 hours, provided that there is a 36 hour break afterwards. With regard to negotiations with any
labor union, Law No. 13,467 provides that certain rights, such as constitutional rights and women&#8217;s rights, cannot be part of the
negotiations, as the Constitution and existing law prevails over any collective bargaining agreement. In addition, Law No.13,467 allows
companies to outsource any activity, including the company&#8217;s principal activity and activities that a company&#8217;s own employees
are carrying out. Furthermore, the law provides that a claimant seeking to enforce his or her rights under this law will have to pay all
costs and expenses related to the lawsuit and limits any compensation for moral damages to certain thresholds. We are currently in compliance
with theses labor regulations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt"><b>C.</b></span></td>
    <td><span style="font-size: 10pt"><b>Organizational Structure</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The chart below sets forth a summary of our corporate
structure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="image_001.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Includes the following subsidiaries:
Compa&#241;&#237;a Sider&#250;rgica del Pac&#237;fico, S.A. de C.V. (99.99%); Coordinadorade Servicios Sider&#250;rgicos de
Calidad, S.A. de C.V. (100.00%); Industrias del Acero y del Alambre, S.A. de C.V. (100.00%); Procesadora Mexicali, S.A. de C.V. (99.99%);
Servicios Simec, S.A. de C.V. (100.00%); Sistemas de Transporte de Baja California, S.A. de C.V. (100.00%); Operadora de Metales, S.A.
de C.V. (100.00%); Operadora de Servicios Sider&#250;rgicos de Tlaxcala, S.A. de C.V. (100.00%); Administradora de Servicios Sider&#250;rgicos
de Tlaxcala, S.A. de C.V. (100.00%); Operadora de Servicios de la Industria Sider&#250;rgica ICH, S.A. de C.V. (100.00%); Arrendadora
Simec S.A. de C.V. (100.00%); CSG Comercial, S.A. de C.V. (99.95%); Compa&#241;&#237;a Sider&#250;rgica de Guadalajara, S.A. de
C.V. (99.99%); Simec Acero, S.A. de C.V. (100.00%); Undershaft Investment N. V. (100.00%); Simec USA Corp. (100.00%); Pacific Steel Projects
Inc. (100.00%); Simec Steel Inc. (100.00%); Simec International, S.A. de C.V. (100.00%); Corporativos G&amp;DL, S.A. de C.V. (100.00%);
Simec International 6, S. A. de C. V. (100.00%), Simec International 7, S. A. de C. V. (99.99%), Simec International 9, S.A.P.I. de C.V.
(100.00%); Corporaci&#243;n ASL, S.A. de C.V. (99.99%); Sider&#250;rgica del Occidente y Pac&#237;fico, S.A. de C.V. (100.00%),
Gases Industriales de Tlaxcala, S.A. de C.V. (100.00%), &#160;GSIM de Occidente, S.A. de C.V.(100.00%), Sider&#250;rgicos Noroeste,
S.A. de C.V. (100.00%), Fundiciones de Acero Estructrual, S.A. de C.V. (100.00%) and Simec Sider&#250;gico, S.A. de C.V. (100.00%).</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Our principal Mexican facilities consist of steel-making facilities in Guadalajara, Jalisco; Mexicali, Baja California; Apizaco, Tlaxcala, and San Luis Potos&#237;; and cold finishing facilities in Cholula, Puebla. These facilities were operated by Simec International 6, S.A. de C.V. (100.00%) until October 31, 2012 (began operations in November 2010). Since November 1, 2012 these facilities were operated by Orge, S.A. de C.V. (99.99%) . These facilities were operated by RRLC, S.A.P.I. de C.V. (99.99%)&#160;&#160;and Grupo Chant, S.A.P.I. de C.V. (99.99%) , since April, 2015 and October 2015, respectively. These facilities were operated by GSIM de Occidente, S.A. de C.V. (100.00%) and Aceros Especiales Simec Tlaxcala, S.A. de C.V.(100.00%) , since March 2016 and July 2016, respectively. The Guadalajara plant is currently operated by Corporaci&#243;n ASL, S.A. de C.V., the Mexicali plant by Simec International 6, S,A, de C.V., the Apizaco and Cholula plants by Simec international, S.A. de C.V., the new Tlaxcala plant by Aceros Especiales Simec Tlaxcala, S.A. de C.V., the San Luis plants by Aceros DM, S.A. de C.V., Aceros San Luis, S.A. de C.V., Malla San 2, S.A. of C.V. and Fundiciones de Acero Estructural, S.A. de C.V.; and the Silao plant by CHQ Wire M&#233;xico, S.A. of C.V. (formerly Malla San 1, S.A. de C.V.). The group&#8217;s marketer is Simec Acero, S.A. de C.V.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt">(3)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">SimRep, Co. owns 100% of Republic Steel, Inc. Our principal U.S. facilities consist of a steel-making facility in Canton, Ohio; a steel- making and hot-rolling facility in Lorain, Ohio; a hot-rolling facility in Lackawanna, New York; and &#160;three cold finishing facilities in Massillon, Ohio and Solon, Ohio; all, of which are owned directly by Republic.</span></td></tr>
  </table><div>
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  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt">(4)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Grupo San facilities are conformed by Corporaci&#243;n Aceros DM, S.A. de C.V. (100.00%) and Subsidiaries, Aceros DM, S.A. de C.V. (100.00%) Acero Transportes SAN, S.A. de C.V. (100.00%), Aceros San Luis, S.A. de C.V. (100.00%), CHQ Wire M&#233;xico, S.A. de C.V. (100.00%) (formerly Malla San 1, S.A. de C.V.), Malla San 2, S.A. de C.V. (100.00%) and Alambres Trefilados de San Luis Potos&#237;, S.A. de C.V. (100.00%).</span></td></tr>
  </table><div>
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt">(5)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Our Brazil facilities are conformed by GV do Brasil Industria e Comercio de A&#231;o LTDA., Companhia Sider&#250;rgica do Espirito Santo, S.A. and the plant in Itauna, Minas Gerais.</span></td></tr>
  </table><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table identifies each of our significant
operating subsidiaries, including its country of incorporation and our percentage ownership thereof at December 31, 2021:</p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold">Name of Subsidiary</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Country of<br/> Incorporation</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 65%; text-align: left">Simec International, S.A. de C.V.</td><td style="width: 1%">&#160;</td>
    <td style="width: 22%; text-align: center; padding-left: 5.4pt">Mexico</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Pacific Steel, Inc.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">United States of America</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">SimRep Corporation and subsidiaries (Republic)</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">United States of America</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.41</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Compa&#241;&#237;a Sider&#250;rgica del Pac&#237;fico, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.99</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Coordinadora de Servicios Sider&#250;rgicos de Calidad, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Industrias del Acero y del Alambre, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.99</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Procesadora Mexicali, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.99</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Servicios Simec, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Sistemas de Transporte de Baja California, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Operadora de Metales, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Operadora de Servicios Sider&#250;rgicos de Tlaxcala, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Administradora de Servicios Sider&#250;rgicos de Tlaxcala, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Operadora de Servicios de la Industria Sider&#250;rgica ICH, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Arrendadora Simec, S.A. de C.V. (in liquidation)</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Compa&#241;&#237;a Sider&#250;rgica de Guadalajara, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.99</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">CSG Comercial, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.95</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Corporaci&#243;n Aceros DM, S.A. de C.V. and Subsidiaries</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Corporaci&#243;n ASL, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.99</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Simec International 6, S. A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Simec International 7, S. A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.99</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Simec International 9, S.A.P.I. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Simec Acero, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Simec USA, Corp.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">United States of America</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Pacific Steel Projects, Inc.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">United States of America</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Simec Steel, Inc.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">United States of America</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Corporativos G&amp;DL, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">GV do Brasil Industria e Comercio de A&#231;o LTDA.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Brazil</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Orge, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.99</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Sider&#250;rgica del Occidente y Pac&#237;fico, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">RRLC, S.A.P.I. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.99</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Grupo Chant, S.A.P.I. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99.99</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Aceros Especiales Simec Tlaxcala, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Gases Industr&#237;ales de Tlaxcala, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">GSIM de Occidente, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Fundiciones de Acero Estructural, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Sider&#250;rgicos Noroeste, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Companhia Sider&#250;rgica do Espirito Santo, S.A.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Brazil</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Simec Sider&#250;rgico, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: center; padding-left: 5.4pt">Mexico</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100.00</td><td style="text-align: left">%</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>D.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Property, Plants and Equipment</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Our Operations and Production Facilities</b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We conduct our operations
at 19 facilities throughout North and South America. At December 31, 2022, our crude steel production capacity was 6 million tons, of
which 1.2 million tons were based on an integrated blast furnace technology, and 4.8 million were based on electric arc furnace, or mini-mill,
technology. Our Mexican facilities have 2.6 million tons of crude steel production capacity, operating six mini-mill facilities. Our U.S.
operations have 2.3 million tons of crude steel production capacity and our Brazil operations have 1.1 million tons of crude steel production
capacity. In addition, we have 5.8 million tons of rolling and finishing capacity, of which 3.1 million are located in Mexico, 1.8 million
are located in the United States of America and Canada and 0.9 million are located in Brazil.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We operate nine mini-mills,
six in Mexico, one in the United States of America and two in Brazil. The Mexican mini-mills are located in: one in Guadalajara, Jalisco;
two in Apizaco, Tlaxcala; one in Mexicali, Baja California; as well as two in San Luis Potos&#237;. Our mini-mill in the United States
of America is located in Canton, Ohio. Our mini-mills in Brazil are located in Pindamonhangaba, S&#227;o Paulo and Cariacica, Esp&#237;rito
Santo. We also own an integrated blast furnace and an electric arc furnace in Lorain, Ohio and a rolling mill in Lackawanna, New York.
Processing mills are located in Massillon, Ohio and Solon, Ohio.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because we own both mini-mill
and integrated blast furnace production facilities, we can allocate production between each type of facility based on efficiency and cost.
In addition, as long as our facilities are not operating at full capacity, we can allocate production based on the relative cost of basic
inputs (iron ore, coking coal, scrap metal and electricity) to the facility where production costs would be the lowest. Our production
facilities are designed to permit the rapid changeover from one product to another. This flexibility permits us to efficiently produce
small volume orders to meet customer needs and to produce varying quantities of standard product. Production runs, or campaigns, occur
on four to eight weeks cycles, minimizing customer waiting time for both standard and specialized products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We can use scrap metal or
iron ore to produce our finished steel products. We produce liquid steel using an electric arc furnace, alloying elements and carbon are
added, and then is transported to continuous casters for solidification. The continuous casters produce long, square strands of steel
that are cut into billet and transferred to the rolling mills for further processing or, in some cases, sold to other steel producers.
In the rolling mills, the billet is reheated in a walking beam furnace with preheating burners, passed through a rolling mill for size
reduction and conformed into final sections and sizes. The shapes are then cut into a variety of lengths. Our facility in Canton, Ohio
is capable of producing billets and blooms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our mini-mill plants use an
electric arc furnace to melt ferrous scrap and other metallic components, which are then cast into long, square bars called billets in
a continuous casting process, all of which occurs in a melt shop. The billet is then transferred to a rolling mill, reheated and rolled
into finished product. In contrast, an integrated steel mill heats iron pellets and other primary materials in a blast furnace to first
produce pig iron, that must be refined in a basic oxygen furnace to liquid steel, and then cast to billet and finished product. Mini-mill
plants typically produce certain steel products more efficiently because of the lower energy requirements resulting from their smaller
size and because of their use of ferrous scrap. Mini-mills are designed to provide shorter production runs with relatively fast product
changeover times. Integrated steel mills are more efficient in producing longer runs and are able to produce certain steel products that
a mini-mill cannot.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The production levels and capacity utilization
rates for our melt shops and rolling mills for the periods indicated are presented below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>Production Volume and Capacity Utilization</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">51.5</td><td style="text-align: left">%</td><td>&#160;</td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Annual installed capacity is determined
based on the assumption that billet of various specified diameters, width and length is produced at the melt shops or that a specified
mix of rolled products are produced in the rolling mills on a continuous basis throughout the year except for periods during which operations
are discontinued for routine maintenance, repairs and improvements. Amounts presented represent annual installed capacity as of December
31 for each year.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 36; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Mexican Operations and Facilities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table presents production by product
at each of our Mexican facilities as a percentage of total production at that facility for 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Mexican Production per Facility by Product Location</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; padding-left: 0.125in; text-indent: -0.125in; text-align: left; font-weight: bold">Product</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Guadalajara</i>. Our Guadalajara
mini-mill facility is located in central western Mexico in the state of Jalisco which is Mexico&#8217;s second largest city. Our Guadalajara
facilities and equipment include one improved electric arc furnace utilizing water-cooled sidewalls and roof, one four-strand continuous
caster, five reheating furnaces and three rolling mills. The Guadalajara mini-mill has an annual installed capacity of 370,000 tons of
billet and an annual installed capacity of finished product of 480,000 tons. In 2022, the Guadalajara mini-mill produced 283,454 tons
of steel billet and 257,513 tons of finished product, operating at 77% capacity for billet production and 54% capacity for finished product
production. The Guadalajara rolling facilities process billet production from our Mexicali and Apizaco mills. Our Guadalajara facility
is 336 miles from Mexico City. Our Guadalajara facility mainly produces structural steel, SBQ steel, light structural steel and rebar.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Guadalajara Mini-Mill</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">7,071</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">6,261</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9,720</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">3,235</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">12,217</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.1in; padding-left: 0.1in"><span style="font-size: 10pt">Average manufacturing conversion cost per ton of billet<sup>(1)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,674</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,836</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,305</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,853</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,359</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Manufacturing conversion cost
is defined as all production costs excluding the cost of scrap and related yield loss.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 37; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mexicali</i>. In 1993,
we began operations at our mini-mill located in Mexicali, Baja California. The mini-mill is strategically located approximately 22 miles
south of the California border and approximately 220 miles from Los Angeles.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Mexicali facilities and
equipment include one electric arc furnace utilizing water-cooled sidewalls and roof, one four-strand continuous caster, one walking beam
reheating furnace, one SACK rolling mill, a Linde oxygen plant and a water treatment plant. This facility has an annual installed capacity
of 430,000 tons of steel billet and an annual installed capacity of finished product of 250,000 tons. Excess billet produced at the Mexicali
facility is used primarily by the Guadalajara facility. This allows us to increase the utilization of the Guadalajara facility&#8217;s
finishing capacity, which exceeds its production capacity. In 2022, the Mexicali mini-mill produced approximately 186,091 tons of billet.
In 2022, the Mexicali mini-mill produced 156,940 tons of finished products. In 2022, we operated the Mexicali mini-mill at 43% capacity
for billet production and at 63% capacity for finished product production. Our facility is strategically located and has access to key
markets in Mexico and the United States of America, stable public sources of scrap, electricity, a highly skilled workforce and other
raw materials. The Mexicali mini-mill also is situated near major highways and a railroad linking the Mexicali and Guadalajara mini-mills,
allowing for coordinated production at the two facilities. Our Mexicali facility mainly produces structural steel, light structural steel
and rebar.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Mexicali Mini-Mill</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">10,734</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2,249</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Manufacturing conversion cost is defined as all production costs excluding the cost of scrap and related yield loss.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Apizaco mini-mills (mini-mill
1 and mini-mill 2) and Cholula facility</i>. We have operated Apizaco mini-mill 1 and Cholula facility since August 1, 2004 and Apizaco
mini-mill 2 since July, 2018. Mini-mill 1 and 2 are located in central Mexico in Apizaco, Tlaxcala. Our Apizaco facilities and equipment
include two EBT Danieli electric arc furnace utilizing water-cooled sidewalls and roof, three ladle stations (two Danieli and the other
Daido), two Daido degasification station, two Danieli four-strand continuous caster, three walking beam reheating furnaces and three rolling
mills (two Danieli and the other Pomini). Mini-mill 1 has an annual installed capacity of 480,000 tons of steel billet and an annual installed
capacity of finished product of 444,000 tons. In 2022, mini-mill 1 produced 275,619 tons of steel billet. In 2022, mini-mill 1 produced
251,149 tons of finished products. In 2022, we operated mini-mill 1 at 57% capacity for billet production and at 57% capacity for finished
product production. Mini-mill 2 has an installed capacity of 650,000 tons of steel billet and an installed capacity of finished product
of 600,000 tons. In 2022, mini-mill 2 produced 139,910 tons of steel billet. In 2022, mini-mill 2 produced 118,097 tons of finished products.
In 2022, we operated mini-mill 2 at 22% capacity for billet production and at 20% capacity for finished product production. Our Apizaco
mini-mills are 1,112 miles from Mexicali and less than 124 miles from Mexico City. Our Apizaco facilities mainly produce SBQ steel, light
structural and rebar. Our Cholula facility is approximately 25 miles from our Apizaco facilities, which allows the integrated operations
of the Apizaco mini-mills and Cholula facility. Our Cholula facilities and equipment include cold drawing and turning machines for peeling
bars. This facility has an annual installed capacity of finished product of 120,000 tons. In 2022, the Cholula facility produced 69,736
tons of finished products, at 58% capacity. Our Cholula facility mainly produces cold finished SBQ steel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">In 2022, our plants in Apizaco and Cholula produced
415,529 tons of billet and 438,982 tons of finished product, operating at 37% of its billet capacity and 38% capacity for finished product.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">In 2022, 48% of the products we produced at the
Apizaco and Cholula facilities were hot rolled bars (round, square and hexagonals), 26% were flat merchant bar and 21% were cold finished
products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>




</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Apizaco Mini-Mill and Cholula Facility</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.1in; padding-left: 0.1in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Average
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                                            16,726</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: left"></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ps.
                                            16,268</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="text-indent: -0.1in; padding-left: 0.1in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Average
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    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">6,383</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5,271</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10,106</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>San Luis Operations and
Facilities. </i>We have operated our San Luis facilities since we acquired them on May 30, 2008. The facilities are located in central
Mexico in the city of San Luis Potos&#237;, in the state of San Luis Potos&#237;. Our San Luis facilities and equipment include four
electric arc furnaces, three continuous casters, three reheating furnaces, two rebar rolling mills and one wire rod rolling mill. As of
December 31, 2021, these facilities had an annual installed capacity of 660,000 tons of billet and 1,197,600 tons of finished product.
In 2022, the San Luis facilities produced 527,088 tons of steel billet. In 2022, the San Luis facilities produced 816,104 tons of finished
product, operating at 80% capacity for billet production and 68% capacity for finished product production. Our San Luis facilities mainly
produce rebar, light structural steel and wire rod.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth, for the periods
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-size: 10pt">2,481</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0px"></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>U.S. Operations and Facilities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have operated our Republic
facilities (in Ohio and New York) since we acquired them from the shareholders of PAV Republic, Inc. on July 22, 2005. As of December
31, 2021, these facilities had an annual installed capacity of 2,296,000 tons of billet and 1,763,000 tons of finished product. In 2022,
Republic facilities produced 187,600 tons of steel billet. For the same period, Republic facilities produced 178,300 tons of hot-rolled
bars. Republic facilities produced 29,700 tons of cold finish bars. In 2022, Republic facilities produced 15,800 tons of wire products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth, for the periods
indicated selected operating data for our Republic facilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
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    <td style="width: 1%">&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Manufacturing conversion cost
is defined as all production costs excluding the cost of scrap and related yield loss.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Lorain, Ohio</i>. The Lorain
facility operates an integrated steel mill, it has a blast furnace, two 220-ton basic oxygen furnaces, a 150-ton electric arc furnace,
two ladle metallurgy facilities, a vacuum degasser, a five-strand continuous bloom caster, a six-strand billet caster, a billet rolling
mill and two bar rolling mills.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Lorain facility had, at
December 31, 2022, an annual installed capacity of 1,049,000 tons of steel billet and 900,000 tons of finished product. This facility
did not produce any steel billets or finished steel bars in 2022 as it has been idled since 2016.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Canton, Ohio</i>. Our Canton
facility mainly produces SBQ steel and includes two 200-ton top charge electric arc furnaces, a 5-strand bloom/billet caster, two ladle
metallurgical furnaces, two vacuum degassers and two slag rakes. This facility also includes a combination Caster rolling facility that
continuously casts blooms in a 4-strand caster, heats the blooms to rolling temperature in a walking beam furnace, then rolls billets
through an 8-stand rolling mill in an inline operation. We installed and commissioned the electric arc furnace, the bloom/billet caster,
ladle metallurgical furnace and vacuum degasser in 2005. Other Canton equipment includes a Mecana billet inspection line, four stationary
billet grinders, a saw line and a quality verification line (or &#8220;QVL line&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Canton produces blooms and
billets for the three rolling mills in Republic facilities and for trade customers. We use the QVL inspection line to inspect finished
bar produced in Lackawanna. As of December 2022, the Canton facility had annual installed capacity of 1,247,000 tons of steel billet.
In 2022, this facility produced 187,600 tons of blooms, billets and other semi-finished trade product and was operated at 15% capacity
of steel billet.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Lackawanna, New York</i>.
Our Lackawanna facility mainly produces SBQ steel and includes a three-zone walking beam billet reheat furnace, a recently upgraded 17
conventional stand mill with a 5 stand sizing mill and two saw lines capable of producing rounds, squares, and hexagons in both cut length
and coils. This facility produces hot rolled bar sizes that range from 0.562&#8221; to 3.250&#8221; with coil weights up to 6,000 lb.
Our Lackawanna facility&#8217;s finishing equipment includes a QVL inspection line and three saw lines. We sell a portion of the hot rolled
bars produced at our Lackawanna facility to trade customers, and we also ship a portion of the finished bars to our cold finishing operations
for further processing. As of December 31, 2022, the Lackawanna facility had annual installed capacity of 653,000 tons of hot rolled bars.
In 2022, this facility produced 178,300 tons of hot rolled bars and was operated at 27% capacity of finished product.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Massillon, Ohio</i>. Our
Massillon facility mainly produces SBQ steel and contains a cold finishing facility which includes the machinery and equipment to clean,
draw, turn, chamfer, anneal, grind, straighten and saw bars. Our Massillon facility had, at December 31, 2021, an annual installed capacity
of 138,000 tons of finished product. During 2022, the Massillon facility was operated at 22% capacity of finished product and produced
29,700 tons of cold finished bars.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 40; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Solon, Ohio. </i>Our Solon
facility, acquired in February 2011, mainly produce Cold Heading Quality (CHQ) wire products and have wire drawing and finishing facilities
that include the machinery and equipment to clean and coat, draw, and anneal wire. As of December 31, 2021, the Solon facility had installed
capacities of 72,000, for wire products. During 2022, the Solon facility produced and shipped 15,800 tons of wire products and was operated
at 21.9% capacity of finished product.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>Hamilton, Ontario, Canada.</i> Our Hamilton
facility was shut down permanently during 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Brazil.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have three plants in Brazil:
a mini-mill and rebar and wire-rod rolling mill in Pindamonhangaba, S&#227;o Paulo, a mini-mill in Cariacica, Espirito Santo and rolling
and finishing facilities in in Itauna, Minas Gerais. Our plant located in Pindamonhangaba, State of Sao Paulo, is 87 miles from the city
of Sao Paulo, and is 218 miles from Rio de Janeiro. Our Pindamonhangaba facility and equipment include an electric arc furnace and a rebar
and wire rod rolling mill. Our facility in Pindamonhangaba began operations in July 2015 and currently produces rebar, while the plants
in Cariacica and Itauna began operations in May 2018, and include an electric arc furnace and two rebar and wire rod rolling mills. As
of December 31, 2022, our plant in Pindamonhangaba had installed capacity to produce 520,000 tons of billet and 450,000 tons of finished
product per year capacity. In 2022, our plant in Pindamonhangaba produced 383,679 tons of billet and 378,838 tons of finished product,
operating at 74% of its capacity for billet and 84% capacity for finished product. Our plant in Cariacica had installed capacity to produce
600,000 tons of billet and 348,000 tons of finished product. In 2022, our plant in Cariacica produced 489,380 tons of billet and 284,094
tons of finished product, operating at 82% of its capacity for billet and 82% capacity for finished product. The plant in Itauna had installed
capacity to produce 140,000 tons of finished product. In 2022, our plant in Itauna produced 118,507 tons of finished product, operating
at 85% capacity for finished product.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022, our plants in Brazil
produced 873,059 tons of billet and 781,439 tons of finished product, operating at 78% of its billet capacity and 83% capacity for finished
product.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth, for the period
indicated, selected operating data for our Brazil facilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
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    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-size: 10pt">Ps. 13,681</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 0.1in; text-indent: -0.1in"><span style="font-size: 10pt">Average scrap cost per ton</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-size: 10pt">6,553</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-size: 10pt">4,240</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-size: 10pt">3,912</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td style="text-align: right"><span style="font-size: 10pt">2,928</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-size: 10pt">2,957</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-size: 10pt">2,649</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-size: 10pt">2,000</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Manufacturing conversion cost
is defined as all production costs excluding the cost of scrap and related yield loss.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 41; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->37<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 7pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table shows the products that we
produce, the equipment that we use and the volume that we produce in each of our separate production facilities:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-size: 7pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Production per Facility by Product, Equipment
and Volume</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 7pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-align: left">equipment to clean and coat, draw, and anneal wire</td><td>&#160;</td>
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    <td style="text-align: left; vertical-align: top">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-align: left">electric arc furnace, with continuous caster with rolling mills and wire rod rolling mill</td><td>&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"><span style="font-size: 7pt">&#160;</span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Production capacity is for
rolling only.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 7pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(2)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Production capacity is for
billets only<i>.</i></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-size: 7pt">&#160;</span></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 42; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 4A. Unresolved Staff Comments</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 5. Operating and Financial Review and
Prospects</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following discussion is
derived from our audited consolidated financial statements, which are presented elsewhere in this annual report. This discussion does
not include all of the information included in our financial statements. You should read our financial statements to gain a better understanding
of our business and our historical results of operations. All of the statements in this Item 5 are subject to and qualified by the information
set forth under &#8220;Forward Looking Statements.&#8221; In evaluating this discussion, you should also consider the factors discussed
in Item 3.D. &#8220;Risk Factors&#8221; and elsewhere in this annual report and other factors that could cause results to differ materially
from those expressed in such forward-looking statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Adoption of International Financial Reporting Standards (IFRS)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Mexican National Banking
and Securities Commission (CNBV) has established the requirement that listed companies must disclose their financial information to the
public, through the Mexican Stock Exchange (BMV) or the <i>Bolsa Institucional de Valores, S.A. de C.V.</i> (BIVA) (operating since July
25, 2018), and therefore, beginning in 2012, we prepare our financial information in accordance with IFRS, as issued by the IASB. IFRS
differs in certain significant respects from U.S. GAAP. Accordingly, Mexican financial statements and reported earnings are likely to
differ from those of companies in other countries in this and other respects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Operating Results</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are producers of SBQ and
structural steel products. Accordingly, our net sales and profitability are highly dependent on market conditions in the steel industry
which is greatly influenced by general economic conditions in North America and globally. Demand, production levels and prices in certain
segments and markets have recovered and stabilized to a certain degree, although the extent, timing and duration of the recovery and potential
return to pre-crisis levels remains uncertain. In 2020, the total increase in net revenue from sales of SBQ products compared to 2019
was 16%. In 2021, the total increase in net revenue from sales of SBQ products compared to 2020 was 17%. In 2022, the total decrease in
net revenue from sales of SBQ products compared to 2021 was 24%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of the significant
competition in the steel industry and the commodity-like nature of some of our products, we have limited pricing power over many of our
products. The North American and global steel markets influence finished steel product prices. Nevertheless, many of our products are
SBQ products for which competition is limited, and, therefore, these products tend to generate somewhat higher margins compared with our
more commercial steel products. We attempt to adjust the mix of our product output toward higher margin products to the extent that we
are able to do so, and we also adjust our overall product levels based on the product demand.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We focus on controlling our
cost of sales as well as our selling, general and administrative expenses. Our cost of sales largely consist of the costs of acquiring
the raw materials necessary to manufacture steel, primarily scrap metal and ferroalloys. Market supply and demand generally determine
scrap prices, and, as a result, we have limited ability to influence their cost or the costs of other raw materials, including energy
costs; however, in 2020, 2021 and 2022, we did not purchase iron ore pellets or coking coal since our Lorain, Ohio blast furnace facility,
which is our only facility that utilizes these materials, was idled during these periods. There is a correlation between the prices of
scrap and iron ore and finished product prices, although the degree and timing of this correlation varies from time to time, so we may
not always be able to fully pass along scrap and other raw material price increases to our customers. Therefore, our ability to decrease
our cost of sales as a percentage of net sales is largely dependent on increasing our productivity. Our ability to control selling, general
and administrative expenses, which do not correlate to net sales as closely as cost of sales do, is a key element of our profitability.
Although our revenues and costs fluctuate from quarter to quarter, we do not experience large fluctuations due to seasonality.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Production costs at our U.S.
facilities are higher than those in our facilities in Mexico, principally due to the higher cost of labor and the higher cost of ferroalloys
used to manufacture SBQ steel, which is the only steel product that we produce in the United States of America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The negative operating trends
in our USA segment are primarily driven by under-utilized production capacity that severely impacts cost. The automotive sector was stable
until 2019, after the pandemic-has suffered a significant drop. For this reason we have changed our customer focus to different industries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 43; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our U.S. subsidiaries have
entered into sale agreements with customers and, in order to comply with the terms thereof, any existing orders pursuant to those agreements
need to be fulfilled even if the price of raw material increases with time. As the existing sale agreements expire, we will evaluate new
agreements which would result in a production of profitable products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A significant percentage of
our business uses a fixed base price that is negotiated annually, plus monthly scrap and alloy surcharges. In the transaction business,
we can adjust the base pricing as required. Scrap metal and commodity prices increased in 2020, in 2021 and 2022 by 9%, 62% and 0.5%,
respectively. Financial resources will continue to be made available as our U.S. segment tackles the cost curve and restores the business
to profitability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Sales Volume, Price and Cost Data, 2018 - 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="18" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Year ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">385</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">298</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">160</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">433</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">684</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">871</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">7,082</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">6,537</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5,319</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">7,669</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">6,675</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">7,525</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">11,354</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">12,136</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">9,246</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">7,120</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,549</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,217</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,867</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">8,520</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10,659</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,974</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,378</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">30,067</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">29,212</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">39,684</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5,710</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,364</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,311</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">6,058</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,569</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">8,154</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5,553</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">12,344</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">21,004</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">24,140</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">12,824</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">10,785</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">13,391</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our results are affected by
general global trends in the steel industry and by the economic conditions in the countries in which we operate and in other steel producing
countries. Our results are also affected by the specific performance of the automotive, non-residential construction, industrial equipment,
tooling equipment and other related industries. Our profitability is also impacted by events that affect the price and availability of
raw materials and energy inputs needed for our operations. The factors and trends discussed below also affect our results and profitability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Our primary source of revenue is the sale of SBQ steel and structural
steel products.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2004, we completed
the Atlax Acquisition (Tlaxcala and Cholula facilities). In July 2005, we and our controlling shareholder, Industrias CH, completed the
acquisition of Republic. We believe that these acquisitions allowed us to become the leading producer of SBQ steel in North America and
the leading producer of structural and light structural steel in Mexico, in each case in terms of sales volume. We expect the sale of
SBQ steel, structural steel and other steel products to continue to be our primary source of revenue. The markets for our products are
highly competitive and highly dependent on developments in global markets for those products. The main competitive factors are price,
product quality and customer relationships and service.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Our results are affected by economic activity,
steel consumption and end-market demand for steel products.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our results of operations
depend largely on macroeconomic conditions in North America. Historically, there has been a strong correlation between the annual rate
of steel consumption and the annual change in GDP in the Mexican and U.S. markets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We sell our steel products
to the automotive, construction, manufacturing and other related industries. These industries are generally cyclical, and their demand
for steel is impacted by the stage of their industry market cycles and the country&#8217;s economic performance. Mexico&#8217;s GDP in
2022 was positive by 3.0% (according to preliminary figures of the INEGI) and 5.0% in 2021 (according to figures of the INEGI). The U.S.
GDP increased 2.1% in 2022 (according to preliminary figures of the U.S. Department of Commerce) and increased 6.0% in 2021. Deterioration
in economic conditions in the countries in which we operate is likely to adversely affect our results of operation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Our results are affected by international steel
prices and trends in the global steel industry.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Steel prices are generally
set by reference to world steel prices, which are determined by global supply and demand trends. Our average steel price decreased approximately
10.6% in 2019 compared to 2018. Our average steel price increased approximately 1% in 2020 compared to 2019. Our average steel price increased
approximately 55% in 2021 compared to 2020. Our average steel price increased approximately 8.1% in 2022 compared to 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the last two decades
the steel industry has been consolidating. Consolidation has enabled steel companies to lower their production costs and allowed for more
stringent supply-side discipline, including through selective capacity closures or idling, as the ones observed recently in the United
States of America by Mittal Steel, U.S. Steel and others. Consolidation may result in increased competition and could adversely affect
our results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Our results are affected by competition from
imports.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our ability to sell our products
is influenced, to a certain degree, by global trade for steel products, particularly trends in imports of steel products into the Mexican
and U.S. markets. During 2005, the Mexican government, at the request of CANACERO, implemented several measures to prevent unfair trade
practices such as dumping in the steel import market. These measures include initiating anti-dumping and countervailing duty proceedings,
temporarily increasing import tariffs for countries with which Mexico does not have free trade agreements. As a result, the competitive
price pressure from dumping declined, contributing to a general upward trend in domestic Mexican steel prices. In 2020, imports to Mexico
in tons decreased 13.1% compared to 2019 according to information of CANACERO. In 2021, imports to Mexico in tons increased 32.8% compared
to 2020 according to information of CANACERO. In 2022, imports to Mexico in tons decreased 11.7% compared to 2021 according to information
of CANACERO.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Foreign producers typically
have lower labor costs, and in some cases are owned, controlled or subsidized by their governments, allowing production and pricing decisions
to be influenced by political and economic policy considerations as well as prevailing market conditions. Increases in future levels of
imported steel in the United States of America could reduce future market prices and demand levels for steel in the United States of America.
To this extent, the U.S. Department of Commerce and the U.S. International Trade Commission are currently conducting five year &#8220;sunset&#8221;
reviews of existing trade relief in several different steel products. Imports represent less of a threat to SBQ producers like us in the
United States of America than to commodity steel producers because of the high-quality requirements and standard required by buyers of
SBQ steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Our results are affected by the cost of raw
materials and energy.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We purchase substantial quantities
of raw materials, including scrap metal, and ferroalloys for use in the production of our steel products. The availability and price of
these inputs vary according to general market and economic conditions and thus are influenced by industry cycles. For example, prices
of scrap metal increased approximately 19.4% in 2018, decreased 20% in 2019, increased 9% in 2020, increased 9% in 2021 and increased
0.5% in 2022; and prices of ferroalloys increased approximately 9.6% in 2018, decreased approximately 1% and 20% in 2019 and 2020,and
increased 62.6% in 2021, and increased approximately 36.4% in 2022. As with other raw materials, iron ore and coking coal prices fluctuate
significantly. However, in 2018, 2019, 2020, 2021 and 2022 we did not purchase coking coal or pellets since our Lorain, Ohio blast furnace
facility was idle during this period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to raw materials,
electricity and natural gas are both relevant components of our cost structure. We purchase electricity and natural gas at prevailing
market prices in Mexico and the United States of America. These prices are impacted by general demand and supply for energy in the United
States of America and Mexico as economic activity fueled energy demand and the supply and price of oil was impacted by geopolitical events.
Natural gas and electricity prices have remained highly volatile. Prices for electricity increased approximately 14% in 2018, increased
approximately 0.1% in 2019, decreased approximately 10% in 2020, increased 4.7% in 2021 and 7.7% in 2022; and prices for natural gas increased
approximately 28% in 2018, increased approximately 1.8% in 2019, decreased 18% in 2020 and decreased 1% in 2021 and increased 54.3% in
2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>If inflation rates in Mexico rise significantly,
our costs may increase and the demand for our services may decrease.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mexico has historically experienced
high annual rates of inflation. The annual rate of inflation, as measured by changes in the Mexican national consumer price index (<i>&#205;ndice
Nacional de Precios al Consumidor</i>) published by the INEGI was 4.8% for 2018, 2.8% for 2019, 3.2% in 2020, 7.4% in 2021 and 7.8% in
2022. High inflation rates could adversely affect our business and results of operations by increasing certain costs, such as the labor
costs of our Mexican facilities, beyond levels that we could pass on to our customers and reducing consumer purchasing power, thereby
adversely affecting demand for our products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Depreciation of the Mexican peso relative to
the U.S. dollar, as well as the reinstatement of exchange controls and restrictions, could adversely affect our financial performance.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Depreciation of the Mexican
peso relative to the U.S. dollar may negatively affect our results of operations. According to the Mexican Central Bank (<i>Banco de Mexico</i>),
during the period from 2020 to 2022, the exchange rate registered a low of Ps. 18.57 per U.S.$1.00 at February 17, 2020, and a high of
Ps. 24.88 per U.S.$1.00 at April 27, 2020. The appreciation of the Mexican peso relative to the U.S. dollar in 2022 was 5.6%. The exchange
rate at December 31, 2022 was 19.3615 compared to 20.5157 at December 31, 2021. At April 28, 2023, the exchange rate was Ps. 18.1030 per
U.S.$1.00.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A severe depreciation of the
Mexican peso may also result in disruption of the international foreign exchange markets and may limit our ability to convert Mexican
pesos into U.S. dollars and other currencies. While the Mexican government does not currently restrict, and has not recently restricted
the right or ability of Mexican or foreign persons or entities to convert Mexican pesos into U.S. dollars or to transfer other currencies
out of Mexico, it has done so in the past and could reinstate exchange controls and restrictions in the future. Currency fluctuations
or restrictions on the transfer of foreign currency outside of Mexico may have an adverse effect on our financial performance. We do not
utilize derivative financial instruments to manage our market risks with respect to foreign currency.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Segment Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are required to disclose
segment information in accordance with IFRS 8 &#8220;Operating Segments&#8221;: Information which establishes standards for reporting
information about operating segments in annual financial statements and requires reporting of selected information about operating segments
in interim financial reports issued to shareholders. Operating segments are components of a company about which separate financial information
is available that is regularly evaluated by the chief operating decision maker(s) in deciding how to allocate resources and assess performance.
The statement also establishes standards for related disclosures about a company&#8217;s products and services, geographical areas and
major customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We conduct business in three
principal business segments which are organized on a geographical basis:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our Mexican segment represents the results of our operations in Mexico, including our plants in Mexicali, Guadalajara, Tlaxcala and San Luis Potos&#237;;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our U.S. segment represents the results of our operations of Republic, including its five plants, located in the United States of America; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our Brazil segment represents the results of our operations in three plants located in Brazil, one of which started operations in June 2015 and two of which started to consolidate operations in May 2018.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following information shows other results by
segment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,096,330</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(286,611</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(779,134</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">7,108,195</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="18" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the year ended December 31, 2020</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(127,847</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,117,817</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(240,726</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(660,785</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">52,656</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">505,946</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">107,605</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">107,827</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(5,108</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(16,104</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(66,007</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">33,473</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(53,746</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(483,822</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2,755,145</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">123,001</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">748,744</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,249,037</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4,875,927</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(118,926</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Other Data</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Mexico</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">33,386,043</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">6,944,579</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(2,927,348</td><td style="text-align: left">)</td><td>&#160;</td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 35.45pt">Our net sales by product during 2020, 2021 and
2022 were as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 35.45pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.1in; padding-left: 0.1in">Structural</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,677,441</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2,051,053</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4,456,151</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4,117,613</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">14,081,399</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">19,625,065</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,851,960</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,376,554</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,673,660</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">11,413,275</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2,139,938</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,213,061</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,092,410</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">6,096,157</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">35,869,314</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">55,620,356</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">54,159,247</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our net sales by country or region during 2020,
2021 and 2022 are as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">18,122,828</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">28,060,405</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">29,650,766</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">6,555,642</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9,050,696</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">6,812,650</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">10,608,151</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,548,823</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">19,969,641</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">311,761</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">441,856</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">291,963</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; text-indent: -0.1in; padding-left: 0.1in">Latin America</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">253,096</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">513,524</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">424,436</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">17,836</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,052</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; text-indent: -0.1in; padding-left: 0.1in">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">35,869,314</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">55,620,356</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">54,159,247</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 48; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Consolidated Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Comparison of Years Ended December 31, 2021 and 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales decreased 2.6%,
to Ps. 54,159 million in 2022 compared to Ps. 55,620 million in 2021. This decrease resulted primarily from a 8.1% increase in the average
price per ton of steel products of 2022 compared to 2021. Total sales outside of Mexico decreased 11.1%, to Ps. 24,508 million in 2022
compared to Ps. 27,560 million in 2021. Total sales in Mexico increased 5.3%, from Ps. 28,060 million in 2021 to Ps. 29,651 million in
2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products decreased 9.9%, to 2.255 million tons in 2022, compared to 2.504 million tons in 2021. Total sales volume outside of Mexico of
finished steel products decreased 12.7% to 0.989 million tons in 2022, compared to 1.132 million tons in 2021, while total Mexican sales
decreased 7.7%, from 1.372 million tons in 2021, compared to 1.266 million tons in 2021. The average price of steel products increased
8.1% in 2022 compared to 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales decreased
0.7%, from Ps. 39,968 million in 2021 to Ps. 39,684 million in 2022, the decrease is mainly attributable to a 10.3% increase in the average
cost per ton of steel products sold and a lower volume of steel tons sold (249 thousand tons less). Cost of sales as a percentage of net
sales was 73% in 2021 and 72% in 2021. We experienced higher cost of sales at our Republic facilities, mainly as a result of (i) higher
labor costs corresponding to our U.S. operations, and (ii) the higher cost of raw materials, which our U.S. operations use in the production
of SBQ steel. Hourly wages at our Mexican operations were approximately U.S.$2.4 (Ps. 47) per hour in 2022 and U.S.$1.8 (Ps. 37) per hour
in 2021, compared to U.S.$28.3 (Ps. 549) and U.S.$23.7 (Ps. 486) per hour for 2022 and 2021, respectively, at our U.S. operations. Although
some raw material costs are similar in the United States of America and Mexico, our U.S. operations produce higher value-added SBQ steel,
which requires more expensive raw materials such as chromium, nickel, molybdenum and other alloys. Our Mexican operations require these
alloys to a lesser extent, because they produce commodity steel as well as SBQ steel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit was Ps. 14,475
million in 2022 compared to a Ps. 15,652 million gross profit in 2021. This decrease in gross profit is attributable mainly to a decrease
of 249,000 tons of finished steel products shipped, an 8.1% increase in the average price of steel products sold. As a percentage of net
sales, our gross profit was 26.7% in 2022 and our gross profit was 28% in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) increased 20.3%, to Ps. 2,457 million in 2022, compared to Ps. 2,043 million in 2021. The variation
of Ps. 414 million corresponds to the increase of Ps. 188 million in the Mexican segment (mainly administrative and maintenance expenses),
the increase of Ps. 196 million in the Brazil segment and an increase of Ps. 30 million in the U.S. segment. In 2022 and 2021, our general
and administrative expenses included Ps. 219.3 million and 256.1 million of amortization of the tangible and intangible assets registered
principally in connection with the acquisition of Republic.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses as
a percentage of net sales were 4.5% in 2022 and 4% in 2021. Depreciation and amortization expense were Ps. 11 million in 2022 compared
to Ps. 16 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other (Income) Expense, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other income,
net, of Ps. 72 million in 2022, mainly from benefits on inventory sold.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other expense,
net, of Ps. 77 million in 2021, mainly from account debugging.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest income
of Ps. 446 million in 2022 compared to Ps. 66 million in 2021, mainly as a result of interest charged to affiliated companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest expense
of Ps. 835 million in 2022 compared to Ps. 87 million in 2021 mainly as a result of a higher use of financial services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Loss (Gain)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
gain of Ps. 700 million in 2022 compared to a foreign exchange loss of Ps. 325 million in 2021; this foreign exchange loss reflected the
5.6% depreciation of the peso against the dollar in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022 we recorded an income
tax provision of Ps. 3,299 million, which included an income tax provision of Ps. 3,150 million and an income tax expense provision for
deferred income taxes of Ps. 150 million. In 2021 we recorded an income tax provision of Ps. 4,390 million, which included an income tax
provision of Ps. 3,818 million and an income tax expense provision for deferred income taxes of Ps. 572 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our effective income tax rates
for 2022 and 2021 were 30.0% and 31.7%, respectively. According to the Income Tax Law in Mexico, the tax rate for the year 2022 and years
thereafter is 30%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Income (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded net profit of
Ps. 7,702 million in 2022, compared to net profit of Ps. 9,446 million in 2021. The net profit for the year 2022 compared to the net profit
in 2021 is mainly as a result of (i) a 8.1% increase in the average price of steel products sold, (ii) the foreign exchange loss in 2021
to Ps. 700 million compared to the foreign exchange gain of Ps. 325 million in 2021, (iii) the loss on stock sale of Ps. 779 million and
(iv) the decrease in the provision of income taxes in 2022 to Ps. 3,299 million compared to Ps. 4,390 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mexican Segment</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Comparison of Years Ended December 31, 2021 and 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales increased 4%, to
Ps. 30,915 million in 2022 compared to Ps. 29,678 million in 2021. This increase resulted principally from a 12.8% increase in the average
price per ton of steel products in 2022 compared to 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products decreased 7.7%, to 1.266 million tons in 2022, compared to 1.372 million tons in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales increased
1.1%, from Ps. 21,337 million in 2021 to Ps. 21,576 million in 2022, this increase is mainly attributable to an increase in energy cost.
As a percentage of net sales, our cost of sales was 69.8% in 2022, compared to 71.9% in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit increased
12.0%, to Ps. 9,339 million in 2022 compared to Ps. 8,341 million in 2021. This increase is attributable mainly to an increase of 13.8%
in the average price of steel products sold, decreased by a higher average cost of sales per ton of 1.1%. As a percentage of net sales,
our gross profit was 30% in 2022, compared to 28% in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) increased 20.8%, to Ps. 1.096 million in 2022, compared to Ps. 908 million in 2021. The increase
was mainly originated by higher administrative and maintenance expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses as
a percentage of net sales were 3.6% in 2022 and 3.1% in 2021. Depreciation and amortization expense were Ps. 207 million in 2022 compared
to Ps. 238 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Expense (Income), Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other expenses,
net, of Ps. 71 million in 2022, reflecting expenses related to doubtful accounts recoverable allowance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other expenses,
net, of Ps. 77 million in 2021, reflecting income related to account debugging.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest income
of Ps. 416 million in 2022 compared to Ps. 65.6 million in 2021. This interest income corresponds mainly to affiliates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest expense
of Ps. 779.1 million in 2022, corresponding mainly to a loss in stocks sale, compared to Ps. 28.9 million of interest expense in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Gain (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
loss of Ps. 700 million in 2022 compared to a foreign exchange gain of Ps. 325 million in 2021; this foreign exchange reflected the 5.6%
depreciation of the Mexican peso against the dollar in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022, we recorded an income
tax provision of Ps. 2,566 million, which included an income tax provision of Ps. 2,686 million and an income tax provision for deferred
income taxes of Ps. 120 million. In 2021, we recorded an income tax provision of Ps. 2,473 million, which included an income tax provision
of Ps. 2,569 million and an income tax provision for deferred income taxes of Ps. 96 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">According to the Income Tax
Law in Mexico, the tax rate for 2022 and thereafter is 30%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded net income of
Ps. 4,542 million in 2022, compared to net income of Ps. 5,245 million in 2021. This variance is attributable mainly to; (i) an increase
of 12.8% in the average price of steel products sold, (ii) higher administrative expenses of Ps. 189 million, (iii) a foreign exchange
gain of Ps. 700 million in 2022 compared to Ps. 325 million of foreign exchange loss in 2021 and (iv) a higher income tax provision in
2022 of Ps. 2,566 million compared to Ps. 2,473 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USA Segment</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Comparison of Years Ended December 31, 2021 and 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales decreased 28.6%,
to Ps. 5,867 million in 2022 compared to Ps. 8,217 million in 2021. This decrease resulted principally from a decrease of 115,000 tons
in shipments of finished steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Shipments of finished steel products decreased
42%, to 160,000 tons in 2022, compared to 275,000 tons in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The average price of steel products in pesos increased
22.5% in 2022 compared to 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales decreased
19.5%, from Ps. 7,159 million in 2021 to Ps. 5,764 million in 2022, the decrease is mainly due to a decrease of approximately 115,000
in tons of shipments of finished steel products and the 38.1% increase in the average cost per ton of steel products sold. Cost of sales
as a percentage of net sales was 98% in 2022, compared to 87% in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Gross Profit (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit was Ps. 103
million in 2022 compared to a Ps. 1,057 million gross profit in 2021. As a percentage of net sales, our gross profit was 1.7% in 2022,
mainly attributable to a decrease of approximately 115,000 tons of shipments of finished steel products and an increase of 38.1%, approximately,
in the average price per ton of steel products sold, compared to a gross profit of 12.9% in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) were Ps. 287 million in 2022, compared to Ps. 257 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses as
a percentage of net sales were 5% in 2022 and 3% in 2021. Depreciation and amortization expense were Ps. 22 million in 2022 compared to
Ps. 27 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Other Income, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded other income, net, of Ps. 2.8 million
in 2022, related to other financial operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded other income, net, of Ps. 454 million
in 2021, related to other financial operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">We recorded an interest income of
Ps. 30 million in 2022 compared to Ps. 0 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">We recorded an interest expense of
Ps. 56 million in 2022 compared to Ps. 61 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Gain (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
loss of Ps. 58 million in 2021 compared to a foreign exchange loss of Ps. 0.4 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022, we recorded a tax
provision of Ps. 88.7 million and an income tax profit provision. In 2021, we recorded a deferred income tax provision of Ps. 477 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a net profit of
Ps. 718 million in 2022, compared to a net profit of Ps. 716 million in 2021. Our net income in 2022 is attributable mainly to an increase
in the average price of steel tons produced of 22.5% and a lower tax provision of Ps. 389 million than in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Brazil Segment</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Comparison of Years Ended December 31, 2021
and 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales decreased 2% to
Ps. 17,377 million in 2022 compared to Ps. 17,726 million in 2021. This resulted principally from very small variations in the number
of steel tons shipped and on the average price of finished steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products decreased to 828,000 tons in 2022 compared to 857,000 tons in 2021 (including the shipment of the plants Cariacica and Itauna).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales increased
to Ps. 12,344 million in 2022 compared to Ps. 11,471 million in 2021. The average cost per ton of steel products sold increased 11.3%
compared to 2021. Cost of sales as a percentage of net sales was 71% in 2022, compared to 65% in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit was Ps. 5,033
million in 2022 compared to Ps. 6,254 million of gross profit in 2021. As a percentage of net sales, our gross profit was 29% in 2022,
compared to 35% of gross profit in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) were Ps. 1,618 million in 2022 compared to Ps. 878 million in 2021. Administrative expenses
as a percentage of net sales were 9% and 5% in 2022 and 2021, respectively. Technical administrative expenses, royalties and legal provisions
increased the administrative expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Depreciation and amortization
expenses were Ps. 0.9 million in 2022 compared to Ps. 2 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Expense, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other income,
net of Ps.140 million in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other income,
net of Ps.2 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">We recorded an interest expense of
Ps. 384 million in 2022 compared to Ps. 96 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Gain (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
loss of Ps. 60 million in 2022 this foreign exchange loss reflected the depreciation of the Brazilian real against the dollar in 2022
compared to a foreign exchange loss of Ps. 120 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2022 we recorded an income
tax provision of Ps. 645 million compared to Ps. 1,440 million of income tax provision in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Income (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a net income of
Ps. 2,466 million in 2022 compared to a net income of Ps. 3,722 million in 2021. The net income for the year 2022 compared to the net
income in 2021 is mainly as a result of an increase in administrative expenses and higher interest expense.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Consolidated Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Comparison of Years Ended December 31, 2020 and 2021</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales increased 55%, to
Ps. 55,620 million in 2021 compared to Ps. 35,869 million in 2020. This increase resulted primarily from a 51% increase in the average
price per ton of steel products of 2021 compared to 2020. Total sales outside of Mexico increased 55%, to Ps. 27,560 million in 2021 compared
to Ps. 17,746 million in 2020. Total sales in Mexico increased 51%, from Ps. 18,123 million in 2020 to Ps. 28,060 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products increased 2.5%, to 2.504 million tons in 2021, compared to 2.441 million tons in 2020. Total sales volume outside of Mexico of
finished steel products increased 2.2% to 1.132 million tons in 2021, compared to 1.108 million tons in 2020, while total Mexican sales
increased 2.9%, from 1.333 million tons in 2020, compared to 1.372 million tons in 2021. The average price of steel products increased
51% in 2021 compared to 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales increased
36.8%, from Ps. 29,212 million in 2020 to Ps. 39,968 million in 2021. The increase is mainly attributable to a 33.3% increase in the average
cost per ton of steel products sold. Cost of sales as a percentage of net sales was 72% in 2021 and 81% in 2020. We experienced higher
cost of sales at our Republic facilities, mainly as a result of (i) higher labor costs corresponding to our U.S. operations, and (ii)
the higher cost of raw materials, which our U.S. operations use in the production of SBQ steel. Hourly wages at our Mexican operations
were approximately U.S.$1.8 (Ps. 37) per hour in 2021 and U.S.$1.9 (Ps. 37) per hour in 2020, compared to U.S.$23.7 (Ps. 486) and U.S.$34
(Ps. 678) per hour for 2021 and 2020, respectively, at our U.S. operations. Although raw material costs are similar in the United States
of America and Mexico, our U.S. operations produce higher value-added SBQ steel, which requires more expensive raw materials such as chromium,
nickel, molybdenum and other alloys. Our Mexican operations require these alloys to a lesser extent, because they produce commodity steel
as well as SBQ steel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit was Ps. 15,652
million in 2021 compared to a Ps. 6,658 million gross profit in 2020. This increase in gross profit is attributable mainly to an increase
of 63,000 tons of finished steel products shipped, a 51% increase in the average price of steel products sold, and a 33.3% increase in
the average cost per ton of steel products sold. As a percentage of net sales, our gross profit was 28% in 2021 and our gross profit was
18% in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) increased 1.1%, to Ps. 2,043 million in 2021, compared to Ps. 2,019 million in 2020. The variation
of Ps. 24 million corresponds to the decrease of Ps. 210 million in the Mexican segment (mainly legal expenses), and the increase of Ps.
217 million in the Brazil segment and an increase of Ps. 16 million in the U.S. segment. In 2021 and 2020, our general and administrative
expenses included Ps. 10.5 million and 11.2 million of amortization of the tangible and intangible assets registered principally in connection
with the acquisition of Republic.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses as
a percentage of net sales were 4% in 2021 and 6% in 2020. Depreciation and amortization expense were Ps. 256 million in 2021 compared
to Ps. 422 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other (Income) Expense, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other expense,
net, of Ps. 77 million in 2021, mainly from account debugging.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other income,
net, of Ps. 547 million in 2020, reflecting (i) income of Ps. 232 million related to the sale of scrap, (ii) income of Ps. 257 million
from a tax benefit in our operations in Brazil.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest income
of Ps. 66 million in 2021 compared to Ps. 108 million in 2020. Mainly due to interest charged to affiliated companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest expense
of Ps. 87 million in 2021 compared to Ps. 54 million in 2020, mainly as a result of higher use of financial services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Loss (Gain)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
gain of Ps. 325 million in 2021 compared to a foreign exchange loss of Ps. 363 million in 2020; this foreign exchange loss reflected the
2.9% depreciation of the peso against the dollar in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2021 we recorded an income
tax provision of Ps. 4,390 million, which included an income tax provision of Ps. 3,818 million and an income tax expense provision for
deferred income taxes of Ps. 572 million. In 2020 we recorded an income tax provision of Ps. 2,078 million, which included an income tax
provision of Ps. 1,831 million and an income tax expense provision for deferred income taxes of Ps. 247 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our effective income tax rates
for 2021 and 2020 were 31.7% and 27.9%, respectively. According to the Income Tax Law in Mexico, the tax rate for the year 2021 and years
thereafter is 30%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Income (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded net profit of
Ps. 9,446 million in 2021, compared to net profit of Ps. 2,798 million in 2020. The net profit for the year 2021 compared to the net profit
in 2020 is mainly as a result of (i) a 51% increase in the average price of steel products sold, (ii) a 9% decrease in cost of sales,
(iii) the increase in the foreign exchange gain in 2021 to Ps. 325 million compared to the foreign exchange loss of Ps. 363 million in
2020 and (iv) the increase in the provision of income taxes in 2021 to Ps. 4,390 million compared to Ps. 2,078 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mexican Segment</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Comparison of Years Ended December 31, 2020 and 2021</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales increased 51%, to
Ps. 29,678 million in 2021 compared to Ps. 19,661 million in 2020. This increase resulted principally from a 46.7% increase in the average
price per ton of steel products in 2021 compared to 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products increased 2.9%, to 1.372 million tons in 2021, compared to 1.332 million tons in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales increased
38%, from Ps. 15,459 million in 2020 to Ps. 21,337 million in 2021, this increase is mainly attributable to an increase in the scrap cost.
As a percentage of net sales, our cost of sales was 72% in 2021, compared to 79% in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit increased
98.5%, to Ps. 8,341 million in 2021 compared to Ps. 4,202 million in 2020. This increase is attributable mainly to an increase of 46.7%
in the average price of steel products sold, decreased by a higher average cost of sales per ton of 34.1%. As a percentage of net sales,
our gross profit was 28% in 2021, compared to 21% in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) decreased 18.8%, to Ps. 908 million in 2021, compared to Ps. 1,118 million in 2020. The decrease
was mainly originated by lower legal expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses as
a percentage of net sales were 3.1% in 2021 and 5.6% in 2020. Depreciation and amortization expense were Ps. 238 million in 2021 compared
to Ps. 283 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Expense (Income), Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other expenses,
net, of Ps. 77.5 million in 2021, reflecting income related to account debugging.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded other income, net, of Ps. 53 million
in 2020, reflecting an income related to the sale of scrap,</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest income
of Ps. 65.6 million in 2021 compared to Ps. 107 million in 2020. This interest income corresponds mainly to affiliates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest expense
of Ps. 28.9 million in 2021, corresponding mainly to related party transactions that are not eliminated in the consolidated statement
of income, compared to Ps. 5 million of interest income in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Gain (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
gain of Ps. 325 million in 2021 compared to a foreign exchange loss of Ps. 484 million in 2020; this foreign exchange reflected the 2.9%
depreciation of the Mexican peso against the dollar in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2021, we recorded an income
tax provision of Ps. 2,473 million, which included an income tax provision of Ps. 2,569 million and an income tax provision for deferred
income taxes of Ps. 96 million. In 2020, we recorded an income tax provision of Ps. 1,748 million, which included an income tax provision
of Ps. 1,460 million and an income tax provision for deferred income taxes of Ps. 288 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">According to the Income Tax
Law in Mexico, the tax rate for 2021 and thereafter is 30%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded net income of
Ps. 5,245 million in 2021, compared to net income of Ps. 1,008 million in 2020. This variance is attributable mainly to; (i) an increase
of 51% in the average price of steel products sold, (ii) less administrative expenses of Ps. 210 million, (iii) a foreign exchange gain
of Ps. 325 million in 2021 compared to Ps. 484 million of foreign exchange loss in 2020 and (iv) a higher income tax provision in 2021
of Ps. 2,473 million compared to Ps. 1,748 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 56; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USA Segment</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Comparison of Years Ended December 31, 2020 and 2021</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales increased 48%, to
Ps. 8,217 million in 2021 compared to Ps. 5,549 million in 2020. This increase resulted principally from an increase of 38,000 tons in
shipments of finished steel products and a higher than average price of steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Shipments of finished steel products increased
16%, to 275,000 tons in 2021, compared to 237,000 tons in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The average price of steel products in pesos increased
27.7% in 2021 compared to 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales increased
26.1%, from Ps. 5,677 million in 2020 to Ps. 7,159 million in 2021. The increase is mainly due to an increase of approximately 38,000
in tons of shipments of finished steel products and the 8.7% increase in the average cost per ton of steel products sold. Cost of sales
as a percentage of net sales was 87% in 2021, compared to 102% in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Gross Profit (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit was Ps. 1,057
million in 2021 compared to a Ps. 128 million gross loss in 2020. As a percentage of net sales, our gross profit was 12.9% in 2021, mainly
attributable to an increase of approximately 38,000 tons of shipments of finished steel products and an increase of 27.7%, approximately,
in the average price per ton of steel products sold, compared to a gross loss of (2%) in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) were Ps. 257 million in 2021, compared to Ps. 241 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses as
a percentage of net sales were 3% in 2021 and 4% in 2020. Depreciation and amortization expense were Ps. 27 million in 2021 compared to
Ps. 25 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Other Income, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded other income, net, of Ps. 454 million
in 2021, related to other financial operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded other income, net, of Ps. 506 million
in 2020, related to scrap metal sold during the period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">We recorded an interest income of
Ps. 0 million in 2021 compared to Ps. 0 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">We recorded an interest expense of
Ps. 61 million in 2021 compared to Ps. 16 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Gain (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
loss of Ps. 0.4 million in 2020 compared to a foreign exchange gain of Ps. 2 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2021, we recorded an income
tax provision of Ps. 477 million and an income tax profit provision. In 2020, we recorded an income tax provision of Ps. 119 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a net profit of
Ps. 716 million in 2021, compared to a net profit of Ps. 4 million in 2020. Our net income in 2021 is attributable mainly to an increase
in the average price of steel tons produced of 27.7% and the increase of 38,000 tons in shipments of finished steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 57; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->53<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Brazil Segment</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Comparison of Years Ended December 31, 2020
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales increased 66% to
Ps. 17,726 million in 2021 compared to Ps. 10,659 million in 2020. This increase resulted principally from a higher average price of finished
steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products decreased to 857,000 tons in 2021 compared to 870,500 tons in 2020 (including the shipment of the plants Cariacica and Itauna).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales increased
to Ps. 11,471 million in 2021 compared to Ps. 8,075 million in 2020. The average cost per ton of steel products sold increased 44.3% compared
to 2020. Cost of sales as a percentage of net sales was 65% in 2021, compared to 76% in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit was Ps. 6,254
million in 2021 compared to Ps. 2,584 million of gross profit in 2020. As a percentage of net sales, our gross profit was 35% in 2021,
compared to 24% of gross profit in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) were Ps. 878 million in 2021 compared to Ps. 661 million in 2020. Administrative expenses as
a percentage of net sales were 5% and 6% in 2021 and 2020, respectively. Managerial expenses increased the administrative expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Depreciation and amortization
expenses were Ps. 2 million in 2021 compared to Ps. 126 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Expense, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other income,
net of Ps.2 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other expense,
net, of Ps. 12 million in 2020.<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">We recorded an interest expense of
Ps. 96 million in 2021 compared to Ps. 66 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Gain (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
loss of Ps. 120 million in 2021. This foreign exchange loss reflected the depreciation of the Brazilian real against the dollar in 2021
compared to a foreign exchange loss of Ps. 1,096 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2021 we recorded an income
tax provision of Ps. 1,440 million compared to Ps. 211 million of income tax provision in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Income (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a net income of
Ps. 3,722 million in 2021 compared to a net income of Ps. 537 million in 2020. The net income for the year 2021 compared to the net income
in 2020 is mainly as a result of an increase of the average price of finished steel products shipped.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Consolidated Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Comparison of Years Ended December 31, 2019 and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales increased 5%, to
Ps. 35,869 million in 2020 compared to Ps. 34,171 million in 2019. This increase resulted primarily from a 1% increase in the average
price per ton of steel products and an increase of 92,000 tons in shipments of finished steel products. Total sales outside of Mexico
increased 9%, to Ps. 17,746 million in 2020 compared to Ps. 16,297 million in 2019. Total sales in Mexico increased 1%, from Ps. 17,874
million in 2019 to Ps. 18,123 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products increased 4%, to 2.441 million tons in 2020, compared to 2.349 million tons in 2019. Total sales volume outside of Mexico of
finished steel products increased 14% to 1.202 million tons in 2020, compared to 1.055 million tons in 2019, while total Mexican sales
decreased 4%, from 1.294 million tons in 2019, compared to 1.239 million tons in 2020. The average price of steel products increased 1%
in 2020 compared to 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales decreased
3%, from Ps. 30,067 million in 2019 to Ps. 29,212 million in 2020, which decrease is mainly attributable to a 6.5% decrease in the average
cost per ton of steel products sold. Cost of sales as a percentage of net sales was 81% in 2020 and 88% in 2019. We experienced higher
cost of sales at our Republic facilities, mainly as a result of (i) higher labor costs corresponding to our U.S. operations, and (ii)
the higher cost of raw materials, which our U.S. operations use in the production of SBQ steel. Hourly wages at our Mexican operations
were approximately U.S.$1.9 (Ps. 37) per hour in 2020 and U.S.$1.9 (Ps. 36) per hour in 2019, compared to U.S.$34 (Ps. 678) and U.S.$50.6
(Ps. 954) per hour for 2020 and 2019, respectively, at our U.S. operations. Although raw material costs are similar in the United States
of America and Mexico, our U.S. operations produce higher value-added SBQ steel, which requires more expensive raw materials such as chromium,
nickel, molybdenum and other alloys. Our Mexican operations require these alloys to a lesser extent, because they produce commodity steel
as well as SBQ steel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit was Ps. 6,658
million in 2020 compared to a Ps. 4,104 million gross profit in 2019. This increase in gross profit is attributable mainly to an increase
of 92,000 tons of finished steel products shipped, a 1% increase in the average price of steel products sold, and a 6.5% decrease in the
average cost per ton of steel products sold. As a percentage of net sales, our gross profit was 18% in 2020 and our gross profit was 12%
in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) increased 23%, to Ps. 2,019 million in 2020, compared to Ps. 1,637 million in 2019. The variation
of Ps. 382 million corresponds to the increase of Ps. 270 million in the Mexican segment (mainly expenses originated from depreciation
and legal expenses) and the increase of Ps. 140 million in the Brazil segment (expenses from new companies and higher depreciation expenses).
In 2020 and 2019, our general and administrative expenses included Ps. 11.2 million and 10 million of amortization of the tangible and
intangible assets registered principally in connection with the acquisition of Republic.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses as
a percentage of net sales were 6% in 2020 and 5% in 2019. Depreciation and amortization expense were Ps. 422 million in 2020 compared
to Ps. 220 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other (Income) Expense, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other expense,
net, of Ps. 547 million in 2020, reflecting (i) income of Ps. 232 million related to the sale of scrap, (ii) income of Ps. 257 million
from a tax benefit in our operations in Brazil.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other income,
net, of Ps. 137 million in 2019, reflecting (i) income of Ps. 3 million related to the sale of scrap, (ii) expense of Ps. 125 million
for debugging accounts, (iii) income of Ps. 6 million for recovery of insurance companies and (iv) expense related to other financial
operations of Ps. 21 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest income
of Ps. 108 million in 2020 compared to Ps. 146 million in 2019. This decrease is attributable mainly to interest charged to affiliated
companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest expense
of Ps. 54 million in 2020 compared to Ps. 55 million in 2019. This decrease is attributable mainly to the lower use of financial services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Loss (Gain)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
loss of Ps. 363 million in 2020 compared to a foreign exchange loss of Ps. 785 million in 2019; this foreign exchange loss reflected the
6% depreciation of the peso against the dollar in 2020, compared to the 4% appreciation of the Mexican peso against the dollar in 2018.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2020 we recorded an income
tax provision of Ps. 2,078 million, which included an income tax provision of Ps. 1,831 million (includes Ps. 554.4 million of the income
tax derived from a review of the Tax Administration System) (SAT) and an income tax expense provision for deferred income taxes of Ps.
247 million. In 2019 we recorded an income tax provision of Ps. 3,276 million, which included an income tax provision of Ps. 2,324 million
(includes Ps. 2,324 million of the income tax derived from a review of the Tax Administration System) (SAT) and an income tax provision
for deferred income taxes of Ps. 202 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our effective income tax rates
for 2020 and 2019 were 27.9% and 58.2%, respectively. According to the Income Tax Law in Mexico, the tax rate for the year 2020 and years
thereafter is 30%. We have implemented the practice of recognizing the benefit derived from the amortization of tax losses for the period
in which such losses are actually amortized. In 2020 and 2019, we amortized tax losses which generated a benefit on income tax of approximately
Ps. 17 million and Ps. 987 million, respectively. These effects caused our effective tax rates during 2020 to be lower than the statutory
tax rate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Income (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded net profit of
Ps. 2,798 million in 2020, compared to net loss of Ps. 1,640 million in 2019. The net profit for the year 2020 compared to the net loss
in 2019 is mainly as a result of (i) a 1% increase in the average price of steel products sold, (ii) a 3% decrease in the average cost
per ton of steel products sold, (iii) the decrease in the foreign exchange loss in 2020 to Ps. 363 million compared to Ps. 785 million
in 2019 and (iv) the decrease in the provision of income taxes in 2020 to Ps. 1,919 million compared to Ps. 3,276 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mexican Segment</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Comparison of Years Ended December 31, 2019 and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales increased 6%, to
Ps. 19,661 million in 2020 compared to Ps. 18,531 million in 2019. This increase resulted principally from a 8.8% increase in the average
price per ton of steel products in 2020 compared to 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products decreased 2.5%, to 1.332 million tons in 2020, compared to 1.367 million tons in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales increased
3.5%, from Ps. 14,935 million in 2019 to Ps. 15,459 million in 2020, which increase is mainly attributable to the increase in the average
cost per ton of steel products sold. As a percentage of net sales, our cost of sales was 79% in 2020, compared to 81% in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit increased
17%, to Ps. 4,202 million in 2020 compared to Ps. 3,596 million in 2019. This increase is attributable mainly to an increase of 9% in
the average price of steel products sold. As a percentage of net sales, our gross profit was 21% in 2020, compared to 19% in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) increased 31.7%, to Ps. 1,118 million in 2020, compared to Ps. 848 million in 2019. The increase
of Ps. 270 million were mainly expenses originated by depreciation and legal costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses as
a percentage of net sales were 6% in 2020 and 5% in 2019. Depreciation and amortization expense were Ps. 283 million in 2020 compared
to Ps. 147 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Expense (Income), Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other income,
net, of Ps. 53 million in 2020, reflecting an income related to the sale of scrap,</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other expense,
net, of Ps. 175 million in 2019, reflecting (i) an income of Ps. 3 million related to the sale of scrap, (ii) income of Ps. 6 million
for recovery of insurance companies, (iii) other expense of Ps. 130 million for debugging accounts and (iv) other expense, net, related
to other financial operations of Ps. 54 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Interest Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest income
of Ps. 107 million in 2020 compared to Ps. 146 million in 2019. This interest income corresponds mainly to affiliates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;<i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded interest expense
of Ps. 5 million in 2020, corresponding mainly to related party transactions that are eliminated in the consolidated statement of income,
compared to Ps. 3 million of interest income in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Gain (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
loss of Ps. 484 million in 2020 compared to a foreign exchange gain of Ps. 628 million in 2019; this foreign exchange reflected the 5.6%
depreciation of the Mexican peso against the dollar in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2020, we recorded an income
tax provision of Ps. 1,748 million, which included an income tax provision of Ps. 1,460 million and an income tax provision for deferred
income taxes of Ps. 288 million. In 2019, we recorded an income tax provision of Ps. 3,505 million, which included an income tax provision
of Ps. 3,492 million (includes Ps. 2,733 million of the income tax derived from a review of the Tax Administration System) (SAT) and an
income tax provision for deferred income taxes of Ps. 13 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to the Income Tax Law in Mexico, the
tax rate for 2020 and thereafter is 30%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded net income of
Ps. 1,008 million in 2020, compared to net loss of Ps. 1,412 million in 2019. This variance is attributable mainly to; (i) an increase
of 8% in the average price of steel products sold, (ii) the increase of Ps. 269 million in our administrative expenses, (iii) a foreign
exchange loss of Ps. 484 million in 2020 compared to Ps. 628 million of foreign exchange loss in 2019 and (iv) the decrease in the provision
of income taxes in 2020 to Ps. 1,748 million compared to Ps. 3,505 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USA Segment</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Comparison of Years Ended December 31, 2019
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales decreased 22%, to
Ps. 5,549 million in 2020 compared to Ps. 7,120 million in 2019. This decrease resulted principally from a decrease of 61,000 tons in
shipments of finished steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products decreased 20%, to 237,000 tons in 2020, compared to 298,000 tons in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The average price of steel
products in pesos decreased 2.1% in 2020 compared to 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales decreased
26.7%, from Ps. 7,753 million in 2019 to Ps. 5,677 million in 2020, the decrease is mainly due to a decrease of approximately 20% in tons
of shipments of finished steel products and the 8% decrease in the average cost per ton of steel products sold. Cost of sales as a percentage
of net sales was 102% in 2020, compared to 109% in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross loss was Ps. 128
million in 2020 compared to a Ps. 632 million gross loss in 2019. As a percentage of net sales, our gross loss was (2%) in 2020, mainly
attributable to a decrease of approximately 20% in tons of shipments of finished steel products and a decrease of 8%, approximately, in
the average cost per ton of steel products sold, compared to a gross loss of (9%) in 2019. The selling steel prices throughout the year
also impacted our margin since prices for steel products charged to our customers were gradually lower than our costs of raw material
purchases as a result of the time lag between the production and sales cycles.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) was Ps. 241 million in 2020, compared to Ps. 268 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative expenses as
a percentage of net sales were 4% in 2020 and 4% in 2019. Depreciation and amortization expense were Ps. 25 million in 2020 compared to
Ps. 50 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Income, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other income,
net, of Ps. 506 million in 2020, related to scrap metal sold during the period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded other income,
net, of Ps. 71 million in 2019, reflecting (i) other income, net, of Ps. 38 million for debugging accounts and (ii) other income, net,
of Ps. 33 million related to other financial operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt">We recorded an interest income of Ps. 0 million in 2020
compared to Ps. 0 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">We recorded an interest expense of
Ps. 16 million in 2020 compared to Ps. 85 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Gain (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
gain of Ps. 2 million in 2020 compared to a foreign exchange gain of Ps. 3 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2020, we recorded an income
tax profit provision of Ps. 1,528 million and an income tax profit provision for deferred income taxes of Ps. 220 million for deferred
income taxes. In 2019, we recorded an income tax profit provision of Ps. 237 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net loss</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a net profit of
Ps. 4 million in 2020, compared to a net loss of Ps. 674 million in 2019. Our net income in 2020 is attributable mainly to a decrease
in the average cost of steel tons produced This compared to 2019, which was mainly impacted due to a decrease of 61,000 tons in shipments
of finished steel products and a decrease of 8% in the average cost of steel products sold.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Brazil Segment</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Statements of Comprehensive Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Comparison of Years Ended December 31, 2019
and 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net sales increased 25% to
Ps. 10,659 million in 2020 compared to Ps. 8,520 million in 2019. This increase resulted principally from an increase of 186,000 tons
of shipments of finished steel products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shipments of finished steel
products increased to 870,500 tons in 2020 compared to 684,000 tons in 2019 (including the shipment of the new plants acquired in 2018,
Cariacica and Itauna.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The average price of steel
products in pesos decreased 1.7% in 2020 compared to 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cost of Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of sales increased
to Ps. 8,075 million in 2020 compared to Ps. 7,380 million in 2019. This increase is mainly attributable to the increase of the shipments
of finished steel products of 186,000 tons in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The average cost per ton of
steel products sold decreased 14% compared to 2019. Cost of sales as a percentage of net sales was 76% in 2020, compared to 87% in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Gross Profit</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our gross profit was Ps. 2,584
million in 2020 compared to Ps. 1,140 million of gross profit in 2019. This increase in gross profit is attributable mainly to an increase
of 186,000 tons of finished steel products shipped, a 1.7% decrease in the average price of steel products sold, and a 14% decrease in
the average cost per ton of steel products sold. As a percentage of net sales, our gross profit was 24% in 2020, compared to 13% of gross
profit in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Administrative Expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our administrative expenses
(including depreciation and amortization) were Ps. 661 million in 2020 compared to Ps. 521 million in 2019. Operating expenses as a percentage
of net sales were 6% in 2020 and 2019. Expenses for new companies acquired in 2018 increased the administrative expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Depreciation and amortization expenses were Ps.
220 million in 2020 compared to Ps. 126 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Other Expense, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded other expense, net of Ps.12 million
in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded other expense, net, of Ps. 32 million
in 2019, for debugging accounts.<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest Expense</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify">We recorded an interest expense of
Ps. 66 million in 2020 compared to Ps. 111 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 35.45pt; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Foreign Exchange Gain (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a foreign exchange
loss of Ps. 1,096 million in 2020. This foreign exchange loss reflected the 29% depreciation of the Brazilian real against the dollar
in 2020 compared to 2019 compared to a foreign exchange loss of Ps. 177 million in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Tax</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2020 we recorded an income
tax provision for deferred income taxes of Ps. 211 million compared to Ps. 8 million of income tax provision in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Income (Loss)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recorded a net income of
Ps. 537 million in 2020 compared to a net income of Ps. 291 million in 2019. The net income for the year 2020 compared to the net income
in 2019 is mainly as a result of an increase of 186,000 tons of finished steel products shipped.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Liquidity and Capital Resources</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 31, 2022, our
total consolidated debt was Ps. 5,847 million (U.S.$302,000) of 10.5% medium-term notes (&#8220;MTNs&#8221;) due 1998, which remained
outstanding after we conducted exchange offers for the MTNs in October 1997 and August of 1998. We could not identify the holders of such
MTNs at the time of the exchange offers and as a result such MTNs, which matured in 1998, have not been paid and remain outstanding.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We depend heavily on cash
generated from operations as our principal source of liquidity. Other sources of liquidity have included financing made available to us
by our parent Industrias CH (primarily in the form of equity or debt, substantially all of which was subsequently converted to equity),
primarily for the purpose of repaying third party indebtedness, as well as limited amounts of vendor financing. On February 8, 2007, we
completed a public offering of ADRs and series B shares and raised cash proceeds of approximately Ps. 2,421 million <b>(</b>U.S.$214 million).
As of December 31, 2022, we had cash and cash equivalents of Ps. 21,546 million and as of December 31, 2021 we had cash and cash equivalents
of Ps. 15,130 million. We believe that this amount of cash generated from operations will be sufficient to satisfy our currently anticipated
cash requirements, including our currently anticipated capital expenditures.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our principal use of cash
has generally been to fund our operating activities, to acquire businesses and to fund our capital expenditure programs. The following
is a summary of cash flows for the three years ended December 31, 2020, 2021 and 2022:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Principal Cash Flows</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Years ended December 31,</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
    <td colspan="10" style="text-align: center">(millions of pesos)</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: justify">Funds provided by operating activities</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">3,634</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">8,387</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">8,790</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Funds used in investing activities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(833</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,010</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(4,138</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Funds used in financing activities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(2,086</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(162</td><td style="text-align: left">)</td><td>&#160;</td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our net funds provided by
operations were Ps. 8,790 million in 2022 compared to Ps. 8,387 million of net funds provided by operations in 2021. The increase of Ps.
403 million in the net funds provided by operations between 2022 and 2021 originated mainly from operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We attribute our net funds
used in investing activities primarily to the acquisition of new facilities, property, plant and equipment and other non-current assets.
Our net funds used in investing activities were Ps. 4,138 million in 2022 compared to Ps. 1,010 million in 2021. In 2022, the acquisition
of property, plant and equipment was Ps.1,696 million, we had interest income of Ps. 446 million, we invested in short-term investments
of Ps- 2,076 million, we had a loss in financial instruments of Ps. 779 million and other non-current assets used for Ps. 33 million.
In 2021 the acquisition of property, plant and equipment was Ps.1,066 million, we had interest income of Ps. 66 million and other non-current
assets used for Ps. 9 million. Our net funds used in investing activities were Ps. 833 million in 2020 compared to Ps. 107 million in
2019. In 2020 the acquisition of property, plant and equipment was Ps.951 million, we had interest income of Ps. 108 million and other
non-current assets used for Ps. 11 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our net funds generated by
financing activities in 2022 were Ps. 2,535 million, compared to Ps. 162 million used by financing activities in 2021. In 2022, we obtained
Ps. 2,381 million in loans from related parties, there was a decrease of Ps. 90 million in the buy-back of our own shares and we paid
interest for Ps. 56 million. In 2021, there was an decrease of Ps. 74 million in the buy-back of our own shares and we paid interest for
Ps. 87 million. Our net funds used by financing activities in 2020 were Ps. 2,086 million, compared to Ps. 211 million used by financing
activities in 2019. In 2020, there was an increase of Ps. 42 million in the buy-back of our own shares, we paid dividends of Ps.1,990
and we paid interest charges of Ps. 54 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
have the following commitments:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 1, 2018, the Company
entered into an agreement with ArcelorMittal S.A. in Brazil, for the acquisition of the steel production plants in Cariacica and ltauna
and drawing equipment for the production of wires and derivatives.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Cariacica unit has the
capacity to produce 600,000 metric tons of liquid steel per year and 450,000 metric tons of rolled steel products. In 2022 and 2021, said
plant has more than 800 employees in both periods and can produce rebar and light structural sections. The factory is located in the city
of Cariacica, next to the city of Victoria, in the state of Espirito Santo, on a land of more than 1,200,000 m2.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The ltauna unit has an installed
capacity to produce 120,000 metric tons per year of rolled steel products, being able to manufacture light structural profiles and rods.
The plant is located in the city of ltauna in the state of Minas Gerais, less than 100 kilometers away from Belo Horizonte, in 2022 and
2021 it has 160 and 145 employees respectively. The factory was leased under a contract expiring in August 2020, however, upon expiration
of said contract, the purchase of the Ita&#250;na factory was formalized. With this acquisition, it is expected to have greater stability
in the market.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Republic has leased certain
equipment, office space and computer equipment under operating contracts that cannot be cancelled. These rents expired on various dates.
During the years ended December 31, 2022 and 2021, the expense related to the income from these operations amounted to USD$0.0 million
and USD$0.0 million, respectively. There are currently no additional obligations beyond 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In January 2013, Republic
entered into an agreement with EnerNOC which enables Republic to receive payments for reducing the electricity consumption during a dispatch
declared by PJM Interconnection as an emergency. The agreement is for 5 years, effective January 31, 2013 and expired on May 31, 2018.
The agreement was extended through May 31, 2022 on that date. In January 2022, Republic entered into a similar agreement with NRG Curtailment
Solutions, Inc. with a term of five years. During the years ended December 31, 2022 and 2021, Republic recognized income of Ps. 11.6 million
(U.S.$0.6 million) and of Ps. 24.6 million (U.S.$1.2 million), respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In January 2018, the Company
entered into a contract with the supplier ECOM, LTDA, for an amount of U.S.$6.3 million (Ps. 124 million) for the purchase of 10,000 MWH
of energy per month, for its subsidiary GV do Brasil Industria e Comercio de A&#231;o LTDA. The monthly payments expire 6 days after
the closing date of the month. The contract ended in February 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 22, 2018, a contract
was signed with Primetals Technologies of Italy, the United States of America and Mexico for the reconstruction of the rolling mill and
the supply of a new reheating furnace for the Mexicali plant, which will increase capacity of finished product manufacturing from 17,500
to 22,500 tons per month. As of January 2021, steel bars are already being produced. Currently, some adjustments are being made to start
the production of steel rods and steel profiles. The budget used for this project is U.S.$24 million (Ps. 492 million).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In order to maintain and increase
the continuity and quality of the electric supply in all the Group&#8217;s clans, the scheme changed from Basic Supply (SSB) to Qualified
Supply Service (SSC), with the provision of acquiring energy in the wholesale electricity market. This project only requires modernization
of the set of equipment that records the consumption measurements of the electrical substations of each plant. We are seeking to achieve
a more efficient, safe, clean and transparent electrical service and more competitive prices than our current costs. The cost of this
project has been U.S.$1.415 million, as of October 2021. The modernization of the Mexicali plan is ongoing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 20, 2020, the
purchase of the Itauna plant was made by Cia. Sider&#250;rgica de Espirito Santo, S.A. to Compa&#241;ia Itaunense Energia y Participacoes
Real Estate and Real Estate Equipment, located on Rua Clara Chaves street in Villa Santa Maria, city of Itauna, committing to pay R$ 4.0
million reais (U.S. $ 0.7 million) per month, up to a value of R$ 105.0 million reais (U.S. $18.8 million), payments made until June 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Brazil&#8217;s facilities
electric energy purchase agreements have been made with different termination dates as of June 30, 2023 with the supplier Newcom for R$9.48
million, another agreement was celebrated with ENEL for R$17.05 million, with termination date on December 31, 2023. With energy suppliers
NEWCOM for R$ 33.9 million and AMERICA for R$16.5 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2021, Republic signed an
agreement with SMS Group to purchase and build machinery in order to fulfill its contract with GV Do Brasil for the turn key project.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Research and Development, Patents and Licenses</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The San Luis facilities are
registered with the Mexican Institute of Industrial Property (&#8220;IMPI&#8221;) for the trademarks &#8220;SAN&#8221; and &#8220;Aceros
San Luis.&#8221; The trademark &#8220;Grupo Simec&#8221; is registered with the IMPI. On October 11, 2017, Simec International 6, S.A.
de C.V., concluded the registration of the patent &#8220;<i>Fabricaci&#243;n de Aceros de Mecanizado F&#225;cil con Plomo en la M&#225;quina
de Colada Continua</i>&#8221; (Manufacture of Easy Machining Steels with Lead in Continuous Casting Machine) in the IMPI.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. Trend Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the first quarter of 2023,
net sales increased by 26% as compared to the fourth quarter of 2022. Sales in tons of finished steel increased by 13% in the first quarter
of 2023 as compared to the fourth quarter of 2022. Prices of finished products sold in the first quarter of 2023 increased by approximately
12% as compared to the fourth quarter of 2022.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>E. Critical Accounting Estimates</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The discussion in this section
is based upon our consolidated financial statements, which have been prepared in accordance with IFRS. The preparation of these financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at year-end, and the reported amount of revenues and expenses during the year. Management regularly
evaluates these estimates, including those related to the carrying value of property, plant and equipment and other non-current assets,
inventories and cost of sales, income taxes, foreign currency transactions and exchange differences, liabilities for deferred income taxes,
valuation of financial instruments, obligations relating to employee benefits, potential tax deficiencies, environmental obligations,
and potential litigation claims and settlements. Management estimates are based on historical experience and various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Accordingly, actual results may differ materially from
current expectations under different assumptions or conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Management believes that the
critical accounting policies which require the most significant judgments and estimates used in the preparation of the consolidated financial
statements relate to deferred income taxes, the impairment of property, plant and equipment, impairment of intangible assets, valuation
allowance on accounts receivable and inventories obsolescence. We evaluate the recoverability of operating tax losses (NOL) carry forwards,
and only for those who have probability of being recovered is determined a deferred tax asset. The final realization of deferred tax assets
depends on the generation of taxable profits in the periods when the temporary differences are deductible. Upon carrying out this evaluation,
we considered the expected reversal of deferred tax liabilities, projected taxable profit and planning strategies. Based on the company&#8217;s
evaluation, it determined the amount of deferred tax assets that is more likely than not to be realized in the future against those taxable
profits.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We evaluate periodically the
adjusted values of our property, plant and equipment and intangible assets to determine whether there is an indication of potential impairment.
Impairment exists when the carrying amount of an asset exceeds net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds
the fair value. Assets to be disposed of are reported at the lower of the carrying amount or realizable value. Significant judgment is
involved in estimating future revenues and cash flows or realizable value, as applicable, of our property, plant and equipment due to
the characteristics of those assets. The class of our assets which most require complex determinations based upon assumptions and estimates
relates to indefinite lived intangibles including goodwill, due to the current market environment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June of 2015, Republic
Steel temporarily idled the newly constructed electric arc furnace at the Lorain, Ohio, facility in response to the severe economic downturn
in the energy exploration sector following the sharp drop in the price of oil which has led to significant market declines and demand
for product. As a consequence of this event, management determined a triggering event took place to where the long-lived assets at the
Lorain facility may not be fully recoverable. Management performed an analysis of the fair value of the Lorain facility with the assistance
of an independent valuation firm and determined the net book value exceeded the fair value by approximately U.S.$130.7 million (Ps. 2,701
million) and as such recognized an asset impairment of this amount during the year ended December 31, 2015. The fair value determination
at the Lorain facility was based on an independent valuation of the Lorain melt shop assets using the comparable match method of the market
approach. The income approach was not considered an appropriate fair value measurement due to the absence of reliable forecast data as
the facility was idled indefinitely in early 2016.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Management has no near-term
plans to restart the facility, except for the Lorain 9/10&#8221; Mill, which is in the process of being recommissioned due to market demand
for cold heading quality steel (CHQ) and special bar quality steel (SBQ). The expectation is that it will be restarted when market conditions
improve substantially, particularly in the oil and gas drilling industry. The Company continues to incur costs to maintain the temporarily
idled Lorain facility and coke, in anticipation of bringing the entire facility back on line. Restarting the facility will require
certain capital expenditures to restore the equipment to productive status. However, there remains significant uncertainty as to if and
when the facility will be restarted and the Company cannot provide any assurances that will restart the facility at all and on economically
feasible terms. During 2022 and 2021, the Company invested in certain improvements in the Lorain facility so as to be better prepared
to reactivate the plant, with USD$ 5.5 and USD$ 15.6 million recorded to construction-in-progress for the years ended December 31, 2022
and 2021, respectively. The construction in progress in the last 3 years amount to USD $27.1 million. Management expects to incur USD$
4.0 million in additional costs related to starting up the facility. The Company has property, plant and equipment with a net book value
of approximately U.S.$61.7 (Ps. 1,194.6 million), U.S.$54.6 (ps. 1,120 million) and U.S.$41.5 (Ps. 827 million) as of December 31, 2022,
2021 and 2020, respectively, pertaining to the Lorain, Ohio, facility, after recording an impairment charge of U.S. $130.7 million (Ps.
2,701 million) in 2015 (the impairment charge did not impact the cash flows as it was not a cash expenditure). Management further assessed
if there were any impairments at the Company&#8217;s other asset groups in accordance with IFRS and determined that as of December 31,
2021, no other asset groups were impaired based on current projections. No further impairment was considered necessary or appropriate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As discussed in note 9 to
our audited financial statements included elsewhere in this Annual Report, management periodically evaluates the potential degradation
of coke inventory to determine whether it remains suitable as a blast furnace input for our operations or, alternatively, should be made
available for sale to other companies using other blast furnaces. Each year we hire a third-party expert to evaluate the impairment of
coke and determine its fair value. The fair value of coke has been decreasing, as can be seen in the following table, and its valuation
is impacted by the exchange rate of the peso against the U.S. dollar:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: center; padding-bottom: 1.5pt; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
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    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; font-weight: bold; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Metric<br/>
    Tons</span></td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; width: 25%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12/31/2020</span></td><td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="vertical-align: top; width: 1%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.$</span></td><td style="vertical-align: top; width: 7%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">350.00</span></td><td style="width: 1%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2021</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: left; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sale&#160;of Coke</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12/31/2021</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Coke&#160;inventory</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">150,509</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2022</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: left; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sale&#160;of Coke</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12/31/2022</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Coke&#160;inventory</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">150,184</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><!-- Field: Rule-Page --><div style="width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">(<span style="font-size: 10pt">1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">In 2022, the applicable exchange rate was 19.36 per 1 U.S. dollar. In 2021, the applicable exchange rate was 20.52 per 1 U.S. dollar. In 2020, the applicable exchange rate was 19.93 pesos per 1 U.S. dollar. </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Market price of Furnace coke quoted by Platts &#8220;SBB STEEL MARKETS DAILY&#8221; - 66/65 CCSR - FOB N.China</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->63<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In assessing the recoverability
of the goodwill and other intangibles, we must make assumptions regarding estimated future cash flows and other factors to determine the
fair value of the respective assets. We perform an annual review in the fourth quarter of each year, or more frequently if indicators
of potential impairment exist, to determine if the carrying value of recorded goodwill is impaired. The impairment review process compares
the fair value of the reporting unit in which goodwill resides to its carrying value. We estimate the reporting unit&#8217;s fair value
based on a discounted future cash flow approach that requires estimating income from operations. In order to estimate our cash flows used
in impairment computations, we considered the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other intangible assets are
mainly comprised of trademarks, customer list and non-competition agreements. When impairment indicators exist, or at least annually for
indefinite live intangibles, we determine our projected revenue streams over the estimated useful life of the asset. In order to obtain
undiscounted and discounted cash flows attributable to each intangible asset, such revenues are adjusted for operating expenses, changes
in working capital and other expenditures as applicable, and discounted to net present value using the risk adjusted discount rates of
return. As of December 31, 2021 and 2022, there was no impairment charge to other intangible assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of the downturn
in the construction industry in Mexico during 2009 and the negative impact the downturn had on our operations mainly at the San Luis facilities,
in which goodwill resides we adjusted the key assumptions used in the valuation model. As of December 31, 2021 and 2022, there was no
impairment charge related to the San Luis facilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, the
main key assumptions used in the valuation models of the San Luis reporting unit are as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">discount rate: 14.9%; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">sales: we estimate a decrease in sales volume of approximately 10.6% in 2023, mainly attributable to a decrease in volume due to the industries&#8217; consolidation process. After 2024, no sales increases in volume terms are considered in the valuation model. For the years after 2023, we estimate only an increase in sales prices in line with estimated inflation.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If these estimates or their
related assumptions for prices and demand change in the future, we may be required to record additional impairment charges for these assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">With respect to valuation
allowance on accounts receivable, on a periodic basis management analyzes the recoverability of accounts receivable in order to determine
if, due to credit risk or other factors, some receivables may not be collected. If management determines that such a situation exists,
the book value of the non-recoverable assets is adjusted and charged to the income statement through an increase in the doubtful accounts
allowance. This determination requires substantial judgment by management. As a result, final losses from doubtful accounts could differ
significantly from estimated allowances.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We apply judgment at each
balance sheet date to determine whether the slow-moving inventory is impaired. Inventory is impaired when the carrying value is greater
than the net realizable value.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The reserve for environmental
liabilities represent the estimated environmental remediation costs that we believe are going to incur. These estimates are based on currently
available data, existing technology, the current laws and regulations and take into account the likely effects of inflation and other
economic and social factors. The time in which we could incur these costs cannot be determined reliably at this time due to the absence
of deadlines for remediation under the laws and regulations which apply to remediation costs will be made.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>New Accounting Pronouncements&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">New standards and amendments issued but not yet
effective for year ending December 31, 2022</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following new standards and amendments are
not yet effective but may have an impact on the financial statements of the Group in a future period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9744;</td><td style="text-align: justify">Amendments to IAS 1 - Classification of Liabilities as Current
or Non-current</td>
</tr></table><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160; &#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9744;</td><td style="text-align: justify">Amendments to IFRS 10 and IAS 28 - Sale or contribution of
assets between an investor and its associate or joint venture</td>
</tr></table><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160; &#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9744;</td><td style="text-align: justify">Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure
of Accounting Policies</td>
</tr></table><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160; &#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9744;</td><td style="text-align: justify">Amendments to IAS 8 - Disclosure of Accounting Policies and
Definition of Accounting Estimates</td>
</tr></table><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160; &#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9744;</td><td style="text-align: justify">Amendments to IAS 12 - Deferred tax related to assets and
liabilities arising from a single transaction</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Amendments to IAS 1 &#8216;Presentation of financial
statements&#8217; clarify requirements for the presentation of liabilities in the statement of financial position as current or non-current.
The meaning of settlement of a liability is also clarified. The amendments are applicable for annual periods commencing on or after 1
January 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Amendments to IFRS 10 &#8216;Consolidated financial
statements&#8217; and IAS 28 &#8216;Investments in associates&#8217; clarify the accounting treatment for sales or contribution of assets
between an investor and its associates or joint ventures. Where the non-monetary assets constitute a business, the investor will recognize
the full gain or loss on the sale or contribution of assets. Otherwise, the gain or loss is recognized by the investor only to the extent
of the other investor&#8217;s interests in the associate or joint venture. The amendments have been deferred until IASB has finalized
its research project on the equity method.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Amendments to Disclosure of Accounting Policies
and Definition of Accounting Estimates modify:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">IFRS 7, to clarify that information about measurement bases
for financial instruments is expected to be material to an entity&#8217;s financial statements;</td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">IAS 1, to require entities to disclose their material accounting
policy information rather than their significant accounting policies;</td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">IAS 8, to clarify how entities should distinguish changes
in accounting policies and changes in accounting estimates;</td>
</tr></table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">IAS 34, to identify material accounting policy information
as a component of a complete set of financial statements; and</td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">IFRS Practice Statement 2 Making Materiality Judgements, to
provide guidance on how to apply the concept of materiality to accounting policy disclosures.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Amendments to Deferred tax related to assets and
liabilities arising from a single transaction modify IAS 12 to clarify the accounting for deferred tax on transactions that, at the time
of the transaction, give rise to equal taxable and deductible temporary differences. In specified circumstances, entities are exempt from
recognizing deferred tax when they recognize assets or liabilities for the first time. The amendments clarify that the exemption does
not apply to transactions for which entities recognize both an asset and a liability and that give rise to equal taxable and deductible
temporary differences. This may be the case for transactions such as leases and decommissioning, restoration and similar obligations.
Entities are required to recognize deferred tax on such transactions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Standard amends IFRS 1 to require deferred
tax related to leases and decommissioning, restoration and similar obligations to be recognized by first-time adopters at the date of
transition to International Accounting Standards, despite the exemption set out in IAS 12.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At the date of issuance of
our consolidated financial statements, these new standards have not had any effect on our financial information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item&#160;6. Directors, Senior Management and
Employees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Directors and Senior Management</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Our Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors is
responsible for managing our business. Pursuant to our by-laws, the board of directors shall consist of a maximum of 21 but not less than
five members elected at an ordinary general meeting of shareholders. Our board of directors currently consists of five directors, each
of whom is elected at the annual shareholders&#8217; meeting for a term of one year with an additional period of thirty days, if a successor
has not been appointed. The board of directors may appoint provisional directors until the shareholders&#8217; meeting appoints the new
directors. Under the Mexican Securities Market Law and our by-laws, at least 25% of our directors must be independent. Under the law,
the determination as to the independence of our directors made by our shareholders&#8217; meeting may be contested by the CNBV. In compliance
with our by-laws and applicable Mexican law, our board of directors meets on a quarterly basis and resolutions adopted by a majority of
directors at the meeting are valid resolutions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Election of the Board of Directors</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At each shareholders&#8217;
meeting for the election of directors, the holders of shares are entitled pursuant to our by-laws to elect the directors. Each person
(or group of persons acting together) holding 10% of our capital stock is entitled to designate one director.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The current members of our
board of directors were nominated and elected to such position at the 2022 general meeting of shareholders as proposed by Industrias CH.
We expect that Industrias CH will be in a position to continue to elect the majority of our directors and to exercise substantial influence
and control over our business and policies and to influence us to enter into transactions with Industrias CH and affiliated companies.
However, our by-laws provide that at least 25% of our directors must be independent from us and our affiliates, and our board of directors
has passed a resolution requiring the approval of at least two independent directors for certain transactions between us and our affiliates
which are not our subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Mexican law, a majority
shareholder has no fiduciary duty to minority shareholders but may not act contrary to the interests of the corporation for the majority
shareholder&#8217;s benefit. Such a majority shareholder is required to abstain from voting on any matter in which it directly or indirectly
has a conflict of interest and can be liable for actual and consequential damages if such matter passes as a result of its vote in favor
thereof. In addition, the directors of a Mexican corporation owe a duty to act in a manner which, in their independent judgment, is in
the best interests of the corporation and all its shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors adopted
a code of ethics in December 2002.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Authority of the Board of Directors</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The board of directors is
our legal representative. The board of directors must approve, among other matters, the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our general strategy;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">annual approval of the business plan and the investment budget;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">capital investments not considered in the approved annual budget for each fiscal year;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">proposals to increase our capital or that of our subsidiaries;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">with input from the Audit Committee, on an individual basis: (i) any transactions with related parties, subject to certain limited exceptions, (ii) our management structure and any amendments thereto, and (iii) the election of our chief executive officer, his compensation and removal for justified causes; (iv) our financial statements and those of our subsidiaries, (v) unusual or non- recurrent transactions and any transactions or series of related transactions during any calendar year that involve (a) the acquisition or sale of assets with a value equal to or exceeding 5% of our consolidated assets or (b) the giving of collateral or guarantees or the assumption of liabilities, equal to or exceeding 5% of our consolidated assets, and (vi) contracts with external auditors and the chief executive officer annual report for the shareholders&#8217; meeting;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">calling shareholders&#8217; meetings and acting on their resolutions;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any transfer by us of shares in our subsidiaries;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">creation of special committees and granting them the power and authority, provided that the committees will not have the authority which by law or under our by-laws is expressly reserved for the board of directors or the shareholders;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">determining how to vote the shares that we hold in our subsidiaries; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the exercise of our general powers in order to comply with our corporate purpose.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Meetings of the board of directors
will be validly convened and held if a majority of our members are present. Resolutions at the meetings will be valid if approved by a
majority of the members of the board of directors, unless our by-laws require a higher number. The chairman has a tie-breaking vote. Notwithstanding
the board&#8217;s authority, our shareholders pursuant to decisions validly taken at a shareholders&#8217; meeting at all times may override
the board.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Duty of Care and Duty of Loyalty</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Mexican Securities Market
Law imposes a duty of care and a duty of loyalty on directors. The duty of care requires our directors to act in good faith and in the
best interests of the company. In carrying out this duty, our directors are required to obtain the necessary information from the executive
officers, the external auditors or any other person to act in the best interests of the company. Our directors are liable for damages
and losses caused to us and our subsidiaries as a result of violating their duty of care.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 71; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->67<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The duty of loyalty requires
our directors to preserve the confidentiality of information received in connection with the performance of their duties and to abstain
from discussing or voting on matters in which they have a conflict of interest. In addition, the duty of loyalty is violated if a shareholder
or group of shareholders is knowingly favored or if, without the express approval of the board of directors, a director takes advantage
of a corporate opportunity. The duty of loyalty is also violated, among other things, by (i) failing to disclose to the audit and corporate
practices committee or the external auditors any irregularities that the director encounters in the performance of his or her duties or
(ii) disclosing information that is false or misleading or omitting to record any transaction in our records that could affect our financial
statements. Directors are liable for damages and losses caused to us and our subsidiaries for violations of this duty of loyalty. This
liability also extends to damages and losses caused as a result of benefits obtained by the director or directors or third parties, as
a result of actions of such directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our directors may be subject
to criminal penalties of up to 12 years&#8217; imprisonment for certain illegal acts involving willful misconduct that result in losses
to us. Such acts include the alteration of financial statements and records.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Liability actions for damages
and losses resulting from the violation of the duty of care or the duty of loyalty may be exercised solely for our benefit and may be
brought by us, or by shareholders representing 5% or more of our capital stock, and criminal actions only may be brought by the Mexican
Ministry of Finance, after consulting with the CNBV. As a safe harbor for directors, the liabilities specified above (including criminal
liability) will not be applicable if the director acting in good faith (i) complied with applicable law, (ii) made the decision based
upon information provided by our executive officers or third-party experts, the capacity and credibility of which could not be subject
to reasonable doubt, (iii) selected the most adequate alternative in good faith or if the negative effects of such decision could not
have been foreseeable, and (iv) complied with shareholders&#8217; resolutions provided the resolutions do not violate applicable law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The members of the board are
liable to our shareholders only for the loss of net worth suffered as a consequence of disloyal acts carried out in excess of their authority
or in violation of our by-laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with the Mexican
Securities Market Law, supervision of our management is entrusted to our board of directors, which shall act through an audit and corporate
practices committee for such purposes, and to our external auditor. The audit and corporate practices committee (together with the board
of directors) replaces the statutory auditor (<i>comisario</i>) that previously had been required by the Mexican Corporations Law. See
Item 6.C. &#8220;&#8212; Committees&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
the names of the members of our board of directors and the year of their initial appointment:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; ">
    <td style="border-bottom: Black 1.5pt solid; width: 88%; font-weight: bold; text-align: justify">Name</td><td style="width: 1%; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 11%; font-weight: bold; text-align: center">Director&#160;<br/> Since</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Rufino Vigil Gonz&#225;lez</td><td>&#160;</td>
    <td style="text-align: center">2001</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Ra&#250;l Arturo P&#233;rez Trejo</td><td>&#160;</td>
    <td style="text-align: center">2003</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Luis Garc&#237;a Lim&#243;n</td><td>&#160;</td>
    <td style="text-align: center">2011</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Rodolfo Garc&#237;a G&#243;mez de Parada</td><td>&#160;</td>
    <td style="text-align: center">2001</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Alfonso Barrag&#225;n Galindo</td><td>&#160;</td>
    <td style="text-align: center">2019</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Biographical Information of our Board of Directors</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Rufino Vigil Gonz&#225;lez</i>.
</b>Mr. Vigil was born in 1948. He is currently the chairman of our board of directors and has been a member of the board of directors
since 2001. Since 1973, Mr. Vigil has been chief executive officer of Operadora de Manufacturera de Tubos, S.A. de C.V., a steel related
products corporation. From 1988 to 1993, Mr. Vigil was a member of the board of directors of a Mexican investment bank and from 1971 to
1973 he was a construction corporation manager. In December 2019, he was appointed general director.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Ra&#250;l Arturo P&#233;rez
Trejo</i></b>. Mr. P&#233;rez was born in 1959. He has been a member of our board of directors since 2003, and is an independent director
for purposes of Mexican law, and is the chairman of our Audit Committee. Mr. P&#233;rez has also served since 1992 as the chief financial
officer of a group that produces and sells structural steel racks for warehousing, aluminum and other industrial storage.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->68<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Luis Garc&#237;a Lim&#243;n</i></b>.
Mr. Garc&#237;a was born in 1944. He was our chief executive officer and is still a member of our board of directors since 2011. From
1982 to 1990 he was general director of Compa&#241;&#237;a Sider&#250;rgica de Guadalajara, S.A. de C.V. (&#8220;<span style="text-decoration:underline">CSG</span>&#8221;),
from 1978 to 1982 he was Operation Director of CSG, from 1974 to 1978 he was general manager of Moly Cop and Pyesa, and from 1969-1974
he was Engineering Manager of CSG. In addition, from 1967 to 1969 Mr. Garc&#237;a was the director of electrical installation of a construction
company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Rodolfo Garc&#237;a
G&#243;mez de Parada</i></b>. Mr. Garc&#237;a was born in 1953. He has been a member of our board of directors since 2001 and is an
independent director for purposes of Mexican law. He has been the tax advisor of Industrias CH since 1991 and also serves as member of
the board of directors of a group of retail stores since 1990.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Alfonso Barrag&#225;n
Galindo</i>. </b>Mr. Barrag&#225;n was born in 1953. He is an independent director for purposes of Mexican law and has been appointed
to our board of directors and the Audit Committee in 2019. Mr. Barrag&#225;n is a labor lawyer and since 1978 has worked at La Comer,
a group of self-service stores for which he is the Director of the Legal Department since 2016.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Executive Officers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
the names of our executive officers, their current position with us and the year of their initial appointment to that position.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom; ">
    <td style="border-bottom: black 1.5pt solid; width: 35%"><span style="font-size: 10pt"><b>Name</b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 35%; text-align: center"><span style="font-size: 10pt"><b>Position</b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 28%; text-align: center"><span style="font-size: 10pt"><b>Position<br/>
Held Since&#160;</b></span></td>
    </tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="text-align: justify"><span style="font-size: 10pt">Rufino Vigil Gonz&#225;lez</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Chief Executive Officer</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">2019</span></td>
    </tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify"><span style="font-size: 10pt">Mario Moreno Cortez</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Finance Coordinator</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">2012</span></td>
    </tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="text-align: justify"><span style="font-size: 10pt">Armando Rueda Granados</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Chief Operating Officer</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">2021</span></td>
    </tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Rufino Vigil Gonz&#225;lez</i>.
</b>Mr. Vigil was born in 1948. He is currently the chairman of our board of directors and has been a member of the board of directors
since 2001. Since 1973, Mr. Vigil has been chief executive officer of Operadora de Manufacturera de Tubos, S.A. de C.V., a steel related
products corporation. From 1988 to 1993, Mr. Vigil was a member of the board of directors of a Mexican investment bank and from 1971 to
1973 he was a construction corporation manager. In December 2019 he was appointed general director for Simec.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Mario Moreno Cortez.
</i></b>Mr. Moreno was born in 1968. He is currently our Finance coordinator. From 1998 to 2010, he was the general accountant within
the main subsidiaries of Grupo Simec. Previously Mr. Moreno worked in various departments of the financial area within certain of our
principal subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Armando Rueda Granados</i>.
</b>Mr. Rueda was born in 1965. He is currently our chief operating officer. From 1998 to 2017, he has been working in several operational
departments, like machining and laminations. From 2017 to 2021, he worked as operational controller.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our chief executive officer
and executive officers are required, under the Mexican Securities Market Law, to act for our benefit and not that of a shareholder or
group of shareholders. Our chief executive is required, principally, to (i) implement the instructions of our shareholders&#8217; meeting
and our board of directors, (ii) submit to the board of directors for approval the principal strategies for the business, (iii) submit
to the Audit Committee proposals for the systems of internal control, (iv) disclose all material information to the public and (v) maintain
adequate accounting and registration systems and mechanisms for internal control. Our chief executive officer and our executive officers
will also be subject to liability of the type described above in connection with our directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Role of Mr. Sergio Vigil Gonz&#225;lez:</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mr. Sergio Vigil Gonz&#225;lez
is the chief executive officer of Industrias CH, which, together with its wholly-owned subsidiaries, currently hold approximately 1% of
our series B shares. Mr. Vigil also functions in a senior management role for the Company, although he holds no formal title at the Company.&#160;In
this function, Mr. Vigil directs business strategies for the Company, negotiates potential acquisitions and directs intercompany loans,
among other things.&#160;Our board of directors is aware of Mr. Vigil&#8217;s role at the Company and he is formally authorized by specific
authority on a case-by-case basis of our board of directors as a signatory of the Company. For example, in May 2018, Mr. Sergio Vigil
executed contracts on behalf of the Company with respect to the acquisition and lease transfer of two plants in Brazil from Arcelor Mittal
Brasil, S.A. Mr. Vigil does not receive any compensation for his role. Mr. Vigil is the brother of our controlling shareholder and chairman
of our board of directors, Rufino Vigil Gonz&#225;lez.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The business address of our
directors and executive officers is our principal executive headquarters.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Compensation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the years ended December
31, 2022 and 2021, we paid no fees to our five directors, and the aggregate compensation our executive officers earned was approximately
Ps. 120.1 million and Ps. 78.3 million, respectively. We do not provide pension, retirement or similar benefits to our directors in their
capacity as directors. Our executive officers are eligible for retirement and severance benefits required by Mexican law on the same terms
as all other employees, and we do not separately set aside, accrue or determine the amount of our costs that is attributable to executive
officers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Board Practices</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As described in Item 6.A above,
our board of directors is responsible for managing our business. The current members of our board of directors were elected to such position
at our annual ordinary shareholders&#8217; meeting held on April 25, 2022, for a term of one year. None of our directors or executive
officers are entitled to benefits upon termination under their service contracts with us, except for what is due to them according to
the Mexican Federal Labor Law <i>(Ley Federal del Trabajo)</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Committees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our by-laws provide for an
audit and corporate practices committee to assist the board of directors with the management of our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Audit and Corporate Practices Committee</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our audit and corporate practices
committee (&#8220;Audit Committee&#8221;) is governed by our by-laws and Mexican law. Our by-laws provide that the audit and corporate
practices committee shall be at least three members, all of which must be independent directors. The chairman of the audit and corporate
practices committee is elected by our shareholders&#8217; meeting, and the board of directors appoints the remaining members.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The audit and corporate practices
committee is currently composed of three members. Ra&#250;l Arturo P&#233;rez Trejo was appointed as chairman of the audit and corporate
practices committee at our annual ordinary shareholders&#8217; meeting held on April 25, 2022, and Alfonso Barrag&#225;n Galindo and
Rodolfo Garc&#237;a G&#243;mez de Parada were re-elected as members. Ra&#250;l Arturo P&#233;rez Trejo has been ratified as the
&#8220;audit committee financial expert.&#8221; In accordance with the by-laws of Grupo Simec, the Audit and Corporate Practices Committee
is made up exclusively of independent directors and a minimum of 3 members. The Chairman of said Committee is appointed by the Shareholders&#8217;
Meeting, and the rest of its members may be appointed by the Board of Directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The audit and corporate practices
committee is responsible, among others, for (i) supervising our external auditors and analyzing their reports, (ii) analyzing and supervising
the preparation of our financial statements, (iii) informing the board of our internal controls and their adequacy, (iv) requesting reports
of our board of directors and executive officers whenever it deems appropriate, (v) informing the board of any irregularities that it
may encounter, (vi) receiving and analyzing recommendations and observations made by the shareholders, members of the board, executive
officers, our external auditors or any third party and taking the necessary actions, (vii) calling shareholders&#8217; meetings, (viii)
supervising the activities of our chief executive officer, (ix) providing an annual report for the annual shareholders&#8217; meeting,
(x) providing opinions to our board of directors, (xi) requesting and obtaining opinions from independent third parties and (xii) assisting
the board in the preparation of annual reports and other reporting obligations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The chairman of the audit
and corporate practices committee, shall prepare an annual report for the annual shareholders&#8217; meeting with respect to the findings
of the audit and corporate practices committee, which shall include (i) the status of the internal controls and internal audits and any
deviations and deficiencies thereof, taking into consideration the reports of external auditors and independent experts, (ii) the results
of any preventive and corrective measures taken based on results of investigations in respect of non-compliance of operating and accounting
policies, (iii) the evaluation of external auditors, (iv) the main results from the review of our financial statements and those of our
subsidiaries, (v) the description and effects of changes to accounting policies, (vi) the measures adopted as result of observations of
shareholders, directors, executive officers and third parties relating to accounting, internal controls, and internal or external audits;
(vii) compliance with shareholders&#8217; and directors&#8217; resolutions; (viii) observations with respect to relevant directors and
officers; (ix) the transactions entered into with related parties; and (x) the remuneration paid to directors and officers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our audit and corporate practices
committee met at least quarterly in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. Employees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
had 5,092 employees (3,066 were employed at our Mexico facilities, of whom 1,408 were unionized, 625 were employed at Republic facilities,
of whom 465 were unionized and 1,401 were employed at our Brazil plants, of whom 1,315 were unionized) compared to 5,331 employees (3,177
were employed at our Mexico facilities, of whom 1,524 were unionized, 815 were employed at Republic facilities, of whom 620 were unionized
and 1,339 were employed at our Brazil plants, of whom 1,248 were unionized) in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The unionized employees in
each of our Mexican facilities are affiliated with different unions. Salaries and benefits of our Mexican unionized employees are determined
annually and biannually, respectively, through collective bargaining agreements. Set forth below is the union affiliation of the employees
of each of our Mexican facilities and the expiration date of the current collective bargaining agreements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Guadalajara facilities: </i>Sindicato de Trabajadores en la Industria Sider&#250;rgica y Similares en el Estado de Jalisco. The contract expires on February 14, 2024.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Mexicali facilities</i>: Sindicato de Trabajadores de la Industria Procesadora y Comercializaci&#243;n de Metales de Baja California. The contract expires on March 1, 2025.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Apizaco facilities</i>: Sindicato Nacional de Trabajadores de Productos Met&#225;licos, Similares y Conexos de la Rep&#250;blica Mexicana. The contract expires on April 1, 2023.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Cholula facilities</i>: Sindicato Industrial &#8220;Acci&#243;n y Fuerza&#8221; de Trabajadores Metal&#250;rgicos Fundidores, Mec&#225;nicos y Conexos CROM del Estado de Puebla. The contract expires on January 31, 2024.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 47px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>San Luis facilities</i>: At the Aceros San Luis facility: Sindicato de Empresas adherido a la CTM, the contract expires on January 15, 2024; and at the Aceros DM facility: Sindicato de Trabajadores de la Industria Metal Mec&#225;nica, Similares y Conexos del Estado de San Luis Potos&#237; CTM, the contract expires on January 24, 2024.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have had good relations
with the unions in our facilities. The collective bargaining agreements are renegotiated every two years, and wages are adjusted every
year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Republic is the only subsidiary
of the Group which offers other benefits and pension plans to their employees. Republic&#8217;s benefit plans to its employees are described
below.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Collective Bargaining Agreements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, 74%
of Republic&#8217;s workers are covered by a collective bargaining agreement with the United Steelworkers (USW) that was extended in August
2019 through August 15, 2022.&#160; The extended agreement renews all the provisions, understandings and agreements set forth in the January
1, 2012 Basic Labor Agreement. During 2022, the Company negotiated a labor agreement with the USW for the period August 16, 2022 through
August 15, 2027. The extended agreement provides that the Company&#8217;s quarterly contributions to fund the Republic Retirement VEBA
Benefit Trust (the &#8220;Benefit Trust&#8221;) be reduced from U.S.$2.6 million (Ps. 50 million) to U.S.$0.25 million (Ps. 4.8 million)
beginning in August 15, 2016. Effective August 16, 2019, the extended agreement provides for profit sharing contributions based on the
Company&#8217;s quarterly pretax income, as defined in the labor agreement (&#8220;EBT&#8221;): 3% of EBT between $0 and $50 million per
quarter and 4% of EBT over $50 million per quarter. Effective August 16, 2022, the Company shall not be required to make contributions
to the Benefit Trust. Starting July 1, 2027, the Company&#8217;s required contribution will be $4.00 per hour worked by USW represented
employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the Mexican operations,
approximately 46% of the employees are under collective bargaining agreements, which expire as described above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the Brazil operations,
approximately 94% of the employees are under collective bargaining agreements, with <i>Sindicato dos Metal&#250;rgicos de Pindamonhangaba,
Moreira C&#233;sar e Roseira afiliado a CUT</i>, which expires on August 31, 2020 (plant in Pindamonhangaba<i>)</i> and <i>Sindicato
dos Trabalhadores nas Industrias Metal&#250;rgicas, Mec&#226;nicas, de Material El&#233;trico e Eletr&#244;nico do Estado do Espirito
Santo </i>(plant in Cariacica<i>), </i>which expires on September 30, 2023<i>.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Defined Contribution Plans</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Steelworkers Pension Trust</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Republic participates in the
Steelworkers Pension Trust (SPT), a defined benefit multi-employer pension plan. While this plan provides defined benefits as a result
of lack of information, the Company accounts for the plan as a defined contribution plan. Specifically, the plan does not maintain accounting
records for purposes of IFRS presentation and does not provide enough information to allocate amounts between participating employers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&#8217;s obligations
to the plan are based upon fixed contribution requirements. The Company contributes a fixed dollar amount of U.S.$1.68 (Ps. 32.5) per
hour for each covered employee&#8217;s contributory hours, as defined under the plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Participation in a multi-employer
pension plan agreed to under the terms of a collective bargaining agreement differs from a traditional qualified single employer defined
benefit pension plan. The SPT shares risks associated with the plan in the following respects:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">-</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Contributions to the SPT by the Company may be used to provide benefits to employees of other participating employers;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 21, 2011, the Board
of Trustees of the SPT elected funding relief which has the effect of decreasing the amount of required minimum contributions in near-term
years, but will increase the minimum funding requirements during later plan years. As a result of the election of funding relief, the
SPT&#8217;s zone funding under the Pension Protection Act may be impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the funding
relief election, the Board of Trustees also elected a special amortization rule, which allows the SPT to separately amortize investment
losses incurred during the SPT&#8217;s December 31, 2008 plan year-end over a 29 year period, whereas they were previously required to
be amortized over a 15 year period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Republic&#8217;s participation
in the SPT for the annual periods ended December 31, 2022 and 2021, is outlined in the table below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: justify"><b>&#160;</b></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td>
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                                            in thousands)&#160;</b></p></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td><td style="font-weight: bold; padding-bottom: 1.5pt"><b>&#160;</b></td>
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    <td style="text-align: center"><b>Expiration of Collective<br/>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Agreement</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: justify">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-align: center; width: 7%">No</td><td style="text-align: center; width: 1%; vertical-align: top">&#160;</td>
    <td style="white-space: nowrap; vertical-align: top; text-align: center; width: 12%">August 15, 2027</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">(a)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The zone status is based on information that Republic received from the plan and is certified by the plan&#8217;s actuary. Among other factors: plans in the green zone are at least 80% funded, plans in the yellow zone are less than 80% funded, and plans in the red zone are less than 65% funded.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">(b)</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">(c)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Indicates whether there were charges to Republic from the plan.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">Republic has not been listed
in the plans&#8217; Forms 5500 as providing more than five percent of the total contributions for any plan years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">There have been no significant
changes that affect the comparability of 2022 and 2021 contributions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>VEBA Benefit Trust</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">Republic is required to
make quarterly contributions to the VEBA Benefit Trust as determined by the terms of the USW collective bargaining agreement. The VEBA
Benefit Trust is a health and welfare plan for USW retiree healthcare benefits and is not a &#8220;qualified&#8221; plan under the regulations
of the Employee Retirement Income Security Act of 1974 (ERISA). Under the terms of the extended collective bargaining agreement referred
to above, the Benefit Trust contributions have been reduced from U.S.$2.6 million (Ps. 53.3 million) to U.S.$0.25 million (Ps. 5 million)
million per quarter, effective August 16, 2016. Effective August 16, 2019, the extended agreement provides for profit sharing contributions
based on the Company&#8217;s quarterly pretax income, as defined in the labor agreement (&#8220;EBT&#8221;): 3% of EBT between $0 and
$50 million per quarter and 4% of EBT over $50 million per quarter. Effective July 1, 2022, the Company&#8217;s contribution to the Benefit
Trust will be $4.00 per hour worked by USW represented employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">For the years ended December
31, 2022 and 2021, the Company recorded expenses of Ps. 5.8 million (U.S.$0.3 million) and Ps. 10.2 million (U.S.$0.5 million), respectively,
related to the Benefit Trust.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">Republic recorded combined
expenses of Ps. 36.8 million (U.S.$1.9 million) and Ps. 51.3 million (U.S.$2.5 million) for the years ended December 31, 2022 and 2021,
respectively, related to the funding obligations of the Benefit Trust and SPT.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>401(k) Plans</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">Republic has a defined contribution
401(k) retirement plan that covers substantially all salaried and nonunion hourly employees. This plan is designed to provide retirement
benefits through company contributions and voluntary deferrals of employees&#8217; compensation. The Company funds contributions to this
plan each pay period based upon the participant&#8217;s age and service as of January&#160;first of each year. The amount of the Company&#8217;s
contribution is equal to the monthly base salary multiplied by the appropriate percentage based on age and years of service. The contribution
becomes 100% vested upon completion of three years of vesting service. In addition, employees are permitted to make contributions into
a 401(k) retirement plan through payroll deferrals. The Company provides a 25.0% matching contribution for the first 5.0% of payroll that
an employee elects to contribute. Employees are 100% vested in both their and the Company&#8217;s matching 401(k) contributions. For the
years ended December 31, 2022 and 2021, the Company recorded expense of Ps. 21.3 million <b>(</b>U.S.$1.1&#160;million) and Ps. 20.5 million
<b>(</b>U.S.$1&#160;million), respectively, related to this defined contribution retirement plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">Employees who are covered
by the USW labor agreement are eligible to participate in the defined contribution 401(k) retirement plan through voluntary deferrals
of employees&#8217; compensation. There are no Company contributions or employer matching contributions relating to these employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Profit Sharing Plans and Incentive Compensation
Plans</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The labor agreement includes
a profit sharing plan to which Republic is required to contribute. The extended agreement modified the plan to the following quarterly
pretax income, as defined in the labor agreement (&#8220;EBT&#8221;): 3% of EBT between $0 and $25 million per quarter; 4% of EBT between
$25 and $75 million per quarter; and 5% of EBIT over $75 million per quarter. For the years ended December 31, 2022 and 2021, the Company
recorded expenses of $0.3 and $0.5 million related to the profit sharing plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.45pt">Republic has a profit sharing
plan for all salaried and nonunion hourly employees. During 2022 and 2021, the profit sharing plan was based upon achieving certain inventory
and shipment targets. No expense was recorded during the year ended December 31, 2022 and a expense of $0.5 million in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>E. Share Ownership</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Industrias CH and its direct
wholly-owned subsidiaries currently hold approximately 76% of our series B shares. At April 28, 2023, Rufino Vigil Gonz&#225;lez, the
chairman of our board of directors, owned, directly or indirectly, approximately 63% of the shares of Industrias CH. Other than Mr. Rufino
Vigil, each director and member of senior management beneficially owns less than 1% of our series B shares. In addition, see Item 7.A.
&#8220;Major Shareholders&#8221; for the beneficial share ownership of Industrias CH.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_009"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item&#160;7. Major Shareholders and Related
Party Transactions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Major Shareholders</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of April 26, 2023, we had
462,032,883 shares of series B common stock outstanding. Based on information available to us, we believe that, other than as described
below, our officers and directors do not beneficially own any series B shares or ADSs. Accordingly, on an individual basis, and as a group,
our directors and executive officers beneficially owned less than one percent of any class of our shares. None of our directors or officers
holds any options to purchase series B shares, ADSs or preferred shares. Prior to June 2002, our capital stock also included series A
shares. On June 5, 2002, we converted all of our series A shares to series B shares on a one-for-one basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Industrias CH and its direct
wholly-owned subsidiaries currently hold approximately 76.19% of our series B shares. At April 28, 2023, Rufino Vigil Gonz&#225;lez,
the chairman of our board of directors, owned, directly or indirectly, approximately 63.3% of Industrias CH.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our major shareholders do
not have voting rights different from the rights of our other shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->74<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table shows
the ownership of our series B shares as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: justify">Name of Shareholder</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number of<br/> shares<br/> owned</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">% of<br/>
 shares<br/> owned</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: justify">Industrias CH, S.A.B. de C.V</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">275,369,337</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">55.3</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify"><span style="font-size: 10pt">Tuber&#237;as Procarsa, S.A. de C.V. <sup>(1)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">99,461,866</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">20.0</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">Aceros y Laminados Sigosa, S.A. de C.V. <sup>(1)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4,377,776</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.9</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify"><span style="font-size: 10pt">Joist Estructuras, S.A. de C.V. <sup>(2)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">6,188,406</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.2</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">Industrial de Herramientas CH, S.A. de C.V. <sup>(2)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,240,628</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.5</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Public Investors</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">74,497,875</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">15.0</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 1.5pt">Treasury Shares</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">35,573,326</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">7.1</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">497,709,214</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">100</td><td style="padding-bottom: 4pt; text-align: left">%</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">A subsidiary of Industrias CH.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Companies directly or indirectly owned by members of the Vigil family.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At April 26, 2023, 462,032,883
series B common shares were held in Mexico by approximately 45 shareholders who were record holders in Mexico (several shareholders were
not disclosed due to confidentiality) and 12 were ADR record holders in the United States of America. The ADR represent 1,622,691 series
B common shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Related Party Transactions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have engaged from time
to time in a number of transactions with certain of our shareholders and companies that are owned or controlled, or are under common control,
directly or indirectly, by our controlling shareholder, Industrias CH, S.A.B. de C.V., or its affiliates and/or the Vigil family. These
transactions were made on terms that we believe were not less favorable than those obtainable on an arm&#8217;s-length basis. See Note
20 to our consolidated financial statements included herein for additional information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Loans to Related Parties</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our related party transactions
include loans made to the following related parties: Perfiles Comerciales Sigosa, S.A. de C.V. (&#8220;Sigosa&#8221;), Industrias CH,
Proyectos Comerciales el Ninzi, S.A. de C.V. (&#8220;Ninzi&#8221;), Operadora Compa&#241;&#237;a Mexicana de Tubos S.A de C.V., Compa&#241;&#237;a
Manufacturera de Tubos, S.A. de C.V. and Compa&#241;&#237;a Laminadora Vista Hermosa, S.A. de C.V.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Sigosa Loan</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2016, we entered into a
loan arrangement with Sigosa, a subsidiary of Industrias CH. The purpose of the loan was to provide funding in connection with a strategic
joint venture in the seam-welded tube business line between Tuber&#237;as Procarsa, S.A. de C.V. (&#8220;Procarsa&#8221;), a subsidiary
of Industrias CH, and Quality Tube, S.A. de C.V. The funding was provided to Procarsa through a series of intercompany loans amongst subsidiaries
of Industrias CH. The loan to Sigosa was memorialized under a current account agreement, dated as of November 30, 2016. The current account
agreement provided that the term of the loan was indefinite but could be terminated by either party upon 30 day&#8217;s written notice.
In addition, the current account agreement provided that amounts advanced under the agreement would bear interest at the Interbank Interest
Rate of Equilibrium (TIIE) (<i>Tasa de Inter&#233;s Interbancaria de Equilibrio</i>) plus 1%, and that interest will accrue and be payable
upon the final repayment and termination of the loan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2017, the
outstanding balance was Ps. 806.4 million, consisting of outstanding principal of Ps. 721.4, and accrued interest of Ps. 85.0 million
(consisting of accrued interest of Ps. 24.6 million in 2016 and Ps. 60.4 million in 2017). As of December 31, 2018, the outstanding balance
of the loan was Ps. 579.0 million, resulting from payments in the amount of Ps. 297.0 million during 2018, plus an adjustment of Ps. 4.0
million related to the conversion from U.S. dollars to pesos, plus accrued interest in 2018 of Ps. 65.6 million. During 2019, payments
of U.S.$428,367 were received, resulting in a balance pending collection of U.S.$142,268, as of December 31, 2019. In the event that Sigosa
fails to repay the outstanding balance, it will be paid by Industrias CH. As of December 31, 2022, there is a balance pending collection
derived from loan interest for $145,910 (USD $7,536,068), (balance pending collection as of December 31, 2021 $154,605).&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Ninzi Loan</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2016, we entered
into a loan arrangement with Proyectos Comerciales el Ninzi, S.A. de C.V., a subsidiary of Controladora VG, S.A. de C.V. (&#8220;CVG&#8221;)
and an affiliate of the Company. CVG is a holding company that is 100% owned by the members of the Vigil family, and is controlled by
Mr. Rufino Vigil, chairman of our board of directors. In 2016, we advanced net proceeds of Ps. 1,549.4 million to Ninzi to facilitate
the acquisition of companies engaged in the seam-welded tube business line. As of December 31, 2016, the outstanding balance of the loan
was Ps. 1,571.0 million, which included Ps. 18.9 million of accrued interest and Ps. 2.8 million of value added tax. As of December 31,
2017, the outstanding balance of the loan was Ps. 1,695.9 million, which included Ps. 124.9 million of accrued interest. As of December
31, 2018, the balance of the outstanding loan was Ps. 376.8 million, as a result of Ps. 1,455.1 million in loan payments made by Ninzi
to the Company, offset by accrued interest of Ps. 136.0 million. Interest on this loan is charged at the Interbank Interest Rate of Equilibrium
(TIIE) (<i>Tasa de Inter&#233;s Interbancaria de Equilibrio</i>) plus 1% and will accrue and become payable upon the final repayment
and termination of the loan. While certain negotiations and due diligence of acquisitions were ongoing, Ninzi used the loan proceeds to
purchase an aggregate amount of 29,007,216 shares of series B common stock in the Mexican open market. The value of the shares purchased
by Ninzi increased, resulting in an unrealized gain of Ps. 125.3 million. After adding interest and taxes payable, Ninzi paid the Company
Ps. 165.1 million in 2018 to provide us with the benefit of the unrealized gain. As of December 31, 2018, Ninzi did not own any series
B common shares of the Company. In 2018, we had loans and collection interests with Proyectos Comerciales el Ninzi, S.A. de C.V., which
were liquidated in 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Other Loans to Related Parties</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2017, we made two loans
to Industrias CH. The first loan was for U.S.$21.4 million and accrues interest at a rate of LIBOR plus 1%. The second loan was for Ps.
89.4 million and accrues interest at a rate of TIIE plus 1%. Interest will accrue and be paid upon the final repayment and termination
of the loans. In 2018, we made two additional loans to Industrias CH. The first loan was for U.S.$25.4 million and accrues interest at
a rate of TIIE plus 1%. The second loan was for Ps. 186.7 million and accrues interest at a rate of TIIE plus 1%. Interest will accrue
and be paid upon the final repayment and termination of the loans. The agreed interest rate 2019 for these loans is the equivalent of
the Interbank interest rate plus 1 percentage point. These loans were granted in U.S. dollars and pesos. In January 1, 2022, an agreement
was signed to leave the outstanding loan amount in Mexican pesos. As of December 31, 2022, the outstanding amount, including interest,
was Ps. 959,153, and as of December 31, 2021, the outstanding amount was Ps. 858,510. In pesos $707,851 plus interest of $215,357, plus
VAT of 33,945, resulting in a total of $959,153 (as of December 31, 2021, the loan was $186,752 plus interest of $59,054, plus VAT of
$9,449, resulting in a total of $255,255).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2018, the Company entered
into a loan agreement with Operadora Compa&#241;&#237;a Mexicana de Tubos S.A de C.V. for U.S.$1.9 million. The principal balance
accrued interest at a rate of LIBOR plus 1%. The outstanding principal and accrued interest on this loan was paid in full in May 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2018, the Company entered
into a loan agreement with Compa&#241;&#237;a Manufacturera de Tubos, S.A. de C.V. for U.S.$2.2 million. The principal balance accrued
interest at a rate of LIBOR plus 1%. The outstanding principal and accrued interest on this loan was paid in full in May 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2018, the Company entered
into a loan agreement with Compa&#241;&#237;a Laminadora Vista Hermosa, S.A. of C.V. for U.S.$9.3 million. The principal balance accrued
interest at a rate of LIBOR plus 1%. The outstanding principal and accrued interest on this loan was paid in full in May 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->76<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company entered a loan
agreement with Perfiles Comerciales Sigosa, S.A. of C.V.. The principal balance accrued interest. The outstanding principal and accrued
interest on this loan was Ps. 145,910 as of December 31, 2022, and as of December 31, 2021, the outstanding amount was Ps. 154,605.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Loans from Related Parties</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have also received loans
from related parties for the purpose of financing acquisitions, debt redemptions, and bank loan amortization and interest payments. These
related party transactions include loans received from the following related parties: Industrias CH, S.A.B. de C.V., Tuberias Procarsa,
S.A. de C.V., Procarsa Tube and Pipe Co. and Pytsa Industrial de M&#233;xico, S.A. de C.V. These loans were primarily received in U.S.
dollars, in an aggregate amount of approximately U.S.$50.0 million. The term of the loans was indefinite and they all accrued interest
at a rate of 0.25% per annum. As of December 31, 2017, the outstanding balances of the loans (translated to pesos) were as follows: Industrias
CH, S.A.B. de C.V. in the amount of Ps. 226.8 million, Tuberias Procarsa, S.A. de C.V. in the amount of Ps. 591.8 million, Procarsa Tube
and Pipe Co. in the amount of Ps. 59.6 million and Pytsa Industrial de M&#233;xico, S.A. de C.V. in the amount of Ps. 102.6 million.
As of December 31, 2022, we have a loan from Operdaora de Perfiles Sigosa, S.A. de C.V. in the amount of Ps. 2,381 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Purchases and Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From time to time, we purchase
and/or sell steel products, primarily &#8220;billet,&#8221; to Industrias CH and its affiliates. In 2020, 2021 and 2022 such purchases
totaled, Ps. 0 million, Ps. 0 million, and Ps. 81,754 million, respectively. In addition, in 2020, 2021 and 2022 we sold Ps. 0 million,
Ps. 0 million and Ps. 157,134 million of steel products to Industrias CH and its affiliates, respectively. We believe that terms of these
transactions were not less favorable than terms that would be available on an arm&#8217;s-length basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, we
have accounts payable corresponding to the purchase of finished products from the following related parties: Ferrovisa, S.A. de C.V. in
the amount of Ps. 7.1 million, Aceros y Laminados Sigosa, S.A. de C.V. in the amount of Ps.24.5 million, Industrias CH in the amount of
Ps. 245.4 million, Operadora de Perfiles Sigosa, S.A. de C.V. in the amount of Ps. 2.8 million, Operadora Pytsa Industrial, S.A. de C.V.
in the amount of Ps. 8.4 million, Perfiles Comerciales Sigosa, S.A. de C.V. in the amount of Ps. 3.8 million, Compania Manufacurera de
Tubos, S.A. de C.V. in the amount of Ps. 9.8 million, Compania Laminadora Vista Hermosa, S.A. de C.V. in the amount of Ps. 0.5 million,
Operadora Compa&#241;&#237;a Mexicana de Tubos, S.A. de C.V. in the amount of Ps.7.6 million and other related parties in the amount
of Ps.1.1 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Service Agreements</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have service agreements
with Industrias CH and certain of its affiliates, pursuant to which Industrias CH and its affiliates provide administrative, business,
financial and legal services to us and our subsidiaries. The term of the service agreements are indefinite. We make payments to Industrias
CH on a monthly basis. Under the service agreement, in 2020, 2021 and 2022, we paid Ps. 199 million, Ps. 113 million and Ps. 121 million,
respectively, to Industrias CH.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Interests of Experts and Counsel</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item&#160;8. Financial Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Consolidated Statements and Other Financial
Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">See Item 18. &#8220;Financial
Statements&#8221; and &#8220;Index to Financial Statements.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Legal Proceedings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Mexico</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 19, 2017, we received
a letter issued by the General Director of Crimes and Sanctions of the <i>Comisi&#243;n Nacional Bancaria y de Valores</i> (National
Banking and Securities Commission) (the &#8220;CNBV&#8221;), notifying us that certain actions in connection with the repurchase of our
own shares could be contrary to the provisions of the <i>Ley del Mercado de Valores</i> (Securities Market Law) (the &#8220;LMV&#8221;).
In December 2017, the General Direction of Crimes and Sanctions of the CNBV fined the Company with the amount of Ps. 545,000. Grupo Simec
appealed for reconsideration before the CNBV itself, which was favorable to Grupo Simec in 2018, and the fine was left without effect.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year 2018, Grupo
Simec and some of its subsidiaries have been audited by the tax authorities of Mexico with respect to fiscal years from 2013 to 2017.
The tax which the authority pretends to impose are non-existent taxes, which we have been litigating through various means including &#8220;amparo&#8221;,
lawsuits, resources of revocation in some cases and nullity lawsuit in others. As of December 31, 2018, the payment has not been enforceable
in any of the disputed matters. The amount of tax credits being appealed in court ascends to $5,880 million. During 2020 and 2019 financial
years, some of the Simec Group subsidiaries that have oversight acts affected tax payments and expenses through Remedial Agreements signed
between the companies and the Tax Administration Service (SAT) during the aforementioned years for an amount of $554.4 and $2,323.7 million.
All lawsuits regarding the tax credits were solved, the amount was $5,880 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The tax authorities in Mexico
have the right to review the previous five years and could determine differences in taxes payable, plus corresponding adjustments, interest
and fines.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 6, 2021, a preliminary
dumping rate of 66.7% was imposed on our exports of rebar to the United States of America; following the U.S. Department of Commerce&#8217;s
physical review carried out at our San Luis Potos&#237; plant, arguing deficiencies and adverse facts during the information process.
Such dumping rate was ratified on June 1, 2022. A preliminary dumping rate of 6.35% was imposed and will be ratified in the first half
of 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>United States of America and Canada</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 13, 2017, the
SEC notified us that it was conducting an informal, and non-public, inquiry into the Company in connection with our internal controls.
After cooperating with the SEC, we settled certain internal controls charges with the SEC on January 29, 2019. We agreed to retain an
independent consultant to remediate our material weaknesses and to pay a civil monetary penalty in the amount of U.S.$200,000.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Related to the agreement signed
on December 14, 2018, with the SEC to correct 4 internal control weaknesses reported in the 20-F form of 2018, the international firm
Protiviti was hired as independent consultant to assess the implemented internal controls, to ensure that transactions made are correctly
recorded in accordance with Mexican and other countries laws, where the company operates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with a sales
and use tax audit by the Ohio Department of Taxation covering the period from January 1, 2009 through December 31, 2012, an assessment
of U.S.$2.5 million (Ps. 47.2 million) (including interest of $0.4 million, Ps. 7.6 million) was issued against Republic on December 9,
2016.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Republic also received an
appraisal notice dated December 11, 2020 for $1,631,827 (including interest of $339,885) covering the period January 1, 2014 to September
30, 2018.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company disagrees with
the assessment in its entirety and has filed a Petition for Reassessment on January 30, 2017, February 9, 2022 and September 2022, appealing
the assessment with the Ohio Board of Tax Appeals. No resolution has been obtained from any of the appeals.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 29, 2021, a summons
was received from the SEC, requesting information on the Group&#8217;s inter-company accounts, including with related parties, from January
2016 to December 2019 and on operations purchase and sale of own shares. On August 31, 2021, a letter was received from the Vice Presidency
of Stock Market Supervision of the National Banking and Securities Commission (CNBV) of Mexico, requesting the same information as in
the SEC subpoena.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The staff of the Division
of Enforcement (the &#8220;Division&#8221;) of SEC is conducting an investigation by into the Company&#8217;s public disclosures regarding
the Company&#8217;s Internal Controls over Financial Reporting for Fiscal Years 2019 through 2021 (the &#8220;Inquiry&#8221;). The Company
received a subpoena for information pursuant to a non-public formal order of investigation for the Inquiry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 13, 2022, the Company
has received an oral &#8220;Wells Notice&#8221; (subsequently confirmed in writing) from the Division setting forth a preliminary determination
by the Division to recommend an enforcement action against the Company and several of its present and former officers and directors alleging
violations of Securities Act Section 17(a); Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 10b-5, 13a-1, 13a-13,
and 13a-15; and providing false Sox 302 Certifications. A Wells Notice is a notice of an intent on the part of the Division staff to recommend
an enforcement action and not a finding of wrongdoing. Upon receipt of a Wells Notice, the recipient is afforded an opportunity to present
its positions with respect to the Division staff&#8217;s recommendations prior to any decision by the Commission on whether enforcement
proceedings will be authorized or any finding by the Commission with respect to any wrongdoing. Any enforcement action would need to be
approved by the Commission before formally being brought.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company maintains that
the actions of the Company and its current and former officers and employees were appropriate and did not violate the federal securities
laws. The Company did not make a Wells submission and intends to defend itself vigorously if charges are brought. The Inquiry is continuing,
and the Company has made productions of information to the Division. The Company will continue to comply with the requests of the Division
in connection with the Inquiry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company cannot predict
the ultimate outcome of the Inquiry and any related legal and administrative proceedings which could include a variety of outcomes including
the institution of administrative or civil injunctive proceedings involving the Company and/or current or former employees and/or officers,
the imposition of fines and other penalties, remedies and/or sanctions, and modifications to compliance programs. It is not possible to
accurately predict at this time when matters relating to the Inquiry will be completed, what if any actions may be taken by the Commission
or the effect that such actions may have on our business, prospects, operating results and financial condition, which could be material.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The tax authorities in the
United States of America have the right to review the previous three years and could determine differences in taxes payable, plus corresponding
adjustments, surcharges and fines.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the years 2015-2016 and
2017-2018, the Canada Revenue Agency (CRA) estimated a tax on sales omitted by Republic of U.S.$4.1 million plus interest for the 2015-2016
period and of U.S.$6.4 million plus interest for the period 2017-2018. Republic does not agree on the amounts and has filed an Objection
notice on September 2018 and July 2019, respectively. This was solved favorably during the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The tax authorities in Canada
have the right to review the previous four years and could determine differences in taxes payable, plus corresponding adjustments, surcharges
and fines.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operations in the United
States of America and Canada have been the subject of various environmental claims, including those described below. The resolution of
any claims against us may result in significant liabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>California Department of Toxic Substances Control, DTSC</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In September 2002, the Department
of Toxic Substances Control (DTSC) inspected Pacific Steel&#8217;s (PS) facilities based on an alleged complaint from neighbors due to
PS&#8217;s excavating to recover scrap metal on its property and on a neighbor&#8217;s property, which PS rents from a third party (BNSF
Railway). In this same month, DTSC issued an enforcement order of imminent and substantial endangerment determination, which alleges that
certain soil piles, soil management and metal recovery operations may cause an imminent and substantial danger to human health and the
environment. Consequently, DTSC sanctioned PS for violating the Hazardous Waste Control Laws in the State of California and imposed an
obligation to make necessary changes to the location. On July 26, 2004, DTSC filed a Complaint for Civil Penalties and Injunctive Relief
against PS in San Diego Superior Court. On July 26, 2004, the court issued a judgment, whereby PS was obligated to pay U.S.$235,000 (Ps.
5 million). This payment was made by PS in 2004 and 2005.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->79<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 6, 2010, the DTSC
and the San Diego Department of Environmental Health (DEH) inspected the facilities of PS, in response to a general complaint. On August
10, 2010 DTSC and DEH conducted a second inspection and found seven infractions. The DEH was satisfied with the compliance of PS on those
issues. On October 19, 2010 the technical division of the DTSC recommended to the enforcement division of DTSC that it impose significant
penalties upon PS as a result of such infractions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The land remediation was suspended
at the beginning of 2011 due to the inefficiency of the process, which was verified by several studies. As an alternative, once the necessary
permits were obtained from the authorities in Mexico, in November 2011, the Mexicali plant began the process of importing raw soil for
final disposal in a secure landfill based in Nuevo Le&#243;n, once the metal content was separated, which metal content is used as raw
material in the smelting process. As of today, PS has completed the importing of raw soil for disposition in the state of Nuevo Le&#243;n.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The disposition of a stack
estimated at 8,000 tons of material classified RCRA (hazardous for Federal purposes) was also considered for shipment to Mexico. The process
began in early 2013, but to date they have been very slow to grant the permits. On April 9, 2015, a letter from the California Attorney
General Department of Justice (Attorney General) was received pursuant to which PS was required, in the absence of obtaining permission
from the Mexican authorities, to present a program for transporting the pile of contaminated soil classified as RCRA to an authorized
confinement in the United States of America at the latest on April 22, 2015. This letter warned that PS must ship the stack no later than
July 9, 2015, or risk DTSC proceeding with a civil lawsuit seeking the maximum amount of fines established by law and corresponding legal
redress.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On April 21, 2015, PS sent
a letter to the Attorney General explaining that the authorities in Mexico had not denied permission to the Company but had simply requested
that it present its application in a different format, which had already been presented and reviewed by the authority on April 17, 2015.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 23, 2015, the Attorney
General denied the extension requested by PS and demanded the immediate shipment of the RCRA stack to an authorized landfill. PS began
transporting the RCRA soil on July, 29, 2015, and completed removal of the RCRA stack by September 12, 2015 with a total of 3,000 metric
tons.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 5, 2016, the Attorney
General and PS filed a &#8220;final judgment and order on consent&#8221; or Consent Judgment in San Diego Superior Court. The parties
negotiated the Consent Judgment, which includes the following terms:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">PS agreed to remove the RCRA stack and send it to an approved landfill. The Judgment indicates that the Company complied with this commitment by October 2, 2015.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">After removing the RCRA stack, the Company must take samples of the soil in the area where the stack of land was located. Samples were taken and the results indicate that the soil had pollution levels which, although not equal to those of the RCRA stack, exceed the limits set by the State of California. On April 7, 2016, the Attorney General and DTSC demanded that the Company remove the soil 10 feet across and 2 feet deep on the perimeter of the area where the stack of RCRA land was located and dispose of it in an approved confinement. On August 5, 2016, DTSC informed PS that it did not need to remove the soil in the vicinity of the former RCRA stack that exceeds California hazardous waste standards.&#160;&#160;Instead, PS and DTSC entered into a Tolling Agreement on August 10, 2016, which tolls for two years (until August 10, 2018) the statute of limitations for DTSC to challenge PS&#8217;s compliance with the Consent Judgment.&#160;&#160;This Agreement was extended in August 10, 2018, for an additional period of two years, effective December 2018 and ending August 10, 2020. This agreement was extended until August 10, 2021, when the DTSC decided not to extend it.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->80<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">PS shall continue to meet the conditions of the
    final judgment of 2016, the corrective measures, and all tasks arising therefrom, which were entered in the same court in 2004. On May
    29, 2019, PS presented a new work plan proposal (IM workplan) to the DTSC to remedy the leased land to BNSF Railway.&#160;On October 21,
    2021, the Company submitted the final draft of the IM work plan. On May 31, 2022, DTSC approved the work plan. No litigation was filed
    against the DTSC approval which is now final.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 6, 2022, the DTSC sent a letter requesting
    a preliminary study and a work plan implementation schedule, both documents were delivered on February 3, 2023. DTSC has not responded
    to either document.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 13, 2023, BNSF Railway issued a contract
    termination notice to PS, notifying BNSF&#8217;s unilateral termination of two lease contracts with PS which ended on February 12 and 22, 2023,
    through its legal counsel informed PS that no longer has access to BNSF Railway property. DTSC is entering into a voluntary agreement
    with BNSF to implement a work plan.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of the date of this report, we cannot estimate
the costs of implementing the work plan of the provisional measures due to the uncertainty of whether BNSF or PS will implement the work
and the DTSC authorizations to whom they designate and their approval date.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Environmental Liabilities</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As is the case with most steel
producers in the United States of America, we could incur significant costs related to environmental compliance activities and remediation
stemming from historical waste management practices or other environmental issues at Republic&#8217;s facilities. At December 31, 2022
and 2021, we had a reserve to cover probable environmental liabilities totaling Ps. 48.4 million (U.S.$2.5 million) and Ps. 51.3 million
(U.S.$2.5 million), respectively. The reserve includes incremental direct costs of remediation efforts and post remediation monitoring
costs that are expected to be included after corrective actions are complete. As of December 31, 2022 and 2021, the current and non-current
portions, Ps. 19.3 million (U.S.$1 million) and Ps. 20.5 million (U.S.$1 million), respectively, of the environmental reserve are included
in other accrued liabilities and accrued environmental liabilities, respectively, in the accompanying consolidated statement of financial
position. The Company is not otherwise aware of any material environmental remediation liabilities or contingent liabilities relating
to environmental matters with respect to the Republic&#8217;s facilities for which the establishment of an additional reserve would be
necessary at this time. To the extent the Company incurs any such additional future costs, these costs will most likely be incurred over
a number of years. However, future regulatory action regarding historical waste management practices at the Company&#8217;s facilities
and future changes in applicable laws and regulations may require the Company to incur significant costs that may have a material adverse
effect on the Company&#8217;s future financial performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Brazil</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 5, 2017, Grupo
Simec and GV do Brasil were notified of an arbitration procedure brought by SMS Concast before the International Court of Arbitration
(ICC), in which the payment of U.S.$1.4 million is requested (Ps.27.6 million), plus additional expenses, for additional costs incurred
in the construction and assembly of the steel plant area in Brazil. On November 6, 2017, the Company filed a response, suing SMS Concast
for various items that amount to U.S.$5 million (approximately Ps. 98.3 million) approximately. On February 26, 2020 the arbitrators sentenced
our companies to individual and joint payments of various amounts and in different currencies. In March 2021, it was agreed with the actor
to terminate the matter by paying U.S. $450,000, after several date changes, the payment was made on July 8, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The tax authorities in Brazil
have the right to review the previous five years and could determine differences in taxes payable, plus corresponding adjustments, surcharges
and fines.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt; text-align: left"><b>Dividends and Dividend
Policy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We typically do not pay dividends
to our shareholders with certain specific exceptions. At the Ordinary General Shareholders&#8217; Meeting held on February 10, 2020, a
Ps. 1,990 million dividend was approved from the net tax profit account for the profits generated until December 31, 2013, which was paid
in full on March 10, 2020. Aside from this dividend, because we intend to devote a substantial portion of our future cash flows to funding
our expansion plan and working capital requirements, we do not currently expect to pay additional dividends in the near future. We may
consider paying dividends in the future based on a number of factors, including our results of operations, financial condition, cash requirements,
tax considerations, future prospects and other factors that our board of directors and our shareholders may deem relevant, including the
terms and conditions of any future debt instruments that might limit our ability to pay dividends. For a description of shareholders&#8217;
and holders of ADS&#8217; rights to receive dividends and the conditions to declare and pay dividends, see Item 10.B. &#8220;Memorandum
and Articles of Association &#8211; Dividends and Distributions.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Significant Changes</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as disclosed elsewhere
in this annual report, we have not experienced any significant changes since the date of our consolidated financial statements included
herein.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_011"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item&#160;9. The Offer and Listing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our series B shares are listed
on the Mexican Stock Exchange under the ticker symbol &#8220;SIMEC B&#8221; and the ADSs are listed on the NYSE American under the ticker
symbol &#8220;SIM.&#8221; The ADSs are issued by The Bank of New York as depositary under a Deposit Agreement, dated as of July 8, 1993,
as amended, among us, the depositary and the holders from time to time of ADRs.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item &#160;10. Additional Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Share Capital</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Memorandum and Articles of Association</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our principal objects and
purposes, as expressed in the Second Clause of our by-laws, are to engage in the control of companies dedicated to the manufacture, processing
and distribution of diversified SBQ steel and structural products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following is a summary
of certain rights of holders of our capital stock, including brief summaries of material provisions of our by-laws and Mexican law. This
summary is not exhaustive and does not contain all information that may be important to you. For more complete information, you should
read our by-laws, which have been filed as an exhibit to this annual report and incorporated by reference herein.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Board of Directors</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Mexican Securities Market
Law imposes a duty of care and a duty of loyalty on directors. The duty of care, which generally requires that directors: (i) obtain the
information reasonably necessary to make decisions; (ii) request from officers and auditors information that is relevant to a decision
to be made; (iii) postpone board of directors meetings when a director is not present, has not arrived on time or has not been provided
with the same information as other directors; (iv) deliberate and vote, including if requested with the presence only of the other directors
and the secretary of the board. Directors will breach their duty of care and be subject to liability when damage is caused to the issuer
by any of the following: (i) failure to attend board, shareholders&#8217; or committee meetings, which failure prevents such meeting from
being duly held; (ii) failure to reveal relevant information to the board of directors or to an applicable committee, subject to legal
or contractual limitations on disclosure of such information; or (iii) failure to comply with the duties imposed by the Mexican Securities
Market Law or the issuer&#8217;s by-laws. Failure of directors to act with due care makes the relevant directors jointly and severally
liable for damages and losses caused to the issuer and its subsidiaries, which may be limited in the company&#8217;s by-laws or by resolution
of the shareholders&#8217; meeting, except in the case of willful misconduct or illegal acts. Liability for breach of the duty of care
may also be covered by indemnification provisions and director and executive officer insurance policies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The duty of loyalty primarily
consists of maintaining the confidentiality of information received in connection with the performance of the director&#8217;s duties,
and abstaining from discussing or voting on matters where the director has a conflict of interest. Directors will have breached their
duty of loyalty in the following cases: (i) if without justification they utilize their position to gain benefits for themselves or third
parties, including an individual shareholder or group of shareholders; (ii) if they vote on or participate in deliberations concerning
an issue on which they have a conflict of interest; (iii) if they do not reveal the conflicts of interests they have; (iv) if they deliberately
favor an individual shareholder or group of shareholders to the detriment of others; (v) if they approve related party transactions without
observing the related guidelines under the Mexican Securities Market Law; (vi) if they utilize property of the issuer for their own benefit
or that of third parties in contravention of relevant policies; (vii) if they make undue use of privileged information; or (viii) if,
for themselves or third parties, they take advantage of a corporate opportunity. A violation of the duty of loyalty makes the relevant
directors jointly and severally liable for damages and losses caused to the issuer and its subsidiaries, and in every case require removal
from their positions. Unlike the duty of care, liability for breach of the duty of loyalty may not be limited by the company&#8217;s by-laws,
by resolution of the shareholders&#8217; meeting or otherwise, nor may indemnification provisions or insurance policies cover such liability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our directors may be subject
to criminal penalties of up to 12 years&#8217; imprisonment for certain illegal acts involving willful misconduct that result in losses
to us, which include, among others, altering financial statements or records. In terms of the General Law of Commercial Companies and
our by-laws, only the shareholders&#8217; meetings can determinate compensation for the directors. Our directors cannot individually exercise
any of our borrowing powers. We do not have any retirement plan. Shareholders, or a group of shareholders, that control 10% of our shares
can name a director and (in that director&#8217;s absence) an alternate director.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Voting Rights and Shareholders&#8217; Meetings</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each series B share entitles
its holder to one vote at any meeting of our shareholders. Each series L share would entitle its holder to one vote at any meeting at
which holders of series L shares are entitled to vote. Holders of series L shares would be entitled to vote only on the following matters:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">to elect one member of our board of directors pursuant to the provisions of our by-laws and the Securities Market Law;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any merger or corporate spin-off in which we are not the surviving entity;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our dissolution or liquidation;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any action that would prejudice the rights of holders of series L shares and not prejudice the other classes of shares similarly. A resolution on any such action requires the affirmative vote of a majority of all outstanding series L shares.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders may vote by proxy
duly appointed in writing. Under Mexican law, holders of shares of any series are also entitled to vote as a class on any action that
would prejudice the rights of holders of shares of such series but not rights of holders of shares of other series, and a holder of shares
of such series would be entitled to judicial relief against any such action taken without such a vote. Our board of directors or other
party calling for shareholder action initially would determine whether an action requires a class vote on these grounds. A negative determination
would be subject to judicial challenge by an affected shareholder, and a court ultimately would determine the necessity for a class vote.
There are no other procedures for determining whether a proposed shareholder action requires a class vote, and Mexican law does not provide
extensive guidance on the criteria to be applied in making such a determination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Mexican law and our
by-laws, we may hold three types of shareholders&#8217; meetings: ordinary, extraordinary and special. Ordinary shareholders&#8217; meetings
are those called to discuss any issue not reserved for extraordinary shareholders&#8217; meeting. An annual ordinary shareholders&#8217;
meeting must be convened and held within the first four months following the end of each fiscal year to discuss, among other things, the
board of director&#8217;s report on our financial statements, the chief executive officer&#8217;s report on our operations during the
preceding year, a report on fulfillment of our tax obligations of the last fiscal year and the Audit Committee&#8217;s report with respect
to the preceding year, the appointment of members of the board of directors and the chairman of the Audit Committee, declaration of dividends
and the determination of compensation for members of the board of directors and for members of the Audit Committee. Under the Mexican
Securities Market Law, our ordinary shareholders&#8217; meeting, in addition to those matters described above, will have to approve any
transaction representing 20% or more of our consolidated assets, executed in a single or a series of transactions, during any fiscal year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Extraordinary shareholders&#8217;
meetings are those called to consider any of the following matters:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">voluntary dissolution of the company;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">an increase or decrease in a company&#8217;s minimum fixed capital;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">change in corporate purpose or nationality;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any transformation, merger or spin-off involving the company;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any stock redemption or issuance of preferred stock or bonds;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the cancellation of the listing of our shares with the National Securities Registry or on any stock exchange;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any other amendment to our by-laws; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any other matters for which applicable Mexican law or our by-laws specifically require an extraordinary meeting.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Special shareholders&#8217;
meetings are those that shareholders of the same series or class call and hold to consider any matter particularly affecting the relevant
series or class of shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders&#8217; meetings
are required to be held in our corporate domicile, which is Guadalajara, Jalisco. Calls for shareholders&#8217; meetings must be made
by the chairman or the secretary of the board of directors or the chairman of our Audit Committee. Any shareholder or group of shareholders
representing at least 10% of our capital stock has the right to request that the chairman of the board of directors or the chairman of
the Audit Committee call a shareholders&#8217; meeting to discuss the matters indicated in the relevant request. If the chairman of the
board of directors or the chairman of the Audit Committee fail to call a meeting within 15 calendar days following receipt of the request,
the shareholder or group of shareholders representing at least 10% of our capital stock may request that the call be made by a competent
court.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Calls for shareholders&#8217;
meetings must be published in the official gazette of the state of Jalisco or any major newspaper located in the City of Guadalajara,
Jalisco, at least 15 calendar days prior to the date of the meeting. Each call must set forth the place, date and time of the meeting
and the matters to be addressed. Calls must be signed by whomever makes them, provided that calls made by the board of directors or the
Audit Committee must be signed by the chairman, the secretary or a special delegate appointed by the board of directors or the Audit Committee
as appropriate, for that purpose. Shareholders&#8217; meetings will be validly held and convened without the need of a prior call or publication
whenever all the shares representing our capital are duly represented.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->84<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To be admitted to any shareholders&#8217;
meeting, shareholders must: (i) be registered in our share registry; and (ii) at least 24 hours prior to the commencement of the meeting
submit (a) an admission ticket issued by us for that purpose, and (b) a certificate of deposit of the relevant stock certificates issued
by the Secretary or by a securities deposit institution, a Mexican or foreign bank or securities dealer in accordance with the Mexican
Securities Market Law. Shareholders may be represented at any shareholders&#8217; meeting by one or more attorneys-in-fact, and these
representatives may not be one of our directors. Representation at shareholders&#8217; meetings may be substantiated pursuant to general
or special powers of attorney or by a proxy executed before two witnesses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At or prior to the time of
the publication of any call for a shareholders&#8217; meeting, we will provide copies of the publication to the depositary for distribution
to the holders of ADSs. Holders of ADSs are entitled to instruct the depositary as to the exercise of voting rights pertaining to the
Series B shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Quorum</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ordinary meetings are regarded
as legally convened pursuant to a first call when shares representing more than 50% of our capital are present or duly represented. Resolutions
at ordinary meetings of shareholders are valid when approved by a majority of the shares present at the meeting. Any number of shares
represented at an ordinary meeting of shareholders convened pursuant to a second or subsequent call constitutes a quorum. Resolutions
at ordinary meetings of shareholders convened pursuant to a second or subsequent call are valid when a majority of the shares present
at the meeting approves them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Extraordinary shareholders&#8217;
meetings are regarded as legally convened pursuant to a first call when shares representing at least 75% of our capital are present or
duly represented, and extraordinary shareholders&#8217; meetings convened pursuant to a second or subsequent call are regarded as legally
convened when shares representing 50% of our capital are present or duly represented. Resolutions at extraordinary meetings of shareholders
are valid when approved by 50% of our outstanding shares. Special meetings of holders of series L shares are governed by the same rules
applicable to extraordinary general meeting of holders of series B shares. The quorum for an extraordinary general meeting at which holders
of series L shares may not vote is 75% of the series B shares, and the quorum for an extraordinary general meeting at which holders of
L shares are entitled to vote is 75% of the outstanding capital stock. Whether on first, second or subsequent call, actions at an extraordinary
general meeting generally may be taken by a majority vote of the series B shares outstanding and, on matters which holders of series L
shares are entitled to vote, a majority vote of all the outstanding capital stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our by-laws also establish
that a delisting of our shares requires the vote of holders of 95% of our capital stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>No Right of Redemption</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Mexican Securities Market
Law and our by-laws provide that our shareholders do not have redemption rights for their shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Registration and Transfer</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our shares are registered
with the National Securities Registry, as required under the Mexican Securities Market Law and regulations issued by the CNBV. Our shares
are evidenced by share certificates in registered form, and registered dividend coupons may be attached thereto. Our shareholders either
may hold their shares directly, in the form of physical certificates, or indirectly, in book-entry form, through institutions that have
accounts with INDEVAL.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">INDEVAL is the holder of record
in respect of all such shares held in book-entry form. INDEVAL will issue certificates on behalf of our shareholders upon request. INDEVAL
participants, brokers, banks, other financial entities or other entities approved by the CNBV maintain accounts at INDEVAL. We maintain
a stock registry and only those persons listed in such stock registry, and those holding certificates issued by INDEVAL indicating ownership,
and any relevant INDEVAL participants, will be recognized as our shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->85<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Dividends and Distributions</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At the annual general ordinary
shareholders&#8217; meeting, the board of directors submits our financial statements for the previous fiscal year, together with their
report on us, to the series B shareholders for approval. Under our by-laws and Mexican law, our annual net income, based upon our audited
financial statements, is applied as follows: (i) five percent of our net earnings must be allocated to a legal reserve fund, until such
fund reaches an amount equal to at least 20% of our then current capital stock, (ii) thereafter, a certain percentage of net earnings
may be allocated to any general or specific reserve fund, and (iii) the remainder of any net earnings is allocated as determined by the
majority of our shareholders and may be distributed as dividends. All shares that are fully paid and outstanding at the time a dividend
or other distribution is declared are entitled to share equally in any or other distribution. We will distribute through INDEVAL cash
dividends on shares held through INDEVAL. Any cash dividends on shares evidenced by physical certificates will be paid by surrendering
to us the relevant dividend coupon registered in the name of its holder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent that we declare
and pay dividends on our shares, owners of ADSs at the time a dividend or other distribution is declared will be entitled to receive any
dividends payable in respect of the series B shares underlying their ADSs, subject to the terms of the Deposit Agreement. Cash dividends
will be paid to the depositary in pesos, and, except as otherwise provided in the Depositary Agreement, which provides that the depositary
will convert them into U.S. dollars and pay them to the holders of ADSs net of currency expenses and applicable fees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A shareholder&#8217;s entitlement
to uncollected dividends lapses within five years following the stated payment date, in favor of us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For additional tender offer
and insider trading rules applicable to our securities pursuant to Mexican Law, see &#8220;Market Information.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Changes in Capital Stock</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Increases and reductions of
our share capital must be approved at an ordinary or extraordinary shareholders&#8217; meeting, subject to the provisions of our by-laws
and the Mexican Corporations Law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to the individual
ownership limitations set forth in our by-laws, in the event of an increase of our capital stock, other than (i) in connection with mergers,
(ii) for the conversion of convertible debentures as provided in Section 210 Bis of the Mexican General Law on Negotiable Instruments
and Credit Transactions, (iii) for purposes of conducting a public offering of such shares or (iv) for the resale of shares maintained
in our treasury as a result of repurchase of shares conducted on the Mexican Stock Exchange, our shareholders will have a preemptive right
to subscribe and pay for new stock issued as a result of such increase in proportion to their shareholder interest at that time. This
preemptive right must be exercised by any method provided in Section 132 of the Mexican Corporations Law, by subscription and payment
of the relevant stock within fifteen business days after the date of publication of the corresponding notice to our shareholders in the
official gazette of the state of Jalisco or in one of the newspapers of general circulation in Guadalajara, Jalisco, Mexico, provided
that if at the corresponding meeting all of our shares are duly represented, the fifteen business day period shall commence on the date
of the meeting. Preemptive rights cannot be waived in advance and cannot be traded separately from the corresponding shares that give
rise to such right.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Holders of ADSs may exercise
preemptive rights in limited circumstances. If a holder of series B shares or ADSs were unable or unwilling to exercise its preemptive
rights in connection with such a capital increase, such holder&#8217;s proportionate share of dividends and other distributions and voting
rights would decline. In addition, depending on the series of shares increased and the pattern in which preemptive rights were exercised,
such a capital increase might increase or reduce the portion of our capital stock represented by series B shares and ADSs or increase
or reduce the proportionate voting rights of such holder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our capital stock may be reduced
by resolution of a shareholders&#8217; meeting taken pursuant to the rules applicable to capital increases. Our capital stock also may
be reduced upon withdrawal of a shareholder as provided in Section 206 of the Mexican Corporations Law, see &#8220;&#8212;Voting Rights
and Shareholders&#8217; Meetings&#8221; above, or by repurchase of our own stock in accordance with the Mexican Securities Market Law,
see &#8220;Share Repurchases&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->86<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Share Repurchases</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may choose to acquire our
own shares through the Mexican Stock Exchange on the following terms and conditions:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the acquisition must be carried out through the Mexican Stock Exchange;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the acquisition must be carried out at market price, unless a public offer or auction has been authorized by the CNBV;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the acquisition must be carried out against our net worth (stockholder&#180;s equity) without adopting a reduction in capital stock or against our capital stock, and the shares so acquired will be held as treasury stock without any requirement to adopt a reduction in capital stock. No shareholder consent is required for such purchases.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">the amount and price paid in all share repurchases must be made public;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">the annual ordinary shareholders meeting must determine the maximum amount of resources to be used in the fiscal year for the repurchase of shares;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">we may not be delinquent on payments due on any outstanding debt issued by us that is registered with the National Securities Registry; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any acquisition of shares must be in conformity with the requirements of Article 54 of the Mexican Securities Market Law, and we must maintain a sufficient number of outstanding shares to meet the minimum trading volumes required by the stock markets on which our shares are listed.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The economic and voting rights
corresponding to repurchased shares may not be exercised during the period in which we own such shares, and such shares are not deemed
to be outstanding for purposes of calculating any quorum or vote at any shareholders&#8217; meeting during such period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The shares and negotiable
instruments representing title to shares belonging to us or, as the case may be, issued but unsubscribed treasury shares, may be placed
with the investing public without the need for a shareholders&#8217; meeting or board resolution. As such, the provisions of Article 132
of the Mexican Corporations Law do not apply.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In our Ordinary Shareholders
Meeting held on September 14, 2016, an increase in the reserve for repurchase of shares of Ps. 1,000 million was approved and the total
reserve at December 31, 2017, amounts to Ps. 2,000 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In our Ordinary Shareholders
Meeting held on April 23, 2018, an increase in the reserve for repurchase of shares of Ps. 3,000 million was approved and the total reserve
at April 23, 2018, amounts to Ps. 5,000 million. In 2018, we repurchased 27,553,643 shares, and we resold 150,000. At December 31, 2018,
we had 31,066,207 treasury shares. In the year 2018 we registered a loss of Ps. 4.2 million in the repurchase of shares. In 2019, we repurchased
2,663,719 shares, and we did not resell any shares. In 2019, we approved total reserve repurchase of Ps7 million. On December 31, 2020,
we had 34,223,573 treasury shares. In 2020, we did not register a gain or loss in the repurchase of shares. In 2020, we did not register
a gain or loss in the repurchase of shares. At December 31, 2021, we had 35,194,691 treasury shares. In 2021, we did not register a gain
or loss in the repurchase of shares. At December 31, 2022, we had 35,573,326 treasury shares. In 2022, we did not register a gain or loss
in the of shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Ownership of Capital Stock by Subsidiaries</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our subsidiaries may not,
directly or indirectly, invest in our shares, except for shares acquired as part of an employee stock option plan and in conformity with
the Mexican Securities Market Law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Delisting</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the Mexican Securities
Market Law, in the event that we decide to cancel the registration of our shares in the National Securities Registry and the listing of
our shares on the Mexican Stock Exchange, or if the CNBV orders such cancellation, we will be required to conduct a tender offer for the
shares held by minority shareholders and to create a trust with a term of six months, with amounts sufficient to purchase all shares not
participating in the tender offer. Under the law, our controlling shareholders will be secondarily liable for these obligations. The price
at which the shares must be purchased in the offer must be the greater of (i) the average of the trading price on the Mexican Stock Exchange
during the last 30 days on which the shares were quoted prior to the date on which the tender offer is made or (ii) the book value of
such shares as determined pursuant to our latest quarterly financial information filed with the CNBV and the Mexican Stock Exchange. If
the CNBV orders the cancellation, we must launch the tender offer within 180 days from the date of their request. If we initiate it, under
the Mexican Securities Market Law, the cancellation must be approved by 95% of our shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Provisions</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Information to Shareholders.
</i>The Mexican Corporations Law establishes that companies, acting through their boards of directors, must annually present a report
at a shareholder&#8217;s meeting that includes:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a report of the directors on our financial statements, as well as on the policies followed by the directors and on the principal existing projects;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a report explaining the principal accounting and information policies and criteria followed in the preparation of the financial information;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a statement of the financial condition of the company at the end of the fiscal year;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a statement showing the results of operations of the company during the preceding year, as well as changes in the company&#8217;s financial condition and capital stock during the preceding year;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a report of the chief executive officer on the operations of the company during the preceding year;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a report of the fulfillment of the company&#8217;s tax obligations of the last fiscal year;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a report of the Audit Committee with respect to the preceding year; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the notes which are required to complete or clarify the above mentioned information.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the foregoing,
our by-laws provide that our board of directors also should prepare the information referred to above with respect to any subsidiary that
represents at least 20% of our net worth (based on the financial statements most recently available).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Shareholders&#8217; Conflict
of Interest. </i>Under Mexican law, any shareholder that has a conflict of interest with respect to any transaction must abstain from
voting thereon at the relevant shareholders&#8217; meeting. A shareholder that votes on a transaction in which its interest conflicts
with ours may be liable for damages in the event the relevant transaction would not have been approved without such shareholder&#8217;s
vote.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Liquidation. </i>In the
event we are liquidated, the surplus assets remaining after payment of all our creditors will be divided among our shareholders in proportion
to their respective share holdings. Shares that are only partially paid will participate in the distribution in the proportion that they
were paid. The general extraordinary shareholders&#8217; meeting at which the liquidation resolution is made, will appoint one or more
liquidators.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Foreign Investment. </i>Ownership
by foreign investors of shares of Mexican corporations in certain economic sectors is regulated by the Foreign Investment Law and the
regulations thereunder. The Ministry of the Economy and the National Commission on Foreign Investment are responsible for the administration
of the Foreign Investment Law and Regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the Mexican Foreign
Investment Law and Regulations, foreign investors may acquire up to 100% of the capital stock of Mexican companies or entities in the
steel industry. In accordance with our by-laws, Mexican and non-Mexican nationals may own all series of our share capital. We have registered
any foreign owner of our shares, and the depositary with respect to the ADSs representing our shares, with the National Registry of Foreign
Investment <i>(Registro Nacional de Inversi&#243;n Extranjera)</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Forfeiture of Shares</i>.
As required by Mexican law, our by-laws provide that &#8220;any alien who at the time of incorporation or at any time thereafter acquires
an interest or participation in the capital of the corporation shall be considered, by virtue thereof, as Mexican in respect thereof and
shall be deemed to have agreed not to invoke the protection of his own government, under penalty, in case of breach of such agreement,
of forfeiture of such interest or participation in favor of the Mexican nation.&#8221; Under this provision, a non-Mexican shareholder
is deemed to have agreed not to invoke the protection of his own government by asking such government to interpose a diplomatic claim
against the Mexican government with respect to the shareholder&#8217;s rights as a shareholder but is not deemed to have waived any other
rights it may have, including any rights under the U.S. securities laws, with respect to its investment in us. If the shareholder invokes
such governmental protection in violation of this agreement, its shares could be forfeited to the Mexican government. Mexican law requires
that such a provision be included in the by-laws of all Mexican corporations unless such by-laws prohibit ownership of shares by non-Mexican
persons or entities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Duration</i>. Our existence
under our by-laws is indefinite.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Certain Differences between Mexican and U.S.
Corporate Law</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">You should be aware that the
Mexican Corporations Law and the Mexican Securities Market Law, which apply to us, differ in certain material respects from laws generally
applicable to U.S. corporations and their shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Independent Directors</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Mexican Securities Market
Law requires that 25% of the directors of Mexican public companies must be independent, but the Audit Committee must be comprised entirely
of independent directors. One alternate director may be appointed for each principal director, provided that the alternates for the independent
directors are also deemed independent. Under Mexican law, certain individuals, including insiders, controlling individuals, major clients
and suppliers, and any relatives of such individuals, are per se deemed as non-independent. In addition, under Mexican law, the determination
as to the independence of our directors made by our shareholders&#8217; meeting may be contested by the CNBV. The independent directors
are required under our by-laws to meet as often as necessary to fulfill their responsibilities. Independent directors are not required
under Mexican law or our by-laws to meet without the presence of non-independent directors and management.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the rules and
regulations of the New York Stock Exchange, 50% of the directors of listed companies must be independent, and foreign companies subject
to reporting requirements under the U.S. federal securities laws and listed on the New York Stock Exchange must maintain an audit committee
comprised entirely of independent directors as defined in the United States of America federal securities laws. Further, independent directors
are required to meet on a regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive
session without the presence of non-independent directors and management.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Audit-Committee</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For differences among Mexican
Securities Market Law, which apply to us, and laws generally applicable to U.S. corporations regarding audit-committees, see &#8220;Item
6. Directors, Senior Management and Employees&#8212;C. Board Practices&#8212;Committees&#8212;Audit and Corporate Practices Committee.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mergers, Consolidations,
and Similar Arrangements</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A Mexican company may merge
with another company only if a majority of the shares representing its outstanding capital stock approve the merger at a duly convened
general extraordinary shareholders&#8217; meeting, unless the company&#8217;s by-laws impose a higher threshold. Dissenting shareholders
are not entitled to appraisal rights. Creditors have ninety days to oppose a merger judicially, provided they have a legal interest to
oppose the merger.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Delaware law, with certain
exceptions, a merger, consolidation, or sale of all or substantially all the assets of a corporation must be approved by the board of
directors and a majority of the outstanding shares entitled to vote thereon. Under Delaware law, a shareholder of a corporation participating
in certain major corporate transactions, under certain circumstances, may be entitled to appraisal rights pursuant to which the shareholder
may receive payment in the amount of the fair market value of the shares held by the shareholder (as determined by a court) in lieu of
the consideration the shareholder would otherwise receive in the transaction. Delaware law also provides that a parent corporation, by
resolution of its board of directors and without any shareholder vote, may merge with any subsidiary of which it owns at least 90% of
each class of share capital. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Anti-Takeover Provisions</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to the approval of
the CNBV, the Mexican Securities Market Law permits public companies to include anti-takeover provisions in their by-laws that restrict
the ability of third parties to acquire control of the company without obtaining approval of the company&#8217;s board of directors if
such provisions (i) are approved by a majority of the shareholders, with no more than 5% of the outstanding capital shares voting against
such provisions, (ii) do not exclude any shareholder(s) or group of shareholder(s) and (iii) do not restrict, in an absolute manner, a
change of control</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Delaware law, corporations
can implement shareholder rights plans and other measures, including staggered terms for directors and super-majority voting requirements,
to prevent takeover attempts. Delaware law also prohibits a publicly-held Delaware corporation from engaging in a business combination
with an interested shareholder for a period of three years after the date of the transaction in which the shareholder became an interested
shareholder unless:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">prior to the date of the transaction in which the shareholder became an interested shareholder, the board of directors of the corporation approves either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owns at least 84% of the voting stock of the corporation, excluding shares held by directors, officers, and employee stock plans; or</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">at or after the date of the transaction in which the shareholder became an interested shareholder, the business combination is approved by the board of directors and authorized at a shareholders&#8217; meeting by at least 66.67% of the voting stock which is not owned by the interested shareholder.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Shareholders&#8217; Suits</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the Mexican Securities
Market Law, only a shareholder or group of shareholders holding at least 5% of our outstanding shares may bring a claim against some or
all of our directors, secretary of the board of directors or relevant executives for violation of their duty of care or duty of loyalty.
In addition, such shareholder or group of shareholders must include in its claim the amount of damages or losses caused to the company
and not only the damages or losses caused to the shareholder or group of shareholders bringing the claim, provided that any amount recovered
as indemnification arising from the liability action will be for the benefit of the company, and not for the benefit of the shareholder
or group of shareholders. The shareholder or group or shareholders must demonstrate the direct and immediate link between the damage or
loss caused to the company, and the acts alleged to have caused it. There is no requirement for the shareholder or group of shareholders
to hold the shares for a certain period of time in order to bring a claim.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 94; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->90<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the court determines that
the shareholder or group of shareholders that initiated the claim acted in bad faith, such shareholder or group of shareholders will be
liable to pay the legal fees and legal proceeding expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The statute of limitations
for these actions is five years from the date on which the act or event that caused the damage or loss occurred. These actions must be
brought in the federal or local courts in Guadalajara, Jalisco (Mexico) and the court must personally notify the parties that have been
sued, and must comply with all other legal formalities in order to satisfy the due process requirements of the Mexican Constitution.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Process must be served on
the defendant personally, or, in the defendant&#8217;s absence, process can be served by a judicial officer on the defendant&#8217;s domicile
whether or not the defendant is present. A method of service that does not comply with these requirements could be considered void. Class
action lawsuits are not permitted under Mexican law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Shareholder Proposals</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Mexican law and our
by-laws, holders of at least 10% of our outstanding capital stock are entitled to appoint one member of our board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Delaware law does not include
a provision restricting the manner in which nominations for directors may be made by shareholders or the manner in which business may
be brought before a meeting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Calling of Special Shareholders&#8217;
Meetings</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Mexican law and our
by-laws, the board of directors, the chairman of the board of directors or the chairman of the Audit Committee may call a shareholders&#8217;
meeting. Any shareholder or group of shareholders with voting rights representing at least 10% of our capital stock may request that the
chairman of the board of directors or the Audit Committee call a shareholders&#8217; meeting to discuss the matters indicated in the written
request. If the chairman of the board of directors or the chairman of the Audit Committee fail to call a meeting within 15 calendar days
following date of the written request, the shareholder or group of shareholders may request that a competent court call the meeting. A
single shareholder may call a shareholders&#8217; meeting if no meeting has been held for two consecutive years or if matters to be dealt
with at an ordinary shareholders&#8217; meeting have not been considered.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Delaware law permits the board
of directors or any person who is authorized under a corporation&#8217;s certificate of incorporation or by-laws to call a special meeting
of shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Cumulative Voting</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Mexican law, cumulative
voting for the election of directors is permitted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Delaware law, cumulative
voting for the election of directors is permitted if expressly authorized in the certificate of incorporation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Staggered Board of Directors</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mexican law does not permit
companies to have a staggered board of directors, while Delaware law does permit corporations to have a staggered board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Approval of Corporate Matters
by Written Consent</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mexican law permits shareholders
to take action by unanimous written consent of the holders of all shares entitled to vote. These resolutions have the same legal effect
as those adopted in a general or special shareholders&#8217; meeting. The board of directors may also approve matters by unanimous written
consent.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Delaware law permits shareholders
to take action by written consent of holders of outstanding shares having more than the minimum number of votes necessary to take the
action at a shareholders&#8217; meeting at which all voting shares were present and voted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 95; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->91<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Amendment of Certificate
of Incorporation</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Mexican law, it is not
possible to amend a company&#8217;s certificate of incorporation (<i>acta constitutiva</i>). However, the provisions that govern a Mexican
company are contained in its by-laws, which may be amended as described below. Under Delaware law, a company&#8217;s certificate of incorporation
generally may be amended by a vote of holders of a majority of the outstanding stock entitled to vote thereon (unless otherwise provided
in the certificate of incorporation), subsequent to a resolution of the board of directors proposing such amendment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Amendment of By-laws</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Mexican law, amending
a company&#8217;s by-laws requires shareholder approval at an extraordinary shareholders&#8217; meeting. Mexican law requires that at
least 75% of the shares representing a company&#8217;s outstanding capital stock be present at the meeting in the first call (unless the
by-laws require a higher threshold) and that the resolutions be approved by a majority of the shares representing a company&#8217;s outstanding
capital stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Delaware law, holders
of a majority of the outstanding stock entitled to vote and, if so, provided in the certificate of incorporation, the directors of the
corporation, have the power to adopt, amend, and repeal the by-laws of a corporation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>C.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Material Contracts</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>D.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Exchange Control</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are no legislative or
legal provisions currently in force in Mexico or arising under our by-laws restricting the payment of dividends to holders of our common
stock not resident in Mexico, except for regulations restricting the remittance of dividends and other payments in compliance with United
Nations sanctions. There are no limitations, either under the laws of Mexico or in our by-laws, on the right of foreigners to hold or
vote on shares of our common stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>E.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Taxation</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following summary contains
a description of the material U.S. and Mexican federal income tax consequences of the purchase, ownership and disposition of the series
B shares or ADSs by a &#8220;non-Mexican holder&#8221; (as defined below) that is an individual citizen or resident of the United States
of America, a corporation created or organized in or under the laws of the United States of America or any state thereof (including the
District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where
a court within the United States of America is able to exercise primary supervision over the administration of the trust and one or more
United States of America persons (as defined in the U.S. Internal Revenue Code of 1986, as amended) have the authority to control all
substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic
trust) (a &#8220;U.S. holder&#8221;), but it does not purport to be a comprehensive description of all of the tax considerations that
may be relevant to an owner of the series B shares or ADSs. In particular, the summary deals only with U.S. holders that will hold the
series B shares or ADSs as capital assets and use the U.S. dollar as their functional currency and does not address the tax treatment
of a U.S. holder that owns or is treated as owning 10% or more of our outstanding shares (measured by vote or value). In addition, the
summary does not address the effects of the U.S. Medicare tax on net investment income, the indirect effects on persons who hold equity
interests in a holder, or any U.S. or Mexican state or local tax considerations that may be relevant to U.S. holders. This summary also
does not address U.S. federal income tax consequences applicable to U.S. holders that are subject to special tax rules, such as certain
U.S. expatriates, REITs, RICs, banks, securities or currency dealers, traders in securities that mark their securities to market, insurance
companies, tax-exempt entities, persons liable for the alternative minimum tax, taxpayers that are required to prepare certified financial
statements or file financial statements with certain regulatory or governmental agencies, persons that hold ADSs or series B shares as
a hedge or as part of a straddle, conversion transaction or other risk reduction transaction for tax purposes, estates and trusts, partnerships,
S corporations or other pass-through entities for U.S. federal income tax purposes. If a partnership (or other pass-through entity for
U.S. federal income tax purposes) holds the series B shares or ADSs, the tax treatment of such partnership or a partner in such partnership
generally will depend upon the status of the partner and the activities of the partnership. Partnerships holding series B shares or ADSs,
and partners in such partnerships should consult their own tax advisors regarding the tax consequences of an investment in series B shares
or ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 96; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->92<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The summary is based upon
the federal income tax laws of the United States of America and Mexico as in effect and available on the date of this annual report, including
the provisions of the income tax treaty between the United States of America and Mexico and protocol thereto (the &#8220;Tax Treaty&#8221;),
all of which are subject to change, possibly with retroactive effect in the case of U.S. federal income tax law. Prospective investors
in the series B shares or ADSs should note that no rulings have been or are expected to be sought from the U.S. Internal Revenue Service
(the &#8220;IRS&#8221;) with respect to any of the U.S. federal tax consequences discussed below, and no assurance can be given that the
IRS will not take contrary positions. Prospective investors in the series B shares or ADSs should consult their own tax advisors as to
the U.S., Mexican or other tax consequences of the purchase, ownership and disposition of the series B shares or ADSs, including, in particular,
the effect of any foreign, state or local tax laws and their entitlement to the benefits, if any, afforded by the Tax Treaty.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For purposes of this summary,
the term &#8220;non-Mexican holder&#8221; shall mean a holder of series B shares or ADSs that is not a resident of Mexico and that will
not hold the series B shares or ADSs or a beneficial interest therein in connection with the conduct of a trade or business through a
permanent establishment or fixed base in Mexico.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An individual is a resident
of Mexico for tax purposes if he established his residence in Mexico. When the individual in question has a residence in another country,
the individual will be deemed a resident in Mexico if his &#8220;center of vital interests&#8221; is located in Mexico. This will be deemed
to occur if (i) more than 50% of the aggregate income realized by such individual in the calendar year is from a Mexican source or (ii)
the principal center of his professional activities is located in Mexico.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A Mexican national who files
a change of tax residence notice with a country or jurisdiction that does not have a comprehensive exchange of information agreement with
Mexico and in which his income is subject to a preferred tax regime pursuant to the provisions of the Mexican Income Tax Law will be considered
a Mexican resident for tax purposes during the year the notice is filed and during the following three years. Unless otherwise proven,
a Mexican national is deemed a resident of Mexico for tax purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An entity in Mexico is a resident
of Mexico if it maintains its principal place of business or its place of effective management in Mexico. If non-residents of Mexico are
deemed to have a permanent establishment in Mexico for tax purposes, all income attributable to the permanent establishment will be subject
to Mexican taxes, in accordance with applicable Mexican tax law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In general, for U.S. federal
income tax purposes, holders of ADSs will be treated as the beneficial owners of the series B shares represented by those ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Taxation of Dividends</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mexican Tax Considerations</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Mexican Income Tax Law
provisions (<i>Ley del Impuesto Sobre la Renta</i>), dividends paid to non-Mexican holders with respect to the series B shares (including
the shares represented by the ADSs) are not subject to Mexican withholding tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Dividends paid from distributable
earnings that have not been subject to corporate income tax are subject to a corporate-level dividend tax at a rate of 42.86% for 2022.
The corporate-level dividend tax on the distribution of earnings is not final and may be credited against income tax payable during the
fiscal year in which the dividend tax was paid and for the following two years. Dividends paid from distributable earnings, after corporate
income tax has been paid with respect to these earnings, are not subject to this corporate-level dividend tax. Currently, dividend distributions
are not subject to individual withholding taxes for shareholder recipients thereof.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Dividends or profits distributed
by legal entities resident in Mexico that are paid to natural persons and persons residing abroad on profits generated since fiscal year
2014, are subject to an additional Income Tax rate of 10%; this additional tax will be withheld by the legal person who distributes the
dividend and its payment is considered definitive. In this case, the rates established in the agreement to avoid double taxation between
Mexico and the United States of America can be applied.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Distributions made by us to
our shareholders other than as dividends, including capital reductions, amortization of shares or otherwise, would be subject to taxation
in Mexico at the corporate rate of 30% in 2022, or at the rate mentioned above, as the case may be.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>U.S. Federal Income Tax
Considerations</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The gross amount of any distributions
paid with respect to the series B shares or the ADSs (including any amounts withheld for Mexican taxes), to the extent paid out of our
current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be taxable as dividends and generally
will be includible in the gross income of a U.S. holder as ordinary income on the date on which the distributions are received by the
U.S. holder, in the case of series B shares, or the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends
received deduction allowed to certain corporations under the U.S. Internal Revenue Code of 1986, as amended. Subject to certain exceptions
for short-term and hedged positions, the U.S. dollar amount of dividends received by non-corporate U.S. holders (including individuals)
with respect to the series B shares and ADSs will be subject to taxation at a maximum rate of 20% if the dividends are &#8220;qualified
dividends.&#8221; Dividends paid on the series B shares and ADSs generally will be treated as qualified dividends if (A) we were not,
in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign
investment company (&#8220;PFIC&#8221;) and (B) (i) we are eligible for the benefits of a comprehensive income tax treaty with the United
States of America that the IRS has approved for the purposes of the qualified dividend rules or (ii) the series B shares or ADSs, as applicable,
are readily tradable on an established securities market in the United States of America. The Tax Treaty has been approved for the purposes
of the qualified dividend rules and we believe that we are eligible for the benefits of the Tax Treaty. Further, as discussed below, we
do not believe that we are a PFIC. Therefore, we believe that dividends paid to a non-corporate U.S. holder with respect to the series
B shares and ADSs generally will be treated as qualified dividends. U.S. holders should consult their own tax advisors in this regard
in light of their particular circumstances.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent that a distribution
exceeds our current and accumulated earnings and profits for a taxable year, it generally will first be treated as a non-taxable return
of basis to the extent thereof, and thereafter as capital gain from the sale of the series B shares or ADSs. However, we do not expect
to keep earnings and profits in accordance with U.S. federal income tax principles. Therefore, a U.S. holder should expect that a distribution
will generally be treated as a dividend (as discussed above).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Distributions, which will
be made in pesos, will be includible in the income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate
in effect on the date they are received by such U.S. holder, in the case of series B shares, or by the depositary, in the case of ADSs,
whether or not they are converted into U.S. dollars. If the pesos received as a dividend are converted into U.S. dollars on the date they
are received, a U.S. holder generally will not be required to recognize foreign currency gain or loss in respect of the dividend income.
If the pesos received as a dividend are not converted into U.S. dollars on the date of receipt, you will have a U.S. federal income tax
basis in the pesos equal to their United States of America dollar value on the date of receipt. U.S. holders should consult their own
tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received that are converted into U.S. dollars
on a date subsequent to receipt.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to certain conditions
and limitations (including a minimum holding period requirement), Mexican withholding taxes on dividends, if any, may be treated as foreign
taxes eligible for credit against a U.S. holder&#8217;s U.S. federal income tax liability. Dividend income generally will constitute foreign
source &#8220;passive category income&#8221; or, in the case of certain U.S. holders, &#8220;general category income&#8221; for U.S. foreign
tax credit purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Distributions of additional
series B shares or ADSs that are made as part of a pro rata distribution to all our stockholders generally will not be subject to U.S.
federal income tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Taxation of Dispositions of Shares or ADSs</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mexican Tax Considerations</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gain on the sale or other
disposition of ADSs by a U.S. holder will generally not be subject to Mexican tax. Deposits and withdrawals of series B shares in exchange
for ADSs will not give rise to Mexican tax or transfer duties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gain on the sale of series
B shares by a U.S. holder will not be subject to any Mexican tax if the transaction is carried out through the Mexican Stock Exchange
or other stock exchange or securities markets approved by the Mexican Ministry of Finance and Public Credit. Gain on sales or other dispositions
of series B shares made in other circumstances generally would be subject to Mexican tax at a rate of 30% for 2022 of gains realized from
the disposition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Tax Treaty, a U.S.
holder that is eligible to claim the benefits of the Tax Treaty will be exempt from Mexican tax on gains realized on a sale or other disposition
of series B shares in a transaction that is not carried out through the Mexican Stock Exchange or such other approved securities markets,
so long as the holder did not own, directly or indirectly, 25% or more of our share capital (including ADSs) during the twelve-month period
preceding the sale or other disposition, and the value of those shares does not derive mainly from immovable property located in Mexico.
Specific formalities apply to claim such treaty benefits.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>U.S. Federal Income Tax
Considerations</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Upon the sale or other taxable
disposition of the series B shares or ADSs, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference
between the amount realized on the sale or other taxable disposition and such U.S. holder&#8217;s U.S. federal income tax basis in the
series B shares or ADSs. Gain or loss recognized by a U.S. holder on such sale or other taxable disposition generally will be long-term
capital gain or loss if, at the time of the sale or other taxable disposition, the series B shares or ADSs have been held for more than
one year. Under current law, long-term capital gain recognized by a non-corporate U.S. holder (including individuals) generally is subject
to a maximum U.S. federal income tax rate of 20%. The deduction of a capital loss is subject to limitations for U.S. federal income tax
purposes. Deposits and withdrawals of series B shares by U.S. holders in exchange for ADSs will not result in the realization of gain
or loss for U.S. federal income tax purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gain, if any, realized by
a U.S. holder on the sale or other taxable disposition of series B shares or ADSs will be treated as U.S. source income for U.S. foreign
tax credit purposes. Consequently, if a Mexican withholding tax is imposed on the sale or disposition of the units or ADSs, a U.S. holder
that does not receive sufficient foreign source income from other sources may not be able to derive effective U.S. foreign tax credit
benefits in respect of these Mexican taxes. U.S. holders should consult their own tax advisors regarding the application of the foreign
tax credit rules to their investment in, and disposition of, series B shares or ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A U.S. holder that receives
pesos upon sale or other disposition of the series B shares will realize an amount equal to the U.S. dollar value of the pesos upon the
date of sale (or in the case of cash basis and electing accrual basis taxpayers, the settlement date). A U.S. holder will have a U.S.
federal income tax basis in the pesos received equal to the U.S. dollar value of the pesos received translated at the same rate the U.S.
holder used to determine the amount realized on its disposal of the series B shares. Any gain or loss realized by a U.S. holder on a subsequent
conversion of the pesos into U.S. dollars generally will be a U.S. source ordinary income or loss. U.S. holders should consult their own
tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received that are converted into U.S. dollars
on a date subsequent to receipt.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Other Mexican Taxes</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are no Mexican inheritance,
gift, succession or value added taxes applicable to the ownership, transfer or disposition of the series B shares or ADSs by non-Mexican
holders; provided, however, that gratuitous transfers of the series B shares or ADSs may in certain circumstances cause a Mexican federal
tax to be imposed upon the recipient. There are no Mexican stamp, issue, registration or similar taxes or duties payable by non-Mexican
holders of the series B shares or ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Passive Foreign Investment
Company (PFIC) </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Based on our audited financial
statements and relevant market and shareholder data, we believe that we are not a PFIC for U.S. federal income tax purposes with respect
to our 2020, 2021 and 2022 taxable years, and we expect to operate in such a manner so as to not become a PFIC. If, however, we are or
become a PFIC, a U.S. holder could be subject to additional U.S. federal income taxes on gain recognized with respect to the series B
shares or ADSs and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>U.S. Backup Withholding
Tax and Information Reporting Requirements</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In general, information reporting
requirements will apply to certain payments to a U.S. holder of dividends in respect of the series B shares or ADSs or the proceeds received
on the sale or other disposition of the series B shares or ADSs that are paid to such U.S. holder within the United States of America
(and in certain cases, outside the United States of America), unless such U.S. holder is an exempt recipient. A backup withholding tax
may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification number to the paying agent or fails
to establish an exemption or otherwise comply with these provisions. Amounts withheld as backup withholding tax will be creditable against
the U.S. holder&#8217;s U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided that the required information
is furnished to the U.S. Internal Revenue Service.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Foreign Account Tax Compliance
Act (&#8220;FATCA&#8221;)</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sections 1471 through 1474
of the Code impose a 30% withholding tax on certain types of payments made to foreign financial institutions, unless the foreign financial
institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain U.S.
persons or U.S.-owned entities, annually report certain information about such accounts, and withhold 30% on certain payments to account
holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution
is otherwise exempt from those requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a non-financial
foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information
regarding each substantial U.S. owner. Failure to comply with the additional certification, information reporting and other specified
requirements imposed under FATCA could result in the 30% withholding tax being imposed on certain &#8220;pass-through&#8221; payments
with respect to series B shares or ADSs held through a non-U.S. entity. However, under current guidance, withholding under FATCA will
apply to certain &#8220;pass-through&#8221; payments no earlier than the date that is two years after publication of final U.S. Treasury
Regulations defining the term &#8220;foreign pass-through payments.&#8221; Prospective investors should consult their own tax advisors
regarding FATCA and its effect on them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>F.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Dividends and Paying Agents</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>G.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Statements by Experts</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>H.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Documents on Display</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Statements contained in this
annual report regarding the contents of any contract or other document are not necessarily complete, and, where the contract or other
document is an exhibit to the annual report, each of these statements is qualified in all respects by the provisions of the actual contract
or other documents.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to the informational
requirements of the Exchange Act. Accordingly, we file reports and other information with the SEC, including annual reports on Form 20-F
and reports on Form 6-K. The SEC maintains an internet website at <i>www.sec.gov </i>from which you can electronically access this annual
report and the other materials that we file with the SEC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 100; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->96<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a foreign private issuer,
we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act. For example, we are not required
to prepare and issue quarterly reports. However, we are required to file with the Commission, promptly after it is made public or filed,
information that we make public in Mexico, file with the Mexican Stock Exchange or the CNBV or distribute to our security holders. As
a foreign private issuer, we are exempt from Exchange Act rules regarding proxy statements and short-swing profits.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>I.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Subsidiary Information</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 11. Quantitative and Qualitative Disclosures
About Market Risk</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are exposed to market risk,
which is the potential risk of loss in fair values, cash flows or earnings due to changes in interest rates and foreign currency rates
(primarily the peso/dollar exchange rate), as a result of our holdings of financial instrument positions. Our financial instruments include
cash and cash equivalents, trade and other accounts receivable, accounts payable, long-term debt securities and related party debt. We
do not maintain a trading portfolio. Our borrowings are entirely denominated in Mexican pesos. We do not utilize derivative financial
instruments to manage our market risks with respect to our financial instruments. Historically, based on the last ten years of data, devaluation
of the Mexican peso has been 4% lower than the Mexico&#8217;s inflation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are exposed to market risk
due to fluctuations of the purchase price of natural gas. To limit our exposure, we have in the past, and may in the future, used derivative
financial instruments, which consist of natural gas swap contracts. These contracts are recognized on our balance sheet at fair value.
The swaps are considered as cash flow hedges since the cash flow exchanges under the swap are highly effective in mitigating exposure
to natural gas price fluctuations. The change in fair value of the swaps is recorded as part of comprehensive income in stockholders&#8217;
equity for those contracts that are designated as accounting hedges until such time as the related item hedged is recorded in income.
At that time, the hedging instrument&#8217;s fair value is recorded in income. For those contracts that are not designated as accounting
hedges, the change in fair value is recorded directly into income. We do not believe our market risk with respect to these natural gas
futures contracts is material. As of December 31, 2022, we did not have natural gas cash-flow exchange contracts or swaps.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Market Risk Measurement</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We measure our market risk
related to our financial instruments based on changes in interest rates and foreign currency rates utilizing a sensitivity analysis. The
sensitivity analysis measures the potential loss in fair values, cash flows and earnings based on a hypothetical increase in interest
rates and a decline in the peso/dollar exchange rate. We used market rates as of December 31, 2022 on our financial instruments to perform
the sensitivity analysis. We believe that these potential changes in market rates are reasonably possible in the near-term (one year or
less). Based upon our analysis of the impact of a 150 basis point increase in interest rates and a 15% decline in the peso/dollar exchange
rate, we have determined that such increase in interest rates and such decline in the peso/dollar exchange rate would not have a material
adverse effect on our earnings. Because there is no active trading market for our debt instruments, we are not able to determine the impact
of these changes on the fair value of those debt instruments. The sections below describe our exposure to interest rates and currency
rates including the impact of changes in these rates on our earnings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Interest Rate Exposure</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are exposed to changes
in short-term interest rates as we invest in short-term dollar-denominated interest bearing investments. On the liability side, we utilize
fixed rate debt, and our financial debt was less than U.S.$1 million as of December 31, 2022. The floating rate debt is exposed to changes
in interest expense and cash flows from changes in LIBOR, while the fixed rate debt is mostly exposed to changes in fair value from changes
in medium term interest rates. Based on an immediate 150 basis point rise in interest rates, we estimate that our earnings before taxes
would not be significantly affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 101; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->97<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Currency Rate Exposure</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our primary foreign currency
exchange rate exposure relates to our debt securities as well as our dollar-denominated trade payables. Our principal currency exposure
is to changes in the peso/dollar exchange rate. We estimate that a 15% decline in the peso/dollar exchange rate would result in a decrease
in our earnings before taxes of approximately Ps. 0.58 million (U.S.$0.03 million).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The sensitivity analysis is
an estimate and should not be viewed as predictive of our future financial performance. Additionally, we cannot assure that our actual
losses in any particular year will not exceed the amounts indicated above. However, we do believe that these amounts are reasonable based
on the financial instrument portfolio at December 31, 2022 and assuming that the hypothetical market rate changes selected by us in our
market risk analysis occur during 2022. The sensitivity analysis does not give effect to the impact of inflation on its exposure to increases
in interest rates or the decline in the peso/dollar exchange rate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_014"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 12.&#160; Description of Securities Other
than Equity Securities</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>A.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Debt Securities</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>B.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Warrants and Rights</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>C.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Other Securities</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>D.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>American Depositary Shares</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Fees and Charges</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bank of New York Mellon
serves as the depositary for our ADSs. The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing
shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making
distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay
the fees. The depositary may collect its annual fee for depositary services by deductions from cash distributions or by directly billing
investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide
fee-attracting services until its fees for those services are paid.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">ADS holders are also required
to pay additional fees for certain services provided by the depositary, as set forth in the table below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="border-bottom: black 1.5pt solid; width: 49%; text-align: justify"><span style="font-size: 10pt"><b>Depositary service</b></span></td>
    <td style="width: 2%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 49%; text-align: justify"><span style="font-size: 10pt"><b>Fee payable by ADR holders</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">Issuance and delivery of ADSs, including issuances resulting from a distribution of shares or rights or other property </span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Up to U.S.$5.00 per 100 ADSs (or portion thereof) </span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify"><span style="font-size: 10pt">Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Up to U.S.$5.00 per 100 ADSs (or portion thereof)</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify"><span style="font-size: 10pt">Registration for the transfer of shares</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Registration or transfer fees that may from time to time be in effect</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">Cash distribution fees</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">U.S.$0.02 or less per ADS</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify"><span style="font-size: 10pt">Depositary services</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">U.S.$0.02 or less per ADS</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 102; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->98<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, holders may be
required to pay a fee for the distribution or sale of securities. Such fee (which may be deducted from such proceeds) would be for an
amount equal to the lesser of (1) the fee for the issuance of ADSs that would be charged as if the securities were treated as deposited
shares and (2) the amount of such proceeds.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Fees and Payments by the Depositary to the Company</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Fees Incurred in Past Annual Period</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We did not receive any reimbursement from the depositary
in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Fees to be Paid in the Future</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bank of New York Mellon,
as depositary, has agreed to reimburse us for expenses they incur that are related to establishment and maintenance expenses of the ADS
program. The depositary has agreed to reimburse us for its continuing annual stock exchange listing fees. The depositary has also agreed
to pay the standard out-of-pocket maintenance costs for the ADSs, which consist of the expenses of postage and envelopes for mailing annual
and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required
tax forms, stationery, postage, facsimile, and telephone calls. It has also agreed to reimburse us annually for certain investor relationship
programs or special investor relations promotional activities. In certain instances, the depositary has agreed to provide additional payments
to us based on any applicable performance indicators relating to the ADS facility. There are limits on the amount of expenses for which
the depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary
collects from investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The depositary collects its
fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or
from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the
amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary
services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants
acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 103; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->99<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><div><a id="a_015"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>PART
II&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><div><a id="a_016"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 13. Defaults, Dividends Arrearages and
Delinquencies</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 14.&#160; Material Modifications to the
Rights of Security Holders and Use of Proceeds</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_018"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 15.&#160; Controls
and Procedures</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt"><b>A.</b></span></td>
    <td><span style="font-size: 10pt"><b>Disclosure Control and Procedures</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our principal executive officer
(CEO) and our principal financial officer (CFO), after evaluating the effectiveness of our disclosure controls and procedures (as defined
in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this annual report, have concluded that, as of such date, our internal
control over financial reporting was effective.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt"><b>B.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Management&#8217;s Annual Report on Internal Control over Financial Reporting</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act,
and for its assessment of the effectiveness of internal control over financial reporting. In making this assessment, it used the criteria
established in the Internal Control Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Our internal control system is designed to provide reasonable assurance as to the reliability of the published financial statements under
applicable International Financial Reporting Standards. Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurances
with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness of the internal
control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The effectiveness of our internal
control over financial reporting as of December 31, 2022 has been audited by Marcelo de los Santos y C&#237;a., S.C., a member of Moore
Global Network, independent registered public accounting firm, as stated in their report which appears in Item 15.C as required by item
15.B(4) of Form 20-F.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management was able to
assess the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, it used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013) in the Internal Control - Integrated
Framework. Based on its assessment and those criteria, our management determined that internal controls over financing reporting were
effective on December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 104; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->100<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt"><b>C.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Attestation Report of the Independent Registered Public Accounting Firms</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>To the Board of Directors and</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Stockholders of Grupo Simec, S.A.B. de C.V.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Opinion on Internal Control over Financial Reporting</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited Grupo SIMEC S.A.B. de C.V. and
subsidiaries (the Company&#8217;s) internal control over financial reporting as of December 31, 2022, based on criteria established in
Internal Control &#8211; Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control &#8211; Integrated Framework (2013) issued by COSO.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States of America) (PCAOB), the consolidated statements of financial position
and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows of the Company, and our report
dated April 28, 2023, expressed an unqualified opinion on those consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Basis for Opinion</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s management is responsible
for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying &#8220;<i>Management&#180;s Annual Report on Internal Control Over Financial Reporting</i>&#8221;.
Our responsibility is to express an opinion of the Company&#8217;s internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Definition and Limitations of Internal Control
over Financial Reporting</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A Company internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A Company&#8217;s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the
Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the Company&#8217;s assets that could have a material effect on the financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 46%"><span style="font-size: 10pt">Marcelo de los Santos y C&#237;a., S.C.</span></td>
    <td style="width: 54%">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">Member of Moore Global Network Limited</span></td>
    <td>&#160;</td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 46%"><span style="font-size: 10pt">/s/ Carlos de los Santos Anaya</span></td>
    <td style="width: 54%">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">San Luis Potos&#237;, S.L.P., M&#233;xico</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">Apr 28, 2023</span></td>
    <td>&#160;</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 105; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->101<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt"><b>D.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Changes in Internal Control Over Financial Reporting</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are no changes in internal
control during 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_019"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16. Reserved</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_020"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16A. Audit Committee Financial Expert</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors has
determined that it has at least one &#8220;audit committee financial expert,&#8221; as defined in Item 16.A of Form 20-F, serving on the
Audit Committee. Ra&#250;l Arturo P&#233;rez Trejo is the director whom the board of directors has determined to be an audit committee
financial expert. Holders of ADSs should understand that this designation is a disclosure requirement of the SEC related to Mr. P&#233;rez&#8217;s
experience and understanding with respect to certain accounting and auditing matters. For more information about Mr. Trejo&#8217;s relevant
experience see Item 6.A. &#8220;&#8212; Directors and Senior Management.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The designation does not impose
on Mr. P&#233;rez any duties, obligations or liability that are greater than those which are generally imposed on him as a member of
the Audit Committee and board of directors, and his designation as an audit committee financial expert pursuant to this SEC requirement
does not affect the duties, obligations or liability of any other member of the Audit Committee or board of directors. Mr. P&#233;rez
is &#8220;independent&#8221; as such term is defined in the listing standards of the NYSE American.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_021"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16B. Code of Ethics</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2002, we adopted a code
of ethics that applies to all of our employees and directors, including our principal executive officer, principal financial officer and
principal accounting officer. In 2021 and 2022, we did not amend our code of ethics in any manner, nor did we grant any waiver from any
provision of the code of ethics to any person. We will provide to any person without charge, upon written or oral request, a copy of such
code of ethics. Requests should be directed to: Grupo Simec, S.A.B. de C.V., Attention: Mario Moreno Cortez, telephone number: 011-52-33-3770-6700.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_022"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16 C. Principal Accountant Fees and Services</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Audit Committee has engaged
Marcelo de los Santos y C&#237;a, S.C., a practice member of Moore Global Network, as independent auditors to audit our consolidated
financial statements as of and for the year ending December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 106; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->102<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Audit Fees</i>. We paid
Ps. 13.2 million (U.S.$0.68 million) in fees to Marcelo de los Santos y Cia., S.C. in connection with the audit of our annual consolidated
financial statements for the year ended December 31, 2022, which are included in this annual report. We paid Ps. 12.3 million (U.S.$0.6
million) in fees to Marcelo de los Santos y Cia., S.C. in connection with the audit of our annual consolidated financial statements for
the year ended December 31, 2021, which are included in this annual report. We paid Ps. 12.0 million in fees to Marcelo de los Santos
y Cia., S.C. in connection with the audit of our annual consolidated financial statements for the year ended December 31, 2020, which
are included in this annual report. We paid Ps. 6.6 million (U.S.$0.34 million) in fees to Doeren Mayhew &amp; Co. Certified public accountants
and advisors, P.C. a practice member of Moore Global Network Limited, in connection with the audit of our annual financial statements
of the United States of America segment for the year ended December 31, 2022. We paid Ps. 6.6 million (U.S.$0.32 million) in fees to Doeren
Mayhew &amp; Co. Certified public accountants and advisors, P.C. a practice member of Moore Global Network Limited, in connection with
the audit of our annual financial statements of the United States of America segment for the year ended December 31, 2021. We paid Ps.
6.6 million (U.S.$0.33 million) in fees to MSPC Certified public accountants and advisors, P.C. a practice member of Moore Global Network
Limited, in connection with the audit of our annual financial statements of the United States of America segment for the year ended December
31, 2020. We paid Ps. 2.2 million (U.S.$0.11 million) in fees to Moore Prisma in connection with the audit of our annual financial statements
of the Brazil segment for the year ended December 31, 2022.We paid Ps. 0.7 million (U.S.$0.04 million) in fees to Moore Lima Lucchesi
in connection with the audit of our annual financial statements of the Brazil segment for the year ended December 31, 2021. We paid Ps.
0.7 million (U.S.$0.04 million) in fees to Moore Lima Lucchesi in connection with the audit of our annual financial statements of the
Brazil segment for the year ended December 31, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Audit Related Fees</i>.
In 2022 and 2021, we did not incur any expenses associated with audit related fees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Tax Fees</i>. In 2022 and
2021, we did not incur any expenses associated with tax compliance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Other Fees</i>. We paid
no other fees to Marcelo de los Santos y C&#237;a. S.C., Moore Global Network Limited or Moore Global Prisma in 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Pre-Approval Policies.
</i>Our Audit Committee has adopted a formal policy on auditor independence requiring it to approve all professional services rendered
by our independent auditor prior to the commencement of the specified services. The Audit Committee will consider annually and, if appropriate,
approve the provision of audit services by our independent auditor and consider and, if appropriate, pre-approve the provision of certain
defined audit and non-audit services. The Audit Committee also will consider on a case-by-case basis and, if appropriate, approve specific
engagements that are not otherwise pre-approved. Any proposed engagement that does not fit within the definition of a pre-approved service
may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the
Audit Committee for action by written consent.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Audit Committee approved
all of the services incurred in 2021 and 2022, described as &#8220;Audit Fees,&#8221; &#8220;Audit Related Fees,&#8221; &#8220;Tax Fees,&#8221;
and &#8220;Other Fees,&#8221; in accordance with our policy on auditor independence.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_023"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16D. Exemptions from the Listing Standards
for Audit Committees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_024"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16E. Purchases of Equity Securities by
the Issuer and Affiliated Purchasers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Neither we nor any affiliated purchasers made any equity
security purchases during 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_025"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16F. Change in Registrant&#8217;s Certifying
Accountant</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 107; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->103<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_026"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16G. Corporate Governance</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our ADS are listed on the
NYSE American. Section 110 of the NYSE American Company Guide provides that the NYSE American will consider the laws, customs and practices
of an issuer&#8217;s country of domicile, to the extent not contrary to the U.S. securities laws, and may grant exemptions from the NYSE
American listing standards based on these considerations. Our following corporate governance practices differ from the NYSE American listing
standards in the following ways:</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Board of Directors Composition,
Nomination and Board Meetings</i>. Under the NYSE American Company Guide, listed companies are generally required to have a majority of
their board of directors be &#8220;independent&#8221; as defined by the NYSE American Company Guide. Pursuant to the Mexican Securities
Market Law, our board of directors must be composed of a maximum of 21 members, of which at least 25% must be independent. Currently,
as permitted under the Mexican Securities Market Law and our by-laws, our board of directors consists of five directors, of which three
are considered to be &#8220;independent.&#8221; The board of directors is elected by the shareholders at the annual meeting, for a one-year
term with the option to be reelected, as determined by the shareholders. One alternate director may be appointed for each director, provided
that independent alternates are appointed for the independent directors. In accordance with Mexican law, our shareholders determine directors&#8217;
independence during the annual shareholders meeting, but this independence determination may be challenged by the CNBV. Our board of directors
meets at least quarterly and resolutions are binding if adopted by a majority of the directors present at a meeting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Nominating and Compensation
Committees. </i>Under the NYSE American Guide, board of director nominations generally must be selected, or recommended for the board&#8217;s
selection, by either a nominating committee comprised solely of independent directors or by a majority of the independent directors. Further,
compensation of the chief executive officer of a listed company and all other officers must be determined, or recommended to the board
of directors for determination, either by a compensation committee comprised of independent directors or by a majority of the independent
directors on the board of directors.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Audit Committee and Auditors.
</i>Our Audit Committee is governed by: (i) our by-laws and (ii) Mexican law. Our Audit Committee is made up of at least three independent
directors, appointed by the board of directors. Our shareholders appoint and/or remove the chairman of the Audit Committee at the annual
shareholders meeting. In accordance with Mexican law, the Audit Committee must provide an opinion regarding any transaction with a related
party, outside of the ordinary course of business. Such transactions must also be approved by the board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Mexican law, we must
be audited by an independent public accountant that has received a &#8220;quality control review,&#8221; as defined by the general rules
issued by the CNBV. These general rules require accounting firms rendering external audit services, to fulfill higher independence standards,
as well as issuing and following quality control internal policies and manuals in accordance with the rules issued by the Mexican Institute
of Public Accountants (<i>Instituto Mexicano de Contadores P&#250;blicos, A.C.</i>).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Quorum Requirements and
Shareholders&#8217; Approval</i>. The NYSE American minimum quorum requirement for a shareholder meeting is one-third of the outstanding
shares of common stock. In addition, a company listed on NYSE American is required to state its quorum requirement in its by-laws. In
compliance with Mexican law, shareholders representing 50% of our capital stock must be present to conduct business at the first call
for ordinary shareholders meetings, dealing with general matters. If a quorum is not reached, there is no minimum quorum requirement for
a second or subsequent call. Resolutions approved at ordinary shareholders&#8217; meetings are valid when approved by a majority of the
shares present. On the other hand, shareholders representing 75% of our capital stock must be present to conduct business at the first
call for extraordinary shareholders meeting dealing with modifications to the our by-laws. If a quorum is not reached, shareholders representing
50% of our capital stock must be present at the meeting in a second or subsequent call. Resolutions at extraordinary shareholders meetings
are valid if approved by shares representing more than 50% of our capital stock. However, resolutions regarding the (i) quorum requirements,
(ii) minority shareholders&#8217; rights, (iii) merger, spin-off and conversion are valid if approved by at least 75% of our capital stock.
Furthermore, resolutions regarding our registration with the National Securities Registry (<i>Registro Nacional de Valores</i>) are valid
if approved by at least 95% of our capital stock. Class II Series &#8220;L&#8221; Shares, representative of our capital stock with limited
economic and corporate rights, are not taken into account when determining the quorum at the general shareholders&#8217; meeting. Currently
there are no Class II Series &#8220;L&#8221; Shares outstanding. In addition, under Mexican law, we may not be required to obtain shareholder
approval for certain issuances of shares in excess of 20% of our outstanding shares, as would be required in certain circumstances by
the NYSE American Company Guide.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Code of Conduct and Ethics</i>.
In compliance with Mexican law, we have a code of conduct and ethics for our directors or executive officers. Also, our directors&#8217;
and executive officers&#8217; conduct is subject to the applicable provisions of the Mexican Securities Market Law and the regulations
issued by the CNBV.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_027"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16H. Mine Safety Disclosure</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_028"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><!-- Field: Page; Sequence: 108; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->104<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><div><a id="a_029"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>PART
III&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 17. Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">See &#8220;Item 18&#8212;Financial Statements.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_031"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 18. Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">See our Consolidated Financial Statements beginning
on page F-1.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_032"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 19. Exhibits</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the rules and regulations of the SEC,
we have filed certain agreements as exhibits to this annual report on Form 20-F. Documents filed as exhibits to this annual report:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; width: 9%"><span style="font-size: 10pt">Exhibit<br/>
Number</span></td>
    <td style="width: 1%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: justify; width: 90%"><span style="font-size: 10pt">Item</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">1.1</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="https://www.sec.gov/Archives/edgar/data/887153/000121390022027975/f20f2021ex1-1_gruposimec.htm"><span style="font-size: 10pt">Amended and Restated by-laws (estatutos sociales) of the registrant translated into English (incorporated herein by reference to Exhibit 1.1 to the annual report for the fiscal year ended December 31, 2021 filed with the SEC on May 18, 2022).</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">2.1</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="https://www.sec.gov/Archives/edgar/data/887153/000101915503000072/simecda.htm"><span style="font-size: 10pt">Form of Amended and Restated Deposit Agreement among the registrant, The Bank of New York, and all Holders and Beneficial Owners from time to time of any American Depositary Receipts.**</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">2.2</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="https://www.sec.gov/Archives/edgar/data/887153/000101915503000072/simecda.htm"><span style="font-size: 10pt">Form of American Depositary Receipt.**</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">2.3</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/887153/000121390022027975/f20f2021ex2-3_gruposimec.htm"><span style="font-size: 10pt">Description of American Depositary Receipts (incorporated herein by reference to Exhibit 2.3 to the annual report for the fiscal year ended December 31, 2021 filed with the SEC on May 18, 2022).</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.1</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="https://www.sec.gov/Archives/edgar/data/887153/000088237706003653/p06-1602ex10_1.htm"><span style="font-size: 10pt">Stock Purchase Agreement by and Among PAV Republic, Inc., The Shareholders of PAV Republic, Inc., SimRep Corporation and Industrias C.H., S.A. de C.V.*</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.2</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="https://www.sec.gov/Archives/edgar/data/887153/000088237707000028/d601986_ex10-2.htm"><span style="font-size: 10pt">2007-2008 Rounds Supply Agreement by and Between Republic, Inc. and United States of America Steel Corporation.*</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.3</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="https://www.sec.gov/Archives/edgar/data/887153/000089109208003333/e32100ex10-3.txt"><span style="font-size: 10pt">Stock Purchase Agreement, dated as of February 21, 2008, among the Sellers (as defined therein) and Grupo Simec, S.A.B. de C.V. relating to the acquisition of 100% of the shares of Grupo San.***</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">8.1</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="f20f2022ex8-1_gruposimec.htm"><span style="font-size: 10pt">List of subsidiaries, their jurisdiction of incorporation and names under which they do business.</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">12.1</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="f20f2022ex12-1_gruposimec.htm"><span style="font-size: 10pt">Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">12.2</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="f20f2022ex12-2_gruposimec.htm"><span style="font-size: 10pt">Certification of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">13.1</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="f20f2022ex13-1_gruposimec.htm"><span style="font-size: 10pt">Certifications of chief executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">101.INS</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Inline XBRL Instance Document.</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">101.SCH</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Inline XBRL Taxonomy Extension Schema Document.</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">101.CAL</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Inline XBRL Taxonomy Extension Calculation LinkbaseDocument.</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">101.DEF</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Inline XBRL Taxonomy Extension Definition LinkbaseDocument.</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">101.LAB</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Inline XBRL Taxonomy Extension Label Linkbase Document.</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">101.PRE</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Inline XBRL Taxonomy Extension Presentation LinkbaseDocument.</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">104</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Cover Page Interactive Data File (formatted as InlineXBRL and contained in Exhibit 101).</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; text-align: justify"><span style="font-size: 10pt">*</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">**</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Previously filed with the SEC as an exhibit and incorporated by reference to Post-Effective Amendment No. 1 to our Registration Statement on Form F-6, File No. 033-48173.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">***</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Previously filed with the SEC as an exhibit and incorporated by reference to our Annual Report on Form 20-F, filed on July 1, 2008.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->105<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SIGNATURES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The registrant hereby certifies
that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this
annual report on its behalf.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td colspan="2"><span style="font-size: 10pt"><b>GRUPO SIMEC, S.A.B. DE C.V.</b></span></td></tr>
  <tr style="vertical-align: top">
    <td style="width: 60%">&#160;</td>
    <td style="width: 4%">&#160;</td>
    <td style="width: 36%">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">By:</span></td>
    <td style="border-bottom: black 1.5pt solid"><span style="font-size: 10pt">/s/ Rufino Vigil Gonz&#225;lez</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Rufino Vigil Gonz&#225;lez</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><i>Chief Executive Officer</i></span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">By:</span></td>
    <td style="border-bottom: black 1.5pt solid"><span style="font-size: 10pt">/s/ Mario Moreno Cortez</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Mario Moreno Cortez</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><i>Finance Coordinator</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dated: May 1, 2023</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->106<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: center; text-indent: -21.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Grupo
Simec, S.A.B. de C.V. and Subsidiaries</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center; text-indent: -21.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(A
Subsidiary of Industrias CH, S.A.B. de C.V.)</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Consolidated
Financial Statements</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
the years ended December 31, 2022, 2021 and 2020</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Index</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="border-bottom: Black 1.5pt solid; text-align: left; width: 90%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Content</b></span></td>
    <td style="width: 1%"><b>&#160;</b></td>
    <td style="white-space: nowrap; border-bottom: Black 1.5pt solid; text-align: center; width: 9%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Page</b></span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><a href="#fin_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Report of Independent Registered Public Accounting Firm</span></a></td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-2</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><a href="#fin_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Financial Position</span></a></td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-3</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><a href="#fin_003">Consolidated Statements of Comprehensive <span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
    (Loss)</span></a></td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-4</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><a href="#fin_004"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Changes in Stockholders&#8217; Equity</span></a></td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-5</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><a href="#fin_005"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Cash Flows</span></a></td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-6</span></td></tr>
  <tr style="vertical-align: top; ">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><a href="#fin_006">Index to the Notes to the Consolidated <span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial
    Statements</span></a></td>
    <td>&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-7 - F-41</span></td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center; text-indent: 7.1pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><b>&#160;</b></span></p><div>


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    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="fin_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
the Board of Directors and</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Stockholders
of Grupo Simec, S.A.B. de C.V.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Opinion
on the Financial Statements</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have audited the accompanying consolidated statements of financial position of Grupo Simec, S.A.B. de C.V. and its subsidiaries (the
&#8220;Company&#8221;) as of December 31, 2022, and 2021, and the related consolidated statements of comprehensive income (loss), changes
in stockholders&#8217; equity, and cash flows, for each of the years in the three-year period ended December 31, 2022, and the related notes
(collectively referred to as the &#8220;consolidated financial statements&#8221;). In our opinion, the consolidated financial statements
present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021 and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards Board.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (&#8220;PCAOB&#8221;),
the Company&#180;s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (&#8220;COSO&#8221;), and
our report dated April 28, 2023 expressed an unqualified opinion.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Basis
for Opinion</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
consolidated financial statements are the responsibility of the Company&#8217;s management. Our responsibility is to express an opinion on
the Company&#8217;s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Critical
Audit Matters</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Critical
audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top; text-align: left"> <td style="width: 40%"><ix:nonNumeric contextRef="c0" name="dei:AuditorName">Marcelo
de los Santos y C&#237;a., S.C.</ix:nonNumeric> </td> <td style="width: 60%"><ix:nonNumeric contextRef="c0" name="dei:AuditorLocation">San Luis Potos&#237;, S.L.P., M&#233;xico</ix:nonNumeric>
April 28, 2023</td></tr>
<tr style="vertical-align: top; text-align: left"> <td>Member
of Moore Global Network Limited</td> <td>ID <ix:nonNumeric contextRef="c0" name="dei:AuditorFirmId">3281</ix:nonNumeric></td></tr>
</table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/
Carlos de los Santos Anaya, C.P.A.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have served as the Company&#8217;s auditor since 2016.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>


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    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

</div><div><a id="fin_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Grupo
Simec, S.A.B. de C.V. and Subsidiaries</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(A
subsidiary of Industrias CH, S.A.B. de C.V.)</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Consolidated
Statements of Financial Position </b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
the years ended December 31, 2022 and 2021</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(In
thousands of Mexican pesos)</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt"><b>&#160;</b></span></p><div>



</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Note</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Assets</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Current assets:</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 65%; text-align: left">Cash and cash equivalents</td><td style="width: 1%">&#160;</td>
    <td style="width: 9%; text-align: center">6</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">7</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">20</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">Recoverable taxes</td><td>&#160;</td>
    <td style="text-align: center">8</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Other receivables, net</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Prepaid expenses</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Inventory</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">9</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">20</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="font-style: normal; font-weight: normal; text-align: left">Non-current loans to related parties</td><td>&#160;</td>
    <td style="text-align: center">20</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:NonCurrentLoansToRelatedParties" scale="3" unitRef="mxn">1,105,063</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Non-current inventory, net</td><td>&#160;</td>
    <td style="text-align: center">9</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:NoncurrentInventories" scale="3" unitRef="mxn">1,488,819</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Property, plant and equipment, net</td><td>&#160;</td>
    <td style="text-align: center">10</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PropertyPlantAndEquipment" scale="3" unitRef="mxn">16,782,893</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Investments in financial instruments</td><td>&#160;</td>
    <td style="text-align: center">11</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherNoncurrentFinancialAssets" scale="3" unitRef="mxn">1,758,605</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Intangible assets and other non-current assets, net</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">12</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IntangibleAssetsAndGoodwill" scale="3" unitRef="mxn">2,325,255</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt">Total assets</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="padding-bottom: 4pt; text-align: center">&#160;</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: center">13</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">14</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: center">20</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">14</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">15</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">16</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherNoncurrentLiabilities" scale="3" unitRef="mxn">212,613</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:NoncurrentLiabilities" scale="3" unitRef="mxn">4,484,886</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:NoncurrentLiabilities" scale="3" unitRef="mxn">4,480,580</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:Liabilities" scale="3" unitRef="mxn">19,638,527</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:Liabilities" scale="3" unitRef="mxn">15,542,504</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-6">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">17</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IssuedCapital" scale="3" unitRef="mxn">2,832,268</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IssuedCapital" scale="3" unitRef="mxn">2,832,268</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdditionalPaidinCapital" scale="3" unitRef="mxn">4,575,233</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdditionalPaidinCapital" scale="3" unitRef="mxn">4,575,233</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Retained earnings</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:RetainedEarnings" scale="3" unitRef="mxn">38,101,948</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:RetainedEarnings" scale="3" unitRef="mxn">30,239,277</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:RepurchaseOfOwnCapitalStockReserve" scale="3" unitRef="mxn">2,733,722</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="simecb:RepurchaseOfOwnCapitalStockReserve" scale="3" unitRef="mxn">2,823,851</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Accumulated Other comprehensive income (loss), net</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">19</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="padding-bottom: 1.5pt; text-align: center">18</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:NoncontrollingInterests" scale="3" unitRef="mxn">37,647</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:NoncontrollingInterests" scale="3" unitRef="mxn">41,161</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notes
are part of these consolidated financial statements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 3 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="fin_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Grupo Simec, S.A.B. de
C.V. and Subsidiaries</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(A
subsidiary of Industrias CH, S.A.B. de C.V.)</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Consolidated
Statements of Comprehensive Income (Loss) </b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
the years ended December 31, 2022, 2021 and 2020</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(In
thousands of Mexican pesos, except income per share figures)</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left"><b>Comprehensive (loss) for the year:</b></td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Total other comprehensive (loss) for the year, net of income taxes</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherComprehensiveIncome" scale="3" sign="-" unitRef="mxn">1,576,622</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherComprehensiveIncome" scale="3" sign="-" unitRef="mxn">589,961</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left; padding-bottom: 4pt"><b>Comprehensive income (loss) for the year, net of tax</b></td>
    <td style="padding-bottom: 4pt; text-align: center">&#160;</td><td style="padding-bottom: 4pt; text-align: center">&#160;</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ComprehensiveIncome" scale="3" unitRef="mxn">8,855,906</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Net income attributable to:</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Controlling interest</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ComprehensiveIncomeAttributableToOwnersOfParent" scale="3" unitRef="mxn">7,862,671</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ComprehensiveIncomeAttributableToOwnersOfParent" scale="3" unitRef="mxn">2,798,188</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Non-controlling interest</td>
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:NoncontrollingInterest1" scale="3" sign="-" unitRef="mxn">1,612</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="simecb:NoncontrollingInterest1" scale="3" sign="-" unitRef="mxn">105</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left; padding-bottom: 4pt"><b>Net income for the year</b></td>
    <td style="padding-bottom: 4pt; text-align: center">&#160;</td><td style="padding-bottom: 4pt; text-align: center">&#160;</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ProfitLoss" scale="3" unitRef="mxn">7,861,059</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ProfitLoss" scale="3" unitRef="mxn">9,445,867</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Comprehensive income (loss) attributable to:</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Controlling interest</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Non-controlling interest</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notes
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>


</div><!-- Field: Page; Sequence: 4 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><div><a id="fin_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Grupo
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(A
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Consolidated
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    <td style="text-align: right">&#160;</td>
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    <td style="text-align: right">&#160;</td>
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    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
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    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
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    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td>
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
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    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td>
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    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
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    <td style="text-align: right">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td>
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td>
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    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: right">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notes
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></p><div>

</div><!-- Field: Page; Sequence: 5 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="fin_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Grupo
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(A
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Consolidated
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-indent: 3.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-indent: 3.25in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-indent: 3.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.25in">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.25in; text-indent: -0.25in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.375in; text-indent: -0.25in; font-weight: bold; text-align: left">Changes in operating assets and liabilities:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForDecreaseIncreaseInTradeAndOtherReceivables" scale="3" sign="-" unitRef="mxn">204,519</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForIncreaseDecreaseInTradeAccountPayable" scale="3" unitRef="mxn">2,375,610</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.375in; text-indent: -0.25in; text-align: left">(Decrease) in Related parties payables</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:AdjustmentsForIncreaseDecreaseInDueToRelatedPartiesPayable" scale="3" sign="-" unitRef="mxn">8,453</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.25in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.25in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.25in; text-indent: -0.25in; font-weight: bold; text-align: left">Investing activities:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.375in; text-indent: -0.25in; text-align: left">Acquisition of property, plant and equipment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PurchaseOfPropertyPlantAndEquipmentClassifiedAsInvestingActivities" scale="3" unitRef="mxn">1,696,485</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="padding-left: 0.25in; text-indent: -0.25in">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.25in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="padding-left: 0.25in; text-indent: -0.25in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="padding-left: 0.25in; text-indent: -0.25in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.625in; text-indent: -0.25in; font-weight: bold; text-align: left; padding-bottom: 4pt">Cash and cash equivalents at end of year</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notes
are part of these consolidated financial statements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>


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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><div><a id="fin_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Grupo
Simec, S.A.B. de C.V. and Subsidiaries</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Notes
to the Consolidated Financial Statements</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
years ended December 31, 2022, 2021 and 2020</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(In
thousands of Mexican pesos, except foreign currency and where indicated)</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="simecb_DisclosureOfNatureOfBusinessExplanatory-c0_cont_1" escape="true" name="simecb:DisclosureOfNatureOfBusinessExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><b>1.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Nature
                                            of business</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfNatureOfBusinessExplanatory-c0_cont_2" id="simecb_DisclosureOfNatureOfBusinessExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Grupo
Simec, S.A.B. de C.V. is a&#160;<i>stock exchange corporation</i>&#160;with&#160;<i>variable equity,</i>&#160;constituted under the laws
of Mexico on August 22, 1990, with a duration of <ix:nonNumeric contextRef="c0" format="ixt-sec:duryear" name="simecb:StockExchangeTerm">99</ix:nonNumeric> years.&#160;The Company is a subsidiary of Industrias CH, S.A.B. de C.V. (Industrias
CH or ICH).&#160;The business headquarters are located in Guadalajara, Jalisco, Mexico and the administrative offices are located on
601 Rd. Lazaro Cardenas, ZIP Code 44440.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfNatureOfBusinessExplanatory-c0_cont_3" id="simecb_DisclosureOfNatureOfBusinessExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
main activity of Grupo Simec, S.A.B. de C.V. and its subsidiaries (Simec or the Company) is manufacturing, processing and distribution
of steel and steel alloys products in Mexico, the United States of America (USA) and Brazil.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="simecb_DisclosureOfNatureOfBusinessExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shares
of the Company are listed on the Mexican Stock Exchange (BMV) and the Company&#180;s American Depositary Receipts are listed on the
New York Stock Exchange (NYSE).</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfNonadjustingEventsAfterReportingPeriodExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfNonadjustingEventsAfterReportingPeriodExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Significant
                                            events</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="_DisclosureOfNonadjustingEventsAfterReportingPeriodExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On June 11, 2021, a contract was signed for the purchase of fixed assets from Kobelco, for USD $<ix:nonFraction contextRef="c51" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:EquityInterestsOfAcquirer" scale="6" unitRef="usd">10.0</ix:nonFraction> million, for wire production, located in Silao Guanajuato. (CHQ Wire Mexico, S.A. de C.V.)</span></td></tr></table></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify; text-indent: -21.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_1" escape="true" name="simecb:DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>3.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Application
                                            of new and amended standards and interpretations and standards not in force yet</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_2" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
consolidated financial statements of Grupo Simec, S.A.B. de C.V. and its Subsidiaries for the periods presented have been prepared in
accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
IFRS also includes all current International Accounting Standards (IAS), in force, as well as all related interpretations issued by the
IFRS Interpretations Committee (IFRIC), including those issued previously by the Standing Interpretations Committee. The company applied
the effective IFRS as of December 31, 2022.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25IN"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_3" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">International
Financial Reporting Standards, not in force yet.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_4" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Following
are the amendments that could have an effect on Simec financial information, which were issued by the IASB (International Accounting
Standards Board) but are not yet effective as of the date of these financial statements.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_5" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following new standards and amendments are not yet effective but may have an impact on the financial statements of the Group in a future
period.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_6" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">+</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments
to IAS 1 - Classification of Liabilities as Current or Non-current</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_7" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">+</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments
to IFRS 10 and IAS 28 - Sale or contribution of assets between an investor and its associate or joint venture</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_8" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">+</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments
to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_9" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">+</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments
to IAS 8 - Disclosure of Accounting Policies and Definition of Accounting Estimates</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_10" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_9"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">+</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments
to IAS 12 - Deferred tax related to assets and liabilities arising from a single transaction</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_11" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments
to IAS 1 &#8216;Presentation of financial statements&#8217; clarify requirements for the presentation of liabilities in the statement
of financial position as current or non-current. The meaning of settlement of a liability is also clarified. The amendments are applicable
for annual periods commencing on or after 1 January 2023.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_12" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments
to IFRS 10 &#8216;Consolidated financial statements&#8217; and IAS 28 &#8216;Investments in associates&#8217; clarify the accounting
treatment for sales or contribution of assets between an investor and its associates or joint ventures. Where the non-monetary assets
constitute a business, the investor will recognise the full gain or loss on the sale or contribution of assets. Otherwise, the gain or
loss is recognised by the investor only to the extent of the other investor&#8217;s interests in the associate or joint venture. The
amendments have been deferred until IASB has finalised its research project on the equity method.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 7 --><div>
    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_13" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments
to Disclosure of Accounting Policies and Definition of Accounting Estimates modify:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_14" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_13"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IFRS
7, to clarify that information about measurement bases for financial instruments is expected to be material to an entity&#8217;s financial
statements;</span></td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_15" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IAS
1, to require entities to disclose their material accounting policy information rather than their significant accounting policies;</span></td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_16" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_15"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IAS
8, to clarify how entities should distinguish changes in accounting policies and changes in accounting estimates;</span></td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_17" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IAS
34, to identify material accounting policy information as a component of a complete set of financial statements; and</span></td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_18" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IFRS
Practice Statement 2 Making Materiality Judgements, to provide guidance on how to apply the concept of materiality to accounting policy
disclosures.</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_19" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments
to Deferred tax related to assets and liabilities arising from a single transaction modify IAS 12 to clarify the accounting for deferred
tax on transactions that, at the time of the transaction, give rise to equal taxable and deductible temporary differences. In specified
circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the first time.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_20" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
amendments clarify that the exemption does not apply to transactions for which entities recognise both an asset and a liability and that
give rise to equal taxable and deductible temporary differences. This may be the case for transactions such as leases and decommissioning,
restoration and similar obligations. Entities are required to recognise deferred tax on such transactions.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_21" id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Standard amends IFRS 1 to require deferred tax related to leases and decommissioning, restoration and similar obligations to be recognised
by first-time adopters at the date of transition to International Accounting Standards, despite the exemption set out in IAS 12.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="simecb_DisclosureOfApplicationOfNewAndModifiedStandardsAndInterpretationsAndStandardsNotYetInForceExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25IN"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Simec
is evaluating the impact these changes could have on its financial statements.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>4.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Basis
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_2" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
consolidated financial statements have been prepared in accordance with IFRS as discussed in Note 3, based on historical costs. Historical
cost is generally based on the fair value of the consideration given in exchange for assets.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_3" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidation
basis - The consolidated financial statements include the financial statements of Grupo Simec, S.A.B. de C.V. and the entities
controlled by the Company (its subsidiaries). Control is obtained when the company possesses the power to govern the financial and operative
policies of an entity in order to obtain benefits from its activities. The results of subsidiaries acquired or sold during the year are
included in the consolidated statements of comprehensive income from the date of acquisition or up to the date of sale, as the case may
be. Total comprehensive income (loss) of subsidiaries is attributed both to the Company and to the non-controlling interests even if
the non-controlling interests have a deficit balance.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_4" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Within
the consolidation process, adjustments are made to the financial statements of the subsidiaries to adapt their accounting policies so
that they are aligned with those used by the Company. All significant intercompany transactions and balances between the consolidated
companies are eliminated during consolidation.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_5" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Changes
in investments in subsidiaries of the Company that do not result in a loss of control are recorded as equity transactions. The book value
of the company&#8217;s non-controlling investments and shares is adjusted to reflect changes in the corresponding investments in subsidiaries.
Any difference between the amount by which non-controlling shares are adjusted and the fair value of the consideration paid or received
is recognized directly and is attributed to the owners of the company.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_6" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
the company loses control of a subsidiary, the profit or loss in the provision is calculated as the difference between (i) the sum of
the fair value of the consideration received and the fair value of any retained ownership interest and (ii) the prior book value of assets
(including commercial credit) and liabilities of the subsidiary and any non-controlling participation. The amounts previously recognized
in other comprehensive income items related to the subsidiary are recorded (that is, reclassified to profit or loss or transferred directly
to retained earnings) in the same manner established for the case of the disposal of significant assets or liabilities. The fair value
of any investment retained by the former subsidiary on the date of loss of control is regarded as the fair value for initial recognition
in its subsequent accounting treatment, according to IAS 39, financial instruments: Recognition and valuation, or, where appropriate,
the cost in the initial recognition of an investment in an associate or entity under joint control.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>


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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_7" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
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    <td style="width: 76%; text-align: justify">Compa&#241;&#237;a Sider&#250;rgica de Guadalajara, S.A. de C.V.</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c55" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
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    <td style="text-align: justify">Arrendadora Simec, S.A. de C.V.</td><td>&#160;</td>
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    <td style="text-align: justify">Simec International, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c59" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
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    <td style="text-align: justify">Compa&#241;&#237;a Sider&#250;rgica del Pacifico, S.A. de C.V.</td><td>&#160;</td>
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    <td style="text-align: left">Coordinadora de Servicios Sider&#250;rgicos de Calidad, S.A. de C.V. (7)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c63" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
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    <td style="text-align: justify">Industrias del Acero y del Alambre, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c65" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Procesadora Mexicali, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c67" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
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    <td style="text-align: left">Servicios Simec, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c69" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Sistemas de Transporte de Baja California, S.A.&#160;de&#160;C.V.</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Operadora de Metales, S.A. de C.V. (7)</td><td>&#160;</td>
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    <td style="text-align: left">Administradora de Servicios Sider&#250;rgicos de Tlaxcala, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c77" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
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    <td style="text-align: justify">CSG Comercial, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c79" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.95</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c80" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.95</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Operadora de Servicios de la Industria Sider&#250;rgica ICH, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c81" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c82" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Corporaci&#243;n Aceros DM, S.A. de C.V. and subsidiaries&#160;(1)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c83" decimals="4" format="ixt:num-dot-decimal" id="ix_0_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c84" decimals="4" format="ixt:num-dot-decimal" id="ix_1_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Acero Transportes San, S.A. de C.V. (1)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c85" decimals="4" format="ixt:num-dot-decimal" id="ix_2_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c86" decimals="4" format="ixt:num-dot-decimal" id="ix_3_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Simec Acero, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c87" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c88" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Corporaci&#243;n ASL, S. A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c89" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c90" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Simec International 6, S.A. de C.V. (7)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c91" decimals="4" format="ixt:num-dot-decimal" id="ix_24_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c92" decimals="4" format="ixt:num-dot-decimal" id="ix_25_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Simec International 7, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c93" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c94" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Simec International 9, S.A.P.I. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c95" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c96" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Corporativos G&amp;DL, S.A. de C.V. (7)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c97" decimals="4" format="ixt:num-dot-decimal" id="ix_26_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c98" decimals="4" format="ixt:num-dot-decimal" id="ix_27_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Orge, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c99" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c100" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Sider&#250;rgica del Occidente y Pacifico, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c101" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c102" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">RRLC, S.A.P.I. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c103" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c104" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">95.10</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Grupo Chant, S.A.P.I. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c105" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.99</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c106" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">97.61</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Aceros Especiales Simec Tlaxcala, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c107" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c108" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Gases Industriales de Tlaxcala, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c109" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c110" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">GSIM de Occidente S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c111" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c112" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Fundiciones de Acero Estructural, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c113" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c114" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Sider&#250;rgicos Noroeste, S.A. de C.V. </td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c115" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c116" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Simec Sider&#250;rgico, S.A. de C.V. </td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c117" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c118" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: justify">Subsidiaries established in foreign countries:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">SimRep Corporation and Subsidiaries (3) (4) (5)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c119" decimals="4" format="ixt:num-dot-decimal" id="ix_8_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.41</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c120" decimals="4" format="ixt:num-dot-decimal" id="ix_9_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">99.41</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Pacific Steel, Inc. (4)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c121" decimals="4" format="ixt:num-dot-decimal" id="ix_10_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c122" decimals="4" format="ixt:num-dot-decimal" id="ix_11_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Pacific Steel Projects, Inc. (4)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c123" decimals="4" format="ixt:num-dot-decimal" id="ix_12_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c124" decimals="4" format="ixt:num-dot-decimal" id="ix_13_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Simec Steel, Inc. (4)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c125" decimals="4" format="ixt:num-dot-decimal" id="ix_14_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c126" decimals="4" format="ixt:num-dot-decimal" id="ix_15_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Simec USA, Corp. (4)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c127" decimals="4" format="ixt:num-dot-decimal" id="ix_16_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c128" decimals="4" format="ixt:num-dot-decimal" id="ix_17_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Undershaft Investments, NV. (6)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c129" decimals="4" format="ixt:num-dot-decimal" id="ix_18_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c130" decimals="4" format="ixt:num-dot-decimal" id="ix_19_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">GV do Brasil Industria e Comercio de A&#231;o LTDA (2)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c131" decimals="4" format="ixt:num-dot-decimal" id="ix_4_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c132" decimals="4" format="ixt:num-dot-decimal" id="ix_5_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Companhia Siderurgica do Espiritu Santo S.A. (2)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c133" decimals="4" format="ixt:num-dot-decimal" id="ix_6_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c134" decimals="4" format="ixt:num-dot-decimal" id="ix_7_fact" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">100.00</ix:nonFraction></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_9" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_8"><ix:continuation continuedAt="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_2" id="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25IN"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><ix:footnote id="ix_0_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Companies located in San Luis Potosi. For purposes of this report constitute the &#8220;Grupo San&#8221;.</span></ix:footnote></td></tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_10" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_9"><ix:continuation continuedAt="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_3" id="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="text-align: justify"><ix:footnote id="ix_1_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Companies located in Brazil.</span></ix:footnote></td></tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_11" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_10"><ix:continuation continuedAt="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_4" id="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="text-align: justify"><ix:footnote id="ix_2_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ICH owns <ix:nonFraction contextRef="c52" decimals="4" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">0.59</ix:nonFraction>% of the shares in this company at December 31, 2022.</span></ix:footnote></td></tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_12" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_11"><ix:continuation continuedAt="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_5" id="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td><td style="text-align: justify"><ix:footnote id="ix_3_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Companies established in the United States of America, except a subsidiary of SimRep which is established in Canada.</span></ix:footnote></td></tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_13" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_12"><ix:continuation continuedAt="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_6" id="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td><td style="text-align: justify"><ix:footnote id="ix_4_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SimRep as an individual company has no significant operations or assets, except for its investment in Republic Steel. For purposes of this report, these companies are named &#8220;Republic&#8221;.</span></ix:footnote></td></tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_14" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_13"><ix:continuation continuedAt="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_7" id="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</span></td><td style="text-align: justify"><ix:footnote id="ix_5_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Company established in Cura&#231;ao.</span></ix:footnote></td></tr></table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_15" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_14"><ix:continuation id="simecb_ScheduleOfSubsidiariesTableTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)</span></td><td style="text-align: justify"><ix:footnote id="ix_6_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Companies that have lost the entire capital stock, except Operadora de Metales, S.A. de C.V. and which only has lost 2/3 of their capital stock.</span></ix:footnote></td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>


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    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_16" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Summary
of the main accounting policies</b> - The preparation of the consolidated financial statements requires the company&#8217;s
management make certain estimates and use certain assumptions to value some of the items in the financial statements and to make the
disclosures required in the same. However, actual results may differ from these estimates. The Company&#8217;s management, using its
professional judgment, believes that the estimates made and assumptions used were adequate under the circumstances. The significant
accounting policies of the Company are those mentioned below:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_17" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_16"><ix:nonNumeric contextRef="c0" continuedAt="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_1" escape="true" name="simecb:DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>a.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Conversion of foreign subsidiaries financial statements </i></b> - The functional and reporting currency of the Company is the Mexican peso ($). The financial statements of foreign subsidiaries were translated to Mexican pesos in accordance with International Accounting Standard (IAS) 21, <i>The Effects of Changes in Foreign Exchange Rates</i>. Under this standard, the first step to convert financial information from operations abroad is the determination of the functional currency. The functional currency is the currency of the primary economic environment of the foreign operation or, if different, the currency that mainly impacts its cash flows.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_18" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_17"><ix:continuation continuedAt="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_2" id="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
U.S. dollar (US Dollar or USD$) was considered as the functional currency of all the U.S. subsidiaries and Brazilian real for subsidiaries
established in Brazil; therefore, the financial statements of these subsidiaries abroad were converted to Mexican pesos applying:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_19" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_18"><ix:continuation continuedAt="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_3" id="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            exchange rates at the balance sheet date, to all assets, liabilities and stockholder&#180;s
                                            equity.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_20" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_19"><ix:continuation continuedAt="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_4" id="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            historical exchange rate at revenues, costs and expenses.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_21" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_20"><ix:continuation continuedAt="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_5" id="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
conversion differences are carried directly to the consolidated statements of comprehensive income as other comprehensive income under
the caption translation effects of foreign subsidiaries.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_22" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_21"><ix:continuation continuedAt="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_6" id="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Relevant
exchange rates used in the conversion of the financial statements of foreign subsidiaries were as follows (Mexican pesos per one U.S.
dollar):</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_23" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_22"><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory"><ix:continuation continuedAt="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_7" id="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: justify; text-indent: -5.4pt; padding-left: 5.4pt">Current exchange rate as of December 31, 2022</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:ClosingForeignExchangeRate" scale="0" unitRef="pure">19.36</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify; text-indent: -5.4pt; padding-left: 5.4pt">Current exchange rate as of December 31, 2021</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:ClosingForeignExchangeRate" scale="0" unitRef="pure">20.52</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Average exchange rate for the year ended December 31, 2022 (*)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" id="ix_28_fact" name="ifrs-full:AverageForeignExchangeRate" scale="0" unitRef="pure">20.12</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Average exchange rate for the year ended December 31, 2021 (*)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" id="ix_29_fact" name="ifrs-full:AverageForeignExchangeRate" scale="0" unitRef="pure">20.28</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; text-indent: -5.4pt; padding-left: 5.4pt">Current exchange rate as of April, 28, 2023</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c135" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:ClosingForeignExchangeRate" scale="0" unitRef="pure">18.10</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_24" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_23"><ix:continuation id="_DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory-c0_cont_1"><ix:continuation id="simecb_DescriptionOfAccountingPolicyForConversionOfForeignSubsidiariesFinancialStatementsExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25IN"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(*)</span></td><td style="text-align: justify"><ix:footnote id="ix_7_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Average exchange rate used to translate revenues, costs and expenses of the companies mentioned above.</span></ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_25" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_24"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>b.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Business combinations </i></b>- Acquisitions of subsidiaries and businesses units are accounted for using the acquisition method. The consideration for each acquisition is valued at its fair value on the date of exchange of the transferred assets, liabilities incurred or assumed and capital instruments issued by the Company in exchange for control of the acquired. The costs related to the acquisition are recognized in the results when incurred.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_26" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_25"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">At
the date of acquisition, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, except:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_27" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_26"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deferred
                                            tax assets or liabilities and liabilities or assets related to employee benefit arrangements,
                                            which are recognized and measured in accordance with IAS 12, <i>Income Taxes,</i> and IAS
                                            19, <i>Employee Benefits,</i> respectively.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_28" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_27"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Assets
                                            (or disposal groups) that are classified as held for sale in accordance with IFRS 5, <i>Non-</i>current
                                            <i>Assets Held for Sale and Discontinued Operations,</i> are measured in accordance with
                                            that Standard.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_29" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_28"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
excess of the cost of acquisition for the Group&#8217;s interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities of the associated company recognized at the date of acquisition is recognized as goodwill. Goodwill is included in the carrying
amount of the investment and is assessed for impairment annually. Any excess of the Group&#8217;s interest in the net fair value of the assets,
liabilities and contingent liabilities over the cost of acquisition, after the reassessment, is immediately recognized in profit and
loss.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_30" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_29"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
the consideration transferred by the Company in a business combination includes assets or liabilities resulting from a contingent consideration
arrangement, the contingent consideration is measured at its acquisition-date fair value and later adjustments to the consideration are
recognized against goodwill, providing that it has arisen from reliable information on the fair value at the acquisition date and occur
during the &#8216;measurement period&#8217; (which cannot exceed one year from the acquisition date). All other subsequent adjustments
are recognized in profit or loss.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_31" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_30"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
subsequent accounting for changes in the fair value of the contingent estimates that do not qualify as measurement period adjustments
depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at
subsequent reporting dates. Contingencies classified as assets or liabilities are remeasured at subsequent reporting dates in accordance
with IAS 37, <i>Provisions, Contingent Liabilities and Contingent Assets</i>, as appropriate, with the corresponding gain or loss being
recognized in profit or loss.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_32" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_31"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
a business combination is achieved in stages, the Company&#8217;s previously held equity interest in the acquiree are remeasured to fair
value at the acquisition date (i.e. the date when the Company obtains control) and the resulting gain or loss, if any, is recognized
in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have been previously recognized
in other comprehensive income (loss) are reclassified to profit or loss where such treatment would be appropriate if that interest were
disposed of.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_33" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_32"><ix:continuation id="_DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the
Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during
the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances
that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_34" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_33"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>c.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Cash and cash equivalents and temporary investments </i></b>- Cash consists of deposits in bank accounts that do not generate interest. Cash equivalents consists in temporary investments referred to as short-term fixed income investments whose original maturity is less than three months. These investments are reported at cost plus accumulated interest. The value so determined approximates their fair value.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_35" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_34"><ix:continuation id="_DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Temporary
investments in equity instruments are measured at the fair value prevailing at the date of the financial statements. Subsequent changes
in the fair value are recognized in profit or loss.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_36" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_35"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DescriptionOfAccountingPolicyForAllowancesForDoubtfulAccountsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>d.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Allowances
for doubtful accounts</i></b> - The Companies recognize an estimation for expected credit loss, based on the historical
experience of credit losses in their accounts receivable, current conditions and reasonable and sustainable forecasts of the different
quantifiable future events that could affect the amount of future cash flows for recovering accounts receivable. The determination of
the estimate is aligned with the criteria established in IFRS 9, &#8220;Financial instruments&#8221;.</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_37" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_36"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>e.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Inventories and cost of sales </i></b>- Inventories are stated at the lower of cost or net realizable value. The cost allocation formula used is the average cost. The cost includes acquisition costs of materials, labor and overhead costs related to manufacturing, based on normal activity levels. The net realizable value represents the estimated selling price for inventories less all estimated costs of completion and other necessary to make the sale.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_38" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_37"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_2" id="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company classifies raw material inventory in the Consolidated Statements of Financial Position based on its expected consumption period,
presenting as long-term inventories those which in accordance with historical data and production trends will not be consumed in the
short-term (one year).</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_39" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_38"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_3" id="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company classifies as long-term inventory certain parts and rollers that, according to historical data and trends, showing that such
inventories will not be consumed in the short-term. The Company utilizes coke, a form of coal, as a raw material input to fuel its blast
furnace which has been inactive in Lorain, Ohio USA plant (see Note 9). The Company has <ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="simecb:CokeInventory" scale="0" unitRef="Tons">136,246</ix:nonFraction> metric tons (MT) of coke inventory valued
at <ix:nonFraction contextRef="c2" decimals="-6" format="ixt:num-dot-decimal" name="simecb:CokeInventoryValue" scale="6" unitRef="mxn">1,237</ix:nonFraction> million Mexican pesos (average of USD$ <ix:nonFraction contextRef="c2" decimals="1" format="ixt:num-dot-decimal" name="simecb:AveragePriceOfCokePerMetricTons" scale="0" unitRef="usd">469.0</ix:nonFraction>/MT) on hand at December 31, 2022 and <ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="simecb:CokeInventory" scale="0" unitRef="Tons">136,541</ix:nonFraction> MT of coke inventory valued at <ix:nonFraction contextRef="c3" decimals="-6" format="ixt:num-dot-decimal" name="simecb:CokeInventoryValue" scale="6" unitRef="mxn">1,304</ix:nonFraction>
million Mexican pesos (average of USD$ <ix:nonFraction contextRef="c3" decimals="1" format="ixt:num-dot-decimal" name="simecb:AveragePriceOfCokePerMetricTons" scale="0" unitRef="usd">465.5</ix:nonFraction>/MT) on hand at December 31, 2021 that is classified as long-term in the accompanying Consolidated
Statements of Financial Position.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_40" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_39"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_4" id="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows the practice of providing a reserve for slow-moving inventory, considering the total of products and raw materials (including
coke) with a turnover above one year, which is recorded in the statement of financial position and against account is the cost of sales.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_41" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_40"><ix:continuation id="_DescriptionOfAccountingPolicyForMeasuringInventories-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
cost of sales of the Company includes inventory costs, outbound freight charges, purchasing and receiving costs, inspection costs, and
warehousing costs in cost of goods sold. Vendor payment incentives are recorded as a reduction to cost of goods sold.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_42" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_41"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>f.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Property</i>,
<i>plant and equipment </i></b>- Property, plant and equipment are <b>r</b>ecorded at acquisition cost less any recognized impairment
loss. Cost includes all expenses related to acquisition and installation and, for qualifying assets, borrowing costs (interest) capitalized
in accordance with the Company&#8217;s accounting policy. Depreciation is recognized so as to write off the cost of assets (other than
land and properties under construction) less their residual values over their useful lives, using the straight-line method, and commences
when the assets are ready for their intended use. The estimated useful lives, residual values and depreciation method are reviewed at
the end of each reporting period, with the effect of any change in estimates accounted for on a prospective basis.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_43" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_42"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined
as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_44" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_43"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
initial estimated useful lives of the Company&#8217;s main assets are as follows:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_45" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_44"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DisclosureOfDetailedInformationAboutEstimatedUsefulLivesOfAssetsExplanatory"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Years</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Buildings</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c136" format="ixt-sec:duryear" name="simecb:UsefulLivesOrDepreciationRatesPropertyPlantAndEquipment">10</ix:nonNumeric> to <ix:nonNumeric contextRef="c137" format="ixt-sec:duryear" name="simecb:UsefulLivesOrDepreciationRatesPropertyPlantAndEquipment">65</ix:nonNumeric></span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Machinery and equipment</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c138" format="ixt-sec:duryear" name="simecb:UsefulLivesOrDepreciationRatesPropertyPlantAndEquipment">5</ix:nonNumeric> to <ix:nonNumeric contextRef="c139" format="ixt-sec:duryear" name="simecb:UsefulLivesOrDepreciationRatesPropertyPlantAndEquipment">40</ix:nonNumeric></span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 89%; text-align: left">Transportation equipment</td>
    <td style="width: 1%; text-align: center">&#160;</td><td style="width: 9%; text-align: center"><ix:nonNumeric contextRef="c140" format="ixt-sec:duryear" name="simecb:UsefulLivesOrDepreciationRatesPropertyPlantAndEquipment">4</ix:nonNumeric></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Furniture, chattels and computer equipment</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c141" format="ixt-sec:duryear" name="simecb:UsefulLivesOrDepreciationRatesPropertyPlantAndEquipment">3</ix:nonNumeric> to <ix:nonNumeric contextRef="c142" format="ixt-sec:duryear" name="simecb:UsefulLivesOrDepreciationRatesPropertyPlantAndEquipment">10</ix:nonNumeric></span></td><td style="text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_46" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_45"><ix:continuation id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Repair
and maintenance costs that significantly increase productive capacity or extend the useful lives of existing plant and equipment are
capitalized. Supplies, comprising of spare parts and consumables for internal use are classified under property, plant and equipment
and expensed as incurred in the manufacturing process. All other repair and maintenance costs are expensed as incurred. Capital expenditures
for projects that cannot be put into use immediately are included in constructions and machinery in-progress. When constructions and
machinery in-progress are completed, they are transferred to depreciable assets.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_47" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_46"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>g.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Leases</i></b>
- IFRS 16 &#8220;Leases&#8221;. These provisions consist of recognizing an asset for the right to use the underlying asset and
a liability for the lease thereof on the start date of the lease. The right-of-use asset is valued at acquisition cost less accumulated
depreciation and, where appropriate, impairment losses; the Lease Liability is valued at the present value of future lease payments to
be made and any other payment for the right to use the underlying asset in the lease term that has not been made at the start date of
the lease. The company applied the exception established in paragraph 5 of IFRS 16, where the lease agreements signed are short-term
and there is no reasonable certainty that they would be extended after their expiration.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_48" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_47"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>h.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Costs for loans</i></b> - Costs for loans directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are ready for their intended use or sale.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_49" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_48"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Investment
income earned on the temporary investment of specific loans pending their expenditure on qualifying assets is deducted from the costs
for loans eligible for capitalization.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_50" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_49"><ix:continuation id="_DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
other costs for loans are recognized in profit or loss in the period in which they are incurred.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_51" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_50"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>i.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Intangible assets</i></b> - Intangible assets with definite useful lives that are acquired separately are carried at cost, less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for, on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_52" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_51"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Expenditure
on research activities is recognized as an expense in the period in which it is incurred.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_53" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_52"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if,
and only if, all of the following have been demonstrated:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_54" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_53"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            technical feasibility of completing the intangible asset so that it will be available for
                                            use or sale;</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_55" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_54"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            intention to complete the intangible asset and use or sell it;</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_56" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_55"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            ability to use or sell the intangible asset;</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_57" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_56"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">How
                                            the intangible asset will generate probable future economic benefits;</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_58" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_57"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            availability of adequate technical, financial and other resources to complete the development
                                            and to use or sell the intangible asset; and</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_59" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_58"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_8"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            ability to measure reliably the expenditure attributable to the intangible asset during its
                                            development.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_60" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_59"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the
intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized,
development expenditure is recognized in profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible
assets that are acquired separately.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_61" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_60"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_11" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intangible
assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the
acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination
are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are
acquired separately.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_62" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_61"><ix:continuation id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses
arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount
of the asset, are recognized in profit or loss.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_63" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_62"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>j.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Goodwill </i></b>- Goodwill arising from a business combination is carried as an asset at cost as established at the date of acquisition of the control of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Company&#8217;s cash-generating units that would be expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_64" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_63"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>k.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Impairment of tangible and intangible assets other than goodwill</i></b> - At the end of each reporting period or more frequently when impairment potential identified, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any of such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than it&#180;s carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>&#160;</i></b></span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_65" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_64"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case
the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the
asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating
unit) in prior years. For purposes of allocation of goodwill when there is business combination will be distributed among each of the
cash generating units of the acquiring entity, expected synergy benefits. A reversal of an impairment loss is recognized immediately
in profit or loss and allocated to the assets of that unit, the carrying amount of an asset other than goodwill attributable to a reversal
of an impairment loss of value shall not exceed the carrying amount that would have been obtained if had not recognized an impairment
loss in value for the asset in prior periods. Unless the related asset is recognized at a revalued amount, in which case the reversal
of the impairment loss is treated as a revaluation increase.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_66" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_65"><ix:continuation id="_DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
reversal of the impairment loss is recorded on profit and loss, unless the corresponding asset recognizes a restated amount, in which
case the reversal of the impairment loss is treated as a restatement increase.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

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<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>l.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Provisions </i></b> - Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_68" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_67"><ix:continuation id="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet
date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, it&#180;s carrying amount is the present value of those cash flows.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>m.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Employee benefits</i></b> - The costs of direct benefits and defined benefit and defined contribution retirement plans are recognized as an expense when employees have rendered service entitling them to the right to receive those benefits.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_70" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_69"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
retirement benefit liability is determined based on the present value of the defined benefit obligation at the date of the statement
of financial position. Any compensation included in the determination of the liability premiums corresponds to seniority premiums for
retirement. Actuarial gains and losses are recognized on profit or loss for the year. The retirement benefit liability and the related
net cost of the period are determined under the projected unit credit method based on projected salaries and certain assumptions determined
by independent actuaries.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_71" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_70"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Liabilities
for employee benefits recognized in the consolidated statement of financial position represent the present value of the defined benefit
obligation.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_72" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_71"><ix:continuation id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Republic
operates various employee benefit plans. The contributions to these benefit plans are either contractually determined by the terms of
a collective bargaining agreement with the United Steelworkers or they are under the terms of a defined contribution plan. Accordingly,
the company pays fixed contributions to separate entities and they are expensed in the period in which the employees rendered the services
entitling them to the benefits.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>n.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Earnings per share </i></b>- Income per share is calculated by dividing net income or loss related to the controlling interests, by the weighted average shares outstanding during each year presented.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

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<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>o.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Income taxes</i></b> - Income taxes represents the sum of the tax currently payable and deferred taxes.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_75" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_74"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Current
                                            tax</i></b> -   The Company incurs Income Tax (ISR) (See note 15) which is recorded in
                                            the result in the year in which it is determined. Determined ISR is based on fiscal earnings.
                                            Fiscal earning differs from the gain reported in the Consolidated Comprehensive Income Statement,
                                            due to taxable income or deductible expenses in other years and items which are never taxable
                                            or deductible. The tax liability for the Company is computed using statutory rates promulgated
                                            or substantially approved at the end of the period on report. </span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_76" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_75"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Deferred
                                            tax</i></b> - Deferred tax is recognized on differences between the carrying amounts
                                            of assets and liabilities in the financial statements and the corresponding tax basis using
                                            the liability method. Deferred tax liabilities are generally recognized for all taxable temporary
                                            differences, and deferred tax assets are generally recognized for all deductible temporary
                                            differences to the extent that it is probable that taxable profits will be available against
                                            which those deductible temporary differences can be utilized. Such assets and liabilities
                                            are not recognized if the temporary difference arises from goodwill or from the initial recognition
                                            (other than in a business combination) of other assets and liabilities in a transaction that
                                            affects neither the taxable profit nor the accounting profit.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_77" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_76"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced by a valuation allowance to the extent that
it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_78" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_77"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deferred
tax assets and liabilities are computed using the tax rates that are expected to apply in the period in which the liability is settled
or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The
effects of changes in the statutory rates are accounted for in the period that includes the enactment date. The measurement of deferred
tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_79" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_78"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deferred
tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and
liabilities on a net basis.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_80" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_79"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForIncomeTaxExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company follows the practice of recognizing the benefit from the amortization of acquired or generated tax losses in current earnings
that are amortized.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Current
                                            and deferred tax for the period</i></b> - Current and deferred tax are recognized as
                                            an expense or income in periodic profit or loss, except when they relate to items that are
                                            recognized in other comprehensive income (loss) or directly in equity, in which case, the
                                            current and deferred tax are also recognized in other comprehensive income (loss) or directly
                                            in equity, respectively.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Interests
                                            on recoverable tax balances</i></b> - Interest on recoverable tax balances are presented
                                            in the consolidated statements of comprehensive income as interest income.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_83" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_82"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>p.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Foreign currencies transactions</i></b> - In preparing the financial statements of each individual group entity, transactions in currencies other than the entity&#8217;s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. In the case of non-monetary items, which arise from the payment or collection of anticipated considerations, are recognized at the exchange rate in force of the date of the transaction.</span></td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_84" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_83"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Exchange
differences are recognized in profit or loss in the period in which they arise except for:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_85" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_84"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Exchange
                                            differences on foreign currency borrowings relating to assets under construction for future
                                            productive use,  which are included in the cost of those assets and are recorded as an
                                            adjustment to interest costs on those foreign currency borrowings;</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_86" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_85"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Exchange
                                            differences on transactions entered into in order to hedge certain foreign currency risks;
                                            and</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_87" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_86"><ix:continuation id="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Exchange
                                            differences on monetary items receivable from or payable to a foreign operation for which
                                            settlement is neither planned nor likely to occur (therefore forming part of the net investment
                                            in the foreign operation), which are recognized initially in other comprehensive income and
                                            reclassified from equity to profit or loss on sale of all or part of the net investment.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_88" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_87"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>q.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Financial instruments</i></b> - Financial assets and financial liabilities are recognized when a group entity becomes a part to the contractual provisions of the instrument.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_89" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_88"><ix:continuation id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial
assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_90" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_89"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>r.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Financial assets</i></b> - Financial assets are classified in accordance with IFRS 9 Financial Instruments (&#8220;IFRS 9&#8221;) into financial assets that are subsequently measured at amortized cost, at fair value through Other Comprehensive Income (OCI) or at fair value through profit or loss based on the Company&#8217;s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_91" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_90"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Financial
assets at amortized cost</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_92" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_91"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial
assets are measured at amortized cost when the objective of holding the financial assets is to obtain contractual cash flows, and the
contractual terms of the financial asset give rise on specified dates to cash flows that are only payments of principal and interest
on the principal amount. Financial assets are initially recognized at fair value plus transaction costs and subsequently recorded at
amortized cost using the effective interest rate method, with changes in carrying value recognized in the statement of income. They are
included in current assets except for maturities greater than 12 months from the closing date, which are included in non-current assets.
The Group&#8217;s financial assets, measured at amortized cost, are mainly presented as &#8220;Trade accounts and notes receivable&#8221;, &#8220;Other
accounts and notes receivable&#8221;, and &#8220;Accounts receivable from related parties&#8221; in the consolidated statement of financial
position.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_93" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_92"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Financial
assets at fair value through OCI</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_94" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_93"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
are financial assets held for the purpose of obtaining contractual cash flows and the sale of the financial assets, and the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_95" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_94"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s investments in certain equity instruments have been designated to be measured at fair value through OCI in accordance with
MFRS 9. In connection with this designation, any amount presented in OCI will not be transferred to the consolidated statement of income.
Dividends on these equity instruments are recognized in the consolidated statement of income when the right to pay the dividend is established,
and it is probable that such dividend will be paid to the Company.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_96" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_95"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Financial
assets at fair value through profit or loss</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_97" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_96"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
are financial assets held for trading. A financial asset is classified in this category if it is acquired for the purpose of selling
in the near term. Derivative financial instruments are also included in this category unless they are designated as hedging instruments.
Assets in this category are classified as current assets if they are expected to be settled within 12 months, otherwise they are classified
as non-current assets.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_98" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_97"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Derecognition</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_99" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_98"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Group assesses the expected credit losses associated with its financial assets recorded at fair value through OCI. The applicable impairment
method depends on whether there has been a significant increase in credit risk.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_100" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_99"><ix:continuation id="_DescriptionOfAccountingPolicyForFinancialAssetsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
notes and trade receivables, the Company applies a simplified approach permitted by MFRS 9, which requires that expected losses over
the life of the asset be recognized upon initial recognition of the notes and trade receivables</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_101" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_100"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>s.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Financial liabilities</i></b> - Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Financial liabilities are classified as either financial liabilities &#8220;at fair value through profit or loss&#8221; or &#8220;other financial liabilities&#8221;.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_102" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_101"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial
liability at fair value with changes through profit or loss is a financial liability classified as held for trading or it is designated
as at fair value with changes through profit or loss.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_103" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_102"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
financial liability is classified as held for trading if:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_104" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_103"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
                                            has been acquired principally for the purpose of repurchasing it in the near term; </span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_105" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_104"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
                                            initial recognition, it is part of a portfolio of identified financial instruments that the
                                            Company manages together and has a recent actual pattern of short-term profit-taking; or
                                            </span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_106" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_105"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
                                            is a derivative that has not been designated as a hedging instrument and fulfils the condition
                                            to be effective.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_107" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_106"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
financial liability other than a financial liability held for trading may be designated as at fair value through profit or loss upon
initial recognition if:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_108" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_107"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Such
                                            designation eliminates or significantly reduces a measurement or recognition inconsistency
                                            that would otherwise arise; or</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 78pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_109" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_108"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_8"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            yield of a group of financial assets, financial liabilities or both, is administered and
                                            assessed based on its fair value, according to an investment strategy or risk management
                                            that the Company has documented and provided internal information over that group, based
                                            on its fair value; or</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_110" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_109"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_9"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
                                            forms part of a contract containing one or more embedded derivatives, and IAS 39, <i>Financial
                                            Instruments: Recognition and Measurement,</i> permits the entire combined contract (asset
                                            or liability) to be designated as at fair value through profit or loss.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_111" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_110"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_11" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_10"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial
                                            liabilities at fair value through profit or loss are recorded at fair value, with any gains
                                            or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized
                                            in profit or loss incorporates any interest paid on the financial liability and is included
                                            in the &#8216;other gains and losses&#8217; line item in the consolidated statement of comprehensive
                                            income.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_112" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_111"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_12" id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_11"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
                                            financial liabilities including borrowings are subsequently measured at amortized cost using
                                            the effective interest method. The effective interest method is a method of calculating the
                                            amortized cost of a financial liability and of allocating interest expense over the relevant
                                            period. The effective interest rate is the rate that exactly discounts estimated future cash
                                            payments through the expected life of the financial liability, or (where appropriate a shorter
                                            period), to the net carrying amount on initial recognition.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_113" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_112"><ix:continuation id="_DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory-c0_cont_12"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            Company derecognizes financial liabilities when, and only when, the Company&#8217;s obligations
                                            are discharged, cancelled or expire. The difference between the carrying amount of the financial
                                            liability derecognized and the consideration paid and payable is recognized in profit or
                                            loss at that time. </span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_114" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_113"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>t.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Derivative financial instruments</i></b> - The Company sometimes uses derivative financial instruments for hedging risks associated with natural gas prices; this commodity is used for the production of goods, for which it conducted studies on historical consumption, future requirement and commitments acquired, thus diminishing its exposure to risks other than its normal operating risks.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_115" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_114"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
derivatives are initially recognized at fair value at the date the derivative contracts are entered into and subsequently are remeasured
to the fair value at the end of reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative
is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature
of the hedge relationship.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_116" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_115"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
mitigate the risks associated with changes in natural gas prices occurring naturally as a result of the supply and demand on international
markets, the Company uses natural gas cash-flow exchange contracts or natural gas swaps to offset fluctuations in the price of natural
gas, whereby the Company receives a floating price and pays a fixed price. Fluctuations in natural gas prices from volumes consumed are
recognized as part of the Company&#8217;s operating cost.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_117" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_116"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">At
the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along
with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the
hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting exposure to changes
in fair values or cash flows of the hedged item attributable to the hedged risk.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_118" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_117"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other
comprehensive income and accumulated under the heading of <i>fair value of derivative financial instruments, </i>net of the corresponding
income taxes. The gain or loss relating to the ineffective portion of hedge instrument is recognized immediately in profit or loss, and
is included in the cost of sales line item.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_119" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_118"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company periodically evaluates the changes in cash flows of the derivative instrument to analyze if the swaps are highly effective for
mitigating the exposure to natural gas price fluctuations. A hedge instrument is considered to be highly effective when changes in its
fair value or cash flows of the primary position are compensated on a regular or cumulatively basis, by changes in fair value or cash
flows of the hedging instrument in a range between <ix:nonFraction contextRef="c53" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageRangeOfChangesInFairValueOrCashFlowsOfHedgingInstrument" scale="-2" unitRef="pure">80</ix:nonFraction>% and <ix:nonFraction contextRef="c54" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageRangeOfChangesInFairValueOrCashFlowsOfHedgingInstrument" scale="-2" unitRef="pure">125</ix:nonFraction>%.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_120" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_119"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amounts
previously recognized in other comprehensive income are reclassified to profit or loss in the periods when the hedged item is recognized
in profit or loss, in the same line of the consolidated statement of comprehensive income as the recognized hedged item. However, when
the hedged forecasted transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses
previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial
asset or non-financial liability.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify; text-indent: 1in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_121" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_120"><ix:continuation id="_DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hedge
accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated,
or exerted, or when it no longer qualifies for hedge accounting. Any gain or loss accumulated from the hedge instrument that had been
recognized in other comprehensive income and accumulated in equity at that time remains in equity until the forecast transaction is ultimately
recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized
immediately in profit or loss.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_122" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_121"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>u.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Revenue from contracts with customers</i></b> - Revenue from contracts with customers is recognized when control of the goods or services is transferred to the customer in an amount that reflects the consideration to which the company expect to be entitled in exchange for those goods and services.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

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    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_123" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_122"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_2" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sale
of goods</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_124" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_123"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_3" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Revenue
from products sales manufactured by the Company (&#8220;the products&#8221;) is recognized at the point in time when control of the asset
is transferred to the customer, normally generally on delivery of the parts. The normal credit term is 30 to 90 days upon delivery.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_125" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_124"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_4" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company does not have any obligations to be fulfilled in the contracts, which are obligations to be fulfilled separately and in which
a portion of the transaction price should be allocated, other than the delivery of products confirming to the specifications of a customer
purchase order. When determining the transaction price for the sale of products, the Company would consider the possible effects of the
variable consideration, the existence of important financing components, the consideration other than cash and the consideration payable
to the client.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_126" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_125"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_5" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Contract
assets</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_127" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_126"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_6" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs an
obligation by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract
asset is recognized for the earned consideration that is conditional.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_128" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_127"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_7" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accounts
receivable</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_129" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_128"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_8" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
receivable represents the Company&#8217;s right to an amount of consideration that is unconditional (i.e., only the passage of time is
required before payment of the consideration is due).</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_130" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_129"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_9" id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Contract
liabilities and advances from customers</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_131" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_130"><ix:continuation id="_DescriptionOfAccountingPolicyForRecognitionOfRevenue-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
contract liability is the obligation to transfer the control over goods or services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers
goods or services to the customer, a contract liability is recognized when the payment is due, and an advance from customers when the
payment is made. Contract liabilities (or advance from customer) are recognized as revenue when the Company performs its performance
obligations under the contract.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_132" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_131"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>v.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Financial information by operating segment</i></b> - An operating segment is an identifiable component of the Company that performs business activities, from which it may earn revenues and incur expenses, including those income and expenses related to transactions with other components of the entity and upon which the company has separate financial information that is evaluated regularly by the Board of Directors, in making decisions to allocate resources and assess segment performance.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_133" id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_132"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DescriptionOfAccountingPolicyForEnvironmentalLiabilitiestextBlock"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>w.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Environmental liabilities</i></b> - The Company and other steel companies are subject to stringent environmental laws and regulations. It is the policy of the Company to endeavor to comply with applicable environmental laws and regulations. The Company established a liability for an amount which the Company believes is appropriate, based on information currently available, to cover costs of environmental remediation it deems probable and estimable. The liability represents an estimate of the environmental remediation costs associated with the required future steps of remediation, based upon management&#8217;s evaluation of probable outcomes. These estimates are based on currently available facts, existing technology and presently enacted laws and regulations. The precise timing of remediation activities cannot be reliably determined at this time due to the absence of any deadlines for remediation under the applicable environmental laws and regulations pursuant to which such remediation costs will be expended. Accordingly, the Company has not discounted its environmental liabilities. Currently no claims for recovery are netted against the recorded liabilities.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

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</div><ix:continuation id="_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory-c0_cont_133"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DescriptionOfAccountingPolicyForCostOfSalesAndExpensesByFunctiontextBlock"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>x.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Cost of sales and expenses by function</i></b> - The Company classifies its costs and expenses by function in the Consolidated Statements of Comprehensive Income, according to accepted practices for the industry in which it operates.</span></td></tr></table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify; text-indent: -21.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><ix:nonNumeric contextRef="c0" continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_1" escape="true" name="simecb:DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>5.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Critical
                                            accounting judgments and key sources of estimates</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric><div>

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</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_2" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the application of the Company&#8217;s accounting policies, which are described in Note 4, management is required to make judgments,
estimates and assumptions regarding the carrying amounts of assets and liabilities. The estimates and associated assumptions are based
on historical experience, the future and other factors that are considered to be relevant. Actual results may differ from these estimates.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

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</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_3" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
estimates and underlying assumptions are reviewed on an ongoing basis and the resulting changes are recorded on the period in which the
estimate has been modified, if such change affects only that period or in future periods.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

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</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_4" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-weight: normal">a.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Critical
                                            accounting judgments</i> <span style="font-weight: normal">- The following are the critical
                                            judgments in the application of accounting policies, apart from those involving estimations,
                                            that the management have made in the process of applying the Company&#8217;s accounting policies
                                            and that have the most significant effect on the amounts recognized in the financial statements:</span></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

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</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_5" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Functional
                                            currency</i></b> - The Company&#8217;s management has evaluated all the indicators
                                            that in its opinion are relevant and has concluded that the Company&#8217;s functional currency
                                            is the Mexican Peso. Likewise, the Company has concluded that the functional currency of
                                            the companies located abroad are those mentioned in Note 4-a.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

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</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_6" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="width: 100%; font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-weight: normal">b.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Key
                                            information for estimates <span style="font-weight: normal">-</span></i><span style="font-weight: normal">
                                            The following are the key assumptions, and other key sources of estimation at the consolidated
                                            balance sheet date, that have a significant risk of causing a material adjustment to the
                                            carrying amounts of assets and liabilities within the following financial year.</span></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

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</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_7" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Allowance
                                            for expected credit losses </i></b>- The practice of creating an allowance for expected
                                            credit losses at the balance sheet date is followed to show the possible losses resulting
                                            from the inability of customers to pay their corresponding debts. The Company calculates
                                            the estimate taking into account the historical experience of credit losses on its accounts
                                            receivable, current conditions and reasonable and supportable forecasts of the different
                                            quantifiable future events that could affect the amount of future cash flows to be recovered
                                            from accounts receivable.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_8" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Net
                                            realizable value of inventory </i></b>- At each balance sheet date, professional judgment
                                            is used to determine any impairment in inventory. Inventory is considered as impaired when
                                            its carrying value is higher than its net realization value. </span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_9" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_8"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Impairment
                                            of long-lived assets in use</i></b> - Management applies professional judgment at each
                                            balance sheet date to determine whether the long-lived assets in use are impaired. Long-lived
                                            assets in use are impaired when the carrying value is greater than the recoverable amount
                                            and there is objective evidence of impairment. The recoverable amount is the present value
                                            of the discounted future cash flows that will generate during the remaining useful life,
                                            or liquidation value (fair value).</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_10" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_9"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Estimating
                                            useful lives and residual values of property, plant and equipment</i></b> - As described
                                            in Note 4 f, the Company reviews the estimated useful life and residual values of property,
                                            plant and equipment at the end of each annual reporting period.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

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</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_11" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_10"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Impairment
                                            of goodwill</i></b> - Determining whether goodwill is impaired requires an estimation
                                            of the value in use of the cash-generating units to which goodwill has been allocated. The
                                            value in use calculation requires management to estimate the future cash flows expected to
                                            arise from the cash-generating unit and a suitable discount rate in order to calculate present
                                            value.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

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<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Employee
                                            Benefits </i></b>- The valuation of employee benefits is carried out by independent actuaries
                                            based on actuarial studies. Among others, the following assumptions, which can have an effect
                                            are used:(i) discount rates, (ii) the expected growth rates of wages and (iii) turnover rates
                                            and mortality recognized tables. </span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_13" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
change in the economic, employment and fiscal conditions could modify the estimates.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_14" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_13"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Contingencies</i></b>
                                            - The Company is subject to transactions or contingent events for which it
                                            uses professional judgment in the development of estimates of probability of occurrence.
                                            Factors that are considered in these estimates are the current legal situation at the date
                                            of the estimate and, the opinion of the legal advisers.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_15" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_14"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Deferred
                                            income tax assets</i></b> - The Company reviews the carrying amounts at the end of
                                            each reporting period and reduces deferred income tax assets to the extent that it is not
                                            probable that sufficient taxable profit will be available to allow all or part of the deferred
                                            income tax assets to be utilized. However, there is no assurance that the Company will generate
                                            sufficient taxable profit to allow all or part of its deferred income tax assets to be realized.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_16" id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_15"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
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                                            of financial instruments</i></b> - The Company has certain types of derivative financial
                                            instruments (gas swaps), and the valuation techniques that includes to determine the fair
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</div><div>

</div><ix:continuation id="simecb_DisclosureOfCriticalAccountingJudgmentsAndKeySourcesOfEstimationExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&#8217;s management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair
value of derivative financial instruments. At December 31, 2022 and 2021 the Company has no derivative financial instruments.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 74.7pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfCashAndCashEquivalentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>6.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Cash
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCashAndCashEquivalentsExplanatory-c0_cont_2" id="_DisclosureOfCashAndCashEquivalentsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cash
and cash equivalents are as follows:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCashAndCashEquivalentsExplanatory-c0_cont_3" id="_DisclosureOfCashAndCashEquivalentsExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="simecb_DisclosureOfDetailedInformationAboutCashAndCashEquivalentsExplanatory-c0_cont_1" escape="true" name="simecb:DisclosureOfDetailedInformationAboutCashAndCashEquivalentsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="text-align: center; font-weight: bold; border-bottom: Black 1.5pt solid">2021</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; width: 76%">Cash</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Cash equivalents (1)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; padding-left: 5.4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CashEquivalents" scale="3" unitRef="mxn">21,546,386</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation id="_DisclosureOfCashAndCashEquivalentsExplanatory-c0_cont_3"><ix:continuation id="simecb_DisclosureOfDetailedInformationAboutCashAndCashEquivalentsExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 21.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><ix:footnote id="ix_8_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cash equivalents are investments with initial original maturities of less than 90 days and consist primarily of Treasury Bills issued by the United States Treasury Department.</span></ix:footnote></td></tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify; text-indent: -21.25pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>7.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Trade
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_2" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
average collection period on sales of goods is between 30 and 60 days. No interest is charged on the outstanding accounts receivables
from clients. The Company has recognized an allowance for doubtful accounts to show the possible financial loss caused by the inability
of customers to make the corresponding payments. Allowances for doubtful accounts are calculated based on several factors including price
adjustments, likelihood of recovery, aging and historical experience.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_3" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Credit
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_4" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Trade
receivables disclosed below include amounts that are past due at the end of the reporting period for which the Company has not recognized
an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered
recoverable. The Company does not hold any collateral. In general terms, the accounts receivable does not show impairment.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_5" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Age
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_6" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:ScheduleOfAgeOfReceivablesPastDueTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="text-align: center; font-weight: bold; border-bottom: Black 1.5pt solid">At December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; font-weight: bold; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%">30 - 60 days</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c143" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:FinancialAssets" scale="3" unitRef="mxn">149,250</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c144" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:FinancialAssets" scale="3" unitRef="mxn">355,633</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c145" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:FinancialAssets" scale="3" unitRef="mxn">709,781</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 21 --><div>
    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_7" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">During
the years ended December 31, 2022 and 2021, the movement in the allowance for doubtful accounts was as follows:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_8" id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_7"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DisclosureOfDetailedInformationAboutAllowanceForDoubtfulAccountsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 4pt">Balance at end of year</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AllowanceAccountForCreditLossesOfFinancialAssets" scale="3" unitRef="mxn">226,432</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company recognize an estimation for expected credit loss, based on the historical experience of credit losses in their accounts receivable,
current conditions and reasonable and sustainable forecasts of the different quantifiable future events that could affect the amount
of future cash flows for recovering accounts receivable. In determining the non-recoverable portion of accounts receivable, the Company
considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting
period. The concentration of credit risk is minimum, due to the fact that the customer base is large and unrelated.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="simecb_DisclosureOfRecoverableTaxesExplanatory-c0_cont_1" escape="true" name="simecb:DisclosureOfRecoverableTaxesExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>8.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Recoverable
                                            taxes</b></span></td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="simecb_DisclosureOfRecoverableTaxesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DisclosureOfDetailedInformationAboutRecoverableTaxesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="text-align: center; font-weight: bold; border-bottom: Black 1.5pt solid">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; font-weight: bold; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; font-weight: bold; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%">Value Added Tax</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ValueAddedTaxReceivables" scale="3" unitRef="mxn">32,686</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Income Tax</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:IncomeTax" scale="3" unitRef="mxn">353,506</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table></ix:nonNumeric></ix:continuation><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfInventoriesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfInventoriesExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Inventories</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p></ix:nonNumeric><div>

</div><div>


</div><ix:continuation continuedAt="_DisclosureOfInventoriesExplanatory-c0_cont_2" id="_DisclosureOfInventoriesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="simecb_DisclosureOfDetailedInformationAboutShortTermAndLongTermInventoriesExplanatory-c0_cont_1" escape="true" name="simecb:DisclosureOfDetailedInformationAboutShortTermAndLongTermInventoriesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="text-align: center; font-weight: bold; border-bottom: Black 1.5pt solid">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>Current inventory:</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; font-weight: bold; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; font-weight: bold; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Finished goods</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:FinishedGoods" scale="3" unitRef="mxn">3,656,990</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>Work-in-process</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:WorkInProgress" scale="3" unitRef="mxn">125,259</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Billets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherInventories" scale="3" unitRef="mxn">2,282,093</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">Raw materials and supplies</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentRawMaterialsAndCurrentProductionSupplies" scale="3" unitRef="mxn">5,446,489</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Materials, spare parts and rollers</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:SpareParts" scale="3" unitRef="mxn">1,264,727</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Materials in-transit</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentInventoriesInTransit" scale="3" unitRef="mxn">15,753</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; padding-bottom: 1.5pt; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInventoriesExplanatory-c0_cont_3" id="_DisclosureOfInventoriesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-current
inventory:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInventoriesExplanatory-c0_cont_4" id="_DisclosureOfInventoriesExplanatory-c0_cont_3"><ix:continuation id="simecb_DisclosureOfDetailedInformationAboutShortTermAndLongTermInventoriesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>


</div><div>

</div><ix:continuation id="_DisclosureOfInventoriesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has $&#160;<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="simecb:CokeInventoryAmount" scale="0" unitRef="usd">1,237,188</ix:nonFraction> and $&#160;<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="simecb:CokeInventoryAmount" scale="0" unitRef="usd">1,303,975</ix:nonFraction> of coke inventory on hand as of December 31, 2022 and 2021, respectively (See note
4-e), which the Company would use as an input to its blast furnace in the Lorain facility which is currently idled. Management of the
Company continually evaluates both the idled facility and the coke inventory for impairment. Management periodically evaluates the potential
degradation of the coke inventory and has determined that it continues to be suitable as a blast furnace input or, alternatively, for
sale to other blast furnace facilities. As of March 2023, management considers that there will be recovery in the industries in which
the Company operates; this would result in the blast furnace being restarted in the future. However, the Company has recorded an impairment
to the blast furnace resulting in a book value of zero. The Company has continued incurring certain costs to maintain the assets in Lorain,
including the blast furnace and the coke; such costs are expensed as incurred. In order to restart the blast furnace the Company will
incur expenses for the restoration of the equipment, and there is still uncertainty on the date on which the blast furnace will restart
operation, if ever The Company cannot offer any guarantee of the eventual restarting of the blast furnace or when conditions will become
economically feasible to do so.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 22 --><div>
    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Property,
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_2" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cost
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_3" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfDetailedInformationAboutPropertyPlantAndEquipmentExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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 mixtures and<br/>
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 and<br/>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_4" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accumulated
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_5" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; padding-bottom: 4pt">Balance as of December 31, 2022</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_6" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_7" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
net book value of property, plant and equipment is as follows (in millions of Mexican pesos):</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_8" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_7"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DisclosureOfDetailedInformationAboutNetBookValueOfPropertyPlantAndEquipmentExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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progress</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

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</div><!-- Field: Page; Sequence: 23 --><div>
    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_9" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Until
December 31, 2014, Republic has invested USD $<ix:nonFraction contextRef="c149" decimals="-5" format="ixt:num-dot-decimal" name="simecb:ElectricArcFurnaceAndAuxiliarFacilitiesExpenses" scale="6" unitRef="usd">158.8</ix:nonFraction> million in an electric arc furnace and auxiliar facilities for its steel facility
in Lorain, Ohio, USA, with the intention to satisfy growing customer demand of SBQ. The locality of this steel mill was selected due
to its strategic location close to customers and the availability of skilled labor. Furnace construction started at midyear of 2012 and
the operations started production in July 2014. The furnace steel amount includes of USD $ <ix:nonFraction contextRef="c149" decimals="-5" format="ixt:num-dot-decimal" name="simecb:LaborAndCapitalizedIndirectExpenses" scale="6" unitRef="usd">45.4</ix:nonFraction> million of labor and capitalized indirect
expenses.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_10" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
facility was idled in June of 2015 and management has no near-term plans to restart the facility, except for the Lorain 9/10&#8221; Mill,
which is in the process of being recommissioned due to market demand for cold heading quality steel (CHQ) and special bar quality steel
(SBQ). The expectation is that it will be restarted when market conditions improve substantially, particularly in the oil and gas drilling
industry. During 2022 and 2021, the Company invested in certain improvements in the Lorain facility so as to be better prepared to reactivate
the plant, with USD$ <ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="simecb:InvestedImprovements" scale="6" unitRef="usd">5.5</ix:nonFraction> and USD$ <ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="simecb:InvestedImprovements" scale="6" unitRef="usd">15.6</ix:nonFraction> million recorded to construction-in-progress for the years ended December 31, 2022 and 2021, respectively.
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_11" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has property, machinery, and equipment with a net book value of approximately USD$ <ix:nonFraction contextRef="c150" decimals="-5" format="ixt:num-dot-decimal" name="simecb:PropertyAndEquipment" scale="6" unitRef="usd">61.7</ix:nonFraction>, USD$&#160;<ix:nonFraction contextRef="c151" decimals="-5" format="ixt:num-dot-decimal" name="simecb:PropertyAndEquipment" scale="6" unitRef="usd">54.6</ix:nonFraction> and USD$ <ix:nonFraction contextRef="c152" decimals="-5" format="ixt:num-dot-decimal" name="simecb:PropertyAndEquipment" scale="6" unitRef="usd">40.3</ix:nonFraction> million
as of December 31, 2022, 2021 and 2020, respectively, pertaining to the Lorain, Ohio facility after recording an impairment charge of
USD$ <ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:ImpairmentLoss" scale="6" unitRef="usd">130.7</ix:nonFraction> million when the facility was idled.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_12" id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a consequence of this event, management determined a triggering event took place to where the long-lived assets at the Lorain facility
may not be fully recoverable. Management performed an analysis of the fair value of the Lorain facility with the assistance of an independent
valuation firm and determined the net book value exceeded the fair value by approximately U.S.$<ix:nonFraction contextRef="c153" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:PlanAssetsAtFairValue" scale="6" unitRef="usd">130.7</ix:nonFraction> million (Ps.$ <ix:nonFraction contextRef="c154" decimals="-6" format="ixt:num-dot-decimal" name="ifrs-full:PlanAssetsAtFairValue" scale="6" unitRef="mxn">2,701</ix:nonFraction> million) and
as such recognized an asset impairment of this amount during the year ended December 31, 2015. The fair value determination at the Lorain
facility was based on an independent valuation of the Lorain melt shop assets using the comparable match method of the market approach.
The income approach was not considered an appropriate fair value measurement due to the absence of reliable forecast data as the facility
was idled indefinitely in early 2016.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Management
further assessed if there were any impairments at the Company&#8217;s other asset groups in accordance with IFRS and determined that as of
December 31, 2022, no other asset groups were impaired based on current projections. No further impairment was considered necessary or
appropriate.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfFinancialInstrumentsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>11.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Investments
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_2" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
balances as of December 31, 2022 are as follows:</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_3" id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfFinancialInstrumentsOwnedAndPledgedAsCollateralTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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</div><div>

</div><ix:continuation id="_DisclosureOfFinancialInstrumentsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Corresponds
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

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    <td style="width: 52%; text-align: left">Republic trade mark</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_5" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_4"><ix:continuation continuedAt="simecb_DisclosureOfDetailedInformationAboutBalancesOfIntangibleAssetsExplanatory-c0_cont_3" id="simecb_DisclosureOfDetailedInformationAboutBalancesOfIntangibleAssetsExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: justify"><ix:footnote id="ix_12_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intangible assets with undefined useful life.</span></ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_6" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_5"><ix:continuation continuedAt="simecb_DisclosureOfDetailedInformationAboutBalancesOfIntangibleAssetsExplanatory-c0_cont_4" id="simecb_DisclosureOfDetailedInformationAboutBalancesOfIntangibleAssetsExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><ix:footnote id="ix_9_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intangible assets from the Republic acquisition.</span></ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_7" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_6"><ix:continuation continuedAt="simecb_DisclosureOfDetailedInformationAboutBalancesOfIntangibleAssetsExplanatory-c0_cont_5" id="simecb_DisclosureOfDetailedInformationAboutBalancesOfIntangibleAssetsExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="text-align: justify"><ix:footnote id="ix_10_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The San 42 trademark and the goodwill are presented net of impairment losses recorded in 2009 for $<ix:nonFraction contextRef="c223" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ImpairmentLossRecognisedInProfitOrLossIntangibleAssetsOtherThanGoodwill" scale="3" unitRef="mxn">16,000</ix:nonFraction> and $<ix:nonFraction contextRef="c224" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ImpairmentLossRecognisedInProfitOrLossIntangibleAssetsAndGoodwill" scale="3" unitRef="mxn">2,352,000</ix:nonFraction>, respectively.</span></ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_8" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_7"><ix:continuation id="simecb_DisclosureOfDetailedInformationAboutBalancesOfIntangibleAssetsExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="text-align: justify"><ix:footnote id="ix_11_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intangible assets from the Grupo San acquisition.</span></ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_9" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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respectively.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_10" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
other assets are not subject to amortization and they are primarily comprised of guarantee deposits.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_11" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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</div><div>

</div><ix:continuation id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_11"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfDetailedInformationAboutIntangibleAssetsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>Additions</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Cancellations</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c259" decimals="-3" format="ixt:num-dot-decimal" name="simecb:CancellationsAmount" scale="3" sign="-" unitRef="mxn">2,505</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:CancellationsAmount" scale="3" unitRef="mxn">0</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Adjustment effect of the year</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c259" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseThroughNetExchangeDifferencesIntangibleAssetsOtherThanGoodwill" scale="3" unitRef="mxn">787</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c260" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseThroughNetExchangeDifferencesIntangibleAssetsOtherThanGoodwill" scale="3" unitRef="mxn">11,899</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseThroughNetExchangeDifferencesIntangibleAssetsOtherThanGoodwill" scale="3" unitRef="mxn">12,686</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Balance as of December 31, 2022</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c261" decimals="-3" format="ixt:num-dot-decimal" name="simecb:IntangibleAssetsOtherThanGoodwillBalance" scale="3" unitRef="mxn">4,594,619</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c262" decimals="-3" format="ixt:num-dot-decimal" name="simecb:IntangibleAssetsOtherThanGoodwillBalance" scale="3" sign="-" unitRef="mxn">2,269,364</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:IntangibleAssetsOtherThanGoodwillBalance" scale="3" unitRef="mxn">2,325,255</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfBorrowingsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfBorrowingsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>13.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Short-term
                                            debt</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="_DisclosureOfBorrowingsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 22, 1997 and August 17, 1998, the Company offered the holders of medium-term notes of Simec then outstanding to exchange their
bonds at par for new subordinated bonds in third place. The new notes bear semi-annual interest at an annual rate of <ix:nonFraction contextRef="c263" decimals="3" format="ixt:num-dot-decimal" name="ifrs-full:BorrowingsInterestRate" scale="-2" unitRef="pure">10.5</ix:nonFraction>% interest and
principal repayments were semiannual from May 15, 2000 until November 15, 2007. At December 31, 2022 and 2021, the amount of the bonds
not exchanged totaled USD$&#160;<ix:nonFraction contextRef="c264" decimals="-5" format="ixt:num-dot-decimal" name="simecb:PrincipalAmountOutstanding" scale="6" unitRef="usd"><ix:nonFraction contextRef="c265" decimals="-5" format="ixt:num-dot-decimal" name="simecb:PrincipalAmountOutstanding" scale="6" unitRef="usd">0.3</ix:nonFraction></ix:nonFraction> million, plus accrued interest. At December 31, 2022 and 2021, liabilities in pesos for the bonds
not exchanged amounted $&#160;<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:PrincipalAmountOutstanding" scale="3" unitRef="mxn">5,847</ix:nonFraction> and $&#160;<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="simecb:PrincipalAmountOutstanding" scale="3" unitRef="mxn">6,296</ix:nonFraction>, respectively.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"></p><div>

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    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25IN; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.85pt 0pt 0.25IN; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfTradeAndOtherPayablesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><b>14.</b></td><td style="text-align: justify; padding-right: 13.9pt"><span style="font-size: 10pt"><b>Accounts payable trade and other accrued liabilities</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.85pt 0pt 0.25IN; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>


</div><ix:continuation id="_DisclosureOfTradeAndOtherPayablesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DisclosureOfDetailedInformationAboutTradeAccountsPayableAndOtherAccruedLiabilitiesExplanatoryTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">2020</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold">&#160;</td>
    <td colspan="2" style="text-align: center; font-weight: bold">&#160;</td><td style="text-align: center; font-weight: bold">&#160;</td><td style="text-align: center; font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">&#160;</td><td style="text-align: center; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Trade accounts payable</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c26" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TradeAndOtherPayablesToTradeSuppliers" scale="3" unitRef="mxn">9,410,419</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TradeAndOtherPayablesToTradeSuppliers" scale="3" unitRef="mxn">6,910,451</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Other accrued liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c26" decimals="-3" format="ixt:num-dot-decimal" name="simecb:OtherAccruedLiabilities" scale="3" unitRef="mxn">697,631</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="simecb:OtherAccruedLiabilities" scale="3" unitRef="mxn">898,404</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c26" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalAccountsPayableTradeAndOtherAccruedLiabilities" scale="3" unitRef="mxn">10,108,050</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalAccountsPayableTradeAndOtherAccruedLiabilities" scale="3" unitRef="mxn">7,808,855</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.85pt 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfEmployeeBenefitsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><b>15.</b></td><td style="text-align: justify; padding-right: 13.9pt"><span style="font-size: 10pt"><b>Employee benefits</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25IN; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_2" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25in; text-align: justify"><b><i>Mexican entities</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25IN; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_3" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">a.</td><td style="text-align: justify"><b><i>Collective bargaining agreements </i></b>- During 2022, approximately
<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageOfCollectiveBargainingAgreements" scale="-2" unitRef="pure">42</ix:nonFraction>% (<ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageOfCollectiveBargainingAgreements" scale="-2" unitRef="pure">42</ix:nonFraction>% on 2021) of the employees in the Company&#8217;s Mexican operations are covered by collective bargaining agreements. The Mexican
collective contracts expire in periods greater than one year.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25IN; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_4" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">b.</td><td style="text-align: justify"><b><i>Seniority premium benefits</i></b> - In accordance with Mexican
Labor Law, the Company provides seniority premium benefits to its employees under certain circumstances. Such benefits consist of a one-time
payment equivalent to 12 days wages for each year of service (at the employee&#8217;s most recent salary, but not to exceed twice the
legal minimum wage), payable to all employees with 15 or more years of service, as well as to certain employees terminated involuntarily
prior to the vesting of their seniority premium benefit. These obligations are calculated by independent actuaries using the projected
unit credit method.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_5" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">c.</td><td style="text-align: justify"><b><i>Severance benefits </i></b>- Further, in accordance with the
Mexican labor laws, the Company also provides statutorily mandated severance benefits to its employees terminated under certain circumstances.
Such benefits consist of a one-time payment of three months&#8217; wages plus 20 days&#8217; wages for each year of service, payable upon
involuntary termination without just cause. Severance benefits payments are recorded directly in the consolidated statement of comprehensive
income (loss) at the time they are paid, unless they are related to restructuring expenses, which are recorded when there is a present
obligation from past events.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 56.7pt; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_6" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">d.</td><td style="text-align: justify"><b><i>Employee profit sharing (EPS) </i></b>- The Mexican Constitution
and the Labor Law grant employees the right to receive a <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageShareOfEmployersProfits" scale="-2" unitRef="pure">10</ix:nonFraction>% share of the employers&#8217; profits. Employees Profit Sharing is computed
in similar terms to the taxable profit for income tax, excluding mainly the employee&#8217;s profit sharing paid this year and the amortization
of tax losses and decreasing the non-deductible part of the social security for purposes of income tax. For the years 2022 and 2021, EPS
amounted to $&#160;<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:EmployeeProfitSharingAmount" scale="3" unitRef="mxn">7,200</ix:nonFraction> and $&#160;<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="simecb:EmployeeProfitSharingAmount" scale="3" unitRef="mxn">0</ix:nonFraction>, respectively. EPS is recorded in the results of operations for the year in which it is incurred.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 56.7pt; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_7" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">e.</td><td style="text-align: justify"><b><i>Governmental defined contribution plans </i></b>- Under Mexican
legislation, the Company must make payments equivalent to <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="simecb:DeferredContributionPlanPercentage" scale="-2" unitRef="pure">2</ix:nonFraction>% of its workers&#8217; daily integrated salary (ceiling) to a defined contribution
plan that is part of the retirement savings system. The expense in 2022, 2021 and 2020 was $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="3" unitRef="mxn">24,118</ix:nonFraction>, and $<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="3" unitRef="mxn">17,110</ix:nonFraction> and $<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="3" unitRef="mxn">12,098</ix:nonFraction>, respectively.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_8" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.5in; text-align: justify">Main actuarial hypothesis used
in the actuarial computations are:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_9" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_8"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfSensitivityAnalysisForActuarialAssumptionsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25IN; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25IN; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_10" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25IN; text-align: justify">Employee benefits liability as
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_11" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_10"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfNetDefinedBenefitLiabilityAssetExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-left: 0.125in; text-indent: -0.125in; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_12" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25in; text-align: justify">Net cost for the period booked
in profit and loss is comprised as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 56.7pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_13" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_12"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:ScheduleOfNetCostForThePeriodBookedInProfitAndLossTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left; padding-bottom: 1.5pt">Labor cost of past services</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 4pt">Net Cost for the period</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c284" decimals="-3" format="ixt:num-dot-decimal" name="simecb:NetCostForThePeriod" scale="3" unitRef="mxn">370</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c288" decimals="-3" format="ixt:num-dot-decimal" name="simecb:NetCostForThePeriod" scale="3" unitRef="mxn">21,282</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 56.7pt; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_14" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">The DBO amount recorded in the
balance sheet as of December 31, 2022 and 2021 are $&#160;<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:RecognisedLiabilitiesDefinedBenefitPlan" scale="3" unitRef="mxn">169,375</ix:nonFraction>, and $&#160;<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:RecognisedLiabilitiesDefinedBenefitPlan" scale="3" unitRef="mxn">162,843</ix:nonFraction>, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 56.7pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_15" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_14"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:ScheduleOfDBOAmountRecordedInTheBalanceSheettableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:DeferredTaxExpenseIncomeRelatingToTaxRateChangesOrImpositionOfNewTaxes" scale="3" unitRef="mxn">162,843</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-decoration: underline; text-align: justify">Value</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Past services labor cost</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PastServiceCostNetDefinedBenefitLiabilityAsset" scale="3" sign="-" unitRef="mxn">11,244</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Current service labor cost</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CurrentServiceCostNetDefinedBenefitLiabilityAsset" scale="3" unitRef="mxn">10,998</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Interest expense</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InterestRevenueExpense" scale="3" unitRef="mxn">12,101</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Paid benefits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:DefinedBenefitsCosts" scale="3" sign="-" unitRef="mxn">9,229</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify; padding-bottom: 1.5pt">Actuarial gains and losses in obligations</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:ActuarialGainsLossesArisingFromChangesInFinancialAssumptionsNetDefinedBenefitLiabilityAsset" scale="3" unitRef="mxn">3,906</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DBO present value at December 31<sup>st</sup></span></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:DefinedBenefitObligationAtPresentValues" scale="3" unitRef="mxn">169,375</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="simecb:DefinedBenefitObligationAtPresentValues" scale="3" unitRef="mxn">162,843</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Initial PNL</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:InitialProfitandLossEmployeeBenefits" scale="3" unitRef="mxn">162,843</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Net cost for the period</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:NetCostsForThePeriod" scale="3" unitRef="mxn">11,855</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Paid benefits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:PaidBenefits" scale="3" sign="-" unitRef="mxn">9,229</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:GainLossOnChangesInEffectOfLimitingNetDefinedBenefitAssetToAssetCeiling" scale="3" unitRef="mxn">3,906</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 1.5pt">Final PNL</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:FinaIProfitandLossEmployeeBenefits" scale="3" unitRef="mxn">169,375</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="simecb:FinaIProfitandLossEmployeeBenefits" scale="3" unitRef="mxn">162,843</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_16" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25in; text-align: justify"><b>Foreign entities (Republic)</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25IN; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_17" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">Republic is the only subsidiary
of the Company which offers other benefits and pension plans to their employees. Such benefit plans to employees are described below:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25IN; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13.9pt 0pt 0.25IN; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 27 --><div>
    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_18" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">a.</td><td style="text-align: justify"><b>Collective Bargaining Agreements</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_19" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">As of December 31, 2022, 2021
and 2020 <ix:nonFraction contextRef="c266" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageOfCollectiveBargainingAgreements" scale="-2" unitRef="pure">70</ix:nonFraction>%, <ix:nonFraction contextRef="c267" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageOfCollectiveBargainingAgreements" scale="-2" unitRef="pure">76</ix:nonFraction>% and <ix:nonFraction contextRef="c268" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageOfCollectiveBargainingAgreements" scale="-2" unitRef="pure">70</ix:nonFraction>%, respectively of Republic employees are covered by a collective bargaining agreement (labor agreement) with
the United Steelworkers (&#8220;USW&#8221;). <ix:nonNumeric contextRef="c266" name="ifrs-full:DescriptionOfContractualAgreementOrStatedPolicyForChargingNetDefinedBenefitCost">The agreement initially expired on August 15, 2016, was extended for three years through August
15, 2019, and further extended through August 15, 2022.</ix:nonNumeric> The extended agreement renews all the provisions, understandings and agreements
set forth in the January 1, 2012 Basic Labor Agreement. The base rates of pay determined under the extended agreement will remain unchanged
from those ruling under the expired agreement as of August 16, 2016. The extended agreement provides that Company&#8217;s quarterly contributions
to fund the Republic Retirement VEBA Benefit Trust (the &#8220;Benefit Trust&#8221;) be reduced from $<ix:nonFraction contextRef="c269" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:ContributionsToPlanNetDefinedBenefitLiabilityAsset" scale="6" unitRef="usd">2.6</ix:nonFraction> million to $<ix:nonFraction contextRef="c270" decimals="-4" format="ixt:num-dot-decimal" name="ifrs-full:ContributionsToPlanNetDefinedBenefitLiabilityAsset" scale="6" unitRef="usd">0.25</ix:nonFraction> million beginning
in August 15, 2016 through June 30, 2019. Effective July 1, 2019, <ix:nonNumeric contextRef="c0" name="simecb:ProfitDescription">the Company&#8217;s contribution to the Benefit Trust changed to $4.00 per
hour for each hour worked by USW represented employees. Effective August 16, 2019, until June 30, 2022, the Company obligation to finance
the Profit Trust changed again and is limited to the creation of a profit-sharing pool consisting of 3% of the quarterly profits from
$ 0 to 50 million and 4% of the profits of the Company over % 50 million. Effective July 1, 2022, the Company&#8217;s contribution to
the Beneficiary Trust changes back to a limit of $ 4.00 per hour worked by USW represented employees.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_20" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_19"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">b.</td><td style="text-align: justify"><b>Defined Contribution Plans</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 56.7pt; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_21" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify"><b>Plan for employees- </b>Republic
participates in the Steelworkers Pension Trust (SPT), a defined benefit multi-employer pension plan. The Company obligations to the plan
are based upon fixed contribution requirements. Republic contributes a fixed amount of USD$<ix:nonFraction contextRef="c266" decimals="2" format="ixt:num-dot-decimal" name="simecb:FixedAmountsPerHourForEachCoveredEmployees" scale="0" unitRef="usdPershares">1.68</ix:nonFraction> per hour for each covered employee&#8217;s contributory
hours, as defined under the plan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_22" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">Participation in a multi-employer
pension plan agreed under terms of a collective bargaining agreement differs from a traditional qualified single employer defined benefit
pension plan. The SPT shares risks associated with the plan in the following respects:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_23" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_22"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">I.</td><td style="text-align: justify">Contributions to the SPT by Republic may be used to provide benefits to employees
of other participating employers;</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_24" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_23"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">II.</td><td style="text-align: justify">If a participating employer stops contributing to the SPT, the unfunded obligations
of the plan may be borne by the remaining participating employers; and</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_25" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_24"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">III.</td><td style="text-align: justify">If Republic chooses to stop participating in the SPT, Republic may be obliged to
pay an amount based on the underfunded status of the plan, referred to as a withdrawal liability.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_26" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_25"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><b>c.</b></td><td style="text-align: justify"><b>VEBA Benefit Trust</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_27" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">The Company is required to make
quarterly contributions to the defined contribution plan for post-retirement health benefits VEBA as determined by the terms of the USW
collective bargaining agreement. The Benefit Trust is a health and welfare plan for USW retiree benefits, and is not a &#8220;qualified&#8221;
plan under the regulations of the Employee Retirement Income Security Act of 1974. For the years ended December 31, 2022, 2021 and 2020,
the Company recorded expenses of USD $ <ix:nonFraction contextRef="c271" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="6" unitRef="usd">0.3</ix:nonFraction>, USD $ <ix:nonFraction contextRef="c272" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="6" unitRef="usd">0.5</ix:nonFraction> million and USD $ <ix:nonFraction contextRef="c273" decimals="-6" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="6" unitRef="usd">0</ix:nonFraction> million, respectively, related to this benefits plan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_28" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">For the years ended December
31, 2022, 2021 and 2020, Republic recorded combined expenses of USD$&#160;<ix:nonFraction contextRef="c274" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="6" unitRef="usd">1.9</ix:nonFraction> million, USD$&#160;<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="6" unitRef="usd">3.5</ix:nonFraction> and USD$&#160;<ix:nonFraction contextRef="c275" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="6" unitRef="usd">3.1</ix:nonFraction> million, respectively,
related to the funding obligations of the retirement healthcare and pension benefits.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_29" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_28"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">d.</td><td style="text-align: justify"><b>401(k) Plans</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_30" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">The Company has a 401(k) defined
contribution retirement plan that covers almost all the salaried and nonunion hourly employees. This plan is designed to provide retirement
benefits through Company contributions and voluntary deferrals of employees&#8217; compensation. The Company funds contributions to this plan
each pay period, based on the participant&#8217;s age and years of service as of January first of each year. The amount of the Company contribution
is equal to the monthly base salary multiplied by the appropriate percentage based on age and years of service. The contribution becomes
<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="simecb:ContributionVestedPercentage" scale="-2" unitRef="pure">100</ix:nonFraction>% vested upon completion of three years of vesting service. In addition, employees are permitted to make contributions to this 401(k)-retirement
plan through payroll deferrals. In this case, the Company provides a <ix:nonFraction contextRef="c0" decimals="3" format="ixt:num-dot-decimal" name="simecb:PercentageMatchingContributionForFirstFivePercentage" scale="-2" unitRef="pure">25.0</ix:nonFraction>% matching contribution for the first <ix:nonFraction contextRef="c276" decimals="3" format="ixt:num-dot-decimal" name="simecb:PercentageMatchingContributionForFirstFivePercentage" scale="-2" unitRef="pure">5.0</ix:nonFraction>% of payroll that an
employee elects to contribute. Employees are <ix:nonFraction contextRef="c274" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageMatchingContributionForFirstFivePercentage" scale="-2" unitRef="pure">100</ix:nonFraction>% vested in both their and Republic matching 401(k) contributions. For the years ended
December 31, 2022, 2021 and 2020 the Company recorded expense of USD$&#160;<ix:nonFraction contextRef="c276" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="6" unitRef="usd">1.1</ix:nonFraction> million, USD$&#160;<ix:nonFraction contextRef="c277" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="6" unitRef="usd">1.0</ix:nonFraction> million and USD$ <ix:nonFraction contextRef="c278" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:PostemploymentBenefitExpenseDefinedContributionPlans" scale="6" unitRef="usd">1.1</ix:nonFraction> million, respectively,
related to this defined contribution retirement plan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 56.7pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 56.7pt; text-align: justify"></p><div>

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    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 56.7pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_31" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">Employees who are covered by the
USW labor agreement are eligible to participate in the 401(k) defined contribution retirement plan through voluntary deferrals of employees&#8217;
compensation. There are no Company contributions or employer matching contributions relating to these employees.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_32" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_31"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">e.</td><td style="text-align: justify"><b>Profit Sharing and Incentive Compensation Plans</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:nonNumeric contextRef="c4" name="simecb:LaborAgreementDescription"><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_33" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">The labor agreement includes a
profit sharing plan to which the Company is required to contribute The extended agreement modified the plan to the following quarterly
pretax income, as defined in the labor agreement (&#8220;EBT&#8221;): 3% of EBT between $0 and $25 million per quarter; 4% of EBT between
$25 and $75 million per quarter; and 5% of EBT over $75 million per quarter. For the years ended December 2021 and 2020, the company does
not make outlays, because the current year thresholds had not been achieved, USD $ 0.3 million and USD $ 0.5 million of expense was recorded
for the years ended December 31, 2022 and 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">Republic has a profit-sharing
plan for all salaried employees and nonunion workers. The profit-sharing plan was based on achieving certain profitability, inventory
and shipments targets. In the year ended December 31, 2022, 2021 and 2020 the Company paid USD <ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:BenefitsPaidOrPayable" scale="6" unitRef="usd">0.0</ix:nonFraction> million, USD $ <ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:BenefitsPaidOrPayable" scale="6" unitRef="usd">0.5</ix:nonFraction> and USD $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="ifrs-full:BenefitsPaidOrPayable" scale="6" unitRef="usd">0.0</ix:nonFraction> million
respectively, under this plan.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 56.7pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfIncomeTaxExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><b>16.</b></td><td style="text-align: justify; padding-right: 13.9pt"><span style="font-size: 10pt"><b>Income taxes</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_2" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">The Company is subject to Income
Tax (ISR).</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_3" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">The analysis of the income tax
charged to the results of 2022, 2021 and 2020 is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 36.85pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_4" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:ScheduleOfDetailedInformationAboutIncomeTaxChargedCreditedExplanatoryTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_5" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">During 2022, 2021 and 2020, the
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_6" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_5"><ix:nonNumeric contextRef="c0" continuedAt="simecb_ScheduleOfDetailedInformationAboutIncomeTaxExpenseBenefitExplanatoryTableTextBlock-c0_cont_1" escape="true" name="simecb:ScheduleOfDetailedInformationAboutIncomeTaxExpenseBenefitExplanatoryTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Benefit from utilization of tax loss carry-forwards and others (1)</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_7" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_6"><ix:continuation id="simecb_ScheduleOfDetailedInformationAboutIncomeTaxExpenseBenefitExplanatoryTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in">(1)</td><td style="text-align: justify"><ix:footnote id="ix_13_footnote" xml:lang="en-US">This amount corresponds to the income tax benefit obtained by those companies
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</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_8" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">The Company has tax losses in
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_9" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">As of December 31, 2022, Grupo
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_10" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_9"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:ScheduleOfDetailedInformationAboutTaxLossesPendingOfAmortizeExplanatoryTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_11" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">As of December 31, 2022, <ix:nonNumeric contextRef="c292" name="ifrs-full:DescriptionOfTypesOfIncomeFromStructuredEntities">Republic
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_12" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">As of December 31, 2022, GV do
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_13" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">Below is a summary of the effects
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</div><div>

</div><ix:continuation id="_DisclosureOfIncomeTaxExplanatory-c0_cont_13"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfTemporaryDifferenceUnusedTaxLossesAndUnusedTaxCreditsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN"><b>&#160;</b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><b>17.</b></td><td style="padding-right: 13.9pt"><span style="font-size: 10pt"><b>Stockholders&#8217; equity</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_2" id="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">a.</td><td style="padding-right: 13.9pt"><span style="font-size: 10pt">Common stock as of December 31, 2022 and 2021, is as follows:</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_3" id="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:EarningsPerShareExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="text-align: justify">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: justify">Fixed capital</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify; padding-bottom: 1.5pt">Effect of restatement</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:EffectOfRestatementAmount" scale="3" unitRef="mxn">412,038</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="ifrs-full:NumberOfSharesAuthorised" scale="3" unitRef="shares">497,709</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:SharesAmount" scale="3" unitRef="mxn">2,832,268</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_4" id="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">Common stock consists of nominative
shares, fully subscribed, without nominal value. Variable capital can be increased without limitation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 56.7pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_5" id="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">All shares correspond to Series
&#8220;B&#8221;. This series is divided in &#8220;Class I&#8221; with <ix:nonFraction contextRef="c320" decimals="0" format="ixt:num-dot-decimal" name="simecb:FixedCapitalShares" scale="0" unitRef="shares">90,850,050</ix:nonFraction> shares that represent the fixed capital, and &#8220;Class
II&#8221; with <ix:nonFraction contextRef="c321" decimals="0" format="ixt:num-dot-decimal" name="simecb:FixedCapitalShares" scale="0" unitRef="shares">406,859,164</ix:nonFraction> shares of variable capital stock.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_6" id="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">b.</td><td style="text-align: justify"><span style="font-size: 10pt">Retained earnings include the statutory legal reserve.
According to the Mexican General Corporate Law, at least <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageOfLegalReserve" scale="-2" unitRef="pure">5</ix:nonFraction>% of net profit of the year must be transferred to the legal reserve until the
reserve equals <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="simecb:PercentageOfNominalCapital" scale="-2" unitRef="pure">20</ix:nonFraction>% of capital stock at par value (historical Mexican Pesos). The legal reserve may be capitalized but should not be distributed
unless the entity is dissolved, and it must be replenished if it is reduced for any reason. As of December 31, 2022, and 2021, the legal
reserve of the Company amounted to $&#160;<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseThroughTransferToStatutoryReserve" scale="3" unitRef="mxn"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseThroughTransferToStatutoryReserve" scale="3" unitRef="mxn">484,046</ix:nonFraction></ix:nonFraction> (nominal pesos), representing <ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:EquityInstrumentsPercentageContributedToFairValueOfPlanAssets" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c3" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:EquityInstrumentsPercentageContributedToFairValueOfPlanAssets" scale="-2" unitRef="pure">20</ix:nonFraction></ix:nonFraction>% of nominal stockholder&#180;s equity.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_7" id="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">c.</td><td style="text-align: justify"><span style="font-size: 10pt">As of December 31,2022, a reserve was approved for
$ <ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockRepurchasedDuringPeriodValue" scale="3" unitRef="mxn">7,000,000</ix:nonFraction> for the repurchase and placement of own shares ($<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CapitalReserve" scale="3" unitRef="mxn">5,000,000</ix:nonFraction> at December 31, 2021), for purchase and re-purchase operations,
in order to increase the liquidity of the shares of the Company and promote stability and continuity of their prices through the Mexican
Stock Exchange. As of December 31 2022, and 2021, the Company held <ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TreasuryShares" scale="3" unitRef="mxn">35,573,326</ix:nonFraction> and <ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:TreasuryShares" scale="3" unitRef="mxn">35,128,483</ix:nonFraction> shares in treasury, respectively, which amounted
to $ <ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PurchaseOfTreasuryShares" scale="3" unitRef="mxn">4,266,278</ix:nonFraction> and $ <ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PurchaseOfTreasuryShares" scale="3" unitRef="mxn">2,176,149</ix:nonFraction>, respectively. The resulting loss in 2022 for the purchase and sale of treasury shares amounted to $ <ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseThroughTreasuryShareTransactions" scale="3" unitRef="mxn">0</ix:nonFraction>
(the <ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseThroughTreasuryShareTransactions" scale="3" unitRef="mxn">0</ix:nonFraction> in $ 2021). </span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_8" id="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">d.</td><td style="text-align: justify">A reconciliation of the number of shares outstanding shows below:</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 56.7pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory-c0_cont_8"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfNumberAndWeightedAverageExercisePricesOfShareOptionsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: justify">Shares outstanding at beginning of year</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify; padding-bottom: 1.5pt">Repurchase of capital shares, net</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="INF" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseInNumberOfSharesOutstanding" scale="3" sign="-" unitRef="shares">445</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="INF" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseInNumberOfSharesOutstanding" scale="3" sign="-" unitRef="shares">662</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfNoncontrollingInterestsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><b>18.</b></td><td style="padding-right: 13.9pt"><span style="font-size: 10pt"><b>Non-controlling interest</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfNoncontrollingInterestsExplanatory-c0_cont_2" id="_DisclosureOfNoncontrollingInterestsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">As mentioned in Note 4, Grupo
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfNoncontrollingInterestsExplanatory-c0_cont_3" id="_DisclosureOfNoncontrollingInterestsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">The table below shows the changes
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</div><div>

</div><ix:continuation id="_DisclosureOfNoncontrollingInterestsExplanatory-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DisclosureOfControllingAndNoncontrollingInterestExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0"><b>&#160;</b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0"><b>&#160;</b></p><div>

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<td style="width: 0in"></td><td style="width: 0.25in"><b>19.</b></td><td style="padding-right: 13.9pt"><span style="font-size: 10pt"><b>Accumulated Other comprehensive income (loss)</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="simecb_DisclosureOfAccumulatedOtherComprehensiveIncomelosstextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfAccumulatedOtherComprehensiveIncomeLossTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in"><b>20.</b></td><td style="padding-right: 13.9pt"><span style="font-size: 10pt"><b>Transactions and balances with related parties</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_2" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">a.</td><td style="text-align: justify; padding-right: 13.9pt">Transactions with related parties, carried out in the ordinary course of business,
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_3" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfTransactionsBetweenRelatedPartiesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfTransactionsBetweenRelatedPartiesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-left: 15.85pt">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify; padding-left: 0.125in">Purchases</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-left: 0.125in">Direct short-term benefits (*)</td><td>&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_4" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_3"><ix:continuation id="_DisclosureOfTransactionsBetweenRelatedPartiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">(*)</td><td style="text-align: justify"><ix:footnote id="ix_14_footnote" xml:lang="en-US">Correspond to the salaries, allowances and bonuses paid to
the executives of Simec.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_5" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">b.</td><td style="text-align: justify; padding-right: 13.9pt">Balances receivable from and payable to related parties are as follows:</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_6" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_5"><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Short-term</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>Accounts receivable:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left; padding-left: 0.125in">Industrias CH, S.A.B. de C.V.</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c331" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">62,055</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">C&#237;a. Laminadora Vista Hermosa, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c333" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">974</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c334" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">628</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Operadora Compa&#241;&#237;a Mexicana de Tubos, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c335" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">824</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c336" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">873</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Compa&#241;&#237;a Manufacturera de Tubos, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c337" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">2,799</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">C&#237;a. Tubos y Perfiles Monterrey, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c338" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">3,371</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c339" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">3,318</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Operadora Perfiles Sigosa, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c340" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">3,999</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c341" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">2,872</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Operadora Construalco, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c342" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">606</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c343" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">519</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Aceros y Laminados Sigosa, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c344" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">16,473</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c345" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">1,638</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Arrendadora Norte de Matamoros, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c346" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">1,294</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c347" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">1,294</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Operadora Industrial de Herramientas, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c348" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">816</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Joist del Golfo, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c349" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">2,582</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c350" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">5,227</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Holding Protel, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c351" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">304</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Aceros CH, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c352" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">130</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Sigosa Aceros, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c353" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">14</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c354" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">18,942</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Sider&#250;rgicos del Golfo, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c355" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">832</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c356" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">940</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Perfiles Comerciales Sigosa, S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c357" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">4,125</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c358" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">25,588</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Pytsa Industrial de Mexico. S.A. de C.V.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c359" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalShortTerm" scale="3" unitRef="mxn">438</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_7" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_6"><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_2" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_8" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">The account receivable with
Industrias CH, S.A.B. de C.V. corresponds mainly to ISR balances to be recovered, due to the fact that some companies consolidated ISR
for tax purposes until 2013 with this company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_9" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">Loans:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_10" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">In USD <ix:nonFraction contextRef="c327" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:Borrowings" scale="0" unitRef="usd">25,400</ix:nonFraction>, equivalent to
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_11" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">As of December 31,2021 a loan
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_12" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">These granted loans in USD and
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_13" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">As of December 31, 2022, including
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_14" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">As of December 31, 2022, there
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_15" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_14"><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_3" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left; padding-left: 0.125in">Aceros y Laminados Sigosa, S.A. de C.V.</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c344" decimals="-3" format="ixt:num-dot-decimal" name="simecb:TotalAccountsPayable" scale="3" unitRef="mxn">24,455</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Compa&#241;ia Manufacturera de Tubos, S.A. de C.V.</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Operadora Compa&#241;ia Mexicana de Tubos, S.A. de C.V.</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in">Sigosa Aceros, S.A. de C.V.</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.125in">Ferrovisa, S.A. de C.V.</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: right; padding-bottom: 1.5pt; padding-left: 0.125in">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_16" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">The other accounts payable correspond
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_17" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_16"><ix:continuation id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="font-weight: bold; text-align: justify">Loans from related parties:</td><td>&#160;</td>
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    <td style="width: 76%; text-align: justify; padding-bottom: 1.5pt">Operadora de Perfiles Sigosa, S.A. de C.V.</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-bottom: 1.5pt; padding-left: 3.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-bottom: 4pt; padding-left: 3.5pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><ix:continuation id="_DisclosureOfRelatedPartyExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">This balance corresponds to a
current account loan granted by Operadora de Perfiles Sigosa, S.A. de C.V. (Sigosa), to be invested in Treasury Bonds; the interest derived
from said investment upon expiration thereof, will be delivered to Sigosa.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p><div>

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<td style="width: 0%"></td><td style="width: 0.25in"><b>21.</b></td><td style="padding-right: 13.85pt"><span style="font-size: 10pt"><b>Cost of sales and expenses by their nature</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

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</div><ix:continuation continuedAt="_DisclosureOfResearchAndDevelopmentExpenseExplanatory-c0_cont_2" id="_DisclosureOfResearchAndDevelopmentExpenseExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">At the years ended at December
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfResearchAndDevelopmentExpenseExplanatory-c0_cont_3" id="_DisclosureOfResearchAndDevelopmentExpenseExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfGeneralAndAdministrativeExpenseExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td>&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation id="_DisclosureOfResearchAndDevelopmentExpenseExplanatory-c0_cont_3"><ix:continuation id="_DisclosureOfGeneralAndAdministrativeExpenseExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><ix:continuation continuedAt="_DisclosureOfOtherOperatingIncomeExpenseExplanatory-c0_cont_2" id="_DisclosureOfOtherOperatingIncomeExpenseExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">The components of other income
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</div><div>

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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Sale of scrap</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>Recovery of losses</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Brazil tax benefits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Update of balances in favor in taxes</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Agreements with clients</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Other income</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:OtherIncome" scale="3" unitRef="mxn">32,733</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Other income</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:OtherIncomeNet" scale="3" unitRef="mxn">97,155</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="simecb:OtherIncomeNet" scale="3" unitRef="mxn">101,914</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="simecb:OtherIncomeNet" scale="3" unitRef="mxn">549,457</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Other income and other (expenses), net</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:OtherIncomeAndOtherExpensesNet" scale="3" unitRef="mxn">71,845</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="simecb:OtherIncomeAndOtherExpensesNet" scale="3" sign="-" unitRef="mxn">77,406</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify; text-indent: 56.7pt">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.25in"><b>23.</b></td><td style="padding-right: 13.9pt"><span style="font-size: 10pt"><b>Financial instruments</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_2" id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">a.</td><td style="text-align: justify"><b><i>Capital risk management</i></b> - The Company manages its capital
to ensure that its subsidiaries will be able to continue as a going concern while maximizing the return to its stockholders through the
reinvestment of earnings. The Company&#8217;s general strategy has not been altered in recent years. The Company&#8217;s policy is to
not obtain bank loans or any other financing transaction.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_3" id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">b.</td><td style="text-align: justify"><b><i>Market risk</i></b> - Market risk is the risk that the fair
value of future cash flows of a financial instrument fluctuates due to changes in market. Market prices include the foreign exchange risk,
interest rate risk and the raw material prices risk.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_4" id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">c.</td><td style="text-align: justify"><b><i>Foreign exchange risk management </i></b>- The Company undertakes
certain transactions denominated in foreign currencies, hence, exposures to exchange rate fluctuations arise. The exposures in exchange
rate are managed within the settings of the approved policies. The book value of the monetary assets and monetary liabilities denominated
in foreign currency at the end of the reporting period are as follows (includes foreign subsidiaries):</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_5" id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:DisclousreOfBookValueOfTheMonetaryAssetsAndMonetaryLiabilitiesDenominatedInForeignCurrencyTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; width: 76%; text-align: justify">Short - term assets</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="simecb:ShortTermAsset" scale="3" unitRef="mxn">28,953,307</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="simecb:ShortTermAsset" scale="3" unitRef="mxn">20,783,197</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
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    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: justify">Short - term liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="simecb:ShortTermsLiabilities" scale="3" unitRef="mxn">10,367,193</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="simecb:ShortTermsLiabilities" scale="3" unitRef="mxn">8,434,451</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: justify">Net monetary asset position in foreign currency</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_6" id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">d.</td><td style="text-align: justify"><b><i>Credit risk management </i></b>- Credit risk refers to the
risk that a counterpart will default on its contractual obligations resulting in financial loss for the Company. The Company has adopted
a policy of only dealing with creditworthy counterparties. The Company only transacts with entities that have a risk grade equivalent
to the investment grade and higher. The Company investigates and rates its major customers. The Company exposure and the credit ratings
of its counterparties are continuously monitored and the accumulated value of transactions concluded is spread amongst approved counterparties.
Credit exposure is controlled by counterparty limits that are reviewed and approved annually by the risk management committee.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_7" id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">Trade receivables consist of
a large number of customers dedicated to construction and automotive industries, distributed in different geographic areas. Ongoing credit
evaluation is performed on the financial condition of accounts receivable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_8" id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">The Company does not have significant
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the counterparties that have similar characteristics are considered related parties. Concentration of credit risk to any other counterparty
did not exceed <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="simecb:ConcentrationOfCreditRiskPercentage" scale="-2" unitRef="pure">5</ix:nonFraction>% of gross monetary assets at any time during the year.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_9" id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">The credit risk on liquid funds
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_10" id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_9"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">e.</td><td style="text-align: justify"><b><i>Liquidity risk and risk tables </i></b>- Ultimate responsibility for
liquidity risk management rests in the board of directors, which has established an appropriate liquidity risk management framework for
the management of the Company&#8217;s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity
risk by maintaining adequate reserves, banking and credit facilities, by continuously monitoring forecast and actual cash flows, and by
matching the maturity profiles of financial assets and liabilities. The following table sets out details of additional bank lines of credit
(to be used as letter of credits) that the Company has at its disposal to reduce liquidity risk. These lines of credit are obtained by
the Company and one part of them has been used for some of the subsidiaries of Industrias CH, S.A.B. de C.V.:</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfDerivativeFinancialInstrumentsExplanatory-c0_cont_10"><ix:nonNumeric contextRef="c0" escape="true" name="simecb:ScheduleOfAdditionalBankLinesOfCreditThatTheCompanyHasAtItsDisposalToReduceLiquidityRiskTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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<td style="width: 0in"></td><td style="width: 0.25in"><b>24.</b></td><td style="padding-right: 13.85pt"><span style="font-size: 10pt"><b>Financial information by segments</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

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regions. The Company&#8217;s sales are made in Mexico, the United States of America and Brazil. The Mexican segment includes the plants
in Mexicali, Guadalajara, Tlaxcala and San Luis Potosi. The USA segment includes seven Republic plants six of which are located in the
United States (Ohio, Indiana and New York) and one in Canada (Ontario). The plant in Canada stopped operating in 2018. The Brazilian segment
includes the plants in Pindamonhangaba, Cariacica and Ita&#250;na. The segments are engaged in the manufacturing and sale of long steel
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</div><ix:continuation continuedAt="_DisclosureOfInformationSufficientToPermitReconciliationOfClassesDeterminedForFairValueMeasurementToLineItemsInStatementOfFinancialPositionAssetsExplanatory-c0_cont_3" id="_DisclosureOfInformationSufficientToPermitReconciliationOfClassesDeterminedForFairValueMeasurementToLineItemsInStatementOfFinancialPositionAssetsExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="simecb_ScheduleOfFinancialInformationBySegmentsTableTextBlock-c0_cont_1" escape="true" name="simecb:ScheduleOfFinancialInformationBySegmentsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Income (loss) before income taxes</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Income taxes</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Depreciation and Amortization</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Total assets</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><ix:continuation id="_DisclosureOfInformationSufficientToPermitReconciliationOfClassesDeterminedForFairValueMeasurementToLineItemsInStatementOfFinancialPositionAssetsExplanatory-c0_cont_4"><ix:continuation id="simecb_ScheduleOfFinancialInformationBySegmentsTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Exchange rate gain (loss), net</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c445" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:GainsLossesOnExchangeDifferencesOnTranslationRecognisedInProfitOrLoss" scale="3" sign="-" unitRef="mxn">483,822</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Income taxes</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c448" decimals="-3" format="ixt:num-dot-decimal" name="simecb:NetIncomelossForTheYear" scale="3" unitRef="mxn">1,249,037</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="simecb:NetIncomelossForTheYear" scale="3" unitRef="mxn">2,798,083</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table></ix:continuation></ix:continuation><div>

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</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfContingentLiabilitiesExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0pt"></td><td style="width: 0.25in"><b>25.</b></td><td style="padding-right: 13.9pt"><span style="font-size: 10pt"><b>Contingencies</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_2" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">As of December 31, 2022, the
Company has the following contingencies:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_3" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">a.</td><td style="text-align: justify">Pacific Steel, Inc. (PS), a subsidiary located in National
City in San Diego County, California, United States of America, for which the main activity is the purchase and sale of scrap, has the
following environmental contingencies:</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_4" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify; text-indent: -0.25in">California
Department of Toxic Substances Control</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_5" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">On September 2002, the Department
of Toxic Substances Control (DTSC) inspected PS facilities based on an alleged complaint from neighbors due to PS&#8217;s excavating to
recover scrap metal on its property and on a neighboring property, which PS rents from a third party (BNSF Railway). In this same month,
DTSC issued an enforcement order of imminent and substantial endangerment determination, which alleges that certain soil piles, soil management
and metal recovery operations may cause an imminent and substantial danger to human health and the environment; consequently, DTSC sanctioned
PS for violating Hazardous Waste Control Laws in the State of California and imposed the obligation to remedy the site. On July 26, 2004,
in an effort to continue with this order, DTSC filed against PS a Complaint for Civil Penalties and Injunctive Relief in San Diego Superior
Court. On July 26, 2004, <ix:nonNumeric contextRef="c453" name="simecb:ObligatedAmountPaidDescription">the court issued a judgment, whereby PS was obligated to pay USD$ 0.2 million, which has been paid.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_6" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">On June 6, 2010, the DTSC and
the San Diego Department of Environmental Health (DEH) inspected the facilities of PS, in response to a general complaint. On August 10,
2010 DTSC and DEH conducted a second inspection and found seven infractions. The DEH is satisfied with the compliance of PS on those issues;
however, on October 19, 2010 the technical division of the DTSC recommended to the legal division of DTSC that it impose significant penalties.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_7" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">The land remediation was suspended
at the beginning of 2011 due to the inefficiency of the process, which was verified by several studies. As an alternative, once the necessary
permits were obtained from the authorities in Mexico, the Mexicali plant began the process of importing non-RCRA soil for final disposal
in a secure landfill based in Nuevo Leon State. This landfill is deposited after the separation of the metal content, which is used as
raw material in the melting process. PS has completed the shipment of non-RCRA soil for final disposal in Nuevo Leon State.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_8" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">The disposition of a stack estimated
at <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="simecb:DispositionOfAStackEstimatedTons" scale="0" unitRef="Tons">8,000</ix:nonFraction> tons of material classified RCRA (hazardous for Federal purposes) was also considered for shipment to Mexico. The process began
in early 2013, but the response from the authorities was slow. Therefore, on April 9, 2015, a letter from the California Attorney General
Department of Justice (Attorney General) was received where PS is required to, in the absence of obtaining permission from the Mexican
authorities; present a program for transport the pile of contaminated soil classified as RCRA to an authorized confinement in the United
States at the latest on April 22, 2015. This letter warned that PS must ship the RCRA soil no later than July 9, 2015, or risk DTSC proceeding
with a civil lawsuit seeking the maximum amount of fines established by law and corresponding legal redress.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_9" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">On April 21, 2015, PS sent a
letter to the Attorney General explaining that the authorities in Mexico had not denied permission to the Company but had simply requested
that it present its application in a different format, which had already been presented and reviewed by the authority on April 17, 2015.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_10" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">On July 23, 2015, <ix:nonNumeric contextRef="c454" name="simecb:AttorneyGeneralTransactionDescription">the Attorney
General denied the extension requested by PS and demanded the immediate shipments of the RCRA stack to an authorized landfill. PS began
transporting RCRA soil on July, 29, 2015, and completed removal of the RCRA stack by September 12, 2015 with a total of 3,000 metric tons.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

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</div><!-- Field: Page; Sequence: 38 --><div>
    </div><div style="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_11" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">On January 5, 2016, the Attorney
General and PS stipulated to filing a &#8220;final judgment and order on consent&#8221; or Consent Judgment in San Diego Superior Court.
The parties negotiated the Consent Judgment, which includes the following terms:</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_12" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_11"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">-</td><td style="text-align: justify">PS to pay USD$ <ix:nonFraction contextRef="c455" decimals="-3" format="ixt:num-dot-decimal" name="simecb:AmountOfPenaltyPaid" scale="6" unitRef="usd">0.138</ix:nonFraction> million as a civil penalty for alleged
violations of the 2004 Corrective Action Consent Agreement. PS has made all of the required payments to DTSC as of December 31, 2017.</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_13" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_12"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">-</td><td style="text-align: justify">Remove the RCRA soil pile and send it to an approved landfill.
The Judgment indicates that the Company complied with this commitment by October 2, 2015.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_14" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_13"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">-</td><td style="text-align: justify">After eliminating the soil pile of RCRA, the Company should take samples of the
floor in which it was located. Samples were taken and the results indicate that the floor had pollution levels that exceeded the limits
established by Government. In April 7, 2016, the General Prosecutor and the DTSC required that the Company would turn over the floor ten
feet wide and two feet down in the perimeter of the area in which was located the soil pile RCRA and to dispose it in an approved confinement.
In turn, PS convinced to DTSC to reach a Turnpike Agreement at august 10, for which would be paid during two years (up to August 10, 2018).
The Agreement was extended, as of August 10, 2018, for a two years additional period, in force up to August 10, 2020. These Agreement
had another extension, in force up to August 10, 2021. And has not been renewed.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_15" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">-</td><td style="text-align: justify">The Company shall continue to meet the conditions of the
final judgment, the corrective measures, and all tasks arising from this, which were entered in the same court in 2004.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_16" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">On May 29, 2019, the company
submitted a proposal with a new work plan (IM Work Plan) to DTSC to conduct soil remediation on the BNSF Railway lease. On October 21,
2021, The Company submitted the final draft of the IM work plan which DTSC has agreed to that proposal or work plan, on May 31, 2022.
No litigation was filed against the DTSC approval which is now final.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_17" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">On December 6, 2022, the DTSC
sent a letter requesting a preliminary study and a work plan implementation schedule, both documents were delivered on February 3, 2023.
DTSC has not responded to either document.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_18" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">On January 13, 2023, BNSF Railway
issued a contract termination notice to PS, notifying BNSF&#8217;s unilateral termination of two lease contracts with PS which ended on February
12 and 22, 2023, through its legal counsel informed PS that no longer has access to BNSF Railway property. DTSC is entering into a voluntary
agreement with BNSF to implement a work plan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_19" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">As of the date of this report,
we cannot estimate the costs of implementing the work plan of the provisional measures due to the uncertainty of whether BNSF or PS will
implement the work and the DTSC authorizations to whom they designate and their approval date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_20" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_19"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">b.</td><td style="text-align: justify"><span style="font-size: 10pt">As with most steel producers in United States of
America, Republic could incur significant costs related to environmental issues in the future, including those arising from environmental
compliance activities and remediation stemming from historical waste management practices at the Republic&#8217;s facilities. The reserve
created to cover probable environmental liabilities of USD$ <ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="simecb:EnvironmentalLiabilities" scale="6" unitRef="usd">2.5</ix:nonFraction> million, USD$&#160;<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="simecb:EnvironmentalLiabilities" scale="6" unitRef="usd">2.5</ix:nonFraction> million and USD$ <ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="simecb:EnvironmentalLiabilities" scale="6" unitRef="usd">2.5</ix:nonFraction> million were recorded as of
December&#160;31, 2022, 2021 and 2020, respectively. The reserve includes incremental direct costs of remediation efforts and post-remediation
monitoring costs that are expected to be paid after corrective actions are complete. As of December 31, 2022, 2021 and 2020, the current
and non-current portions of the reserve amounted to USD$ <ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="simecb:AmountOfTaxPaymentsAndExpensesIncreaseDecrease" scale="6" unitRef="usd">1.0</ix:nonFraction> million, USD$ <ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="simecb:AmountOfTaxPaymentsAndExpensesIncreaseDecrease" scale="6" unitRef="usd">1.0</ix:nonFraction> million and USD$&#160;<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="simecb:AmountOfTaxPaymentsAndExpensesIncreaseDecrease" scale="6" unitRef="usd">1.5</ix:nonFraction> million, respectively, are included
payable and accumulated liabilities in the short and long term, respectively, in the Consolidated Statements of Financial Position.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_21" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_20"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">c.</td><td style="text-align: justify"><span style="font-size: 10pt">The Company is not aware of any material environmental
remediation liabilities or contingent liabilities relating to environmental matters with respect to facilities, for which the establishment
of an additional reserve would be necessary at this time. In the event that, in the future, the Company incurs in any such additional
expenses, these costs will most likely be incurred over a number of years. However, future regulatory action regarding historical waste
management practice in the facilities of Republic PS and future changes in applicable laws and regulations may require the Company to
incur significant costs that may have a material adverse effect on the future financial performance of the Company.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_22" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_21"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">d.</td><td style="text-align: justify"><span style="font-size: 10pt">The Company is involved in a series of lawsuits and
legal claims that have arisen during the normal course of its operations. The Company and its legal advisors do not expect the outcome
of these matters to have any significant adverse effect on the Company&#8217;s financial position and results of operations, therefore it has
not been recognized any liabilities for such lawsuits and claims.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_23" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_22"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">e.</td><td style="text-align: justify"><span style="font-size: 10pt">Mexican tax authorities have the right to review,
at least the previous five years and could determine differences in taxes payable, plus any corresponding adjustments, surcharges and
fines.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_24" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_23"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">f.</td><td style="text-align: justify"><span style="font-size: 10pt">Tax authorities in the United States of America have
the right to review, at least the previous three years and could determine differences in taxes payable, plus its corresponding adjustments,
surcharges and fines.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_25" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_24"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">g.</td><td style="text-align: justify"><span style="font-size: 10pt">Canadian tax authorities have the right to review,
at least the previous four years and could determine differences in taxes payable, plus its corresponding adjustments, surcharges and
fines.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_26" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_25"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">h.</td><td style="text-align: justify"><span style="font-size: 10pt">Brazilian tax authorities have the right to review,
at least the previous five years and could determine differences in taxes payable, plus its corresponding adjustments, surcharges and
fines.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_27" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_26"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">i.</td><td style="text-align: justify"><span style="font-size: 10pt">On September 5, 2017, Grupo Simec and GV do Brasil
were notified of the arbitration procedure filed by SMS Concast at the International Court of Arbitration (ICC), which demands the payment
of USD $ <ix:nonFraction contextRef="c456" decimals="-5" format="ixt:num-dot-decimal" name="simecb:AmountOfTaxPaymentsAndExpensesIncreaseDecrease" scale="6" unitRef="usd">1.4</ix:nonFraction> million plus expenses, for additional costs incurred in the construction and assembly of the steelmaking area of the Brazilian
plant. On November 6, 2017, the companies of the Group replied to the demand and filed a counterclaim against SMS Concast for the amount
of USD $ <ix:nonFraction contextRef="c457" decimals="-6" format="ixt:num-dot-decimal" name="simecb:EquipmentToWorkProperlyExpenses" scale="6" unitRef="usd">5</ix:nonFraction> million, which GV do Brasil utilized on the equipment to work properly. On February 26, 2020, The company was notified of the
judgment. In March 2021, it was agreed with the actor to conclude the matter by paying USD $ <ix:nonFraction contextRef="c458" decimals="-3" format="ixt:num-dot-decimal" name="simecb:PaymentsOnSeveralChangesOfDates" scale="3" unitRef="usd">450</ix:nonFraction> thousand dollars, after several changes
of dates, the payment was made on July 8, 2021.</span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_28" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">j.</td><td style="text-align: justify"><span style="font-size: 10pt">Related to Republic Steel&#8217;s audits of GST for
the periods 2015-2016 and 2017-2018 made by the Canadian Revenue Agency (CRA), amounts of USD $<ix:nonFraction contextRef="c459" decimals="0" format="ixt:num-dot-decimal" name="simecb:InterestsExpense" scale="0" unitRef="usd">4,178,517</ix:nonFraction> plus interest for the period
2015-2016 and USD $<ix:nonFraction contextRef="c460" decimals="0" format="ixt:num-dot-decimal" name="simecb:InterestsExpense" scale="0" unitRef="usd">6,372,306</ix:nonFraction> plus interest for the period 2017-2018 were determined by the CRA. The Company presented a notice of objection
for the 2015-2016 period on September 2018 and another for the 2017-2018 period on March 2021. This matter was settled during the year
ended December 31, 2021. </span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-indent: -0.25in">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_29" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_28"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25IN"></td><td style="width: 0.25IN">k.</td><td style="text-align: justify"><span style="font-size: 10pt">In connection with a sale and use tax audit by the
Ohio Department of Taxes covering the period from January 1, 2009 to December 31, 2012, an assessment of $ <ix:nonFraction contextRef="c461" decimals="-3" format="ixt:num-dot-decimal" name="simecb:SaleAndUseTaxAmount" scale="3" unitRef="mxn">2,452,028</ix:nonFraction> (including interests
of $ <ix:nonFraction contextRef="c461" decimals="-3" format="ixt:num-dot-decimal" name="simecb:OtherInterest" scale="3" unitRef="mxn">394,138</ix:nonFraction>) against the Company was issued, on December 9, 2016. </span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_30" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">Republic also received an appraisal
notice dated December 11, 2020 for $<ix:nonFraction contextRef="c462" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:OtherLongtermBenefits" scale="0" unitRef="usd">1,631,827</ix:nonFraction> (including interest of $<ix:nonFraction contextRef="c463" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeStockOwnershipPlanESOPInterestPaymentsFromESOP" scale="0" unitRef="usd">339,885</ix:nonFraction>) covering the period January 1, 2014 to September 30, 2018.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_31" id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify">The Company does not agree with
the evaluation in its entirety and has filed Reevaluation Petitions on January 30, 2017, on February 9, 2022 and on September 2022, appealing
the assessment to the Ohio Board of Tax Appeals. As of the date of this report, no resolution has been obtained on this appeals.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN; text-align: justify; text-indent: -0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfContingentLiabilitiesExplanatory-c0_cont_31"><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in">Due to the nature of this matter
and the uncertainty of the resolution on the appeal that is in the early stages, the Company has not recorded an expense in the fiscal
year 2022, 2021 or 2020 that recognizes the evaluation or any estimated amount of liquidation.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfCommitmentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfCommitmentsExplanatory"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in"><b>26.</b></td><td><span style="font-size: 10pt"><b>Commitments</b></span></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25IN"><b>&#160;</b></p></ix:nonNumeric><div>

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</div><ix:continuation continuedAt="_DisclosureOfCommitmentsExplanatory-c0_cont_2" id="_DisclosureOfCommitmentsExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">a.</td><td style="text-align: justify">On May 1, 2018, the Company signed a contract with ArcelorMittal S.A. in Brazil,
for the acquisition of Cariacica and Itauna steels for rent, producing plants and wire drawing equipment for the production of wires and
derivatives.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 56.7pt; text-align: justify">&#160;</p></ix:continuation><div>

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</div><ix:continuation continuedAt="_DisclosureOfCommitmentsExplanatory-c0_cont_3" id="_DisclosureOfCommitmentsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.5in; text-align: justify; text-indent: 0pt">The Cariacica
unit has the capacity to produce <ix:nonFraction contextRef="c464" decimals="-3" format="ixt:num-dot-decimal" name="simecb:ProductionCapacity" scale="3" unitRef="Tons">600</ix:nonFraction> thousand metric tons of liquid steel per year and <ix:nonFraction contextRef="c465" decimals="-3" format="ixt:num-dot-decimal" name="simecb:ProductionCapacity" scale="3" unitRef="Tons">450</ix:nonFraction> thousand metric tons of rolled steel products.
This plant has in 2021 and 2020 more than 800 and 500 employees in 2019, and can produce rod and light structural profiles. The factory
is located in the city of Cariacica, next to the city of Victoria, in the state of Esp&#237;rito Santo on a land of more than <ix:nonFraction contextRef="c466" decimals="0" format="ixt:num-dot-decimal" name="simecb:AreaOfLandUsedForPlant" scale="0" unitRef="sqm">1,200,000</ix:nonFraction>
square meters.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 56.7pt; text-align: justify; text-indent: -21.25pt">&#160;</p></ix:continuation><div>

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<td style="width: 0.25in"></td><td style="width: 0.25in">c.</td><td style="text-align: justify">In January 2013, The Company reached a contract with EnerNOC, which allows Republic
to receive payments for reduction in the electric energy consumption during a term declared by PJM Interconnection as an Emergency. The
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<td style="width: 0.25in"></td><td style="width: 0.25in">d.</td><td style="text-align: justify">On February 22, 2018, a contract was signed with Primetals Technologies of Italy,
United States of America and Mexico, for the construction of the Lamination train and the supply of a new reheating furnace for the Mexicali
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structures in June 2021. Naturally, the COVID pandemic delayed significantly the process. USD $<ix:nonFraction contextRef="c472" decimals="-6" format="ixt:num-dot-decimal" name="simecb:BudgetExpense" scale="6" unitRef="usd">24</ix:nonFraction> million from budget has already been
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<td style="width: 0.25in"></td><td style="width: 0.25in">e.</td><td style="text-align: justify">In order to maintain and increase the continuity and quality of the electricity
supply in all the Group&#8217;s plants, the scheme change from Basic Supply (SSB) to the Qualified Supply Service (SSC), with the provision
of acquiring energy in the wholesale electricity market. With the implementation of this project, which only requires the modernization
of the set of equipment that records the consumption measurements of the electrical substations of each plant, it seeks to achieve a more
efficient, safe, clean and transparent electrical service and more competitive prices than those current. The cost of this project as
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<td style="width: 0.25in"></td><td style="width: 0.25in">f.</td><td style="text-align: justify">On December 20, 2020, we purchased the Itauna plant by Cia. Sider&#250;rgica
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<td style="width: 0.25in"></td><td style="width: 0.25in">g.</td><td style="text-align: justify">For our Brazil&#8217;s facilities electric energy purchase agreements have been
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ongoing reviews of our commercial practices in Mexico and other countries to avoid, as much as possible, the imposition of tariff rates
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{"company-data": {"conformed-name": "GRUPO SIMEC, S.A.B. de C.V.", "cik": "0000887153", "assigned-sic": "3312", "irs-number": "000000000", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "001-11176", "film-number": "23874720"}, "business-address": {"street1": "CALZADA LAZARO CARDENAS 601", "city": "44910 GUADALAJARA JA", "state": "O5", "zip": "10022", "phone": "01152 333 669 5742"}, "mail-address": {"street1": "CALZADA LAZARO CARDENAS", "city": "GUADALAJARA JALISCO", "state": "O5", "zip": "999999999"}, "former-company": {"former-conformed-name": "GROUP SIMEC SA DE CV", "date-changed": "19950505"}}
UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
20-F
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31
,
2022
OR
☐
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number
1-11176
GRUPO SIMEC, S.A.B. de C.V.
(Exact name of registrant as specified in its charter)
GROUP SIMEC
(Translation of registrant's name into English)
UNITED
MEXICAN
STATES
(Jurisdiction of incorporation or organization)
Calzada Lázaro Cárdenas 601
Colonia La Nogalera
,
Guadalajara
,
Jalisco
,
México
44440
(Address of principal executive offices)
Mario Moreno Cortez
,
telephone number
011-52-33
3770-6700
,
e-mail mmoreno@gruposimec.com.mx
(Name, telephone, e-mail and/or facsimile number
and address of company contact person)
Securities registered or to be registered pursuant
to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
American Depositary Shares (each representing one Series B share)
Series B Common Stock
SIM
NYSE
American
NYSE American*
*
Not for trading, but only in
connection with the registration of American depositary shares.
Securities registered or to be registered pursuant
to Section 12(g) of the Act: None
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each
of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:
Series B Common Stock —
462,135,888
shares
as of December 31, 2022
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
☐
No
☒
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934. Yes
☐
No
☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant
has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large
accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Emerging growth company
☐
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards
†
provided pursuant to Section 13(a)
of the Exchange Act.
☐
†
The term "new or revised
financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards
Codification after April 5, 2012.
Indicate by check mark whether the registrant
has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
☒
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
☐
International Financial Reporting Standards
as issued
by the International Accounting Standards Board
☒
Other
☐
If "Other" has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17
☐
Item 18
☐
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
Table
of Contents
Page
PART I
1
Item 1.
Identity of Directors, Senior Management and Advisers
1
Item 2.
Offer Statistics and Expected Timetable
1
Item 3.
Key Information
1
Item 4.
Information on the Company
15
Item 4A.
Unresolved Staff Comments
39
Item 5.
Operating and Financial Review and Prospects
39
Item 6.
Directors, Senior Management and Employees
66
Item 7.
Major Shareholders and Related Party Transactions
74
Item 8.
Financial Information
77
Item 9.
The Offer and Listing
82
Item 10.
Additional Information
82
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
97
Item 12.
Description of Securities Other than Equity Securities
98
PART II
100
Item 13.
Defaults, Dividends Arrearages and Delinquencies
100
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
100
Item 15.
Controls and Procedures
100
Item 16.
Reserved
102
Item 16A.
Audit Committee Financial Expert
102
Item 16B.
Code of Ethics
102
Item 16C.
Principal Accountant Fees and Services
102
Item 16D.
Exemptions from the Listing Standards for Audit Committees
103
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
103
Item 16F.
Change in Registrant's Certifying Accountant
103
Item 16G.
Corporate Governance
104
Item 16H.
Mine Safety Disclosure
104
Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
104
PART III
105
Item 17.
Financial Statements
105
Item 18.
Financial Statements
105
Item 19.
Exhibits
105
i
CERTAIN TERMS
Grupo Simec, S.A.B. de C.V.
is a corporation (
sociedad anónima bursátil de capital variable
) organized under the laws of the United Mexican States
("Mexico"). Unless the context requires otherwise, when used in this annual report, the terms "we," "our,"
"the company," "our company" and "us" refer to Grupo Simec, S.A.B. de C.V., together with its consolidated
subsidiaries.
References in this annual
report to "U.S. dollars" or "U.S.$" are to the lawful currency of the United States of America. References in
this annual report to "pesos" or "Ps." are to the lawful currency of Mexico. References in this annual report
to "real" are to the lawful currency of Brazil. References to "tons" in this annual report refer to tons; a metric
ton equals 1,000 kilograms or 2,204 pounds. We publish our financial statements in pesos.
The terms "special bar
quality steel" or "SBQ steel" refer to steel that is hot rolled or cold finished into round square, or hexagonal steel
bars that generally contain higher proportions of alloys than lower quality grades of steel. SBQ steel is produced with precise chemical
specifications and generally is made to order following client specifications.
This annual report contains
translations of certain peso amounts to U.S. dollars at specified rates solely for your convenience. These translations do not mean that
the peso amounts actually represent such dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise
indicated, we have translated these U.S. dollar amounts from pesos at the exchange rate of Ps. 19.3615 per U.S.$1.00, the interbank transactions
rate in effect on December 31, 2022. On April 28, 2023, the interbank transactions rate for the peso was Ps. 18.1030 per U.S.$1.00.
FORWARD LOOKING STATEMENTS
This annual report contains
certain statements regarding our business that may constitute "forward looking statements" within the meaning of the safe
harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. When used in this annual report, the words "anticipates,"
"plans," "believes," "estimates," "intends," "expects," "projects"
and similar expressions are intended to identify forward looking statements, although not all forward looking statements contain those
words. These statements, including, but not limited to, our statements regarding the ongoing effects of the coronavirus (COVID-19) pandemic
on both our projected customer demand and supply chain, as well as our operations and financial performance, our strategy for raw material
acquisition, products and markets, production processes and facilities, sales and distribution and exports, growth and other trends in
the steel industry and various markets, operations and liquidity and capital resources, are based on management's beliefs, as well
as on assumptions made by, and information currently available to, management, and involve various risks and uncertainties, some of which
are beyond our control. Our actual results could differ materially from those expressed in any forward looking statement. In light of
these risks and uncertainties, we cannot assure you that forward looking statements will prove to be accurate. Factors that might cause
actual results to differ materially from forward looking statements include, but are not limited to, the following:
●
the overall global economic
environment and risks associated with the COVID-19 pandemic;
●
factors relating to the steel
industry (including the cyclicality of the industry, finished product prices, worldwide production capacity, the high degree of competition
from Mexican, U.S. and foreign producers and the price of ferrous scrap, iron ore and other raw materials);
●
our inability to operate at
high capacity levels;
●
the costs of compliance with
Mexican, Brazilian and U.S. environmental laws;
●
future capital expenditures
and acquisitions;
●
future devaluations of the peso
and the real;
●
the imposition by Mexico and
Brazil of foreign exchange controls and price controls;
●
the influence of economic and
market conditions in other countries on Mexican securities; and
●
the factors discussed in Item
3.D – "Risk Factors" below.
Forward looking statements
speak only as of the date of this filing, and we undertake no obligation to publicly update or to revise any forward looking statements
after the date of this annual report because of new information, future events or other factors. In light of the risks and uncertainties
described above, the forward looking events and circumstances discussed in this annual report might not occur.
ii
PART
I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A. Reserved
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Investing in our series B
shares and ADSs involves a high degree of risk. You should consider carefully the following risks, as well as all the other information
presented in this annual report, before making an investment decision. Any of the following risks, if they were to occur, could materially
and adversely affect our business, results of operations, prospects and financial condition. Additional risks and uncertainties not currently
known to us or that we currently deem immaterial may also materially and adversely affect our business, results of operations, prospects
and financial condition. In either event, the market price of our series B shares and ADSs could decline significantly, and you could
lose all or substantially all of your investment.
Risks Related to Our Business
Our results of operations are significantly influenced by the
cyclical nature of the steel industry.
The steel industry is highly
cyclical and sensitive to regional and global macroeconomic conditions. Global demand for steel as well as global production capacity
levels significantly influence prices for our products, and changes in global demand or supply for steel in the future will likely impact
our results of operations. Steel prices are sensitive to macroeconomic fluctuations in the global economy, and substantial price decreases
during periods of economic weakness have not always been offset by price increases during periods of economic strength. The steel industry
has suffered in the past, especially during downturn cycles, from substantial over-capacity relative to local demand. Currently, as a
result of the increase in steel production capacity in recent years, there are signs of excess capacity in steel markets, which is impacting
the profitability of the steel industry. During 2020, global steel prices decreased, a trend which accelerated due to the global COVID-19
pandemic. In 2022 and 2021, global steel prices increased after a global economic recovery. We cannot give you any assurance as to prices
of steel in the future.
The U.S. economy has experienced
a strong recovery from the conditions experienced at the onset of the COVID-19 pandemic, but new variants of COVID-19 and the continued
abatement of the COVID-19 pandemic, labor shortages, supply chain disruptions, new or proposed legislation related to governmental spending,
inflation and increases in interest rates have impacted, and will continue to impact, economic growth. Even with this economic recovery,
challenges from global production overcapacity in the steel industry and ongoing uncertainties, both in the United States and in other
regions of the world, remain. We are unable to predict with certainty the duration of current economic conditions or the magnitude and
timing of changes in economic activity. Future economic downturns, prolonged slow growth or stagnation in the economy, a sector-specific
slowdown in one of our key end-use markets, such as nonresidential construction, or changes in inflation could materially adversely affect
our business, results of operations, financial condition and cash flows, especially in light of the capital-intensive nature of our business.
1
We may not be able to pass along price increases
for raw materials to our customers to compensate for fluctuations in price and supply.
Prices for raw materials necessary
for production of our steel products have fluctuated significantly in the past and may do so in the future. Significant increases in raw
material prices could adversely affect our gross profit. During periods when prices for scrap metal, iron ore, ferroalloys, coking coal
and other raw materials have increased, our industry has historically sought to maintain profit margins by passing along increased raw
material costs to customers by means of price increases. For example, prices of scrap metal in 2018 increased approximately 19%, in 2019
decreased approximately 20%, in 2020 increased approximately 9%, in 2021 increased approximately 62.6% and 0.5% in 2022; while prices
of ferroalloys in 2018 increased approximately 10%, in 2019 increased approximately 1%, in 2020 decreased approximately 20%, in 2021 increased
approximately 32.9% and 36.4% in 2022. We may not be able to pass along these and other cost increases in the future and, therefore, our
profitability may be materially and adversely affected. Even when we can successfully increase our prices, interim reductions in profit
margins frequently occur due to a time lag between the increase in raw material prices and the market acceptance of higher selling prices
for finished steel products. We cannot assure you that our customers will agree to pay increased prices for our steel products that compensate
us for increases in our raw material costs.
We purchase our raw materials
either in the open market or from certain key suppliers. Both scrap metal and ferroalloy prices are negotiated on a monthly basis with
our suppliers and are subject to market conditions. We cannot assure you that we will be able to continue to find suppliers of these raw
materials in the open market, that the prices of these materials will not increase or that the quality will remain the same. In addition,
if any of our key suppliers fails to deliver or we fail to renew our supply contracts, we could face limited access to some raw materials,
or higher costs and delays resulting from the need to obtain our raw materials requirements from other suppliers.
The energy costs involved in our production
processes are subject to fluctuations that are beyond our control and could significantly increase our costs of production.
Energy costs constitute a
significant component of our costs of operations. Our energy cost was 12.6% of our manufacturing costs for 2022 compared to 10.8% for
2021, 11.1% for 2020, 14.3% for 2019 and 12.4% for 2018. Our energy costs are driven by the dependence of our production processes on
adequate supplies of electricity and natural gas. A substantial increase in the cost of electricity or natural gas could have a material
adverse effect on our gross profit. In addition, a disruption or curtailment in supply could have a material adverse effect on our production
and sales. Prices for electricity increased approximately 14% in 2018, in 2019 increased approximately 1%, in 2020 decreased approximately
9.8%, in 2021 increased approximately 2.8% and 7.7% in 2022; and prices for natural gas increased approximately 28% in 2018 and increased
approximately 1.8% in 2019, decreased approximately 18% in 2020, increased approximately 37% in 2021 and 54.3% in 2022.
We pay special rates to the
Mexican federal electricity commission (
Comisión Federal de Electricidad
or "CFE") for electricity. We also
pay special rates to Pemex, Gas y Petroquímica Básica, ("PEMEX"), the national oil company of Mexico, for natural
gas used at our facilities in Mexico. We cannot assure you that these special rates will continue to be available to us or that these
rates may not increase significantly in the future, particularly in light of recent energy reforms in Mexico. In accordance with the energy
reform in Mexico, the Republic's Congress approved the Law of the Electricity Industry and the Regulation of the Law of the Electricity
Industry, which regulate some articles of the Constitution of the United Mexican States and have the purpose of regulating the planning
and control of the National Electric System (SEN), the Public Service of Transmission and Distribution (T&D) of electric energy and
other activities of the electric industry. The Mexican State will establish and execute the policies, regulation and surveillance of the
electricity industry through the Secretary of Energy (SENER), which is empowered to establish, conduct and coordinate the country's
energy policies in matters of electricity, direct the process of planning and preparation of the SEN development program, establishing
the criteria for granting Clean Energy Certificates, monitoring the operation of the Wholesale Electricity Market (the Market) and the
determinations of the National Center for Energy Control (CENACE), among others. The Energy Regulatory Commission (CRE) is empowered to
grant qualified user generation permits, among others, to determine the consideration methodologies applicable to Exempt Generators, to
issue and apply the tariff regulation to which the T&D, the operation of the Providers of Basic Services, the operation of CENACE
and Related Services not included in the Market, as well as the final rates of the Basic Supply that are not determined by the Federal
Executive, authorize the contract models that CENACE enters into with Market Participants, among others. In the United States of America,
we have contracts in place with special rates from the electric utilities. We cannot assure you that these special rates will continue
to be available to us or that these rates may not increase significantly in the future. In certain deregulated electric markets in the
United States of America, we have third party electric generation contracts under a fixed price arrangement. These contracts mitigate
our price risk for electric generation from the volatility in the electric markets. In addition, we purchase natural gas from various
suppliers in the United States of America and Canada. These purchase prices are generally established as a function of monthly New York
Mercantile Exchange settlement prices. We also contract with different natural gas transportation and storage companies to deliver the
natural gas to our facilities. In addition, we enter into futures contracts to fix and reduce volatility of natural gas prices both in
Mexico and the United States of America, as appropriate. As of December 31, 2022, we have not entered into derivative financial instruments
in Mexico, the United States of America or Brazil. We have not always been able to pass the effect of increases in our energy costs on
to our customers and we cannot assure you that we will be able to pass the effect of these increases on to our customers in the future.
We also cannot assure you that we will be able to maintain futures contracts to reduce volatility in natural gas prices. Changes in the
price or supply of electricity or natural gas would materially and adversely affect our business and results of operations.
2
We face significant competition from other
steel producers, which may adversely affect our profitability and market share.
Competition in the steel industry
is intense, which exerts a downward pressure on prices, and, due to high start-up costs, the economics of operating a steel mill on a
continuous basis may encourage mill operators to establish and maintain high levels of output even in times of low demand, which further
decreases prices and profit margins. The recent trend of consolidation in the global steel industry may further increase competitive pressures
on independent producers of our size, particularly if large steel producers formed through consolidations, which have access to greater
resources than us, adopt predatory pricing strategies that decrease prices and profit margins. If we are unable to remain competitive
with these producers, our profitability and market share would likely be materially and adversely affected.
A number of our competitors
in Mexico, the United States of America, Brazil and Canada have undertaken modernization and expansion plans, including the installation
of production facilities and manufacturing capacity for certain products that compete with our products. As these producers become more
efficient, we will face increased competition from them and may experience a loss of market share. In each of Mexico, the United States
of America and Brazil, we also face competition from international steel producers. Increased international competition, especially when
combined with excess production capacity, would likely force us to lower our prices or to offer increased services at a higher cost to
us, which could materially reduce our profit margins.
Competition from other materials could significantly reduce demand
and market prices for steel products.
In many applications, steel
competes with other materials that may be used as steel substitutes, such as aluminum (particularly in the automobile industry), cement,
composites, glass, plastic and wood. Additional substitutes for steel products could significantly reduce demand and market prices for
steel products and thereby affect our results of operations.
A sudden slowdown in consumption in, or
increase in exports from, China could have a significant impact on international steel prices, affecting our profitability.
As demand for steel has surged
in China, steel production capacity in that market has also increased, and China is now the largest worldwide steel producing country,
accounting for approximately half the worldwide steel production. Due to the size of the Chinese steel market, a slowdown in steel consumption
in that market, could cause a sizable increase in the volume of Chinese steel offered in the international steel markets, exerting a downward
pressure on sales and margins of steel companies operating in other markets and regions, including us.
The COVID-19 pandemic, as well as similar
epidemics and other public health emergencies in the future, could have a material adverse effect on our business, results of operations,
financial condition and cash flows.
The COVID-19 pandemic is continuing to impact countries,
communities, supply chains and markets, though to a generally lesser extent than during 2020-2022. Responses by individuals, governments
and businesses to ever-changing developments in the COVID-19 pandemic and efforts to reduce its spread, including quarantines, travel
restrictions, business closures, and mandatory stay-at-home or work-from-home orders, while largely lifted during 2022, could be reinstituted
in the event novel strains or new variants prove resistant to existing vaccines. We continue to be subject to risks arising out of the
turbulence of the economic recovery associated with the COVID-19 pandemic, including inflationary pressures, which have generally increased
the costs of our labor, raw materials, energy supplies and other production inputs, adversely impacting our results of operations and
profitability. Despite our widespread vaccination efforts, we remain subject to the ongoing risk that a portion of our workforce or on-site
contractors in the United States, Mexico and Brazil could suffer illness or otherwise be unable to perform their ordinary work functions
due to adverse developments in the COVID-19 pandemic or other infectious disease outbreak. In addition, we have experienced, and may continue
to experience, supply chain disruptions or operational issues with our vendors or logistics providers, as our suppliers and contractors
face similar challenges related to the COVID-19 pandemic, including as a result of new or continued pandemic lockdowns in China. Because
the prolonged COVID-19 pandemic and resulting economic volatility continues to evolve, we cannot predict the full extent to which our
businesses, results of operations, financial condition or liquidity will ultimately be impacted. To the extent the COVID-19 pandemic adversely
affects our businesses, it may also have the effect of exacerbating many of the other risks described in Item 3.D. "Risk Factors.",
any of which could have a material adverse effect on us.
3
Implementing our growth strategy, which may include additional
acquisitions, may adversely affect our operations.
As part of our growth strategy,
we may seek to expand our existing facilities, build additional plants, acquire additional steel production assets, enter into joint ventures
or form strategic alliances that we expect will expand or complement our existing business. If we undertake any of these transactions,
they will likely involve some or all of the following risks:
●
disruption of our ongoing business;
●
diversion of our resources and
of management's time;
●
decreased ability to maintain
uniform standards, controls, procedures and policies;
●
difficulty managing the operations
of a larger company;
●
increased likelihood of involvement
in labor, commercial or regulatory disputes or litigation related to the new enterprise;
●
potential liability to joint
venture participants or to third parties;
●
difficulty competing for acquisitions
and other growth opportunities with companies having greater financial resources; and
●
difficulty integrating the acquired
operations and personnel into our existing business.
We will require significant
capital for acquisitions and other strategic plans, as well as for the maintenance of our facilities and compliance with environmental
regulations. We may not be able to fund our capital requirements from operating cash flow and we may be required to issue additional equity
or debt securities or obtain additional credit facilities, which could result in additional dilution to our shareholders. We cannot assure
you that adequate equity or debt financing would be available to us on favorable terms or at all. If we are unable to fund our capital
requirements, we may not be able to implement our growth strategy.
We intend to continue to pursue
a growth strategy, the success of which will depend in part on our ability to acquire and integrate additional facilities. Some of these
acquisitions may be outside of Mexico, the United States of America, Canada and Brazil. Acquisitions involve special risks, in addition
to those described above, that could adversely affect our business, financial condition and results of operations, including the assumption
of legacy liabilities and the potential loss of key employees. We cannot assure you that any acquisition we make will not materially and
adversely affect us or that any such acquisition will enhance our business. We are unable to predict the likelihood of any additional
acquisitions being proposed or completed in the near future or the terms of any such acquisitions.
Tariffs, anti-dumping and countervailing
duty claims imposed in the future could harm our ability to export our products outside of Mexico, and changes in Mexican tariffs on steel
imports could adversely affect the profitability and market share of our Mexican steel business.
International trade-related
administrative proceedings, legal actions and restrictions pose a constant risk for our international operations and sales throughout
the world. Countries may impose restrictive import duties and other restrictions on imports under various national trade laws. The timing
and nature of the imposition of trade-related restrictions potentially affecting our exports are unpredictable. Trade restrictions on
our exports could adversely affect our ability to sell products abroad and, as a result, our profit margins, financial condition and overall
business could suffer.
One significant source of
trade restrictions results from the imposition of "anti-dumping" and "countervailing" duties, as well as "safeguard
measures." These duties can severely limit or altogether prevent exports to relevant markets. For example, in October 2014, the
United States of America International Trade Commission (USITC) determined that the U.S. steel industry was materially injured by imports
of steel concrete reinforcing bars from Mexico that are sold in the United States of America at less than fair value, and from Turkey,
that are subsidized by the government of Turkey. As a result of the USITC's affirmative determinations, the U.S. Department of Commerce
issued an anti-dumping duty order on imports of this product from Mexico and a countervailing duty order on imports of this product from
Turkey. The U.S. government imposed tariffs of 66.7% against imports for rebar from Deacero, S.A.P.I de C.V. and us and tariffs of 20.58%
for rebar imports from all other producers in Mexico, including Simec. On January 6, 2021, a preliminary dumping rate of 66.7% was imposed
on our exports of rebar to the United States of America; following the U.S. Department of Commerce's physical review carried out
at our San Luis Potosí plant, arguing deficiencies and adverse facts during the information process. Such dumping rate was ratified
on June 1, 2022. A preliminary dumping rate of 6.35% was imposed and will be ratified in the first half of 2023.
4
Many of our products are subject
to existing duties, tariffs, anti-dumping duties and quotas that may limit the quantity of some types of goods that we import into the
United States of America. Furthermore, certain of our competitors may be better positioned than us to withstand or react to border taxes,
tariffs or other restrictions on global trade and as a result we may lose market share to such competitors. Due to broad uncertainty regarding
the timing, content and extent of any regulatory changes in the U.S. or elsewhere, we cannot predict the impact, if any, that these changes
could have to our business, financial condition and results of operations. See "Risks Related to Mexico—Developments in other
countries could adversely affect the Mexican economy, our financial performance and the price of our shares."
We and our auditors identified material
weaknesses in our internal controls over financial reporting for 2020 and 2021, which resulted in our conducting a thorough review and
implementing remedial measures in 2020 and 2021.
In connection with the preparation
of our financial statements as of and for each of the years ended December 31, 2020 and 2021, we and our auditors identified material
weaknesses (as defined under standards established by the U.S. Public Company Accounting Oversight Board) in our internal controls over
financial reporting for the years 2020 and 2021. A material weakness is a deficiency, or combination of deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis. In 2020 and 2021, the Company made progress addressing the deficiencies. In 2022,
we believe that all material weaknesses have been addressed.
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."
The operation of our facilities depends
on good labor relations with our employees.
As of December 31, 2022, approximately
88% of our non-Mexican and 46% of our Mexican employees were members of unions. The compensation terms of our labor contracts are adjusted
on an annual basis, and all other terms of the labor contracts are renegotiated every two years. In addition, collective bargaining agreements
are typically negotiated on a facility-by-facility basis for our Mexican facilities. Any failure to reach an agreement on new labor contracts
or to negotiate these labor contracts could result in strikes, boycotts or other labor disruptions. These potential labor disruptions
could have a material and adverse effect on our business. Labor disruptions or significant negotiated wage increases could reduce our
sales or increase our costs, which could in turn have a material adverse effect on our results of operations.
Operations at our Lackawanna, New York,
facility depend on our continuing right to use certain property and assets of an adjoining facility and the termination of any such rights
would interrupt our operations and have a material adverse effect on our results of operations and financial condition.
The operations of our Lackawanna
facility depend upon certain service and utility arrangements and understandings with third parties relating to, among other things, our
use of industrial water, compressed air, sanitary sewer and electrical power. We have entered into a written agreement, subject to automatic
one-year renewals and terminable by either party, for the provision of compressed air to our Lackawanna facility and an option to purchase
the equipment at various times and at stated prices. The water pump that services our plant is located on property owned and maintained
by another third party, which also continues to furnish industrial water to us on a month-to-month basis. The electric system which services
the compressed air equipment, as well as the electric system which services the property on which the compressed air equipment is located,
is routed through our electric meter located at a substation on adjacent property owned by the third party providing the compressed air
to our facility. In the event of a termination of any of our rights, either due to a failure to negotiate a satisfactory outcome with
the third parties providing these services or for any other reason, we could be required to cease all or substantially all of our operations
at the Lackawanna facility. Because we produce certain types of products in our Lackawanna facility that we do not produce in our other
facilities, an interruption of production at our Lackawanna facility would result in a substantial loss of revenue and could damage our
relationships with customers.
Our sales in the United States of America
are concentrated and could be significantly reduced if one of our major customers reduced its purchases of our products or was unable
to fulfill its financial obligations to us.
Our sales in the United States
of America are concentrated among a relatively small number of customers. Any of our major customers can stop purchasing our products
or significantly reduce their purchases at any time. During 2022, 2021, 2020, 2019, and 2018, sales to our ten largest customers in the
United States of America accounted for approximately 72.1%, 66.6%, 68%, 65% and 68.4% of our consolidated revenues in the United States
of America, respectively, and approximately 10.8%, 14.8%, 15.5%, 20.8% and 13.8% of our total consolidated revenues, respectively. A disruption
in sales to one or more of our largest customers would adversely affect our cash flow and results of operations.
5
We cannot assure you that
we will be able to maintain our current level of sales to our largest customers or that we will be able to sell our products to other
customers on terms that are favorable to us or at all. The loss of, or substantial decrease in the amount of purchases by, or a write-off
of any significant receivables from, any of our major customers would materially and adversely affect our business, results of operations,
liquidity and financial condition.
Unanticipated problems with our manufacturing
equipment and facilities could have an adverse impact on our business.
Our capacity to manufacture
steel products depends on the suitable operation of our manufacturing equipment, including blast furnaces, electric arc furnaces, continuous
casters, reheating furnaces and rolling mills. Breakdowns requiring significant time and/or resources to repair, as well as the occurrence
of unexpected adverse events, such as fires, explosions or adverse meteorological conditions, could cause production interruptions that
could adversely affect our results of operations.
We have not obtained insurance
against all risks, and do not maintain insurance covering losses resulting from catastrophes or business interruptions (such as interruptions
attributable to the COVID-19 pandemic). In the event we are not able to quickly and cost-effectively remedy problems creating any significant
interruption of our manufacturing capabilities, our operations could be adversely affected. In addition, in the event any of our plants
were destroyed or significantly damaged or their production capabilities otherwise significantly decreased, we would likely suffer significant
losses, and capital investments necessary to repair any destroyed or damaged facilities or machinery would adversely affect our profitability,
liquidity and financial condition.
If we are unable to obtain or maintain quality
and environmental management certifications for our facilities, we may lose existing customers and fail to attract new customers.
Most of our automotive parts
customers in Mexico and the United States of America require that we have ISO 9001, TS 16949 and ISO 14001 certifications. All of the
Mexican and U.S. facilities that sell to automotive parts customers are currently certified, as required. If the foregoing certifications
are canceled, approvals are withdrawn or necessary additional standards are not obtained in a timely fashion, our ability to continue
to serve our targeted market, retain our customers or attract new customers may be impaired. For example, our failure to maintain these
certifications could cause customers to refuse shipments, which could materially and adversely affect our revenues and results of operations.
We cannot assure you that we will be able to maintain these required certifications.
In the SBQ steel market, all
participants must satisfy quality audits and obtain certifications in order to obtain the status of "approved supplier." The
automotive industry has put these stringent conditions in place for the production of auto parts to assure vehicle quality and safety.
We currently are an approved supplier for our automotive parts customers. Maintaining these certifications is key to preserving our market
share, because they can be a barrier to entry in the SBQ steel market, and we cannot assure you that we will be able to do so.
Failure to comply with environmental laws
and regulations may result in fines, penalties or other significant liabilities or prevent us from operating our facilities.
Our operations are subject
to a broad range of environmental laws and regulations governing our impact on air, water, soil and groundwater and exposure to hazardous
substances. The costs of complying with and the imposition of liabilities pursuant to, environmental laws and regulation can be significant.
Despite our efforts to comply with environmental laws and regulations, environmental incidents or events that negatively affect the operations
of our facilities may occur. In addition, we cannot assure you that we will at all times operate in compliance with environmental laws
and regulations. If we fail to comply with these laws and regulations, we may be assessed fines or penalties, be required to make large
expenditures to comply with such laws and regulations, or be forced to shut down non-compliant operations and face lawsuits by third parties.
In addition, environmental laws and regulations are becoming increasingly stringent and it is possible that future laws and regulations
may require us to undertake material environmental compliance expenditures and require modifications in our operations. Furthermore, we
need to maintain existing and obtain future environmental permits in order to operate our facilities. The failure to obtain necessary
permits or consents or the loss of any permits could result in significant fines or penalties or prevent us from operating our facilities.
We may also be subject, from time to time, to legal proceedings brought by private parties or governmental agencies with respect to environmental
matters, including matters involving alleged property damage or personal injury that could result in significant liability. Certain of
our facilities in the United States of America have been the subject of administrative action by federal, state and local environmental
authorities. See Item 8. "Financial Information—Legal Proceedings."
6
Greenhouse gas policies and regulations,
particularly any binding restriction on emissions of greenhouse gases such as carbon dioxide, could negatively impact our steelmaking
operations.
Our steel making operations
in the United States of America, Brazil and Mexico use electric arc furnaces where carbon dioxide generation is primarily linked to energy
use. In the United States of America, the Environmental Protection Agency has issued rules imposing inventory and reporting obligations
to which some of our facilities are subject, and has also issued rules that will affect preconstruction permits for our facilities where
increases in greenhouse gas pollutants are contemplated. The U.S. Congress has debated various measures for regulating greenhouse gas
emission (such as carbon dioxide) and may enact them in the future. Such laws and regulations may also result in higher costs for coking
coal, natural gas and electricity generated by carbon-based systems (such as coal-fired electric generating facilities). Such future laws
and regulations, whether in the form of a cap-and-trade emissions permit system, a carbon tax or other regulatory regime may have a negative
effect on our operations. Climate change policy is evolving at regional, national and international levels, and political and economic
events may significantly affect the scope and timing of climate change measures that are ultimately put in place. As signatories to the
United Nations Framework Convention on Climate Change (the "UNFCCC"), Mexico became subject to the Paris Agreement to fight
climate change, which was approved at the 21th session of the UNFCCC conference in 2015. The United States of America is also a member
of the Paris Agreement.
If we are required to remediate contamination
at our facilities, we may incur significant liabilities.
Certain of our U.S. facilities
are currently engaged in the investigation and/or remediation of environmental contamination. Most of these investigations relate to legacy
activities by prior owners. We may in the future be subject to similar investigations or required to undertake similar remediation measures
at other facilities. We recognize a liability for environmental remediation when it becomes probable that such remediation will be required
and the amount can be reasonably estimated. As estimated costs to remediate change, or when new liabilities become probable, we adjust
the record liabilities accordingly. However, due to the numerous variables associated with the judgments and assumptions that are part
of these estimates and changes in governmental regulations and environmental technologies over time, we cannot assure you that our environmental
reserves will be adequate to cover such liabilities or that our environmental expenditures will not differ significantly from our estimates
or materially increase in the future. Failure to comply with any legal obligations requiring remediation of contamination could result
in liabilities, imposition of cleanup liens and fines, and we could incur large expenditures to bring our facilities into compliance.
See Item 8. "Financial Information—Legal Proceedings."
We could incur losses due to product liability claims.
We could experience losses
from defects or alleged defects in our steel products that subject us to claims for monetary damages. For example, many of our products
are used in automobiles and it is possible that a defect in a vehicle could result in product liability claims against us. In accordance
with normal commercial sales, some of our products include warranties that they meet certain agreed upon manufacturing specifications.
We cannot assure you that future product liability claims will not be brought against us.
We depend on our senior management and their
unique knowledge of our business and of the SBQ steel industry, and we may not be able to replace key executives if they leave.
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.
7
Our tax liability may increase if the tax laws and regulations
in countries in which we operate change or become subject to adverse interpretations.
Taxes payable by companies
in the countries in which we operate are substantial and include income tax, value-added tax, excise duties, profit taxes, payroll-related
taxes, property taxes and other taxes. Tax laws and regulations in some of these countries may be subject to change, varying interpretation
and inconsistent enforcement. Ineffective tax collection systems and continuing budget requirements may increase the likelihood of the
imposition of onerous taxes and penalties which could have a material adverse effect on our financial condition and results of operations.
In addition to the usual tax burden imposed on taxpayers, these conditions create uncertainty as to the tax implications of various business
decisions. This uncertainty could expose us to significant fines and penalties and to enforcement measures despite our best efforts at
compliance, and could result in a greater than expected tax burden. In addition, many of the jurisdictions in which we operate, including
Mexico, have adopted transfer pricing legislation. If tax authorities impose significant additional tax liabilities as a result of transfer
pricing adjustments, it could have a material adverse effect on our financial condition and results of operations. It is possible that
tax authorities in the countries in which we operate will introduce additional tax raising measures. The introduction of any such provisions
may affect our overall tax efficiency and may result in significant additional taxes becoming payable. Any such additional tax exposure
could have a material adverse effect on our financial condition and results of operations.
If we are unable to protect our information
systems against data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.
We are increasingly dependent
on information technology networks and systems to process, transmit and store electronic information. In particular, we depend on our
information technology infrastructure for digital marketing activities and electronic communications among us and our clients, suppliers
and also among our subsidiaries and facilities. Security breaches or infrastructure flaws can create system disruptions, shutdowns or
unauthorized disclosures of confidential information. If we are unable to prevent such breaches or flaws, our operations could be disrupted,
or we may suffer financial damage or loss because of lost or misappropriated information.
Cyber threats are rapidly
evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly
sophisticated. Cyber threats and cyber-attackers can be sponsored by countries or sophisticated criminal organizations or be the work
of a single "hacker" or small groups of "hackers."
Insider or employee cyber
and security threats are increasingly a concern for all companies, including ours. Nevertheless, as cyber threats evolve, change and become
more difficult to detect and successfully defend against, one or more cyber-attacks might defeat our or a third-party service provider's
security measures in the future and obtain the personal information of customers or employees. Employee error or other irregularities
may also result in a defeat of security measures and a breach of information systems. Moreover, hardware, software or applications we
use may have inherent defects of design, manufacture or operations or could be inadvertently or intentionally implemented or used in a
manner that could compromise information security. A security breach and loss of information may not be discovered for a significant period
of time after it occurs. While we have no knowledge of a material security breach to date, any compromise of data security could result
in a violation of applicable privacy and other laws or standards, the loss of valuable business data, or a disruption of our business.
A security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information could
give rise to unwanted media attention, materially damage to our customer relationships and reputation, and result in fines, fees, or liabilities,
which may not be covered by our insurance policies.
Risks Related to Global Economic Conditions
The COVID-19 pandemic, as well as similar
epidemics and other public health emergencies in the future, could have a material adverse effect on our business, results of operations,
financial condition and cash flows.
The ongoing global pandemic
resulting from the spread of COVID-19 has had a significant effect on economies, businesses and individuals around the world. Efforts
by governments around the world, including in the U.S., Brazil and Mexico, to contain COVID-19 have involved, among other things, border
closings and other significant travel restrictions; mandatory stay-at-home and work-from-home orders; mandatory business closures; public
gathering limitations; and prolonged quarantines. These efforts and other governmental, business and individual responses to the COVID-19
pandemic have led to significant disruptions to commerce, supply chains, credit losses, lower consumer demand for goods and services and
general uncertainty regarding the near-term and long-term effects of COVID-19 on the domestic and international economy and on public
health. Global steel production has been and will continue to be affected by volatility in the market due to the COVID-19 pandemic and
uncertainty remains around the potential emergence of new and more contagious variants of the virus and the effectiveness of vaccine programs.
These developments and other consequences of the COVID-19 outbreak have and could continue to materially adversely affect our results
of operations, financial condition and cash flows. In addition, the COVID-19 pandemic or other public health emergencies could negatively
affect our internal controls over financial reporting as a portion of our workforce may be required to work from home in the future and,
therefore, new processes, procedures, and controls may be required to respond to changes in our business environment. The effects of the
COVID-19 pandemic may also have the effect of exacerbating many of the other risks described in this Item 3.D. "Risk Factors."
8
Global economic conditions which have been
impacted by the Russian invasion of Ukraine and the failure of Silicon Valley Bank, have in the past, and may
continue to, significantly impact our business.
The corresponding reduction
in demand across the economy in general and in the automotive, construction and manufacturing sectors due to the global pandemic has reduced
demand for steel products in North America and globally. These economic conditions significantly impacted, and will continue to significantly
impact, our business and results of operations. Although the reasons mentioned before, demand, production levels and prices in certain
segments and markets have recovered and stabilized to a certain degree in 2022. On February 24, 2022, Russia invaded Ukraine, which, due
to geopolitical reasons, increased the uncertainty and could delay the global economic recovery. An increase in price of certain commodities
has been the major impact of this fact.
In March 2023, Silicon Valley
Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance
Corporation, or FDIC, as receiver. In the same month, each of Signature Bank and Silvergate Capital Corp. were swept into receivership.
In the same month, each of Signature Bank and Silvergate Capital Corp. were also placed in receivership. Although we did not have any
cash balances on deposit with these banks and are not a borrower or party to any agreement with these banks, investor concerns regarding
the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates
or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources potentially
making it more difficult to acquire financing. If global macroeconomic conditions deteriorate, the outlook for steel producers would be
adversely affected. It is difficult to predict the duration or severity of a new global economic downturn, or to what extent it will affect
us.
An unsustainable recovery
and persistently weak economic conditions in our key markets could depress demand for our products and adversely affect our business and
results of operations. We sell our products to the automotive and construction-related industries, both of which reported substantially
lower customer demand during and after the latest global recession and have recently exhibited reduced demand for steel products due to
the ongoing financial recession. Our operating levels in recent years declined compared to pre-recession levels. In 2020, 2021 and 2022
we experienced a decrease in our sales to the automotive industry.
Moreover, if the global economic
downturn continues for a prolonged period, or a new global financial crisis occurs, we may face increased risk of insolvency and other
credit related issues of our customers and suppliers, as we faced with our customers and suppliers particularly in industries that were
hard hit by the latest recession, such as automotive, construction and appliance. Also, there is the possibility that our suppliers face
similar risks. The decrease in available credit may increase the risk default of our clients and that our suppliers might delay the raw
materials delivery. The impact of global economic conditions on these industries may have a significant effect on our results of operations.
Finally, if global economic
conditions continue to deteriorate, we may be required to undertake asset impairments, as we have been required to undertake in the past.
Because a significant portion of our sales
are to the automotive industry, a decrease in automotive manufacturing could reduce our cash flows and adversely affect our results of
operations.
Sales of our products to the
automotive market (either directly to automotive assemblers and manufacturers or indirectly through distributors, component suppliers,
and steel service centers) accounted for approximately 20% of our net sales of our SBQ steel products in 2022. Demand for our products
is affected by, among other things, the relative strength or weakness of the North American automotive industry. Any reduction in vehicles
manufactured in North America, the principal market for our SBQ steel products, has had and will continue to have an adverse effect on
our results of operations. Developments affecting the North American automotive industry may adversely affect us.
Our customers in the automotive industry
continually seek to obtain price reductions from us, which may adversely affect our results of operations.
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.
9
Sales may fall as a result of fluctuations
in industry inventory levels.
Inventory levels of steel
products held by companies that purchase our products can vary significantly from period to period. These fluctuations can temporarily
affect the demand for our products, as customers draw from existing inventory during periods of low investment in construction and the
other industry sectors that purchase our products and accumulate inventory during periods of high investment and, as a result, these companies
may not purchase additional steel products or maintain their current purchasing volume. Accordingly, we may not be able to increase or
maintain our current levels of sales volumes or prices.
Risks Related to Mexico
Adverse economic conditions in Mexico may
adversely affect our financial performance.
A substantial portion of our
operations are conducted in Mexico and our business is affected by the performance of the Mexican economy. The Mexican economy, as measured
by gross domestic product, was growing 2% in 2018, contracted by 0.1% in 2019, contracted by 8.5% in 2020 and grew by 5% in 2021 and 3%
in 2022 (according to figures of the
Instituto Nacional de Estadística y Geografía
(INEGI)). Mexico has historically
experienced prolonged periods of economic crises, caused by internal and external factors over which we have no control. Those periods
have been 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. Decreases in the growth rate of the Mexican economy, or periods of negative growth, or increases in inflation may result in lower
demand for our products. The Mexican government recently cut spending in response to a downward trend in international crude oil prices,
and it may further cut spending in the future. These cuts could adversely affect the Mexican economy and, consequently, our business,
financial condition, operating results and prospects. We cannot assure you that economic conditions in Mexico will not worsen, or that
those conditions will not have an adverse effect on our financial performance.
Political, social and other developments
in Mexico could adversely affect our business.
Political, social and other
developments in Mexico may adversely affect our business. Social unrest, such as strikes, suspension of labor, demonstrations, acts of
violence and terrorism in the Mexican states in which we operate could disrupt our financial performance. Additionally, the Mexican government
has exercised, and continues to exercise, significant influence over the economy. Accordingly, Mexican federal governmental actions and
policies concerning the economy, the regulatory framework, the social or political context, and state-owned and stated controlled entities
or industries could have a significant impact on private sector companies and on market conditions, prices and returns of Mexican securities.
In the past, governmental actions have involved, among other measures, increases in interest rates, changes in tax policies, price controls,
currency devaluations, capital controls and limits on imports.
The Mexican government has exercised, and
continues to exercise, significant influence over the Mexican economy.
The Mexican federal government
has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican federal governmental actions
and policies concerning the economy, state-owned enterprises and state controlled, funded or influenced financial institutions could have
a significant impact on private sector entities in general and on us in particular, and on market conditions, prices and returns on securities
of Mexican companies. The Mexican federal government occasionally makes significant changes in policies and regulations, and may do so
again in the future. Actions to control inflation and other regulations and policies have involved, among other measures, increases in
interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Tax legislation
in Mexico is subject to continuous change and we cannot assure you whether the Mexican government may maintain existing political, social,
economic or other policies, or whether changes may have a material adverse effect on our financial performance.
Violence in Mexico may adversely impact the Mexican economy and
have a negative effect on our financial performance.
Mexican drug related violence
and other organized crime have escalated significantly since 2006, when the Mexican federal government began increasing the use of the
army and police to fight drug trafficking. Drug cartels have carried out attacks largely directed at competing drug cartels and law enforcement
agents; however, they also target companies and their employees, including companies' industrial properties, including through extortion,
theft from trucks or industrial sites, kidnapping and other forms of crime and violence. This increase in violence and criminal activity
has led to increased costs for companies in the form of stolen products and added security and insurance. Corruption and links between
criminal organizations and authorities also create conditions that affect our business operations, as well as extortion and other acts
of intimidation, which may have the effect of limiting the level of action taken by federal and local governments in response to such
criminal activity. We cannot assure you that the levels of violent crime in Mexico, over which we have no control, will not have an adverse
effect on the country's economy and, as a result, on our financial performance.
10
Depreciation of the Mexican peso relative to the U.S. dollar
could adversely affect our financial performance.
The peso historically has
been subject to significant depreciation against the U.S. dollar. Depreciation of the Mexican peso relative to the U.S. dollar decreases
a portion of our revenues in U.S. dollar terms, as well as increases the cost of a portion of the raw materials we require for production
and any debt obligations denominated in U.S. dollars, and thereby may negatively affect our results of operations.
The Mexican Central Bank may
from time to time participate in the foreign exchange market to minimize volatility and support an orderly market. The Mexican Central
Bank and the Mexican government have also promoted market-based mechanisms for stabilizing foreign exchange rates and providing liquidity
to the exchange market, such as using over-the-counter derivatives contracts and publicly-traded futures contracts on the Chicago Mercantile
Exchange. However, the Peso is currently subject to significant fluctuations against the U.S. dollar and may be subject to such fluctuations
in the future. In 2019, the exchange rate registered a low of Ps. 18.76 to U.S.$1.00 and a high of Ps. 20.12 to U.S.$1.00. In 2020, the
exchange rate registered a low of Ps. 18.57 to U.S.$1.00 and a high of Ps. 24.86 to U.S.$1.00. In 2021, the exchange rate registered a
low of Ps.19.58 to U.S. $1.00 and a high of Ps. 21.82. In 2022, the exchange rate registered a low of Ps.19.14 to U.S. $1.00 and a high
of Ps. 21.38.
A severe depreciation of the
Mexican peso may also result in disruption of the international foreign exchange markets and may limit our ability to transfer and to
convert Mexican pesos into U.S. dollars and other currencies. While the Mexican government does not currently restrict, and since 1982
has not restricted the right or ability of Mexican or foreign persons or entities to convert Mexican pesos into U.S. dollars or to transfer
other currencies out of Mexico, the Mexican government could impose restrictive exchange rate policies in the future.
Currency fluctuations or restrictions
on transfer of funds outside Mexico may have an adverse effect on our financial performance, and could adversely affect the U.S. dollar
value of the price of our Series B shares and the ADSs.
Changes in the reference rate
set by the Mexican Central Bank may negatively affect our business and operations. The Mexican Central Bank has increased the reference
rate during the last two years. On March 1, 2023, reference rate was increased to 11.25%. Future changes by the Mexican Central Bank of
the reference rate or by U.S. Federal Reserve of the target range for the federal funds rate in the United States of America may negatively
impact the Mexican economy or the value of securities issued by Mexican companies including as a result of any precipitous unwinding of
investments in emerging markets, depreciations and increased volatility in the value of their currency and higher interest rates.
High inflation rates in Mexico may affect demand for our products
and result in cost increases.
Mexico has historically experienced
high annual rates of inflation. However, the Mexican economy has been in a non-inflationary environment given the low inflation rates
of recent years. The annual rate of inflation, as measured by changes in the Mexican national consumer price index (
Índice Nacional
de Precios al Consumidor
) published by the INEGI was 4.8% for 2018, 2.8% for 2019, 3.2% for 2020, 7.4% for 2021 and 7.8% for 2022.
High inflation rates could adversely affect our business and results of operations by reducing consumer purchasing power, thereby adversely
affecting demand for our products, increasing certain costs beyond levels that we could pass on to consumers, and by decreasing the benefit
to us of revenues earned if the inflation rate exceeds the growth in our pricing levels.
Developments in other countries could adversely
affect the Mexican economy, our financial performance and the price of our shares.
The Mexican economy and the
market value of Mexican companies may be, to varying degrees, affected by economic and market conditions globally, in other emerging market
countries and major trading partners, in particular the United States of America. Although economic conditions in other countries may
differ significantly from economic conditions in Mexico, investors' reactions to adverse developments in other countries may have
an adverse effect on the market value of securities of Mexican issuers or of Mexican assets.
In addition, in recent years
economic conditions in Mexico have become increasingly correlated with economic conditions in the United States of America and Canada
as a result of the Tratado entre Mexico, Estados Unidos y Canada (TMEC) or the United States of America, Mexico and Canada Agreement (USMCA)
which entered into effect on July 1, 2020; increased economic activity between the three countries, and the remittance of funds from Mexican
immigrants working in the United States of America to Mexican residents. Adverse economic conditions in the US, changes to the TMEC and
other related events could have an adverse effect on the Mexican economy. We cannot assure that events in other countries, the United
States of America or another event could negatively impact our financial situation.
11
Moreover, the financial recession
originated by the effects to stop the COVID-19 pandemic, the recent confrontation between the United States of America and China, the
negative effect on the worldwide markets due to the recent Russian invasion of Ukraine and the recent changes in credit conditions, may
also affect the global and Mexican economies. We cannot assure you that events in other emerging market countries, in the United States
of America or elsewhere will not adversely affect our financial performance.
We could be adversely affected by violations
of the Mexican Federal Anticorruption Law in Public Contracting, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery
laws.
The Mexican Federal Anticorruption
Law (
Ley Federal de Anticorrupción en Contrataciones Públicas
), the U.S. Foreign Corrupt Practices Act and similar
worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to government officials
and other persons for the purpose of obtaining or retaining business. There can be no assurance that our internal control policies and
procedures will protect us from reckless or criminal acts committed by our employees or agents. Violations of these laws, or allegations
of such violations, could disrupt our business and could have an adverse effect on our business, financial condition and results of operations.
Our financial statements are prepared in
accordance with IFRS and therefore are not directly comparable to financial statements of other companies prepared under U.S. GAAP or
other accounting principles.
All Mexican companies listed
on the Mexican Stock Exchange must prepare their financial statements in accordance with IFRS which differs in certain significant respects
from U.S. GAAP. Items on the financial statements of a company prepared in accordance with IFRS may not reflect its financial position
or results of operations in the way they would be reflected had such financial statements been prepared in accordance with U.S. GAAP.
Accordingly, Mexican financial statements and reported earnings are likely to differ from those of companies in other countries in this
and other respects.
Mexico has different corporate disclosure
and accounting standards than those in the United States of America and other countries.
A principal objective of the
securities laws of the United States of America, Mexico and other countries is to promote full and fair disclosure of all material corporate
information, including accounting information. However, there may be different or less publicly available information about issuers of
securities in Mexico than is regularly made available by public companies in countries with more highly developed capital markets, including
the United States of America. The disclosure standards imposed by the Mexican Stock Exchange may be different than those imposed by securities
exchanges in other countries or regions such as the United States of America. As a foreign private issuer, we are not subject to U.S.
proxy rules and are exempt from certain reports under the U.S. Securities Exchange Act of 1934 (the "Exchange Act"), as we
are not required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S.
domestic reporting companies whose securities are registered under the Exchange Act. These exemptions and leniencies will reduce the frequency
and scope of information and protections available to you in comparison to those applicable to a U.S. domestic reporting company.
Risks Related to Brazil
Brazilian political and economic conditions, and the Brazilian
government's economic and other policies, may negatively affect our business, operations and financial condition.
The Brazilian economy has
been characterized by frequent and occasionally extensive intervention by the Brazilian government and unstable economic cycles. The Brazilian
government has often changed monetary, taxation, credit, tariff and other policies to influence the course of Brazil's economy.
The Brazilian government's actions to control inflation and implement other policies have at times involved wage and price controls,
blocking access to bank accounts, imposing capital controls and limiting imports into Brazil.
Our results of operations and financial condition
may be adversely affected by factors such as:
●
fluctuations in exchange rates;
●
exchange control policies;
●
interest rates;
12
●
inflation;
●
tax policies;
●
expansion or contraction of
the Brazilian economy, as measured by rates of growth in gross domestic product ("GDP");
●
changes in labor regulation;
●
energy shortages;
●
social and political instability;
●
liquidity of domestic capital
and lending markets; and
●
other political, diplomatic,
social and economic developments in or affecting Brazil.
Risks Related to Ownership of our ADRs
We are a foreign private issuer under the
rules and regulations of the SEC and are therefore exempt from a number of rules under the Exchange Act and are permitted to file less
information with the SEC than a domestic U.S. reporting company, which reduces the level and amount of disclosure that you receive.
We are a foreign private issuer
under the rules and regulations of the SEC and are therefore exempt from a number of rules under the Exchange Act and are permitted to
file less information with the SEC than a domestic U.S. reporting company, which reduces the level and amount of disclosure that you receive.
As a foreign private issuer
whose ADRs are listed on the NYSE American, we are permitted to follow certain home country corporate governance practices instead of
certain requirements of the NYSE American. Among other things, as a foreign private issuer we may also follow home country practice with
regard to, the composition of the board of directors, director nomination procedure, compensation of officers and quorum at shareholders'
meetings. See Item 10.B "Memorandum and Articles of Association.
The market price of our ADRs has been, and
may continue to be, highly volatile, and such volatility could cause the market price of our ADRs to decrease and could cause you to lose
some or all of your investment in our ADRs.
The stock market in general
and the market prices of the ADRs 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 first quarter of 2023, the market price of our ADRs fluctuated from a high of
$36.96 per ADR to a low of $30.75 per ADR, and the price of our ADRs 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;
13
●
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.
Our controlling shareholder, Industrias
CH, S.A.B. de C.V. ("Industrias CH"), is able to exert significant influence on our business and policies and its interests
may differ from those of other shareholders.
Industrias CH, which is controlled
by the chairman of our board of directors, Rufino Vigil González, owns approximately 49% of our shares as of April 28, 2023. Industrias
CH nominated all current members of our board of directors and can exercise substantial influence and control over our business and policies,
including the timing and payment of dividends. Industrias CH's interests may differ significantly from those of other shareholders.
Furthermore, as a result of Industrias CH's significant equity position, there is currently limited liquidity in our series B shares
and the ADSs.
Mr. Sergio Vigil González
is the chief executive officer of Industrias CH, and he also functions in a senior management role for the Company, although he holds
no formal title at the Company. In this function, Mr. Vigil directs business strategies for the Company, negotiates potential acquisitions
and directs intercompany loans, among other things. Our board of directors is aware of Mr. Vigil's role at the Company, and
our board of directors authorizes him by specific authority as a signatory of the Company. Mr. Vigil is the brother of our controlling
shareholder and chairman of our board of directors, Rufino Vigil González.
We have had a number of related party transactions
with our affiliates.
Historically, we have engaged
in a number and variety of transactions with our affiliates, including entities that Industrias CH owns or controls. While we believe
that these transactions were made on terms that were not less favorable to us than those obtainable on an arm's-length basis, there
was no independent determination of that fact. We expect that in the future we will continue to enter into transactions with our affiliates,
and some of these transactions may be significant. See Item 7.B "Related Party Transactions."
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 the capital
markets.
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 the
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.
14
Item 4. Information on the Company
A. History and Development of the Company
Overview
We are a diversified manufacturer,
processor and distributor of SBQ steel and structural steel products with production and commercial operations in the United States of
America, Mexico and Brazil. We believe that, in 2018, 2019, 2020, 2021 and 2022, we were an important producer of SBQ products in both
the United States of America and Mexico, in each case in terms of shipped volume. We also believe that in 2018, 2019, 2020, 2021 and 2022,
we were an important producer of structural and light structural steel products in Mexico in terms of shipped volume.
Our 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. Our structural steel products are mainly used in the non-residential construction market and
other construction applications.
We focus on the Mexican and
U.S. specialty steel markets by providing high value-added products and services from our strategically located plants. The quality of
our products and services, together with cost benefits generated by our facility locations, has allowed us to develop long standing relationships
with many of our SBQ clients, which include Mexico and U.S.-based automotive and industrial equipment manufacturers and their suppliers.
In addition, our facilities located in the northwest and central parts of Mexico allow us to serve the structural steel and construction
markets in those regions and southwest California with an advantage in the cost of freight over competitors which do not have production
facilities in such regions.
Our legal name is Grupo Simec,
S.A.B. de C.V. and our commercial name for advertising and publicity purposes is Simec. We are a
sociedad anónima bursátil
de capital variable
, organized under the laws of Mexico. We are domiciled in the city of Guadalajara, Jalisco, and our principal administrative
office is located at Calzada Lázaro Cárdenas 601, Guadalajara, Jalisco, Mexico 44440. Our telephone number is +52-33-3770-6700.
The address of our website is www.gsimec.com.mx.
The SEC maintains a website
(http://www.sec.gov), which contains reports, information statements and other information regarding issuers that file electronically
with the SEC.
Our History
Our steel operations commenced
in 1969 when a group of families from Guadalajara, Jalisco, formed Compañía Siderúrgica de Guadalajara, S.A. de C.V.
("CSG"), a mini-mill steel company. In 1980, Grupo Sidek, S.A. de C.V. ("Sidek"), our former parent company, was
incorporated and became the holding company of CSG. In 1990, Sidek consolidated its steel and aluminum operations into a separate subsidiary,
Grupo Simec, S.A. de C.V., a Mexican corporation with limited liability, organized under the laws of Mexico.
In March 2001, Sidek consummated
the sale of its entire approximate 62% controlling interest in our company to Industrias CH. Industrias CH subsequently increased its
equity position in us through various conversions of debt to equity and capital contributions and currently holds, together with its direct,
wholly-owned subsidiaries, approximately 82.5% of our series B shares.
In August 2004, we acquired
the Mexican steel-making facilities of Industrias Ferricas del Norte S.A. (Corporación Sidenor of Spain, or "Grupo Sidenor")
located in Apizaco, Tlaxcala and Cholula, Puebla. We refer to this acquisition as the "Atlax Acquisition."
15
In July 2005, we and Industrias
CH acquired 100% of the capital stock of Republic, a U.S. producer of SBQ steel. We acquired 50.2% of Republic's stock through our
majority-owned subsidiary, SimRep, and Industrias CH purchased the remaining 49.8% through SimRep. Industrias CH currently owns 0.59%
of the capital stock, and Grupo Simec the remaining 99.41%.
On May 30, 2008, we acquired
Aceros DM and certain affiliated companies ("Grupo San"), a long products steel mini-mill and the second-largest corrugated
rebar producer in Mexico. Grupo San's operations are based in San Luis Potosí, Mexico. Its plants have a production capacity
of 700 thousand tons of finished products annually.
On September 3, 2010, we formed
a Brazilian entity denominated GV do Brazil Indústria e Comércio de Aço Ltda. On August 5, 2011, we acquired 1,300,000
square meters of land on Pindamonhangaba, São Paulo State, Brazil, for the construction of a new steel facility. In November 2015,
our steel plant in Brazil started operations. This facility has a production capacity of 450,000 tons of finished goods of rebar and wire,
and 800 employees.
On January 16, 2015, we entered
into a cooperation agreement with the government of the State of Tlaxcala, Mexico, to build a new steel facility on land adjacent to our
existing plant in Tlaxcala with a production capacity of 600,000 tons of bar quality steel (SBQ). We started steelmaking operations at
this facility in July 2018.
On May 1, 2018, Grupo Simec,
S.A.B de C.V. entered into a contract with Arcelor Mittal Brasil, S.A. for the acquisition of the steel products plants of Cariacica,
in Espíritu Santo, and the transfer of the lease contract and subsequent purchase for the plant in Itauna, in Minas Gerais, both
in Brazil. The production capacity of the Cariacica plant is 600,000 tons of liquid steel per year and 348,000 tons of rolled steel products
per year and the production capacity of the Itauna plant is 120,000 tons of rolled steel products per year.
On January 1, 2019, Grupo
Simec, S.A.B. de C.V. increased its equity position to 99.41% in SimRep Corporation, by acquiring 83,862 ordinary shares, priced at U.S.$3.454
each, as repayment of outstanding debt, for a total subscription of U.S.$290 million.
On June 11, 2021, the fixed
assets of a wire production plant in Silao, Guanajuato, were purchased; which is operated by CHQ Wire México, S.A. de C.V. (formerly
Malla San 1, S.A. de C.V.).
In 2021, a turnkey contract
was signed between Republic and GV Do Brasil, for the construction of a plant in Pindamonghangaba. This project has an assigned budget
of 200 million dollars.
In June 2021, a turnkey contract
was signed between Republic and Companhia Siderurgica Do Spirito Santo, for the construction of a rolling mill. This project has an assigned
budget of 108.5 million dollars.
Principal Capital Expenditures
We continually seek to improve
our operating efficiency and increase sales of our products through capital investments in new equipment and technology. These capital
expenditures are financed primarily with funds that we segregate monthly from the results of operations generated by each facility.
We currently estimate capital
expenditures for the year 2023 will be approximately Ps. 1,525.3 million (U.S.$788 million), which consists of Ps. 121.2 million (U.S.$6.3
million) of estimated capital expenditures in our facilities in Mexico and Ps. 1,404.1 million (U.S.$72.5 million) consisting of capital
expenditures in our facilities in Brazil. This estimate is subject to uncertainty and actual capital expenditures in 2022 may differ significantly
from such estimate.
In 2022, we spent Ps. 187.2
million (U.S.$9.7 million) on capital improvements at our facilities in Mexico and Ps. 1,404.1 million (U.S.$72.5 million) on capital
investments at our steel facilities in Brazil.
In 2021, we spent Ps. 119.1
million (U.S.$5.54 million) on capital investments for Republic's facilities. We spent Ps. 1,079.6 million (U.S.$52.6 million) on
capital improvements at our facilities in Mexico, including Ps. 420 million (U.S.$20.5 million) at the Apizaco facility, Ps. 428.3 million
(U.S.$20.9 million) at the Mexicali facility, Ps. 3 million (U.S.$0.1 million) at the Guadalajara facility, and Ps. 200 million (U.S.$9.7
million) at the San Luis facilities.
In 2020, we spent Ps. 49.5
million (U.S.$2.5 million) on capital investments for Republic's facilities, including Ps. 10.8 million (U.S.$0.5 million) at the
Lorain, Ohio facility, Ps. 8.6 million (U.S.$0.4 million) at the Lackawanna, New York facility, Ps. 21.5 million (U.S.$1.1 million) at
the Canton, Ohio facility and Ps. 8.6 million (U.S.$0.4 million) at the Massillon, Ohio facility. We spent Ps. 270.2 million (U.S.$13.6
million) on capital improvements at our facilities in Mexico, including Ps. 180 million (U.S.$9 million) at the Apizaco facility, Ps.
32.2 million (U.S.$1.6 million) at the Mexicali facility, Ps. 15 million (U.S.$0.7 million) at the Guadalajara facility, and Ps. 43 million
(U.S.$2.1 million) at the San Luis facilities. We also spent Ps. 631.5 million (U.S.$31.6 million) on capital investments at our steel
facility in Pindamonhangaba, Sao Paulo State, Brazil.
16
B. Business Overview
In the United States of America,
Mexico and Brazil, we own and operate 19 state-of-the-art steel making, processing and/or finishing facilities with a combined annual
crude steel installed production capacity of 6.0 million tons and a combined annual installed rolling capacity of 5.8 million tons. We
own both mini-mill and integrated steel making facilities, which give us the flexibility to optimize our production and reduce production
costs based on the relative prices of raw materials (e.g., scrap for mini-mills and iron ore for blast furnace).
We currently own and operate:
●
a mini-mill in Guadalajara,
Jalisco, Mexico;
●
a mini-mill in Mexicali, Baja
California Norte, Mexico;
●
two mini-mills in Apizaco, Tlaxcala,
Mexico;
●
a cold finishing facility in
Cholula, Puebla, Mexico;
●
two mini-mills in San Luis Potosí,
San Luis Potosí, Mexico;
●
a mini-mill in Canton, Ohio,
an integrated facility in Lorain, Ohio and value-added rolling and finishing facilities in Lorain and Massillon, Ohio; Lackawanna, New
York and Solon, Ohio, all of which we own through our majority-owned subsidiary, Republic; and
●
a mini-mill and rebar and wire
rod rolling mill in Pindamonhangaba, São Paulo (Brazil), a mini-mill in Cariacica, Espirito Santo (Brazil) and we own and operate
rolling and finishing facilities in Itauna, Minas Gerais (Brazil).
In 2022, we had net sales
of Ps. 54.2 billion, gross profit of Ps. 14.5 billion and net profit of Ps. 7.7 billion. In 2022, approximately 11% of our consolidated
sales were in our segment in the United States of America, approximately 57% were in our segment in Mexico and approximately 32% were
in our segment in Brazil.
Business Strategy
We seek to further consolidate
our position as a leading producer, processor and distributor of SBQ steel in North America and structural steel in Mexico. We also seek
to expand our presence in the steel industry by identifying and pursuing growth opportunities and value-enhancing initiatives. Our strategy
includes:
Improving our cost structure.
We are continually working
to reduce our operating cost and non-operating expenses and plan to continue to do so by reducing overhead expenses and operating costs
through sharing best practices among our operating facilities and maintaining a conservative capital structure.
Focusing on high margin and value-added products.
We prioritize the production
of high margin steel products over volume and utilization levels. We plan to continue to base our production decisions on achieving relatively
high margins.
Building on our strong customer relationships.
We intend to strengthen our
long-standing customer relationships by maintaining strong customer service and proactively responding to changing customer needs.
Pursuing strategic growth opportunities.
We have successfully grown
our business by acquiring, integrating and improving under-performing operations. In addition, we intend to continue to pursue acquisition
opportunities that will allow for disciplined growth of our business and value creation for our shareholders. We also intend to pursue
organic growth by reinvesting the cash generated by our operating activities to expand the capacity and increase the efficiency of our
existing facilities.
17
Our Products
We produce a wide range of
value-added SBQ steel, long steel and medium-sized structural steel products. In our Mexican facilities, we produce I-beams, channels,
structural and commercial angles, hot rolled bars (round, square and hexagonals), flat bars, rebars, cold finished bars and wire rods.
In our U.S. facilities, we produce hot rolled bars, cold finished bars, semi-finished tube rounds and other semi-finished trade products.
In our Brazil facilities, we produce rebars, I-beams, channels, structural and commercial angles. The following is a description of these
products and their main uses:
●
I-beams
. I-beams, also
known as standard beams, are "I" form steel structural sections with two equal parallel sides joined together by the center
with a transversal section, forming 90º angles. We produce I-beams in our Mexican and Brazil facilities and they are mainly used
by the industrial construction sector as structure supports.
●
Channels
. Channels, also
known as U-Beams because of their "U" form, are steel structural sections with two equal parallel sides joined together by
its ends with a transversal section, forming 90º angles. We produce channels in our Mexican and Brazil facilities, and they are
mainly used by industrial construction sector as structure supports and for stocking systems.
●
Angles
. Angles are two
equal sided sections joined by their ends with a 90º angle, in an "L" form. We produce angles in our Mexican and Brazil
facilities, and they are used mainly by the construction and furniture industries as joist structures and framing systems.
●
Hot rolled bars
. Hot
rolled bars are round, square and hexagonal steel bars that can be made of special or commodity steel. The construction, auto part and
furniture industries mainly use the round and square bars. The hexagonal bars are made of special steel and are mainly used by the hand
tool industry. We produce the steel sections in our Mexican and U.S. facilities.
●
Flat bars
. Flat bars
are rectangular steel sections that can be made of special or commodity steel. We produce flat bars at our Mexican facilities. The auto
part industry mainly uses special steel as springs, and the construction industry uses the commodity steel flat bars as supports.
●
Rebar
. Rebar is reinforced,
corrugated round steel bars with sections from 0.375 to 1.5 inches in diameter, and we produced rebar in our Mexican facilities and in
our Brazil facilities. Rebar is only used by the construction industry to reinforce concrete. Rebar is considered a commodity product
due to its general acceptance by most consumers of industry standard specifications.
●
Cold-finished bars
. Cold-finished
bars are round and hexagonal SBQ steel bars transformed through a diameter reduction process. This process consists of (1) reducing the
cross-sectional area of a bar by drawing the material through a die without any pre-heating or (2) turning or "peeling" the
surface of the bar. The process changes the mechanical properties of the steel, and the finished product is accurate to size, free from
scale with a bright surface finish. We produce these bars in our Mexican and U.S. facilities, primarily to supply the auto part industry.
The following table sets forth, for the periods
indicated, our sales volume for basic steel products.
Steel Product Sales Volume
Years ended December 31,
2018
2019
2020
2021
2022
(thousands of tons)
I-Beams
72.5
86.6
95.3
116.0
91.6
Channels
48.7
54.3
40.0
32.3
31.6
Angles
(1)
156.7
217.7
281.9
217.1
239.4
Hot-rolled bars (round, square and hexagonal rods)
564.9
534.6
535.8
618.7
430.4
Flat bar
168.7
188.4
80.3
102.9
101.2
Rebar
924.2
1,033.8
1,100.2
1,007.3
926.5
Cold finished bars
151.9
131.4
185.1
183.8
188.5
Other semi-finished trade products
(2)
14.0
0.6
0.0
0.0
0.0
Electro-Welded wire mesh
18.5
14.0
18.6
19.9
16.8
Wire rod
48.7
57.9
32.3
151.8
167.9
Electro-Welded wire mesh panel
22.1
18.4
29.2
26.5
21.6
Other
0.9
11.2
42.1
27.9
39.7
Total steel sales
2,191.8
2,348.9
2,440.8
2,504.2
2,255.2
(1)
Includes structural angles and commercial angles.
(2)
Includes billets and blooms (wide section square and round bars).
18
Sales and Distribution
We sell and distribute our
steel products throughout North America. We also export steel products from Mexico to Central and South America and Europe. In 2022, approximately
20% of our steel product sales in tons represented SBQ steel products, of which we sold 45% to the auto part industry, 46% to service
centers and the remaining 9% to other industries.
In 2022, direct sales in tons
to the automotive industry decreased by 13% compared to 2021. In 2021, direct sales in tons to the automotive industry increased by 4%
compared to 2020.
The following table sets forth,
for the periods indicated, our product sales as a percentage of our total product sales in tons to Mexico, and to the U.S., Canada, and
Brazil and other countries.
Steel Product Sales By Region
Mexico
United States of America, Canada,
Brazil and Other Countries
Years ended December 31,
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
I-Beams
94
%
82
%
82
%
71
%
64
%
6
%
18
%
18
%
29
%
36
%
Channels
56
%
44
%
55
%
86
%
84
%
44
%
56
%
45
%
14
%
16
%
Angles
67
%
52
%
37
%
53
%
50
%
33
%
48
%
63
%
47
%
50
%
Hot-rolled bars (round, square and hexagonal rods)
32
%
38
%
48
%
39
%
42
%
68
%
62
%
52
%
61
%
58
%
Flat bar
68
%
61
%
72
%
75
%
81
%
32
%
39
%
28
%
25
%
19
%
Rebar
67
%
56
%
50
%
51
%
56
%
33
%
44
%
50
%
49
%
44
%
Cold drawn finished bars
77
%
76
%
46
%
50
%
46
%
23
%
24
%
54
%
50
%
54
%
Other semi-finished trade products
—
—
—
—
—
100
%
100
%
100
%
—
—
Electro-Welded wire mesh
100
%
100
%
100
%
100
%
100
%
—
—
—
—
—
Wire rod
100
%
100
%
89
%
74
%
63
%
—
—
11
%
26
%
37
%
Electro-Welded wire mesh panel
100
%
100
%
100
%
100
%
100
%
—
—
—
—
—
Other
75
%
0
%
0 1%
10
%
11
%
25
%
100
%
99
%
90
%
89
%
Total (weighted average)
60
%
55
%
51
%
52
%
54
%
40
%
45
%
49
%
48
%
46
%
During 2022, approximately
7.1% of our sales by volume came from the U.S. segment, with almost 100% of such sales representing SBQ product and 36.7% of our sales
by volume came from the Brazil segment. The Mexican segment represents approximately 56.2 of our sales by volume, with SBQ products representing
approximately 26.6% of such sales and the remainder representing commercial steel products.
A significant portion of our
sales in the United States of America and Canadian markets came from contractual long-term agreements that establish minimum quantities
and prices, which are adjustable based on fluctuations of prices of key production materials. The remainder of our sales in the United
States of America and Canadian markets were spot sales either directly to end customers through our sales force or through independent
distributors. We sell to customers in the United States of America and Canadian markets through a staff of professional sales representatives
and sales technicians located in the major manufacturing centers of the Midwest, Great Lakes and Southeast regions of the United States
of America.
We sell to the Mexican market
through a group of approximately 100 independent distributors, who also carry other steel companies' product lines, and through
our wholly-owned distribution center in Guadalajara. Our sales force and distribution center are an important source of information concerning
customer needs and market developments. By working through our distributors, we believe that we have established and can maintain market
leadership with small-and mid-market end-users throughout Mexico. We believe that our domestic customers are highly service-conscious.
19
We distribute our exports
outside North America primarily through independent distributors who also carry other product lines.
During 2022 and 2021, we received
orders for our products in our Mexican facilities on average approximately two weeks before producing those products. We generally filled
orders for our U.S. and Canadian SBQ steel products within one to 12 weeks of the order depending on the product, customer needs and other
production requirements. Customer orders are generally cancelable without penalty prior to finishing size rolling and depending on customers'
changing production schedules. Accordingly, we do not believe that backlog is a significant factor in our business. A substantial portion
of our production is ordered by our customers prior to production.
In our Republic plants, we
have long-term relationships with most of our major customers, in some cases for 10 to 20 years or longer. Our major direct and indirect
customers span throughout numerous market sectors including automotive, manufacturing, industrial equipment and defense.
Our U.S. facilities are strategically
located to serve the majority of consumers of SBQ products in the United States of America. Our U.S. facilities ship products between
their mills and finished products to customers by rail and truck. Customer needs and location, determine the type of transportation used
for deliveries. The proximity of our rolling mills and cold finishing plants to our U.S. customers allows us to provide competitive rail
and truck freight rates and flexible deliveries in order to satisfy just-in-time and other customer manufacturing requirements. We believe
that the ability to meet the product delivery requirements of our customers in a timely and flexible fashion is a key to attracting and
retaining customers as more SBQ product consumers reduce their in-plant raw material inventory. We optimize freight costs by using our
significantly greater scale of operations to maintain favorable transportation arrangements, continuing to combine orders in shipments
whenever possible and "backhauling" scrap and other raw materials.
Our first plant in Brazil
began production in June 2015 with 30,000 tons and 4,000 tons sold in the same year, all of which correspond to rebar. Sales have increased
since 2015, and by consolidating the expansion within the Brazilian territory, we have reached sales of approximately 828,000 tons for
2022, increasing the variety of products offered in the market. Our main objective is to sell our products through independent distributors,
aimed at the construction market by providing the highest quality service and products, a key factor in attracting and retaining customers.
Our sales policy in Brazil has been well accepted by our customers, and our sales increased steadily, creating an opportunity in the Brazilian
steel market. Our steel production decreased 3.3% in 2022 compared with 2021.
Our major customers in 2022
include: Pires Do Rio Cibraco Comercio e Industria de Ferro e Aco, Ltda., Marson Distribuicao, Ltda, Aco e Aco Vergalhoes Ltda, Udiaco
Comercio e Industria de Ferro e Aco Ltda, UK Industria de Molas e Grampos, Ltda, SAE Towers Brasil Torres Trans, Ltda, Comercio de Ferro
Arevalo & Junior Eireli, Arcelor Mittal Brasil, SA, Aco Fera Com Ferro e Aco Ltda, Cedisa Central de Aco, SA, Automolas Equipamentos
Ltda, Fama Do Brasil, S A, MKRAFT Comercio de Metais Ltda and, RDG Acos Do Brasil, SA.
Competition
Competition in the steel industry
is significant. Competition in the steel industry exerts a downward pressure on prices, and, due to high start-up costs, the economics
of operating a steel mill on a continuous basis may encourage mill operators to establish and maintain high levels of output even in times
of low demand, which further decreases prices and profit margins. The recent trend of consolidation in the global steel industry may further
increase competitive pressures on independent producers of our size, particularly if large steel producers formed through consolidations,
which have access to greater resources than us, adopt predatory pricing strategies that decrease prices and profit margins. If we are
unable to remain competitive with these producers, our profitability and market share would likely be materially and adversely affected.
A number of our competitors
in the United States of America, Mexico and Brazil have undertaken modernization and expansion plans, including the installation of production
facilities and manufacturing capacity for certain products that compete with our products. As these producers become more efficient, we
will face increased competition from them and may experience a loss of market share. In each of Mexico, Brazil and the United States of
America, we also face competition from international steel producers. Increased international competition, especially when combined with
excess production capacity, would likely force us to lower our prices or to offer increased services at a higher cost to us, which could
materially reduce our profit margins.
Mexico
We compete in the Mexican
domestic market and in its export markets for non-flat steel products primarily on the basis of price and product quality. In addition,
we compete in the domestic market based upon our responsiveness to customer delivery requirements. The flexibility of our production facilities
allows us to respond quickly to the demand for our products. We also believe that the geographic locations of our various facilities throughout
Mexico and variety of products help us to maintain our competitive market position in Mexico and in the southwestern United States of
America. We believe that our Mexicali mini-mill, one of the closest mini-mills to the southern California market, is competitive in terms
of production and transportation costs in northwestern Mexico and southern California.
20
We believe that our competitors'
closest plants to the southern California market are: Nucor Corporation, located in Plymouth, Utah; Commercial Metals Company, located
in Meza, Arizona; Thyssenkrupp Steel North America, Inc., located in Santa Fe Springs, California; Deacero, S.A. de C.V. ("Deacero"),
located in Saltillo, Coahuila, México and Gerdau Corsa, S.A.P.I. de C.V. ("Gerdau Corsa"), located in Tijuana, Baja
California, Mexico. We believe that we have an advantage over certain competitors due to the labor cost in our Mexican operations.
In 2022, we sold approximately
266,840 tons of I-beams, channels and angles at least three inches in width which represented approximately 12.7% of our total finished
product sales for the year. In 2021, we sold approximately 275,545 tons of I-beams, channels and angles at least three inches in width
which represented approximately 11% of our total finished product sales for the year. We believe that the domestic competitors in the
Mexican market for structural steel are Gerdau Corsa, Deacero, Grupo Acerero, S.A. de C.V., Grupo Collado, S.A. de C.V. and Siderúrgica
del Golfo, S.A. de C.V. (a wholly-owned subsidiary of Industrias CH). We estimate that our share of Mexican production of structural steel
was 12.7% in 2021 and 14.8% in 2021, according to information provided by the Cámara Nacional de la Industria del Hierro y del
Acero (CANACERO).
In 2022, we sold approximately
626,864 tons of hot rolled and cold finished steel bars and 817,917 tons in 2021. Our other major product lines are rebar and light structural
steel (angles less than three inches in width and flat bar), for which our share of domestic production was 12.8% and 16.6%, respectively,
in 2022 and 14.3% and 16.1%, respectively, in 2021. Rebar and light structural steel together accounted for approximately 1,124,562 tons,
or 49.9%, of our total production of finished steel products in Mexico, the United States of America and Brazil in 2022. Rebar and light
structural steel together accounted for approximately 1,187,206 tons, or 47.4% of our total production of finished steel products in Mexico,
the United States of America and Brazil in 2021. We compete in the Mexican market with a number of producers of these products, including
Deacero, Talleres y Aceros, S.A., Grupo Acerero, S.A. de C.V., ArcelorMittal Lazaro Cardenas, S.A. de C.V., Ternium Mexico, S.A. de C.V.,
Grupo Acerero Fonderia, Suacero, S.A. de C.V. and Gerdau Corsa.
We believe that we have been
able to maintain our domestic market share and profitable pricing levels in Mexico in part because the central Mexico sites of the Guadalajara,
Apizaco, Cholula and San Luis facilities afford us cost advantages relative to certain U.S. producers when shipping to customers in central
and southern Mexico, and our flexible production facility has given us the ability to ship specialty products in relatively small quantities
with short lead times. The Mexicali mini-mill has helped to increase sales in northwestern Mexico and the southwestern United States of
America because its proximity to these areas reduces our freight costs.
United States of America and Canada
In the United States of America,
we compete primarily with both domestic SBQ steel producers and importers. Our U.S. domestic competition for hot-rolled engineered bar
products is both large U.S. domestic steelmakers and specialized mini-mills. Non-U.S. competition may impact segments of the SBQ market,
particularly where certifications are not required, and during periods when the U.S. dollar is strong compared with foreign currencies.
The principal areas of competition
in our markets are product quality and range, delivery reliability, service and price. Special chemistry and precise processing requirements
characterize SBQ steel products. Maintaining high standards of product quality, while keeping production costs low, is essential to our
ability to compete in our markets. The ability of a manufacturer to respond quickly to customer orders currently is, and is expected to
remain, important as customers continue to reduce their in-plant raw material inventory.
We believe our principal competitors
in the United States of America market, depending on the product, include Nucor, Corporation, Charter Steel, Steel Dynamics, Cascade Rolling
Mills, Commercial Metals Company, Vinton Steel and Gerdau.
Brazil
Our main competitors in the
Brazilian market are ArcelorMittal Brazil, CSN, Gerdau, Sinobras, Usiminas, Ternium Do Brasil, Vallourec and Villares Metals.
The Brazilian steel industry
is comprised of 12 business groups operating 31 mills in 10 Brazilian states, making Brazil the 9th largest producer in the world.
21
The main competitors in Brazil
are:
●
Gerdau Aços Especiais
(Usina Pindamonhangaba)
●
Gerdau Aços Especiais
(Usina Mogi das Cruzes)
●
ArcelorMittal Aços Longos
(Piracicaba)
●
Usiminas (Cubatão)
●
Gerdau Aços Longos (Usina
São Paulo)
●
Gerdau Aços Longos (Usina
Araçariguama)
●
Villares Metals
Certifications
ISO is a worldwide federation
of national standards bodies which have united to develop internationally accepted standards so that customers and manufacturers have
a system in place to provide a product of known quality and standards. The standards set by ISO cover every aspect of quality from management
responsibility to service and delivery. We believe that adhering to the stringent ISO procedures not only creates efficiency in manufacturing
operations, but also positions us to meet the strict standards that our customers require. We are engaged in a total quality program designed
to improve customer service, overall personnel qualifications and team work. The facilities at Apizaco and Cholula have received ISO/TS
16949:2009 certification from International Quality Certifications, effective until September 2024.
All of Republic Steel's
plants are certified to ISO9001:2015 and IATF16949:2016. Our plants in Canton, Ohio, Lackawanna, New York, and Massillon, Ohio, are certified
to IATF16949, effective until January 2024. The plant in Solon, Ohio, is certified to ISO 9001:2015, and the current certification is
effective until January 2024. The IATF 16949:2016 standard, developed by the International Automotive Task Force, is the result of the
harmonization of the supplier quality requirements of vehicle manufacturers worldwide and provides for a single quality management system
of continuous improvement, defect prevention and reduction of variation and waste in the supply chain. It places greater emphasis on management's
commitment to quality and customer focus. ISO 9001 is a set of international quality control standards for management and practices.
Through these certifications,
Republic's Environmental, Health & Safety Management System is structured upon training, communication, employee participation,
document control, objective and target setting, and management's periodic reviews to implement our commitments to environmental
protection and providing a safe and clean workplace.
Raw Materials
Prices for raw materials necessary
for production of our steel products have fluctuated significantly in the past and significant increases in raw material prices could
adversely affect our profit margins. During periods when prices for scrap metal, iron ore, ferroalloys, coking coal and other raw materials
have increased, our industry has historically sought to maintain profit margins by passing along increased raw materials costs to customers
by means of price increases. For example, prices of scrap metal increased approximately 19.4% in 2018, decreased 20% in 2019, increased
9% in 2020, increased 62% in 2021 and increased 0.5% in 2022, and prices of ferroalloys increased approximately 9.7% in 2018, decreased
approximately 1% in 2019, decreased 20% in 2020, increased 32.9% in 2021 and increased 36.4% in 2022. We may not be able to pass along
these and other cost increases in the future and even when we can successfully increase our prices, interim reductions in profit margins
frequently occur due to a time lag between the increase in raw material prices and the market acceptance of higher selling prices for
finished steel products.
We purchase our raw material
requirements either in the open market or from certain key suppliers. If any of our key suppliers fails to deliver or we fail to renew
our supply contracts, we could face limited access to some raw materials, or higher costs and delays resulting from the need to obtain
our raw materials requirements from other suppliers.
22
In 2022, our cost of sales
in Mexico, as a percentage of sales in Mexico, was 70%, compared to our U.S. operations where our cost of sales, as a percentage of sales
in the United States of America, was 98%, as a percentage of sales in Brazil, was 71% and our consolidated cost of sales, as a percentage
of consolidated sales, was 73%. The higher cost of sales of facilities is mainly a result of higher labor costs prevailing in our U.S.
operations, and the higher costs of the raw materials that our U.S. operations use in the production of SBQ steel.
Scrap metal, electricity,
ferroalloys, electrodes and refractory products are the principal materials that we use to manufacture our steel products.
Scrap metal
. Scrap
metal is among the most important components for our steel production and accounted for approximately 60.5% of our consolidated manufacturing
conversion cost in 2022 (62% of the manufacturing conversion cost in our Mexico operations, 31% of the manufacturing conversion cost in
our U.S. operations and 66% in our Brazil operations), compared to 70% of our consolidated manufacturing conversion cost in 2021 (67%
of the manufacturing conversion cost in our Mexico operations, 43% of the manufacturing conversion cost in our U.S. operations and 72%
in our Brazil operations). Scrap metal is principally generated from automobile, industrial, naval and railroad industries. The market
for scrap metal is influenced by availability, freight costs, speculation by scrap brokers and other conditions largely beyond our control.
Fluctuations in scrap costs directly influence the cost of sales of finished goods.
We purchase raw scrap from
dealers in Mexico and the San Diego area, and we process the raw scrap into refined scrap metal at our Guadalajara, San Luis, Mexicali
and Apizaco facilities. We meet our refined scrap metal requirements through: (i) our wholly-owned scrap processing facilities, which
in the aggregate provided us with approximately 11.5% and 15.9% of our refined scrap tonnage in 2022 and 2021, respectively, and (ii)
purchases from third party scrap processors in Mexico and the southwestern United States of America, which, in the aggregate, provided
us with approximately 87.3% and 1.2%, respectively, in 2021 and approximately 82.2% and 1.9%, respectively, in 2020 of our refined scrap
metal requirements. We are a large scrap collector in the Mexicali, Tijuana and Hermosillo regions, and, by primarily dealing directly
with small Mexican scrap collectors, we believe we have been able to purchase scrap at prices lower than those in the international and
Mexican markets. We purchase scrap on the open market through a number of brokers or directly from scrap dealers for our U.S. facilities.
We purchase scrap on the open market through a number of brokers or directly from scrap dealers for our Brazil facilities. We do not depend
on any single scrap supplier to meet our scrap requirements.
Ferroalloys, Electrodes
and Refractory Products
. In our Mexican operations, ferroalloys, electrodes and refractory products collectively accounted for approximately
14% of our manufacturing conversion cost in 2022, compared to 10% in 2021, in our U.S. and Canadian facilities accounted for 19% of our
manufacturing conversion cost in 2022, compared to 9% in 2021 and in our Brazil facilities accounted for approximately 9% of our manufacturing
conversion cost in 2022 compared to 7% in 2021.
Ferroalloys are essential
for the production of steel and are added to the steel during manufacturing process to reduce undesirable elements and to enhance its
hardness, durability and resistance to friction and abrasion. For our Mexican operations, we buy most of our manganese ferroalloys from
Compañía Minera Autlán, S.A., Autlán Metal Services, S.A. de C.V., Elmet, S.A. de C.V., Marco Metales de Mexico,
S. de R.L. de C.V., Metaloides, S.A. de C.V., Micro Abrasivos, S.A. de C.V.and Distribuidora de Aleaciones y Metales, S.A. de C.V. Our
U.S. facilities purchase most of their ferroalloys from Affival Inc., Kennecott Molybdenum Company, Vale Americas Inc., Minerais U.S.
LLC, Greenwich Metals Inc. and BPI Inc. Our Brazil facilities purchase most of their ferroalloys from Multiligas Eireli. Ltda, Comercial
Cometa Industria y Comercio Ltda., Fertileg Ferro Liga Ltda, Granha Ligas Ltda., and Cia de Ferro Ligas de Bahia Ferbasa.
For our Mexican operations,
we obtain electrodes used to melt raw materials (scrap metal) from Jilin Carbon Co. Ltd., Interfer Edelsthal H. Mbh, Duracarbon Latinoamerica
LCC, FRC Global Inc, CNBM International Corp, Dalian Xihua Refractories Materials Co., and HEG Limited. Our U.S. facilities purchase most
of their electrodes from Sangraf International and Starex Inc. Our Brazil facilities purchase most of their electrodes from Jilin Carbon
Import Cimm Group Co. Ltd and Export Company and Dura Carbon Singapur.
Refractory products include
firebricks, which line and insulate furnaces, ladles and other transfer vessels. We purchase our refractory products for our Mexican operations
from Vesuvius de México, S.A. de C.V., Magnesita Refractories México, S.A. de C.V., Magna Refractarios México, S.A.
de C.V., FRC Global Inc, Puyang Refractories group Co. Ltd. Kumas, Manyezit Sanayi A.S., Calderys France S.A.S., and Rectix Materiales
Refractarios, S.A. de C.V.. Our U.S. facilities purchase most of their refractory products from RHI US, Inc., Vesuvius USA, Corp., Magna
a Division of Timab, Vibrantz Minerias LLC, Harbison-Walker Refractories Company and FRC Global Inc. Our Brazil facilities purchase most
of their refractory products from Magnesitas Navarrasm S.A., Vesivius and Magnesita Refractaries Mexico S.A. de C.V.
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Electricity.
In 2022
and 2021, electricity accounted for approximately for 8% and 7% of our consolidated manufacturing conversion cost, respectively. Electricity
accounted for 7% and 7% in 2022 and 2021 of our manufacturing conversion in our Mexico facilities and is supplied by the Comisión
Federal de Electricidad (CFE) for basic service and Iberdrola for qualified service. It accounted for 9% in 2022 and 4% in 2021 of the
manufacturing conversion cost in our U.S. operations and is supplied by American Electric Power Company, Archer Energy, National Grid,
The Illumination Company, New York Power and Ohio Edison. It accounted for 5% and 8% in 2022 and 2021, respectively, of the manufacturing
conversion cost in our Brazil operations and is supplied by Ecom Energia Ltda., Comercializadora de Energiaeletrica Ltda. and Comerc
Ltda. We, like most high volume users of electricity in Mexico, pay special rates to CFE for electricity. Energy prices in Mexico have
historically been very volatile and subject to dramatic price increases in short periods of time. In the late 1990s, the CFE began to
charge for electricity usage based on the time of use during the day and the season (summer or winter). As a result, we have modified
our production schedule in order to reduce electricity costs by limiting production during periods when peak rates are in effect. We cannot
assure that any future cost increases will not have a material adverse effect on our business.
Natural Gas.
Natural
gas (including "combustoleo" fuel oil which is an oil derivative that is less refined than gasoline and diesel fuel oil that
can be used instead of gasoline in our Mexicali plant) consisted of approximately 5% of our consolidated manufacturing conversion cost
(3% of the manufacturing conversion cost of our Mexican operations, 6% of the manufacturing conversion cost of our U.S. operations and
4% of our Brazil operations) in 2022 and approximately 3% of our consolidated manufacturing conversion cost (2% of the manufacturing conversion
cost of our Mexican operations, 1% of the manufacturing conversion cost of our U.S. operations and 2% of our Brazil operations) in 2021.
In previous years we have entered into natural gas cash-flow exchange contracts or swaps where we receive a floating price and pay a fixed
price to hedge our risk of from fluctuations in natural gas prices. Fluctuations in natural gas prices from volume consumed are recognized
as part of our operating costs. As applicable, we recognized the fair value of instruments either as liabilities or assets. We periodically
evaluated the changes in the cash flows of derivative instruments to analyze if the swaps are highly effective for mitigating the exposure
to natural gas price fluctuations. At December 31, 2022 and 2021, we did not have natural gas cash-flow exchange contracts or swaps. For
the derivatives that qualified for hedge accounting, their fair value was adjusted through the stockholders' equity under the caption
fair value of derivative financial instruments until such time as the related item in the derivative hedges is recognized as income.
We do not enter into contracts for speculation
purposes.
Regulation
U.S. Operations
Our U.S. operations are subject
to U.S. federal, state and local environmental laws and administrative regulations concerning, among other things the management of hazardous
materials and the discharge of pollutants to the atmosphere and to surface waters. Our U.S. operations have been the subject of administrative
action by federal, state (or provincial) and local environmental authorities. The resolution of any of these claims may result in significant
liabilities. See Item 3.D. "Risk Factors—Risk Factors Related to our Business—In the event of environmental violations
at our facilities we may incur significant liabilities" and Item 8. "Financial Information—Legal Proceedings."
Environmental Matters
We are subject to a broad range of environmental
laws and regulations, including those governing the following:
●
discharges to the air, water
and soil;
●
the handling and disposal of
solid and hazardous wastes;
●
the release of petroleum products,
hazardous substances, hazardous wastes, or toxic substances to the environment; and
●
the investigation and remediation
of contaminated soil, sediment and groundwater.
24
We monitor our compliance
with these laws and regulations through our environmental management system, and believe that we currently are in substantial compliance
with them, although we cannot assure you that we will at all times operate in compliance with all such laws and regulations. If we fail
to comply with these laws and regulations, we may be assessed fines or penalties or be subject to injunctive relief which could have a
material adverse effect on us.
Future changes in the applicable
environmental laws and regulations, or changes in the regulating agencies' approach to enforcement or interpretation of their regulations,
could cause us to make additional capital expenditures beyond what we currently anticipate.
Our Lorain, Ohio plant (which
is not currently in operation) and our Canton, Ohio facility each are subject to the Maximum Achievable Control Technology ("MACT")
standard for Electric Arc Furnaces as an "area source." Revisions of this standard are under development and, when promulgated,
may impose additional restrictions on our Lorain and Canton operations including those relating to mercury emissions and control.
Our steelmaking operations
in the United States of America, Brazil and in Mexico use electric arc furnaces where carbon dioxide generation is primarily linked to
energy use. In the United States of America, the federal Environmental Protection Agency has issued rules imposing inventory and reporting
obligations to which some of our facilities are subject, and has also issued rules that will affect preconstruction permits for our facilities
where increases in greenhouse gas pollutants are contemplated. The U.S. Congress has debated various measures for regulating greenhouse
gas emission (such as carbon dioxide) and may enact them in the future. Such laws and regulations may also result in higher costs for
coking coal, natural gas and electricity generated by carbon-based systems (such as coal-fired electric generating facilities). Such future
laws and regulations, whether in the form of cap-and-trade emissions permit system, a carbon tax or other regulatory regime may have a
negative effect on our operations. Climate change policy is evolving at regional, national and international levels, and political and
economic events may significantly affect the scope and timing of climate change measures that are ultimately put in place. As signatories
to the UNFCCC, Mexico became subject to the Paris Agreement to fight climate change, which was taken by the parties at the 21th session
of the UNFCCC conference of the Parties in 2015. In August 2017, the U.S. State Department officially informed the United Nations of the
United States of America withdrawal from the Paris Agreement. Following the 2020 U.S. presidential election, the U.S. formally rejoined
the Paris Agreement in February 2021. As a result, some of our significant facilities may ultimately be subject to future regional, provincial
and/or federal climate change regulations to manage greenhouse emissions. More stringent greenhouse policies and regulations could adversely
affect our business and results of operations.
Various federal, state (or
provincial) and local laws, regulations and ordinances govern the removal, encapsulation or disturbance of asbestos-containing materials
("ACMs"). These laws, regulations and ordinances may impose liability for the release of ACMs and may permit third parties
to seek recovery from owners or operators of facilities at which ACMs were or are located for personal injury associated with exposure
to ACMs. We are aware of the presence of ACMs at our facilities, but we currently believe that such materials are being managed in accordance
with applicable law.
In the United States of America,
the federal Environmental Protection Agency has in the past introduced regulation regarding the phasing out of polychlorinated biphenyl
("PCB") containing fluid in equipment that we currently use at many of our U.S. facilities. If any such rules are enacted,
our facilities may be required to reduce the levels of PCBs in our equipment, which will in turn may require us to incur costs for the
removal and disposal of PCB containing oils, sampling and possible replacement of equipment in the event PCB levels cannot be reduced
to acceptable levels.
Also in the United States
of America, more stringent standards for particulate matter were promulgated in 2012. As these new more stringent standards were implemented
through the different state programs, we experienced higher costs associated with any preconstruction permitting of new or modified sources
at our U.S. facilities in 2014 and subsequent years. These costs were related to extensive dispersion modeling and/or pre-construction
monitoring not previously required.
25
Mexican Operations
We are subject to Mexican
federal, state and municipal laws, administrative regulations and Mexican Official Rules (
Normas Oficiales Mexicanas)
relating
to a variety of environmental matters, anti-trust matters, trade regulations, and tax and employee matters.
Among other matters, Mexican
tax returns are open for review generally for a period of five years, and, according to Mexican tax law, the purchaser of a business may
become jointly and severally liable for unpaid tax liabilities of the business prior to its acquisition, which may have an impact on the
liabilities and contingencies derived from any such acquisitions. Although we believe that we are in compliance with all material Mexican
federal, state and municipal laws, administrative regulations and Mexican Official Rules, we cannot assure you that the interpretation
of the Mexican authorities of the laws and regulations affecting our business or the enforcement thereof will not change in a manner that
could increase our costs of doing business or could have a material adverse effect on our business, results of operations, financial condition
or prospects.
Environmental Matters
We are subject to various Mexican federal, state
and municipal laws, administrative regulations and Mexican Official Rules (
Normas Oficiales Mexicanas)
relating to the protection
of human health, the environment and natural resources.
The major federal environmental
laws applicable to our operations, among others, are: (i) the General Law of Ecological Balance and Environmental Protection (
Ley General
del Equilibrio Ecológico y la Protección al Ambiente
or "LGEEPA") and its regulations, which are administered
and overseen by the Ministry of the Environment and Natural Resources (
Secretaría de Medio Ambiente y Recursos Naturales
or
"SEMARNAT") and enforced by the Ministry's enforcement branch, the Federal Attorney's Office for the Protection
of the Environment (
Procuraduría Federal de Protección al Ambiente
or
"
PROFEPA"); (ii) the General
Law for the Prevention and Integral Management of Waste (
Ley General para la Prevención y Gestión Integral de los Residuos
or the "Law on Wastes"), which is also administered by SEMARNAT and enforced by PROFEPA; (iii) the National Waters Law
(
Ley de Aguas Nacionales
) and its regulations, which are administered and enforced by the National Waters Commission (
Comisión
Nacional de Agua),
also a branch of SEMARNAT
;
and
(iv) the Federal Law on Environmental Responsibility (Ley Federal de Responsabilidad
Ambiental), which is also administered by SEMARNAT and enforced by PROFEPA.
In addition to the foregoing,
Mexican Official Rules, which are technical standards issued by applicable regulatory authorities pursuant to the General Normalization
Law (
Ley General de Metrología y Normalización
) and to other laws that include the environmental laws described above,
establish standards relating to air emissions, waste water discharges, the generation, handling and disposal of hazardous wastes and noise
control, among others. Mexican Official Rules regarding soil contamination and waste management were enacted in order to protect these
potential contingencies. Although not enforceable, the internal administrative criteria on soil contamination established by PROFEPA is
widely used as guidance in cases where soil remediation, restoration or clean-up is required.
LGEEPA sets forth the legal
framework applicable to the generation and handling of hazardous wastes and materials, the release of contaminants into the air, soil
and water, as well as the environmental impact assessment of the construction, development and operation of different projects, sites,
facilities and industrial plants similar to the ones owned and/or operated by us and our subsidiaries. In addition to LGEEPA, the Law
on Wastes regulates the generation, handling, transportation, storage and final disposal of hazardous waste.
LGEEPA also mandates that
companies that contaminate soil be responsible for the clean-up. Furthermore, the Law on Wastes provides that owners and lessors of real
property with soil contamination are jointly and severally liable for the remediation of such contaminated sites, irrespective of any
recourse or other actions such owners and lessors may have against the contaminating party, and aside from the criminal or administrative
liability to which the contaminating party may be subject. The Law on Wastes also restricts the transfer of contaminated sites.
PROFEPA can bring administrative,
civil and criminal proceedings against companies that violate environmental laws, regulations and Mexican Official Rules, and has the
power to impose a variety of sanctions. These sanctions may include, among others, monetary fines, revocation of authorizations, concessions,
licenses, permits or registries, administrative arrests, seizure of contaminating equipment, and in certain cases, temporary or permanent
closure of facilities.
Additionally, as part of its
inspection authority, PROFEPA is entitled to periodically visit the facilities of companies whose activities are regulated by Mexican
environmental legislation, and verify compliance. Similar rights are granted to state environmental authorities pursuant to applicable
state environmental laws.
26
Companies in Mexico are required
to obtain proper authorizations, concessions, licenses, permits and registrations from competent environmental authorities for the performance
of activities that may have an impact on the environment or may constitute a source of contamination. Such companies in Mexico are also
required to comply with a variety of reporting obligations that include, among others, providing PROFEPA and SEMARNAT with periodic reports
regarding compliance with various environmental laws. Among other permits, the operations and related activities of the steel industry
are subject to the prior obtainment of an environmental impact authorization granted by SEMARNAT.
We believe that we have obtained
all the necessary authorizations, concessions, general operating licenses, permits and registries from the applicable environmental authorities
to duly operate our facilities, plants and sites, and sell our products and that we are in material compliance with applicable environmental
legislation. We, through our subsidiaries, have made significant capital investments to assure our production and operation facilities
comply with requirements of federal, state and municipal law and administrative regulation, and to remain in compliance with our current
authorizations, concessions, licenses, permits and registries.
Mexican environmental laws
and administrative regulations have become increasingly stringent over the last decade, and this trend is likely to continue, influenced
recently by the North American Agreement on Environmental Cooperation entered into by Mexico, the United States of America and Canada
in connection with the USMCA. In this regard, any obligation to remedy environmental damages caused by us or any contaminated sites owned
or leased by us could require significant unplanned capital expenditures and be materially adverse to our financial condition and results
of operations.
Water
In Mexico, the National Waters
Law regulates water resources. In addition, the Mexican Official Rules govern the quality of water. A concession granted by the National
Waters Commission is required for the use and exploitation of national waters. Some of our facilities in Mexico have renewable concessions
to use and exploit underground waters from wells in order to meet the water requirements of our production processes. We pay the National
Waters Commission duties per cubic meter of water extracted under our concessions. We believe we are in substantial compliance with all
the requirements imposed by each of the concessions we have obtained.
Pursuant to the National Waters
Law, companies that discharge waste into national water bodies must comply with certain requirements, including maximum permissible contamination
or pollution levels. Periodic reports on water quality must be provided by dischargers to applicable authorities. Liability may result
from the contamination of underground waters or recipient water bodies. We believe that we are in substantial compliance with all water
and waste water legislation applicable to us.
Antitrust Matters
We are also subject to the
Mexican Antitrust Law (
Ley Federal de Competencia Económica
), which regulates monopolies and monopolistic practices in Mexico
and requires Mexican government approval of certain mergers, acquisitions and joint ventures. We believe that we are currently in material
compliance with the Mexican Antitrust Law. However, due to our growth strategy of acquiring new businesses and assets and because we are
a large manufacturer with a significant share of the markets in Mexico with respect to certain of our products, we may be subject to greater
regulatory scrutiny in the future.
Measurements Law
Mexico's Ministry of
Economy (
Secretaría de Economía
), through the General Rules Department (
Dirección General de Normas
or
"DGN"), promulgates regulations regarding many products that we manufacture. Specifically, pursuant to the Measurements Law
(
Ley Federal sobre Metrología y Normalización
), the DGN issues specifications on the quality and safety standards
for our product lines. We believe that all of our products are in material compliance with all applicable DGN regulations.
27
Brazil operations
We produce according to technical
specifications of the Brazilian standard ABNT NBR 7480:2007 for steel bars and wires designed for the reinforcement for concrete structures.
Our products are also registered with the Brazilian National Institute of Metrology, Quality and Technology (INMETRO), in accordance with
Resolution CONMETRO No. 05, dated May 6, 2008, and comply with conformity assessment regulations, including Ordinance No. 73, dated March
17, 2010, and with compulsory product certification regulations.
We have received environmental
permits from the Sao Paulo State, for which hydrological studies and feasibility of groundwater have been conducted, such permits include
a license granted by the Ministry of Environment of Sao Paulo and an operations license granted by the Ministry of Environment CETESBE
Sao Paulo State Companhia.
Trade Regulation Matters
We have experienced significant
competition from imports into Mexico in the past as a result of excess worldwide steel production capacity, particularly in periods of
economic slowdown, and as a consequence of the Peso's appreciation, making imports cheaper and more competitive in peso terms. In
2003, imports declined as international market conditions improved and the peso weakened. Recently, the Mexican government, at the request
of CANACERO, has taken several measures to prevent unfair trade practices such as dumping the steel import market. The overall climate
for imports in Mexico is influenced by the free trade agreements that Mexico has entered into with other countries, as well as the level
of tariffs and anti-dumping duties (some of which are described below).
We have benefited from the
free trade agreements that Mexico has entered into. Specifically, we have directly benefited from our ability to export finished steel
products directly to export markets and compete with similar products manufactured in those markets. We have also indirectly benefited
from increased demand from our domestic customers who similarly manufacture their products to foreign markets under free trade agreements.
Nevertheless, we cannot assure you that the trade agreements affecting our business or the enforcement thereof will not change in a manner
that could have a material adverse effect on our business, results of operations, financial condition or prospects.
United States of America-Mexico-Canada Agreement
(USMCA), previously North American Free Trade Agreement (NAFTA)
NAFTA became effective on
January 1, 1994. NAFTA provided for the progressive elimination over a period of ten years of the 10% duties formerly in effect on most
steel products imported into Mexico from the United States of America and Canada, including those that compete with our main product lines.
After a 13-month negotiation period, on September 30, 2018, the United States of America, Mexico and Canada signed the United States of
America-Mexico-Canada Agreement (the USMCA), which replaced NAFTA on July 1, 2020. See "Item 3.D. Risk Factors—Risks Related
to Mexico—Developments in other countries could adversely affect the Mexican economy, our financial performance and the price of
our shares." The new agreement has benefits on custom expenses, an orderly economic competition, clear rules for investment and
its protection.
Mexican-European Community
Free Trade Agreement
. The Mexican-European Free Trade Agreement, or "MEFTA," became effective on July 1, 2000, and taxes
applying to a large quantity of imported goods were eliminated or reduced. The goal of this trade agreement is to establish a bilateral
and preferential, progressive and reciprocal framework to encourage the development of trade in goods and services, taking into account
the sensitivity of certain products and services sectors, and in accordance with relevant rules of the World Trade Organization (WTO).
The Joint Council is responsible for deciding the arrangements and timetable for the liberalization of duties and non-duty barriers to
trade in goods, in accordance with the relevant WTO rules. This agreement was modified in 2018.
Mexico-Japan Economic Association
(the "Association")
. On January 1, 2004, Japan and the other members of the G-7, agreed to reduce the steel tariffs to
zero percent, so Mexico has benefited from this rate since such date. However, Mexico is sensitive to the steel exports coming from Japan,
so the Association was negotiated in the following terms: (i) the specialized steel that is not produced in Mexico, and that is used to
produce vehicles, spare parts, electronics, machinery and heavy equipment, was released from any tariffs, as from the effective date of
the Association, (ii) the steel products coming from Japan currently have a zero percent rate, and (iii) the products to be imported from
the under the programs established by the Association, will pay the tariffs pursuant to the fixed tariffs established in such Sector Programs,
so the electronic and vehicles industries will be exempted as of the effective date of the Association.
28
Other Trade Agreements
.
In the last several years, Mexico has signed other free trade agreements with Israel (2000), Iceland, Norway, Liechtenstein and Switzerland
(2001), and with the following Latin American countries: Chile (1992 and amended in 1999); Venezuela and Colombia (1995); Costa Rica (1995);
Bolivia (1995); Nicaragua (1998); Honduras, El Salvador and Guatemala (2001); and Uruguay (2003). We do not anticipate any significant
increase in competition in the Mexican steel market as a result of these trade agreements due to their minimal steel production or, in
the case of Venezuela and Chile, minimal share of the Mexican market. Venezuela stepped off the free trade agreement with Mexico and Colombia.
Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP).
On February 4, 2016, Mexico, along with Australia, Brunei, Canada, Chile, United
States of America, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam, signed the Transpacific Partnership Trade Agreement, in
the City of Auckland, New Zealand, which was intended to grant Mexican products access to six markets (Australia, Brunei, Malaysia, New
Zealand, Singapore and Vietnam) with approximately 155 million of potential consumers, which were not covered by any other trade agreement.
In January 2017, the United States of America withdrew from the agreement, after which the remaining 11 countries reached a revised agreement
and renamed it the CPTPP. On December 30, 2018, it became effective without U.S. participation.
The CPTPP eliminates or reduces
tariff and non-tariff barriers across substantially all trade in goods and services and covers the full spectrum of trade, including goods
and services trade and investment, so as to create new opportunities and benefits for the businesses, workers, and consumers of the countries'
members. The CPTPP is intended to facilitate the development of production and supply chains, and seamless trade, enhancing efficiency
and supporting the goal of creating and supporting jobs, raising living standards, enhancing conservation efforts, and facilitating cross-border
integration, as well as opening domestic markets. The CPTPP is intended to promote innovation, productivity, and competitiveness by addressing
new issues, including the development of the digital economy, and the role of state-owned enterprises in the global economy. Finally,
the CPTPP includes new elements that seek to ensure that economies at all levels of development and businesses of all sizes can benefit
from trade. It also includes specific commitments on development and trade capacity building.
Dumping and Countervailing Duties
.
We are or have been a party
to, or have been affected by, numerous steel dumping and countervailing duty claims. Many of these claims have been brought by Mexican
steel producers against international steel companies, while others have been brought against Mexican steel companies. In certain instances,
such cases have resulted in duties being imposed on certain imported steel products and, in a few instances, duties have been imposed
on Mexican steel exports. In the aggregate, these duties have not had a material impact on our results of operations.
On September 11, 2013, the
United States of America International Trade Commission (USITC) started an official anti-dumping investigation against rebar exports from
Mexico and Turkey promoted by Nucor, Gerdau, Commercial Metals, and Cascade Steel Buyer.
On October 14, 2014, the USITC
determined that the U.S. steel industry was materially injured by imports of steel concrete reinforcing bar from Mexico that are sold
in the United States of America at less than fair value and from Turkey that are subsidized by the government of Turkey. As a result of
the USITC's affirmative determinations, the U.S. Department of Commerce issued an anti-dumping duty order on imports of this product
from Mexico and a countervailing duty order on imports of this product from Turkey. The U.S. government imposed tariffs of 66.7% against
imports for rebar from Deacero, S.A.P.I de C.V. and us and tariffs of 20.58% for rebar imports from all other producers in Mexico, which
tariffs were rescinded in June 2017.
On January 6, 2021, a preliminary
dumping rate of 66.7% was imposed on our exports of rebar to the United States of America; following the U.S. Department of Commerce's
physical review carried out at our San Luis Potosí plant, arguing deficiencies and adverse facts during the information process.
Such dumping rate was ratified in June 1, 2022. A preliminary dumping rate of 6.35% was imposed and will be ratified in the first half
of 2023.
On January 19, 2023, the International
Trade Practices Unit (UPCI) published the final resolution of the China wire rod countervailing duty examination, extending the countervailing
duty on wire rod imports from China for 5 years. And on February 24, 2023, the UPCI published the final resolution imposing countervailing
duties on imports of type I and II steel beams from Spain, Germany and the United Kingdom.
Labor.
In July 2017,
the Brazilian government issued Law No.13,467 (Labor Reform Law), which resulted in significant changes to labor regulations. This law
extends the workday from 8 hours to 12 hours, provided that there is a 36 hour break afterwards. With regard to negotiations with any
labor union, Law No. 13,467 provides that certain rights, such as constitutional rights and women's rights, cannot be part of the
negotiations, as the Constitution and existing law prevails over any collective bargaining agreement. In addition, Law No.13,467 allows
companies to outsource any activity, including the company's principal activity and activities that a company's own employees
are carrying out. Furthermore, the law provides that a claimant seeking to enforce his or her rights under this law will have to pay all
costs and expenses related to the lawsuit and limits any compensation for moral damages to certain thresholds. We are currently in compliance
with theses labor regulations.
29
C.
Organizational Structure
The chart below sets forth a summary of our corporate
structure.
(1)
Includes the following subsidiaries:
Compañía Siderúrgica del Pacífico, S.A. de C.V. (99.99%); Coordinadorade Servicios Siderúrgicos de
Calidad, S.A. de C.V. (100.00%); Industrias del Acero y del Alambre, S.A. de C.V. (100.00%); Procesadora Mexicali, S.A. de C.V. (99.99%);
Servicios Simec, S.A. de C.V. (100.00%); Sistemas de Transporte de Baja California, S.A. de C.V. (100.00%); Operadora de Metales, S.A.
de C.V. (100.00%); Operadora de Servicios Siderúrgicos de Tlaxcala, S.A. de C.V. (100.00%); Administradora de Servicios Siderúrgicos
de Tlaxcala, S.A. de C.V. (100.00%); Operadora de Servicios de la Industria Siderúrgica ICH, S.A. de C.V. (100.00%); Arrendadora
Simec S.A. de C.V. (100.00%); CSG Comercial, S.A. de C.V. (99.95%); Compañía Siderúrgica de Guadalajara, S.A. de
C.V. (99.99%); Simec Acero, S.A. de C.V. (100.00%); Undershaft Investment N. V. (100.00%); Simec USA Corp. (100.00%); Pacific Steel Projects
Inc. (100.00%); Simec Steel Inc. (100.00%); Simec International, S.A. de C.V. (100.00%); Corporativos G&DL, S.A. de C.V. (100.00%);
Simec International 6, S. A. de C. V. (100.00%), Simec International 7, S. A. de C. V. (99.99%), Simec International 9, S.A.P.I. de C.V.
(100.00%); Corporación ASL, S.A. de C.V. (99.99%); Siderúrgica del Occidente y Pacífico, S.A. de C.V. (100.00%),
Gases Industriales de Tlaxcala, S.A. de C.V. (100.00%),  GSIM de Occidente, S.A. de C.V.(100.00%), Siderúrgicos Noroeste,
S.A. de C.V. (100.00%), Fundiciones de Acero Estructrual, S.A. de C.V. (100.00%) and Simec Siderúgico, S.A. de C.V. (100.00%).
(2)
Our principal Mexican facilities consist of steel-making facilities in Guadalajara, Jalisco; Mexicali, Baja California; Apizaco, Tlaxcala, and San Luis Potosí; and cold finishing facilities in Cholula, Puebla. These facilities were operated by Simec International 6, S.A. de C.V. (100.00%) until October 31, 2012 (began operations in November 2010). Since November 1, 2012 these facilities were operated by Orge, S.A. de C.V. (99.99%) . These facilities were operated by RRLC, S.A.P.I. de C.V. (99.99%)  and Grupo Chant, S.A.P.I. de C.V. (99.99%) , since April, 2015 and October 2015, respectively. These facilities were operated by GSIM de Occidente, S.A. de C.V. (100.00%) and Aceros Especiales Simec Tlaxcala, S.A. de C.V.(100.00%) , since March 2016 and July 2016, respectively. The Guadalajara plant is currently operated by Corporación ASL, S.A. de C.V., the Mexicali plant by Simec International 6, S,A, de C.V., the Apizaco and Cholula plants by Simec international, S.A. de C.V., the new Tlaxcala plant by Aceros Especiales Simec Tlaxcala, S.A. de C.V., the San Luis plants by Aceros DM, S.A. de C.V., Aceros San Luis, S.A. de C.V., Malla San 2, S.A. of C.V. and Fundiciones de Acero Estructural, S.A. de C.V.; and the Silao plant by CHQ Wire México, S.A. of C.V. (formerly Malla San 1, S.A. de C.V.). The group's marketer is Simec Acero, S.A. de C.V.
(3)
SimRep, Co. owns 100% of Republic Steel, Inc. Our principal U.S. facilities consist of a steel-making facility in Canton, Ohio; a steel- making and hot-rolling facility in Lorain, Ohio; a hot-rolling facility in Lackawanna, New York; and  three cold finishing facilities in Massillon, Ohio and Solon, Ohio; all, of which are owned directly by Republic.
(4)
Grupo San facilities are conformed by Corporación Aceros DM, S.A. de C.V. (100.00%) and Subsidiaries, Aceros DM, S.A. de C.V. (100.00%) Acero Transportes SAN, S.A. de C.V. (100.00%), Aceros San Luis, S.A. de C.V. (100.00%), CHQ Wire México, S.A. de C.V. (100.00%) (formerly Malla San 1, S.A. de C.V.), Malla San 2, S.A. de C.V. (100.00%) and Alambres Trefilados de San Luis Potosí, S.A. de C.V. (100.00%).
(5)
Our Brazil facilities are conformed by GV do Brasil Industria e Comercio de Aço LTDA., Companhia Siderúrgica do Espirito Santo, S.A. and the plant in Itauna, Minas Gerais.
30
The following table identifies each of our significant
operating subsidiaries, including its country of incorporation and our percentage ownership thereof at December 31, 2021:
Name of Subsidiary
Country of
Incorporation
Ownership
Interest (%)
Simec International, S.A. de C.V.
Mexico
100.00
%
Undershaft Investments, N.V.
Curaçao
100.00
%
Pacific Steel, Inc.
United States of America
100.00
%
SimRep Corporation and subsidiaries (Republic)
United States of America
99.41
%
Compañía Siderúrgica del Pacífico, S.A. de C.V.
Mexico
99.99
%
Coordinadora de Servicios Siderúrgicos de Calidad, S.A. de C.V.
Mexico
100.00
%
Industrias del Acero y del Alambre, S.A. de C.V.
Mexico
99.99
%
Procesadora Mexicali, S.A. de C.V.
Mexico
99.99
%
Servicios Simec, S.A. de C.V.
Mexico
100.00
%
Sistemas de Transporte de Baja California, S.A. de C.V.
Mexico
100.00
%
Operadora de Metales, S.A. de C.V.
Mexico
100.00
%
Operadora de Servicios Siderúrgicos de Tlaxcala, S.A. de C.V.
Mexico
100.00
%
Administradora de Servicios Siderúrgicos de Tlaxcala, S.A. de C.V.
Mexico
100.00
%
Operadora de Servicios de la Industria Siderúrgica ICH, S.A. de C.V.
Mexico
100.00
%
Arrendadora Simec, S.A. de C.V. (in liquidation)
Mexico
100.00
%
Compañía Siderúrgica de Guadalajara, S.A. de C.V.
Mexico
99.99
%
CSG Comercial, S.A. de C.V.
Mexico
99.95
%
Corporación Aceros DM, S.A. de C.V. and Subsidiaries
Mexico
100.00
%
Corporación ASL, S.A. de C.V.
Mexico
99.99
%
Simec International 6, S. A. de C.V.
Mexico
100.00
%
Simec International 7, S. A. de C.V.
Mexico
99.99
%
Simec International 9, S.A.P.I. de C.V.
Mexico
100.00
%
Simec Acero, S.A. de C.V.
Mexico
100.00
%
Simec USA, Corp.
United States of America
100.00
%
Pacific Steel Projects, Inc.
United States of America
100.00
%
Simec Steel, Inc.
United States of America
100.00
%
Corporativos G&DL, S.A. de C.V.
Mexico
100.00
%
GV do Brasil Industria e Comercio de Aço LTDA.
Brazil
100.00
%
Orge, S.A. de C.V.
Mexico
99.99
%
Siderúrgica del Occidente y Pacífico, S.A. de C.V.
Mexico
100.00
%
RRLC, S.A.P.I. de C.V.
Mexico
99.99
%
Grupo Chant, S.A.P.I. de C.V.
Mexico
99.99
%
Aceros Especiales Simec Tlaxcala, S.A. de C.V.
Mexico
100.00
%
Gases Industríales de Tlaxcala, S.A. de C.V.
Mexico
100.00
%
GSIM de Occidente, S.A. de C.V.
Mexico
100.00
%
Fundiciones de Acero Estructural, S.A. de C.V.
Mexico
100.00
%
Siderúrgicos Noroeste, S.A. de C.V.
Mexico
100.00
%
Companhia Siderúrgica do Espirito Santo, S.A.
Brazil
100.00
%
Simec Siderúrgico, S.A. de C.V.
Mexico
100.00
%
D.
Property, Plants and Equipment
Our Operations and Production Facilities
We conduct our operations
at 19 facilities throughout North and South America. At December 31, 2022, our crude steel production capacity was 6 million tons, of
which 1.2 million tons were based on an integrated blast furnace technology, and 4.8 million were based on electric arc furnace, or mini-mill,
technology. Our Mexican facilities have 2.6 million tons of crude steel production capacity, operating six mini-mill facilities. Our U.S.
operations have 2.3 million tons of crude steel production capacity and our Brazil operations have 1.1 million tons of crude steel production
capacity. In addition, we have 5.8 million tons of rolling and finishing capacity, of which 3.1 million are located in Mexico, 1.8 million
are located in the United States of America and Canada and 0.9 million are located in Brazil.
31
We operate nine mini-mills,
six in Mexico, one in the United States of America and two in Brazil. The Mexican mini-mills are located in: one in Guadalajara, Jalisco;
two in Apizaco, Tlaxcala; one in Mexicali, Baja California; as well as two in San Luis Potosí. Our mini-mill in the United States
of America is located in Canton, Ohio. Our mini-mills in Brazil are located in Pindamonhangaba, São Paulo and Cariacica, Espírito
Santo. We also own an integrated blast furnace and an electric arc furnace in Lorain, Ohio and a rolling mill in Lackawanna, New York.
Processing mills are located in Massillon, Ohio and Solon, Ohio.
Because we own both mini-mill
and integrated blast furnace production facilities, we can allocate production between each type of facility based on efficiency and cost.
In addition, as long as our facilities are not operating at full capacity, we can allocate production based on the relative cost of basic
inputs (iron ore, coking coal, scrap metal and electricity) to the facility where production costs would be the lowest. Our production
facilities are designed to permit the rapid changeover from one product to another. This flexibility permits us to efficiently produce
small volume orders to meet customer needs and to produce varying quantities of standard product. Production runs, or campaigns, occur
on four to eight weeks cycles, minimizing customer waiting time for both standard and specialized products.
We can use scrap metal or
iron ore to produce our finished steel products. We produce liquid steel using an electric arc furnace, alloying elements and carbon are
added, and then is transported to continuous casters for solidification. The continuous casters produce long, square strands of steel
that are cut into billet and transferred to the rolling mills for further processing or, in some cases, sold to other steel producers.
In the rolling mills, the billet is reheated in a walking beam furnace with preheating burners, passed through a rolling mill for size
reduction and conformed into final sections and sizes. The shapes are then cut into a variety of lengths. Our facility in Canton, Ohio
is capable of producing billets and blooms.
Our mini-mill plants use an
electric arc furnace to melt ferrous scrap and other metallic components, which are then cast into long, square bars called billets in
a continuous casting process, all of which occurs in a melt shop. The billet is then transferred to a rolling mill, reheated and rolled
into finished product. In contrast, an integrated steel mill heats iron pellets and other primary materials in a blast furnace to first
produce pig iron, that must be refined in a basic oxygen furnace to liquid steel, and then cast to billet and finished product. Mini-mill
plants typically produce certain steel products more efficiently because of the lower energy requirements resulting from their smaller
size and because of their use of ferrous scrap. Mini-mills are designed to provide shorter production runs with relatively fast product
changeover times. Integrated steel mills are more efficient in producing longer runs and are able to produce certain steel products that
a mini-mill cannot.
The production levels and capacity utilization
rates for our melt shops and rolling mills for the periods indicated are presented below.
Production Volume and Capacity Utilization
Years ended December 31,
2018
2019
2020
2021
2022
(tons in thousands)
Melt shops
Steel billet production
2,359.0
2,497.1
2,879.7
3,005.9
2,472.8
Annual installed capacity
(1)
5,257.9
5,776.9
6,006.0
6,006.0
6,006.0
Effective capacity utilization
44.9
%
43.2
%
47.9
%
50.5
%
41.2
%
Rolling mills
Total production
2,306.7
2,513.4
2,581.6
2,708.1
2,674.8
Annual installed capacity
(1)
4,480.0
4,896.0
5,185.0
5,205.0
5,792.6
Effective capacity utilization
51.5
%
51.3
%
49.8
%
52.0
%
46.2
%
(1)
Annual installed capacity is determined
based on the assumption that billet of various specified diameters, width and length is produced at the melt shops or that a specified
mix of rolled products are produced in the rolling mills on a continuous basis throughout the year except for periods during which operations
are discontinued for routine maintenance, repairs and improvements. Amounts presented represent annual installed capacity as of December
31 for each year.
32
Mexican Operations and Facilities
The following table presents production by product
at each of our Mexican facilities as a percentage of total production at that facility for 2022.
Mexican Production per Facility by Product Location
Product
Guadalajara
Mexicali
Apizaco/ Cholula
San Luis
Total
Production (%)
I-Beams
23.4
%
0.4
%
0
%
0
%
4.7
%
Channels
9.7
%
4.3
%
0
%
0
%
2.5
%
Angles
43.6
%
15.2
%
0
%
0
%
10.6
%
Hot rolled bars (round, square and hexagonal rods)
13.5
%
2.3
%
48.0
%
0.7
%
15.0
%
Rebar
0.0
%
73.4
%
0.0
%
75.7
%
41.9
%
Flat bars
8.4
%
4.4
%
21.0
%
0.0
%
7.3
%
Cold finished bars
0.9
%
0.0
%
25.8
%
0.0
%
6.4
%
Electro-Welded wire mesh
0.0
%
0.0
%
0.0
%
3.61
%
1.3
%
Wire rod
0.0
%
0.0
%
4.8
%
16.7
%
8.4
%
Electro-Welded wire mesh panel
0.0
%
0.0
%
0.0
%
4.0
%
1.7
%
Other
0.5
%
0.0
%
0.4
%
-0.2
%
0.2
%
Total
100
%
100
%
100
%
100
%
100
%
Guadalajara
. Our Guadalajara
mini-mill facility is located in central western Mexico in the state of Jalisco which is Mexico's second largest city. Our Guadalajara
facilities and equipment include one improved electric arc furnace utilizing water-cooled sidewalls and roof, one four-strand continuous
caster, five reheating furnaces and three rolling mills. The Guadalajara mini-mill has an annual installed capacity of 370,000 tons of
billet and an annual installed capacity of finished product of 480,000 tons. In 2022, the Guadalajara mini-mill produced 283,454 tons
of steel billet and 257,513 tons of finished product, operating at 77% capacity for billet production and 54% capacity for finished product
production. The Guadalajara rolling facilities process billet production from our Mexicali and Apizaco mills. Our Guadalajara facility
is 336 miles from Mexico City. Our Guadalajara facility mainly produces structural steel, SBQ steel, light structural steel and rebar.
Guadalajara Mini-Mill
Years ended December 31,
2018
2019
2020
2021
2022
Steel sales (thousands of tons)
307
267
290
302
252
Average finished product price per ton
Ps. 13,896
Ps. 13,794
Ps. 13,235
Ps. 21,361
Ps. 26,880
Average scrap cost per ton
7,071
5,492
6,261
9,720
9,966
Average manufacturing conversion cost per ton of finished product
(1)
3,252
4,393
3,235
12,217
4,714
Average manufacturing conversion cost per ton of billet
(1)
2,674
2,836
2,305
2,853
3,359
(1)
Manufacturing conversion cost
is defined as all production costs excluding the cost of scrap and related yield loss.
33
Mexicali
. In 1993,
we began operations at our mini-mill located in Mexicali, Baja California. The mini-mill is strategically located approximately 22 miles
south of the California border and approximately 220 miles from Los Angeles.
Our Mexicali facilities and
equipment include one electric arc furnace utilizing water-cooled sidewalls and roof, one four-strand continuous caster, one walking beam
reheating furnace, one SACK rolling mill, a Linde oxygen plant and a water treatment plant. This facility has an annual installed capacity
of 430,000 tons of steel billet and an annual installed capacity of finished product of 250,000 tons. Excess billet produced at the Mexicali
facility is used primarily by the Guadalajara facility. This allows us to increase the utilization of the Guadalajara facility's
finishing capacity, which exceeds its production capacity. In 2022, the Mexicali mini-mill produced approximately 186,091 tons of billet.
In 2022, the Mexicali mini-mill produced 156,940 tons of finished products. In 2022, we operated the Mexicali mini-mill at 43% capacity
for billet production and at 63% capacity for finished product production. Our facility is strategically located and has access to key
markets in Mexico and the United States of America, stable public sources of scrap, electricity, a highly skilled workforce and other
raw materials. The Mexicali mini-mill also is situated near major highways and a railroad linking the Mexicali and Guadalajara mini-mills,
allowing for coordinated production at the two facilities. Our Mexicali facility mainly produces structural steel, light structural steel
and rebar.
Mexicali Mini-Mill
Years ended December 31,
2018
2019
2020
2021
2022
Steel sales (thousands of tons)
208
236
230
170
163
Average finished product price per ton
Ps. 13,538
Ps. 12,093
Ps. 13,126
Ps. 20,371
Ps.
23,145
Average scrap cost per ton
6,302
4,954
5,319
8,412
8,183
Average manufacturing conversion cost per ton of finished product
(1)
3,290
3,326
2,986
10,734
4,603
Average manufacturing conversion cost per ton of billet
(1)
2,249
2,413
2,517
2,489
2,859
(1)
Manufacturing conversion cost is defined as all production costs excluding the cost of scrap and related yield loss.
Apizaco mini-mills (mini-mill
1 and mini-mill 2) and Cholula facility
. We have operated Apizaco mini-mill 1 and Cholula facility since August 1, 2004 and Apizaco
mini-mill 2 since July, 2018. Mini-mill 1 and 2 are located in central Mexico in Apizaco, Tlaxcala. Our Apizaco facilities and equipment
include two EBT Danieli electric arc furnace utilizing water-cooled sidewalls and roof, three ladle stations (two Danieli and the other
Daido), two Daido degasification station, two Danieli four-strand continuous caster, three walking beam reheating furnaces and three rolling
mills (two Danieli and the other Pomini). Mini-mill 1 has an annual installed capacity of 480,000 tons of steel billet and an annual installed
capacity of finished product of 444,000 tons. In 2022, mini-mill 1 produced 275,619 tons of steel billet. In 2022, mini-mill 1 produced
251,149 tons of finished products. In 2022, we operated mini-mill 1 at 57% capacity for billet production and at 57% capacity for finished
product production. Mini-mill 2 has an installed capacity of 650,000 tons of steel billet and an installed capacity of finished product
of 600,000 tons. In 2022, mini-mill 2 produced 139,910 tons of steel billet. In 2022, mini-mill 2 produced 118,097 tons of finished products.
In 2022, we operated mini-mill 2 at 22% capacity for billet production and at 20% capacity for finished product production. Our Apizaco
mini-mills are 1,112 miles from Mexicali and less than 124 miles from Mexico City. Our Apizaco facilities mainly produce SBQ steel, light
structural and rebar. Our Cholula facility is approximately 25 miles from our Apizaco facilities, which allows the integrated operations
of the Apizaco mini-mills and Cholula facility. Our Cholula facilities and equipment include cold drawing and turning machines for peeling
bars. This facility has an annual installed capacity of finished product of 120,000 tons. In 2022, the Cholula facility produced 69,736
tons of finished products, at 58% capacity. Our Cholula facility mainly produces cold finished SBQ steel.
In 2022, our plants in Apizaco and Cholula produced
415,529 tons of billet and 438,982 tons of finished product, operating at 37% of its billet capacity and 38% capacity for finished product.
In 2022, 48% of the products we produced at the
Apizaco and Cholula facilities were hot rolled bars (round, square and hexagonals), 26% were flat merchant bar and 21% were cold finished
products.
34
Apizaco Mini-Mill and Cholula Facility
Years
    ended December 31,
2018
2019
2020
2021
2022
Steel
    sales (thousands of tons)
321
318
318
346
306
Average
    finished product price per ton
Ps.
                                            17,935
Ps.
                                            16,726
Ps.
                                            16,268
Ps.
                                            23,587
Ps.
                                            26,732
Average
    scrap cost per ton
6,383
5,271
5,933
9,486
10,106
Average
    manufacturing conversion cost per ton of finished product
(1)
5,604
5,916
5,639
13,243
4,416
Average
    manufacturing conversion cost per ton of billet
(1)
3,767
4,047
3,446
4,748
6,397
(1)
Manufacturing conversion cost is defined as all production costs excluding the cost of scrap and related yield loss.
San Luis Operations and
Facilities.
We have operated our San Luis facilities since we acquired them on May 30, 2008. The facilities are located in central
Mexico in the city of San Luis Potosí, in the state of San Luis Potosí. Our San Luis facilities and equipment include four
electric arc furnaces, three continuous casters, three reheating furnaces, two rebar rolling mills and one wire rod rolling mill. As of
December 31, 2021, these facilities had an annual installed capacity of 660,000 tons of billet and 1,197,600 tons of finished product.
In 2022, the San Luis facilities produced 527,088 tons of steel billet. In 2022, the San Luis facilities produced 816,104 tons of finished
product, operating at 80% capacity for billet production and 68% capacity for finished product production. Our San Luis facilities mainly
produce rebar, light structural steel and wire rod.
The following table sets forth, for the periods
indicated selected operating data for our San Luis facilities.
Years ended December 31,
2018
2019
2020
2021
2022
Steel sales (thousands of tons)
538
546
496
554
543
Average finished product price per ton
Ps. 14,255
Ps. 12,225
Ps. 15,041
Ps. 20,494
Ps. 22,334
Average scrap cost per ton
6,822
5,378
6,407
9,894
10,067
Average manufacturing conversion cost per ton of finished product
(1)
3,094
3,026
2,719
12,713
858
Average manufacturing conversion cost per ton of billet
(1)
2,481
2,381
2,113
3,327
3,723
(1)
Manufacturing conversion cost is defined as all production costs excluding the cost of scrap and related yield loss.
U.S. Operations and Facilities
We have operated our Republic
facilities (in Ohio and New York) since we acquired them from the shareholders of PAV Republic, Inc. on July 22, 2005. As of December
31, 2021, these facilities had an annual installed capacity of 2,296,000 tons of billet and 1,763,000 tons of finished product. In 2022,
Republic facilities produced 187,600 tons of steel billet. For the same period, Republic facilities produced 178,300 tons of hot-rolled
bars. Republic facilities produced 29,700 tons of cold finish bars. In 2022, Republic facilities produced 15,800 tons of wire products.
35
The following table sets forth, for the periods
indicated selected operating data for our Republic facilities.
Years ended December 31,
2018
2019
2020
2021
2022
Steel sales (thousands of tons)
385
298
237
275
161
Average finished product price per ton
Ps. 24,016
Ps. 23,893
Ps. 23,511
Ps. 29,880
Ps. 36,562
Average scrap cost per ton
7,026
5,650
6,014
9,995
7,952
Average manufacturing conversion cost per ton of finished product
(1)
10,555
8,487
9,592
17,173
5,354
Average manufacturing conversion cost per ton of billet
(1)
6,842
6,862
6,838
7,267
12,246
(1)
Manufacturing conversion cost
is defined as all production costs excluding the cost of scrap and related yield loss.
Lorain, Ohio
. The Lorain
facility operates an integrated steel mill, it has a blast furnace, two 220-ton basic oxygen furnaces, a 150-ton electric arc furnace,
two ladle metallurgy facilities, a vacuum degasser, a five-strand continuous bloom caster, a six-strand billet caster, a billet rolling
mill and two bar rolling mills.
Our Lorain facility had, at
December 31, 2022, an annual installed capacity of 1,049,000 tons of steel billet and 900,000 tons of finished product. This facility
did not produce any steel billets or finished steel bars in 2022 as it has been idled since 2016.
Canton, Ohio
. Our Canton
facility mainly produces SBQ steel and includes two 200-ton top charge electric arc furnaces, a 5-strand bloom/billet caster, two ladle
metallurgical furnaces, two vacuum degassers and two slag rakes. This facility also includes a combination Caster rolling facility that
continuously casts blooms in a 4-strand caster, heats the blooms to rolling temperature in a walking beam furnace, then rolls billets
through an 8-stand rolling mill in an inline operation. We installed and commissioned the electric arc furnace, the bloom/billet caster,
ladle metallurgical furnace and vacuum degasser in 2005. Other Canton equipment includes a Mecana billet inspection line, four stationary
billet grinders, a saw line and a quality verification line (or "QVL line").
Canton produces blooms and
billets for the three rolling mills in Republic facilities and for trade customers. We use the QVL inspection line to inspect finished
bar produced in Lackawanna. As of December 2022, the Canton facility had annual installed capacity of 1,247,000 tons of steel billet.
In 2022, this facility produced 187,600 tons of blooms, billets and other semi-finished trade product and was operated at 15% capacity
of steel billet.
Lackawanna, New York
.
Our Lackawanna facility mainly produces SBQ steel and includes a three-zone walking beam billet reheat furnace, a recently upgraded 17
conventional stand mill with a 5 stand sizing mill and two saw lines capable of producing rounds, squares, and hexagons in both cut length
and coils. This facility produces hot rolled bar sizes that range from 0.562" to 3.250" with coil weights up to 6,000 lb.
Our Lackawanna facility's finishing equipment includes a QVL inspection line and three saw lines. We sell a portion of the hot rolled
bars produced at our Lackawanna facility to trade customers, and we also ship a portion of the finished bars to our cold finishing operations
for further processing. As of December 31, 2022, the Lackawanna facility had annual installed capacity of 653,000 tons of hot rolled bars.
In 2022, this facility produced 178,300 tons of hot rolled bars and was operated at 27% capacity of finished product.
Massillon, Ohio
. Our
Massillon facility mainly produces SBQ steel and contains a cold finishing facility which includes the machinery and equipment to clean,
draw, turn, chamfer, anneal, grind, straighten and saw bars. Our Massillon facility had, at December 31, 2021, an annual installed capacity
of 138,000 tons of finished product. During 2022, the Massillon facility was operated at 22% capacity of finished product and produced
29,700 tons of cold finished bars.
36
Solon, Ohio.
Our Solon
facility, acquired in February 2011, mainly produce Cold Heading Quality (CHQ) wire products and have wire drawing and finishing facilities
that include the machinery and equipment to clean and coat, draw, and anneal wire. As of December 31, 2021, the Solon facility had installed
capacities of 72,000, for wire products. During 2022, the Solon facility produced and shipped 15,800 tons of wire products and was operated
at 21.9% capacity of finished product.
Hamilton, Ontario, Canada.
Our Hamilton
facility was shut down permanently during 2021.
Brazil.
We have three plants in Brazil:
a mini-mill and rebar and wire-rod rolling mill in Pindamonhangaba, São Paulo, a mini-mill in Cariacica, Espirito Santo and rolling
and finishing facilities in in Itauna, Minas Gerais. Our plant located in Pindamonhangaba, State of Sao Paulo, is 87 miles from the city
of Sao Paulo, and is 218 miles from Rio de Janeiro. Our Pindamonhangaba facility and equipment include an electric arc furnace and a rebar
and wire rod rolling mill. Our facility in Pindamonhangaba began operations in July 2015 and currently produces rebar, while the plants
in Cariacica and Itauna began operations in May 2018, and include an electric arc furnace and two rebar and wire rod rolling mills. As
of December 31, 2022, our plant in Pindamonhangaba had installed capacity to produce 520,000 tons of billet and 450,000 tons of finished
product per year capacity. In 2022, our plant in Pindamonhangaba produced 383,679 tons of billet and 378,838 tons of finished product,
operating at 74% of its capacity for billet and 84% capacity for finished product. Our plant in Cariacica had installed capacity to produce
600,000 tons of billet and 348,000 tons of finished product. In 2022, our plant in Cariacica produced 489,380 tons of billet and 284,094
tons of finished product, operating at 82% of its capacity for billet and 82% capacity for finished product. The plant in Itauna had installed
capacity to produce 140,000 tons of finished product. In 2022, our plant in Itauna produced 118,507 tons of finished product, operating
at 85% capacity for finished product.
In 2022, our plants in Brazil
produced 873,059 tons of billet and 781,439 tons of finished product, operating at 78% of its billet capacity and 83% capacity for finished
product.
The following table sets forth, for the period
indicated, selected operating data for our Brazil facilities.
Years ended December 31,
2018
2019
2020
2021
2022
Steel sales (thousands of tons)
433
684
871
857
828
Average finished product price per ton
Ps. 13,681
Ps. 12,456
Ps. 12,422
Ps. 20,973
Ps. 20,978
Average scrap cost per ton
6,553
5,290
5,420
9,320
9,419
Average manufacturing conversion cost per ton of finished product
(1)
4,240
3,912
2,928
11,628
1,463
Average manufacturing conversion cost per ton of billet
(1)
2,957
2,649
2,000
3,173
4,644
(1)
Manufacturing conversion cost
is defined as all production costs excluding the cost of scrap and related yield loss.
37
The following table shows the products that we
produce, the equipment that we use and the volume that we produce in each of our separate production facilities:
Production per Facility by Product, Equipment
and Volume
Location
Product (%)
Equipment
2022 Annual
Production Volume
(tons)
Finished Product
Annual Installed
Capacity (tons)
Guadalajara
I-Beams, Channels, Angles, Hot rolled bars, Flat bars
electric arc furnace with continuous caster rolling mill and bar processing lines
257,513
480,000
Mexicali
Angles, Rebar, Channels, Hot rolled bars, Other
electric arc furnace with continuous caster and rolling mills
156,940
250,000
Apizaco and Cholula
SBQ
electric arc furnace with vacuum tank degasser, continuous caster, rolling mills, cold drawn and bar turning equipment
438,982
1,164,000
Aceros DM, San Luis Potosí
Rebar, Wire rod, Electro-Welded wire mesh, Electro-Welded wire mesh panel, Bars
electric arc furnaces, with continuous casters, rolling mill and wire rod rolling mill
368,702
410,000
Aceros San Lui, San Luis Potosí
Rebar
electric arc furnaces, with continuous casters, reheating furnace and rebar rolling mill
149,497
200,000
Fundiciones de Acero, San Luis Potosí
Wire
Pickling line, wire drawing machines
160,134
325,000
Malla San, San Luis Potosí
Wire rod, Electro-Welded wire mesh, Electro-Welded wire
Wire drawing machines, reheating furnace, electrowelders
128,563
235,000
CHQ Wire, Guanajuato
Wire rod
Pickling line, wire drawing machines
9,208
27,600
Lorain
(1)
SBQ
electric arc furnace, blast furnace, vacuum tank degasser, continuous caster, and rolling mills
0
900,000
Canton
(2)
SBQ
electric arc furnace, vacuum tank degasser and continuous caster
Our billet and bloom for internal consumption
Our billet and bloom for internal consumption
Lackawanna
SBQ
rolling mill and wire rod rolling mill
178,300
653,000
Massillon
SBQ
cold drawn, bar turning and heat treating equipment
29,700
138,000
Solon
SBQ
equipment to clean and coat, draw, and anneal wire
15,800
72,000
Brazil
Rebar, Angles, Bars. Flat bars, Other
electric arc furnace, with continuous caster with rolling mills and wire rod rolling mill
781,439
938,000
(1)
Production capacity is for
rolling only.
(2)
Production capacity is for
billets only
.
38
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and
Prospects
The following discussion is
derived from our audited consolidated financial statements, which are presented elsewhere in this annual report. This discussion does
not include all of the information included in our financial statements. You should read our financial statements to gain a better understanding
of our business and our historical results of operations. All of the statements in this Item 5 are subject to and qualified by the information
set forth under "Forward Looking Statements." In evaluating this discussion, you should also consider the factors discussed
in Item 3.D. "Risk Factors" and elsewhere in this annual report and other factors that could cause results to differ materially
from those expressed in such forward-looking statements.
Adoption of International Financial Reporting Standards (IFRS)
The Mexican National Banking
and Securities Commission (CNBV) has established the requirement that listed companies must disclose their financial information to the
public, through the Mexican Stock Exchange (BMV) or the
Bolsa Institucional de Valores, S.A. de C.V.
(BIVA) (operating since July
25, 2018), and therefore, beginning in 2012, we prepare our financial information in accordance with IFRS, as issued by the IASB. IFRS
differs in certain significant respects from U.S. GAAP. Accordingly, Mexican financial statements and reported earnings are likely to
differ from those of companies in other countries in this and other respects.
A. Operating Results
Overview
We are producers of SBQ and
structural steel products. Accordingly, our net sales and profitability are highly dependent on market conditions in the steel industry
which is greatly influenced by general economic conditions in North America and globally. Demand, production levels and prices in certain
segments and markets have recovered and stabilized to a certain degree, although the extent, timing and duration of the recovery and potential
return to pre-crisis levels remains uncertain. In 2020, the total increase in net revenue from sales of SBQ products compared to 2019
was 16%. In 2021, the total increase in net revenue from sales of SBQ products compared to 2020 was 17%. In 2022, the total decrease in
net revenue from sales of SBQ products compared to 2021 was 24%.
As a result of the significant
competition in the steel industry and the commodity-like nature of some of our products, we have limited pricing power over many of our
products. The North American and global steel markets influence finished steel product prices. Nevertheless, many of our products are
SBQ products for which competition is limited, and, therefore, these products tend to generate somewhat higher margins compared with our
more commercial steel products. We attempt to adjust the mix of our product output toward higher margin products to the extent that we
are able to do so, and we also adjust our overall product levels based on the product demand.
We focus on controlling our
cost of sales as well as our selling, general and administrative expenses. Our cost of sales largely consist of the costs of acquiring
the raw materials necessary to manufacture steel, primarily scrap metal and ferroalloys. Market supply and demand generally determine
scrap prices, and, as a result, we have limited ability to influence their cost or the costs of other raw materials, including energy
costs; however, in 2020, 2021 and 2022, we did not purchase iron ore pellets or coking coal since our Lorain, Ohio blast furnace facility,
which is our only facility that utilizes these materials, was idled during these periods. There is a correlation between the prices of
scrap and iron ore and finished product prices, although the degree and timing of this correlation varies from time to time, so we may
not always be able to fully pass along scrap and other raw material price increases to our customers. Therefore, our ability to decrease
our cost of sales as a percentage of net sales is largely dependent on increasing our productivity. Our ability to control selling, general
and administrative expenses, which do not correlate to net sales as closely as cost of sales do, is a key element of our profitability.
Although our revenues and costs fluctuate from quarter to quarter, we do not experience large fluctuations due to seasonality.
Production costs at our U.S.
facilities are higher than those in our facilities in Mexico, principally due to the higher cost of labor and the higher cost of ferroalloys
used to manufacture SBQ steel, which is the only steel product that we produce in the United States of America.
The negative operating trends
in our USA segment are primarily driven by under-utilized production capacity that severely impacts cost. The automotive sector was stable
until 2019, after the pandemic-has suffered a significant drop. For this reason we have changed our customer focus to different industries.
39
Our U.S. subsidiaries have
entered into sale agreements with customers and, in order to comply with the terms thereof, any existing orders pursuant to those agreements
need to be fulfilled even if the price of raw material increases with time. As the existing sale agreements expire, we will evaluate new
agreements which would result in a production of profitable products.
A significant percentage of
our business uses a fixed base price that is negotiated annually, plus monthly scrap and alloy surcharges. In the transaction business,
we can adjust the base pricing as required. Scrap metal and commodity prices increased in 2020, in 2021 and 2022 by 9%, 62% and 0.5%,
respectively. Financial resources will continue to be made available as our U.S. segment tackles the cost curve and restores the business
to profitability.
Sales Volume, Price and Cost Data, 2018 - 2022
Year ended December 31,
2018
2019
2020
2021
2022
Shipments (thousands of tons)
2,192
2,349
2,441
2,504
2,255
Guadalajara and Mexicali
515
503
519
472
415
Apizaco and Cholula
321
318
318
346
308
San Luis facilities
538
546
496
554
543
Republic facilities
385
298
237
275
160
Brazil
433
684
871
857
828
Net sales (Ps. millions)
35,678
34,171
35,869
55,620
54,159
Guadalajara and Mexicali
7,082
6,537
6,914
9,914
10,534
Apizaco and Cholula
5,757
5,319
5,222
8,161
8,244
San Luis facilities
7,669
6,675
7,525
11,354
12,136
Republic facilities
9,246
7,120
5,549
8,217
5,867
Brazil
5,924
8,520
10,659
17,974
17,378
Cost of sales (Ps. millions)
30,563
30,067
29,212
39,973
39,684
Guadalajara and Mexicali
5,710
5,364
5,311
7,083
6,640
Apizaco and Cholula
3,948
4,001
4,148
6,101
6,902
San Luis facilities
6,058
5,569
6,000
8,154
8,034
Republic facilities
9,294
7,753
5,677
7,159
5,764
Brazil
5,553
7,380
8,075
11,476
12,344
Average price per ton (Ps.)
16,276
14,547
14,666
22,212
24,015
Guadalajara and Mexicali
13,751
12,996
13,321
21,004
25,410
Apizaco and Cholula
17,935
16,726
16,421
23,587
26,732
San Luis facilities
14,255
12,225
15,171
20,495
22,334
Republic facilities
24,016
23,893
23,437
29,880
36,562
Brazil
13,681
12,456
12,237
20,973
20,978
Average cost per ton (Ps.)
13,943
12,800
11,968
15,964
17,597
Guadalajara and Mexicali
11,087
10,664
10,138
15,006
16,017
Apizaco and Cholula
12,299
12,582
13,044
17,633
22,378
San Luis facilities
11,260
10,200
12,107
14,718
14,785
Republic facilities
24,140
26,017
25,996
26,033
35,920
Brazil
12,824
10,789
10,785
13,391
14,901
Our results are affected by
general global trends in the steel industry and by the economic conditions in the countries in which we operate and in other steel producing
countries. Our results are also affected by the specific performance of the automotive, non-residential construction, industrial equipment,
tooling equipment and other related industries. Our profitability is also impacted by events that affect the price and availability of
raw materials and energy inputs needed for our operations. The factors and trends discussed below also affect our results and profitability.
Our primary source of revenue is the sale of SBQ steel and structural
steel products.
In August 2004, we completed
the Atlax Acquisition (Tlaxcala and Cholula facilities). In July 2005, we and our controlling shareholder, Industrias CH, completed the
acquisition of Republic. We believe that these acquisitions allowed us to become the leading producer of SBQ steel in North America and
the leading producer of structural and light structural steel in Mexico, in each case in terms of sales volume. We expect the sale of
SBQ steel, structural steel and other steel products to continue to be our primary source of revenue. The markets for our products are
highly competitive and highly dependent on developments in global markets for those products. The main competitive factors are price,
product quality and customer relationships and service.
40
Our results are affected by economic activity,
steel consumption and end-market demand for steel products.
Our results of operations
depend largely on macroeconomic conditions in North America. Historically, there has been a strong correlation between the annual rate
of steel consumption and the annual change in GDP in the Mexican and U.S. markets.
We sell our steel products
to the automotive, construction, manufacturing and other related industries. These industries are generally cyclical, and their demand
for steel is impacted by the stage of their industry market cycles and the country's economic performance. Mexico's GDP in
2022 was positive by 3.0% (according to preliminary figures of the INEGI) and 5.0% in 2021 (according to figures of the INEGI). The U.S.
GDP increased 2.1% in 2022 (according to preliminary figures of the U.S. Department of Commerce) and increased 6.0% in 2021. Deterioration
in economic conditions in the countries in which we operate is likely to adversely affect our results of operation.
Our results are affected by international steel
prices and trends in the global steel industry.
Steel prices are generally
set by reference to world steel prices, which are determined by global supply and demand trends. Our average steel price decreased approximately
10.6% in 2019 compared to 2018. Our average steel price increased approximately 1% in 2020 compared to 2019. Our average steel price increased
approximately 55% in 2021 compared to 2020. Our average steel price increased approximately 8.1% in 2022 compared to 2021.
During the last two decades
the steel industry has been consolidating. Consolidation has enabled steel companies to lower their production costs and allowed for more
stringent supply-side discipline, including through selective capacity closures or idling, as the ones observed recently in the United
States of America by Mittal Steel, U.S. Steel and others. Consolidation may result in increased competition and could adversely affect
our results.
Our results are affected by competition from
imports.
Our ability to sell our products
is influenced, to a certain degree, by global trade for steel products, particularly trends in imports of steel products into the Mexican
and U.S. markets. During 2005, the Mexican government, at the request of CANACERO, implemented several measures to prevent unfair trade
practices such as dumping in the steel import market. These measures include initiating anti-dumping and countervailing duty proceedings,
temporarily increasing import tariffs for countries with which Mexico does not have free trade agreements. As a result, the competitive
price pressure from dumping declined, contributing to a general upward trend in domestic Mexican steel prices. In 2020, imports to Mexico
in tons decreased 13.1% compared to 2019 according to information of CANACERO. In 2021, imports to Mexico in tons increased 32.8% compared
to 2020 according to information of CANACERO. In 2022, imports to Mexico in tons decreased 11.7% compared to 2021 according to information
of CANACERO.
Foreign producers typically
have lower labor costs, and in some cases are owned, controlled or subsidized by their governments, allowing production and pricing decisions
to be influenced by political and economic policy considerations as well as prevailing market conditions. Increases in future levels of
imported steel in the United States of America could reduce future market prices and demand levels for steel in the United States of America.
To this extent, the U.S. Department of Commerce and the U.S. International Trade Commission are currently conducting five year "sunset"
reviews of existing trade relief in several different steel products. Imports represent less of a threat to SBQ producers like us in the
United States of America than to commodity steel producers because of the high-quality requirements and standard required by buyers of
SBQ steel products.
Our results are affected by the cost of raw
materials and energy.
We purchase substantial quantities
of raw materials, including scrap metal, and ferroalloys for use in the production of our steel products. The availability and price of
these inputs vary according to general market and economic conditions and thus are influenced by industry cycles. For example, prices
of scrap metal increased approximately 19.4% in 2018, decreased 20% in 2019, increased 9% in 2020, increased 9% in 2021 and increased
0.5% in 2022; and prices of ferroalloys increased approximately 9.6% in 2018, decreased approximately 1% and 20% in 2019 and 2020,and
increased 62.6% in 2021, and increased approximately 36.4% in 2022. As with other raw materials, iron ore and coking coal prices fluctuate
significantly. However, in 2018, 2019, 2020, 2021 and 2022 we did not purchase coking coal or pellets since our Lorain, Ohio blast furnace
facility was idle during this period.
41
In addition to raw materials,
electricity and natural gas are both relevant components of our cost structure. We purchase electricity and natural gas at prevailing
market prices in Mexico and the United States of America. These prices are impacted by general demand and supply for energy in the United
States of America and Mexico as economic activity fueled energy demand and the supply and price of oil was impacted by geopolitical events.
Natural gas and electricity prices have remained highly volatile. Prices for electricity increased approximately 14% in 2018, increased
approximately 0.1% in 2019, decreased approximately 10% in 2020, increased 4.7% in 2021 and 7.7% in 2022; and prices for natural gas increased
approximately 28% in 2018, increased approximately 1.8% in 2019, decreased 18% in 2020 and decreased 1% in 2021 and increased 54.3% in
2022.
If inflation rates in Mexico rise significantly,
our costs may increase and the demand for our services may decrease.
Mexico has historically experienced
high annual rates of inflation. The annual rate of inflation, as measured by changes in the Mexican national consumer price index (
Índice
Nacional de Precios al Consumidor
) published by the INEGI was 4.8% for 2018, 2.8% for 2019, 3.2% in 2020, 7.4% in 2021 and 7.8% in
2022. High inflation rates could adversely affect our business and results of operations by increasing certain costs, such as the labor
costs of our Mexican facilities, beyond levels that we could pass on to our customers and reducing consumer purchasing power, thereby
adversely affecting demand for our products.
Depreciation of the Mexican peso relative to
the U.S. dollar, as well as the reinstatement of exchange controls and restrictions, could adversely affect our financial performance.
Depreciation of the Mexican
peso relative to the U.S. dollar may negatively affect our results of operations. According to the Mexican Central Bank (
Banco de Mexico
),
during the period from 2020 to 2022, the exchange rate registered a low of Ps. 18.57 per U.S.$1.00 at February 17, 2020, and a high of
Ps. 24.88 per U.S.$1.00 at April 27, 2020. The appreciation of the Mexican peso relative to the U.S. dollar in 2022 was 5.6%. The exchange
rate at December 31, 2022 was 19.3615 compared to 20.5157 at December 31, 2021. At April 28, 2023, the exchange rate was Ps. 18.1030 per
U.S.$1.00.
A severe depreciation of the
Mexican peso may also result in disruption of the international foreign exchange markets and may limit our ability to convert Mexican
pesos into U.S. dollars and other currencies. While the Mexican government does not currently restrict, and has not recently restricted
the right or ability of Mexican or foreign persons or entities to convert Mexican pesos into U.S. dollars or to transfer other currencies
out of Mexico, it has done so in the past and could reinstate exchange controls and restrictions in the future. Currency fluctuations
or restrictions on the transfer of foreign currency outside of Mexico may have an adverse effect on our financial performance. We do not
utilize derivative financial instruments to manage our market risks with respect to foreign currency.
Segment Information
We are required to disclose
segment information in accordance with IFRS 8 "Operating Segments": Information which establishes standards for reporting
information about operating segments in annual financial statements and requires reporting of selected information about operating segments
in interim financial reports issued to shareholders. Operating segments are components of a company about which separate financial information
is available that is regularly evaluated by the chief operating decision maker(s) in deciding how to allocate resources and assess performance.
The statement also establishes standards for related disclosures about a company's products and services, geographical areas and
major customers.
We conduct business in three
principal business segments which are organized on a geographical basis:
●
our Mexican segment represents the results of our operations in Mexico, including our plants in Mexicali, Guadalajara, Tlaxcala and San Luis Potosí;
●
our U.S. segment represents the results of our operations of Republic, including its five plants, located in the United States of America; and
●
our Brazil segment represents the results of our operations in three plants located in Brazil, one of which started operations in June 2015 and two of which started to consolidate operations in May 2018.
42
The following information shows other results by
segment.
For the year ended December 31, 2022
Mexico
United
States of
America
Brazil
Operations
between
Segments
Total
(in thousands of pesos)
Net sales
30,914,890
5,867,193
17,377,164
—
54,159,247
Cost of sales
(21,575,758
)
(5,764,239
)
(12,343,864
)
—
(39,683,861
)
Gross profit (loss)
9,339,132
102,954
5,033,300
—
14,475,386
Administrative expenses
(1,096,330
)
(286,611
)
(1,618,151
)
544,392
(2,456,700
)
Other (expense) income, net
(71,202
)
1,015,586
140,205
(1,012,744
)
71,845
Interest income and dividends
415,704
30,175
—
—
445,879
Interest expense
(779,134
)
(55,867
)
(383,646
)
383,646
(835,001
)
Exchange gain (loss), net
(699,975
)
(58
)
(60,625
)
60,625
(700,033
)
Income (loss) before income tax
7,108,195
806,179
3,111,083
(24,081
)
11,001,376
Income tax
(2,565,834
)
(88,679
)
(645,009
)
—
(3,299,522
)
Net (loss) income
4,542,361
717,500
2,466,074
(24,081
)
7,701,854
Other Data
Mexico
United
States of
America
Brazil
Operations
between
Segments
Total
Depreciation and amortization
627,078
236,601
253,193
—
1,116,872
Total assets
44,025,917
12,930,111
14,149,332
(3,472,457
)
67,632,903
Total liabilities
8,375,028
7,243,113
7,492,843
(3,472,457
)
19,638,527
Additions of property, plant and equipment, net
151,783
252,116
1,292,586
—
1,696,485
For the year ended December 31, 2021
Mexico
United
States of
America
Brazil
Operations
between
Segments
Total
(in thousands of pesos)
Net sales
29,678,133
8,216,595
17,725,628
—
55,620,356
Cost of sales
(21,337,462
)
(7,159,354
)
(11,471,370
)
—
(39,968,186
)
Gross profit (loss)
8,340,671
1,057,241
6,254,258
—
15,652,170
Administrative expenses
(907,798
)
(256,875
)
(877,969
)
—
(2,042,642
)
Other (expense) income, net
(77,530
)
454,303
1,793
(455,972
)
(77,406
)
Interest income
(65,631
)
(317
)
—
—
(65,948
)
Interest expense
(28,904
)
(61,494
)
(96,486
)
99,439
(87,445
)
Exchange gain (loss), net
(325,389
)
378
120,300
(120,300
)
(325,011
)
Income (loss) before income tax
7,717,459
1,193,114
5,161,296
(236,233
)
13,835,636
Income tax
(2,472,751
)
(477,380
)
(1,439,638
)
—
(4,389,769
)
Net (loss) income
5,244,708
715,734
3,721,658
(236,233
)
9,445,867
Other Data
Mexico
United
States of
America
Brazil
Operations
between
Segments
Total
Depreciation and amortization
667,167
270,119
237,852
—
1,175,108
Total assets
47,917,643
10,836,083
8,815,051
(10,226,205
)
57,342,572
Total liabilities
7,665,924
5,544,135
12,396,190
(10,226,205
)
15,380,044
Additions of property, plant and equipment, net
367,496
288,487
410,439
—
1,066,422
43
For the year ended December 31, 2020
Mexico
United
States of
America
Brazil
Operations
between
Segments
Total
(in thousands of pesos)
Net sales
19,660,889
5,549,366
10,659,259
—
35,869,314
Cost of sales
(15,459,258
)
(5,677,213
)
(8,075,253
)
—
(29,211,724
)
Gross profit (loss)
4,201,631
(127,847
)
2,583,806
—
6,657,590
Administrative expenses
(1,117,817
)
(240,726
)
(660,785
)
—
(2,019,328
)
Other (expense) income, net
52,656
505,946
(11,854
)
—
546,748
Interest income
107,605
222
—
—
107,827
Interest expense
(5,108
)
(16,104
)
(66,007
)
33,473
(53,746
)
Exchange (loss) gain, net
(483,822
)
1,510
(1,096,416
)
1,215,564
(363,164
)
Income (loss) before income tax
2,755,145
123,001
748,744
1,249,037
4,875,927
Income tax
(1,747,568
)
(118,926
)
(211,350
)
—
(2,077,844
)
Net (loss) income
1,007,577
4,075
537,394
1,249,037
2,798,083
Other Data
Mexico
United
States of
America
Brazil
Operations
between
Segments
Total
Depreciation and amortization
693,362
332,186
426,723
—
1,452,271
Total assets
33,386,043
9,237,831
5,807,121
(2,927,348
)
45,503,647
Total liabilities
6,944,579
4,797,682
3,670,075
(2,927,348
)
12,484,988
Additions of property, plant and equipment, net
278,700
41,054
631,451
—
951,205
Our net sales by product during 2020, 2021 and
2022 were as follows:
SALES BY PRODUCT
(in thousands of pesos)
2020
2021
2022
Light structural
1,529,216
2,600,484
3,453,952
Structural
3,677,441
5,342,228
5,701,308
Bars
2,051,053
4,456,151
4,117,613
Rebar
14,081,399
19,625,065
18,834,890
Flat bar
1,851,960
3,376,554
3,673,660
Hot rolled bars
7,548,939
11,413,275
9,189,257
Cold drawn bars
2,139,938
3,213,061
3,092,410
Other
2,989,368
5,593,538
6,096,157
Total
35,869,314
55,620,356
54,159,247
Our net sales by country or region during 2020,
2021 and 2022 are as follows:
SALES BY COUNTRY OR REGION
(in thousands of pesos)
2020
2021
2022
Mexico
18,122,828
28,060,405
29,650,766
USA
6,555,642
9,050,696
6,812,650
Brazil
10,608,151
17,548,823
19,969,641
Canada
311,761
441,856
291,963
Latin America
253,096
513,524
424,436
Other (Europe and Asia)
17,836
5,052
9,791
Total
35,869,314
55,620,356
54,159,247
44
Consolidated Statements of Comprehensive Income
Comparison of Years Ended December 31, 2021 and 2022
Net Sales
Net sales decreased 2.6%,
to Ps. 54,159 million in 2022 compared to Ps. 55,620 million in 2021. This decrease resulted primarily from a 8.1% increase in the average
price per ton of steel products of 2022 compared to 2021. Total sales outside of Mexico decreased 11.1%, to Ps. 24,508 million in 2022
compared to Ps. 27,560 million in 2021. Total sales in Mexico increased 5.3%, from Ps. 28,060 million in 2021 to Ps. 29,651 million in
2022.
Shipments of finished steel
products decreased 9.9%, to 2.255 million tons in 2022, compared to 2.504 million tons in 2021. Total sales volume outside of Mexico of
finished steel products decreased 12.7% to 0.989 million tons in 2022, compared to 1.132 million tons in 2021, while total Mexican sales
decreased 7.7%, from 1.372 million tons in 2021, compared to 1.266 million tons in 2021. The average price of steel products increased
8.1% in 2022 compared to 2021.
Cost of Sales
Our cost of sales decreased
0.7%, from Ps. 39,968 million in 2021 to Ps. 39,684 million in 2022, the decrease is mainly attributable to a 10.3% increase in the average
cost per ton of steel products sold and a lower volume of steel tons sold (249 thousand tons less). Cost of sales as a percentage of net
sales was 73% in 2021 and 72% in 2021. We experienced higher cost of sales at our Republic facilities, mainly as a result of (i) higher
labor costs corresponding to our U.S. operations, and (ii) the higher cost of raw materials, which our U.S. operations use in the production
of SBQ steel. Hourly wages at our Mexican operations were approximately U.S.$2.4 (Ps. 47) per hour in 2022 and U.S.$1.8 (Ps. 37) per hour
in 2021, compared to U.S.$28.3 (Ps. 549) and U.S.$23.7 (Ps. 486) per hour for 2022 and 2021, respectively, at our U.S. operations. Although
some raw material costs are similar in the United States of America and Mexico, our U.S. operations produce higher value-added SBQ steel,
which requires more expensive raw materials such as chromium, nickel, molybdenum and other alloys. Our Mexican operations require these
alloys to a lesser extent, because they produce commodity steel as well as SBQ steel.
Gross Profit
Our gross profit was Ps. 14,475
million in 2022 compared to a Ps. 15,652 million gross profit in 2021. This decrease in gross profit is attributable mainly to a decrease
of 249,000 tons of finished steel products shipped, an 8.1% increase in the average price of steel products sold. As a percentage of net
sales, our gross profit was 26.7% in 2022 and our gross profit was 28% in 2021.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) increased 20.3%, to Ps. 2,457 million in 2022, compared to Ps. 2,043 million in 2021. The variation
of Ps. 414 million corresponds to the increase of Ps. 188 million in the Mexican segment (mainly administrative and maintenance expenses),
the increase of Ps. 196 million in the Brazil segment and an increase of Ps. 30 million in the U.S. segment. In 2022 and 2021, our general
and administrative expenses included Ps. 219.3 million and 256.1 million of amortization of the tangible and intangible assets registered
principally in connection with the acquisition of Republic.
Administrative expenses as
a percentage of net sales were 4.5% in 2022 and 4% in 2021. Depreciation and amortization expense were Ps. 11 million in 2022 compared
to Ps. 16 million in 2021.
Other (Income) Expense, Net
We recorded other income,
net, of Ps. 72 million in 2022, mainly from benefits on inventory sold.
We recorded other expense,
net, of Ps. 77 million in 2021, mainly from account debugging.
Interest Income
We recorded interest income
of Ps. 446 million in 2022 compared to Ps. 66 million in 2021, mainly as a result of interest charged to affiliated companies.
45
Interest Expense
We recorded interest expense
of Ps. 835 million in 2022 compared to Ps. 87 million in 2021 mainly as a result of a higher use of financial services.
Foreign Exchange Loss (Gain)
We recorded a foreign exchange
gain of Ps. 700 million in 2022 compared to a foreign exchange loss of Ps. 325 million in 2021; this foreign exchange loss reflected the
5.6% depreciation of the peso against the dollar in 2022.
Income Tax
In 2022 we recorded an income
tax provision of Ps. 3,299 million, which included an income tax provision of Ps. 3,150 million and an income tax expense provision for
deferred income taxes of Ps. 150 million. In 2021 we recorded an income tax provision of Ps. 4,390 million, which included an income tax
provision of Ps. 3,818 million and an income tax expense provision for deferred income taxes of Ps. 572 million.
Our effective income tax rates
for 2022 and 2021 were 30.0% and 31.7%, respectively. According to the Income Tax Law in Mexico, the tax rate for the year 2022 and years
thereafter is 30%.
Net Income (Loss)
We recorded net profit of
Ps. 7,702 million in 2022, compared to net profit of Ps. 9,446 million in 2021. The net profit for the year 2022 compared to the net profit
in 2021 is mainly as a result of (i) a 8.1% increase in the average price of steel products sold, (ii) the foreign exchange loss in 2021
to Ps. 700 million compared to the foreign exchange gain of Ps. 325 million in 2021, (iii) the loss on stock sale of Ps. 779 million and
(iv) the decrease in the provision of income taxes in 2022 to Ps. 3,299 million compared to Ps. 4,390 million in 2021.
Mexican Segment
Statements of Comprehensive Income
Comparison of Years Ended December 31, 2021 and 2022
Net Sales
Net sales increased 4%, to
Ps. 30,915 million in 2022 compared to Ps. 29,678 million in 2021. This increase resulted principally from a 12.8% increase in the average
price per ton of steel products in 2022 compared to 2021.
Shipments of finished steel
products decreased 7.7%, to 1.266 million tons in 2022, compared to 1.372 million tons in 2021.
Cost of Sales
Our cost of sales increased
1.1%, from Ps. 21,337 million in 2021 to Ps. 21,576 million in 2022, this increase is mainly attributable to an increase in energy cost.
As a percentage of net sales, our cost of sales was 69.8% in 2022, compared to 71.9% in 2021.
Gross Profit
Our gross profit increased
12.0%, to Ps. 9,339 million in 2022 compared to Ps. 8,341 million in 2021. This increase is attributable mainly to an increase of 13.8%
in the average price of steel products sold, decreased by a higher average cost of sales per ton of 1.1%. As a percentage of net sales,
our gross profit was 30% in 2022, compared to 28% in 2021.
46
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) increased 20.8%, to Ps. 1.096 million in 2022, compared to Ps. 908 million in 2021. The increase
was mainly originated by higher administrative and maintenance expenses.
Administrative expenses as
a percentage of net sales were 3.6% in 2022 and 3.1% in 2021. Depreciation and amortization expense were Ps. 207 million in 2022 compared
to Ps. 238 million in 2021.
Other Expense (Income), Net
We recorded other expenses,
net, of Ps. 71 million in 2022, reflecting expenses related to doubtful accounts recoverable allowance.
We recorded other expenses,
net, of Ps. 77 million in 2021, reflecting income related to account debugging.
Interest Income
We recorded interest income
of Ps. 416 million in 2022 compared to Ps. 65.6 million in 2021. This interest income corresponds mainly to affiliates.
Interest Expense
We recorded interest expense
of Ps. 779.1 million in 2022, corresponding mainly to a loss in stocks sale, compared to Ps. 28.9 million of interest expense in 2021.
Foreign Exchange Gain (Loss)
We recorded a foreign exchange
loss of Ps. 700 million in 2022 compared to a foreign exchange gain of Ps. 325 million in 2021; this foreign exchange reflected the 5.6%
depreciation of the Mexican peso against the dollar in 2022.
Income Tax
In 2022, we recorded an income
tax provision of Ps. 2,566 million, which included an income tax provision of Ps. 2,686 million and an income tax provision for deferred
income taxes of Ps. 120 million. In 2021, we recorded an income tax provision of Ps. 2,473 million, which included an income tax provision
of Ps. 2,569 million and an income tax provision for deferred income taxes of Ps. 96 million.
According to the Income Tax
Law in Mexico, the tax rate for 2022 and thereafter is 30%.
Net Income
We recorded net income of
Ps. 4,542 million in 2022, compared to net income of Ps. 5,245 million in 2021. This variance is attributable mainly to; (i) an increase
of 12.8% in the average price of steel products sold, (ii) higher administrative expenses of Ps. 189 million, (iii) a foreign exchange
gain of Ps. 700 million in 2022 compared to Ps. 325 million of foreign exchange loss in 2021 and (iv) a higher income tax provision in
2022 of Ps. 2,566 million compared to Ps. 2,473 million in 2021.
47
USA Segment
Statements of Comprehensive Income
Comparison of Years Ended December 31, 2021 and 2022
Net Sales
Net sales decreased 28.6%,
to Ps. 5,867 million in 2022 compared to Ps. 8,217 million in 2021. This decrease resulted principally from a decrease of 115,000 tons
in shipments of finished steel products.
Shipments of finished steel products decreased
42%, to 160,000 tons in 2022, compared to 275,000 tons in 2021.
The average price of steel products in pesos increased
22.5% in 2022 compared to 2021.
Cost of Sales
Our cost of sales decreased
19.5%, from Ps. 7,159 million in 2021 to Ps. 5,764 million in 2022, the decrease is mainly due to a decrease of approximately 115,000
in tons of shipments of finished steel products and the 38.1% increase in the average cost per ton of steel products sold. Cost of sales
as a percentage of net sales was 98% in 2022, compared to 87% in 2021.
Gross Profit (Loss)
Our gross profit was Ps. 103
million in 2022 compared to a Ps. 1,057 million gross profit in 2021. As a percentage of net sales, our gross profit was 1.7% in 2022,
mainly attributable to a decrease of approximately 115,000 tons of shipments of finished steel products and an increase of 38.1%, approximately,
in the average price per ton of steel products sold, compared to a gross profit of 12.9% in 2021.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) were Ps. 287 million in 2022, compared to Ps. 257 million in 2021.
Administrative expenses as
a percentage of net sales were 5% in 2022 and 3% in 2021. Depreciation and amortization expense were Ps. 22 million in 2022 compared to
Ps. 27 million in 2021.
Other Income, Net
We recorded other income, net, of Ps. 2.8 million
in 2022, related to other financial operations.
We recorded other income, net, of Ps. 454 million
in 2021, related to other financial operations.
Interest Income
We recorded an interest income of
Ps. 30 million in 2022 compared to Ps. 0 million in 2021.
Interest Expense
We recorded an interest expense of
Ps. 56 million in 2022 compared to Ps. 61 million in 2021.
Foreign Exchange Gain (Loss)
We recorded a foreign exchange
loss of Ps. 58 million in 2021 compared to a foreign exchange loss of Ps. 0.4 million in 2021.
Income Tax
In 2022, we recorded a tax
provision of Ps. 88.7 million and an income tax profit provision. In 2021, we recorded a deferred income tax provision of Ps. 477 million.
Net Profit
We recorded a net profit of
Ps. 718 million in 2022, compared to a net profit of Ps. 716 million in 2021. Our net income in 2022 is attributable mainly to an increase
in the average price of steel tons produced of 22.5% and a lower tax provision of Ps. 389 million than in 2021.
48
Brazil Segment
Statements of Comprehensive Income
Comparison of Years Ended December 31, 2021
and 2022
Net Sales
Net sales decreased 2% to
Ps. 17,377 million in 2022 compared to Ps. 17,726 million in 2021. This resulted principally from very small variations in the number
of steel tons shipped and on the average price of finished steel products.
Shipments of finished steel
products decreased to 828,000 tons in 2022 compared to 857,000 tons in 2021 (including the shipment of the plants Cariacica and Itauna).
Cost of Sales
Our cost of sales increased
to Ps. 12,344 million in 2022 compared to Ps. 11,471 million in 2021. The average cost per ton of steel products sold increased 11.3%
compared to 2021. Cost of sales as a percentage of net sales was 71% in 2022, compared to 65% in 2021.
Gross Profit
Our gross profit was Ps. 5,033
million in 2022 compared to Ps. 6,254 million of gross profit in 2021. As a percentage of net sales, our gross profit was 29% in 2022,
compared to 35% of gross profit in 2021.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) were Ps. 1,618 million in 2022 compared to Ps. 878 million in 2021. Administrative expenses
as a percentage of net sales were 9% and 5% in 2022 and 2021, respectively. Technical administrative expenses, royalties and legal provisions
increased the administrative expenses.
Depreciation and amortization
expenses were Ps. 0.9 million in 2022 compared to Ps. 2 million in 2021.
Other Expense, Net
We recorded other income,
net of Ps.140 million in 2022.
We recorded other income,
net of Ps.2 million in 2021.
Interest Expense
We recorded an interest expense of
Ps. 384 million in 2022 compared to Ps. 96 million in 2021.
Foreign Exchange Gain (Loss)
We recorded a foreign exchange
loss of Ps. 60 million in 2022 this foreign exchange loss reflected the depreciation of the Brazilian real against the dollar in 2022
compared to a foreign exchange loss of Ps. 120 million in 2021.
Income Tax
In 2022 we recorded an income
tax provision of Ps. 645 million compared to Ps. 1,440 million of income tax provision in 2021.
Net Income (Loss)
We recorded a net income of
Ps. 2,466 million in 2022 compared to a net income of Ps. 3,722 million in 2021. The net income for the year 2022 compared to the net
income in 2021 is mainly as a result of an increase in administrative expenses and higher interest expense.
49
Consolidated Statements of Comprehensive Income
Comparison of Years Ended December 31, 2020 and 2021
Net Sales
Net sales increased 55%, to
Ps. 55,620 million in 2021 compared to Ps. 35,869 million in 2020. This increase resulted primarily from a 51% increase in the average
price per ton of steel products of 2021 compared to 2020. Total sales outside of Mexico increased 55%, to Ps. 27,560 million in 2021 compared
to Ps. 17,746 million in 2020. Total sales in Mexico increased 51%, from Ps. 18,123 million in 2020 to Ps. 28,060 million in 2021.
Shipments of finished steel
products increased 2.5%, to 2.504 million tons in 2021, compared to 2.441 million tons in 2020. Total sales volume outside of Mexico of
finished steel products increased 2.2% to 1.132 million tons in 2021, compared to 1.108 million tons in 2020, while total Mexican sales
increased 2.9%, from 1.333 million tons in 2020, compared to 1.372 million tons in 2021. The average price of steel products increased
51% in 2021 compared to 2020.
Cost of Sales
Our cost of sales increased
36.8%, from Ps. 29,212 million in 2020 to Ps. 39,968 million in 2021. The increase is mainly attributable to a 33.3% increase in the average
cost per ton of steel products sold. Cost of sales as a percentage of net sales was 72% in 2021 and 81% in 2020. We experienced higher
cost of sales at our Republic facilities, mainly as a result of (i) higher labor costs corresponding to our U.S. operations, and (ii)
the higher cost of raw materials, which our U.S. operations use in the production of SBQ steel. Hourly wages at our Mexican operations
were approximately U.S.$1.8 (Ps. 37) per hour in 2021 and U.S.$1.9 (Ps. 37) per hour in 2020, compared to U.S.$23.7 (Ps. 486) and U.S.$34
(Ps. 678) per hour for 2021 and 2020, respectively, at our U.S. operations. Although raw material costs are similar in the United States
of America and Mexico, our U.S. operations produce higher value-added SBQ steel, which requires more expensive raw materials such as chromium,
nickel, molybdenum and other alloys. Our Mexican operations require these alloys to a lesser extent, because they produce commodity steel
as well as SBQ steel.
Gross Profit
Our gross profit was Ps. 15,652
million in 2021 compared to a Ps. 6,658 million gross profit in 2020. This increase in gross profit is attributable mainly to an increase
of 63,000 tons of finished steel products shipped, a 51% increase in the average price of steel products sold, and a 33.3% increase in
the average cost per ton of steel products sold. As a percentage of net sales, our gross profit was 28% in 2021 and our gross profit was
18% in 2020.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) increased 1.1%, to Ps. 2,043 million in 2021, compared to Ps. 2,019 million in 2020. The variation
of Ps. 24 million corresponds to the decrease of Ps. 210 million in the Mexican segment (mainly legal expenses), and the increase of Ps.
217 million in the Brazil segment and an increase of Ps. 16 million in the U.S. segment. In 2021 and 2020, our general and administrative
expenses included Ps. 10.5 million and 11.2 million of amortization of the tangible and intangible assets registered principally in connection
with the acquisition of Republic.
Administrative expenses as
a percentage of net sales were 4% in 2021 and 6% in 2020. Depreciation and amortization expense were Ps. 256 million in 2021 compared
to Ps. 422 million in 2020.
50
Other (Income) Expense, Net
We recorded other expense,
net, of Ps. 77 million in 2021, mainly from account debugging.
We recorded other income,
net, of Ps. 547 million in 2020, reflecting (i) income of Ps. 232 million related to the sale of scrap, (ii) income of Ps. 257 million
from a tax benefit in our operations in Brazil.
Interest Income
We recorded interest income
of Ps. 66 million in 2021 compared to Ps. 108 million in 2020. Mainly due to interest charged to affiliated companies.
Interest Expense
We recorded interest expense
of Ps. 87 million in 2021 compared to Ps. 54 million in 2020, mainly as a result of higher use of financial services.
Foreign Exchange Loss (Gain)
We recorded a foreign exchange
gain of Ps. 325 million in 2021 compared to a foreign exchange loss of Ps. 363 million in 2020; this foreign exchange loss reflected the
2.9% depreciation of the peso against the dollar in 2021.
Income Tax
In 2021 we recorded an income
tax provision of Ps. 4,390 million, which included an income tax provision of Ps. 3,818 million and an income tax expense provision for
deferred income taxes of Ps. 572 million. In 2020 we recorded an income tax provision of Ps. 2,078 million, which included an income tax
provision of Ps. 1,831 million and an income tax expense provision for deferred income taxes of Ps. 247 million.
Our effective income tax rates
for 2021 and 2020 were 31.7% and 27.9%, respectively. According to the Income Tax Law in Mexico, the tax rate for the year 2021 and years
thereafter is 30%.
Net Income (Loss)
We recorded net profit of
Ps. 9,446 million in 2021, compared to net profit of Ps. 2,798 million in 2020. The net profit for the year 2021 compared to the net profit
in 2020 is mainly as a result of (i) a 51% increase in the average price of steel products sold, (ii) a 9% decrease in cost of sales,
(iii) the increase in the foreign exchange gain in 2021 to Ps. 325 million compared to the foreign exchange loss of Ps. 363 million in
2020 and (iv) the increase in the provision of income taxes in 2021 to Ps. 4,390 million compared to Ps. 2,078 million in 2020.
51
Mexican Segment
Statements of Comprehensive Income
Comparison of Years Ended December 31, 2020 and 2021
Net Sales
Net sales increased 51%, to
Ps. 29,678 million in 2021 compared to Ps. 19,661 million in 2020. This increase resulted principally from a 46.7% increase in the average
price per ton of steel products in 2021 compared to 2020.
Shipments of finished steel
products increased 2.9%, to 1.372 million tons in 2021, compared to 1.332 million tons in 2020.
Cost of Sales
Our cost of sales increased
38%, from Ps. 15,459 million in 2020 to Ps. 21,337 million in 2021, this increase is mainly attributable to an increase in the scrap cost.
As a percentage of net sales, our cost of sales was 72% in 2021, compared to 79% in 2020.
Gross Profit
Our gross profit increased
98.5%, to Ps. 8,341 million in 2021 compared to Ps. 4,202 million in 2020. This increase is attributable mainly to an increase of 46.7%
in the average price of steel products sold, decreased by a higher average cost of sales per ton of 34.1%. As a percentage of net sales,
our gross profit was 28% in 2021, compared to 21% in 2020.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) decreased 18.8%, to Ps. 908 million in 2021, compared to Ps. 1,118 million in 2020. The decrease
was mainly originated by lower legal expenses.
Administrative expenses as
a percentage of net sales were 3.1% in 2021 and 5.6% in 2020. Depreciation and amortization expense were Ps. 238 million in 2021 compared
to Ps. 283 million in 2020.
Other Expense (Income), Net
We recorded other expenses,
net, of Ps. 77.5 million in 2021, reflecting income related to account debugging.
We recorded other income, net, of Ps. 53 million
in 2020, reflecting an income related to the sale of scrap,
Interest Income
We recorded interest income
of Ps. 65.6 million in 2021 compared to Ps. 107 million in 2020. This interest income corresponds mainly to affiliates.
Interest Expense
We recorded interest expense
of Ps. 28.9 million in 2021, corresponding mainly to related party transactions that are not eliminated in the consolidated statement
of income, compared to Ps. 5 million of interest income in 2020.
Foreign Exchange Gain (Loss)
We recorded a foreign exchange
gain of Ps. 325 million in 2021 compared to a foreign exchange loss of Ps. 484 million in 2020; this foreign exchange reflected the 2.9%
depreciation of the Mexican peso against the dollar in 2021.
Income Tax
In 2021, we recorded an income
tax provision of Ps. 2,473 million, which included an income tax provision of Ps. 2,569 million and an income tax provision for deferred
income taxes of Ps. 96 million. In 2020, we recorded an income tax provision of Ps. 1,748 million, which included an income tax provision
of Ps. 1,460 million and an income tax provision for deferred income taxes of Ps. 288 million.
According to the Income Tax
Law in Mexico, the tax rate for 2021 and thereafter is 30%.
Net Income
We recorded net income of
Ps. 5,245 million in 2021, compared to net income of Ps. 1,008 million in 2020. This variance is attributable mainly to; (i) an increase
of 51% in the average price of steel products sold, (ii) less administrative expenses of Ps. 210 million, (iii) a foreign exchange gain
of Ps. 325 million in 2021 compared to Ps. 484 million of foreign exchange loss in 2020 and (iv) a higher income tax provision in 2021
of Ps. 2,473 million compared to Ps. 1,748 million in 2020.
52
USA Segment
Statements of Comprehensive Income
Comparison of Years Ended December 31, 2020 and 2021
Net Sales
Net sales increased 48%, to
Ps. 8,217 million in 2021 compared to Ps. 5,549 million in 2020. This increase resulted principally from an increase of 38,000 tons in
shipments of finished steel products and a higher than average price of steel products.
Shipments of finished steel products increased
16%, to 275,000 tons in 2021, compared to 237,000 tons in 2020.
The average price of steel products in pesos increased
27.7% in 2021 compared to 2020.
Cost of Sales
Our cost of sales increased
26.1%, from Ps. 5,677 million in 2020 to Ps. 7,159 million in 2021. The increase is mainly due to an increase of approximately 38,000
in tons of shipments of finished steel products and the 8.7% increase in the average cost per ton of steel products sold. Cost of sales
as a percentage of net sales was 87% in 2021, compared to 102% in 2020.
Gross Profit (Loss)
Our gross profit was Ps. 1,057
million in 2021 compared to a Ps. 128 million gross loss in 2020. As a percentage of net sales, our gross profit was 12.9% in 2021, mainly
attributable to an increase of approximately 38,000 tons of shipments of finished steel products and an increase of 27.7%, approximately,
in the average price per ton of steel products sold, compared to a gross loss of (2%) in 2020.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) were Ps. 257 million in 2021, compared to Ps. 241 million in 2020.
Administrative expenses as
a percentage of net sales were 3% in 2021 and 4% in 2020. Depreciation and amortization expense were Ps. 27 million in 2021 compared to
Ps. 25 million in 2020.
Other Income, Net
We recorded other income, net, of Ps. 454 million
in 2021, related to other financial operations.
We recorded other income, net, of Ps. 506 million
in 2020, related to scrap metal sold during the period.
Interest Income
We recorded an interest income of
Ps. 0 million in 2021 compared to Ps. 0 million in 2020.
Interest Expense
We recorded an interest expense of
Ps. 61 million in 2021 compared to Ps. 16 million in 2020.
Foreign Exchange Gain (Loss)
We recorded a foreign exchange
loss of Ps. 0.4 million in 2020 compared to a foreign exchange gain of Ps. 2 million in 2020.
Income Tax
In 2021, we recorded an income
tax provision of Ps. 477 million and an income tax profit provision. In 2020, we recorded an income tax provision of Ps. 119 million.
Net Profit
We recorded a net profit of
Ps. 716 million in 2021, compared to a net profit of Ps. 4 million in 2020. Our net income in 2021 is attributable mainly to an increase
in the average price of steel tons produced of 27.7% and the increase of 38,000 tons in shipments of finished steel products.
53
Brazil Segment
Statements of Comprehensive Income
Comparison of Years Ended December 31, 2020
and 2021
Net Sales
Net sales increased 66% to
Ps. 17,726 million in 2021 compared to Ps. 10,659 million in 2020. This increase resulted principally from a higher average price of finished
steel products.
Shipments of finished steel
products decreased to 857,000 tons in 2021 compared to 870,500 tons in 2020 (including the shipment of the plants Cariacica and Itauna).
Cost of Sales
Our cost of sales increased
to Ps. 11,471 million in 2021 compared to Ps. 8,075 million in 2020. The average cost per ton of steel products sold increased 44.3% compared
to 2020. Cost of sales as a percentage of net sales was 65% in 2021, compared to 76% in 2020.
Gross Profit
Our gross profit was Ps. 6,254
million in 2021 compared to Ps. 2,584 million of gross profit in 2020. As a percentage of net sales, our gross profit was 35% in 2021,
compared to 24% of gross profit in 2020.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) were Ps. 878 million in 2021 compared to Ps. 661 million in 2020. Administrative expenses as
a percentage of net sales were 5% and 6% in 2021 and 2020, respectively. Managerial expenses increased the administrative expenses.
Depreciation and amortization
expenses were Ps. 2 million in 2021 compared to Ps. 126 million in 2020.
Other Expense, Net
We recorded other income,
net of Ps.2 million in 2021.
We recorded other expense,
net, of Ps. 12 million in 2020.
Interest Expense
We recorded an interest expense of
Ps. 96 million in 2021 compared to Ps. 66 million in 2020.
Foreign Exchange Gain (Loss)
We recorded a foreign exchange
loss of Ps. 120 million in 2021. This foreign exchange loss reflected the depreciation of the Brazilian real against the dollar in 2021
compared to a foreign exchange loss of Ps. 1,096 million in 2020.
Income Tax
In 2021 we recorded an income
tax provision of Ps. 1,440 million compared to Ps. 211 million of income tax provision in 2020.
Net Income (Loss)
We recorded a net income of
Ps. 3,722 million in 2021 compared to a net income of Ps. 537 million in 2020. The net income for the year 2021 compared to the net income
in 2020 is mainly as a result of an increase of the average price of finished steel products shipped.
54
Consolidated Statements of Comprehensive Income
Comparison of Years Ended December 31, 2019 and 2020
Net Sales
Net sales increased 5%, to
Ps. 35,869 million in 2020 compared to Ps. 34,171 million in 2019. This increase resulted primarily from a 1% increase in the average
price per ton of steel products and an increase of 92,000 tons in shipments of finished steel products. Total sales outside of Mexico
increased 9%, to Ps. 17,746 million in 2020 compared to Ps. 16,297 million in 2019. Total sales in Mexico increased 1%, from Ps. 17,874
million in 2019 to Ps. 18,123 million in 2020.
Shipments of finished steel
products increased 4%, to 2.441 million tons in 2020, compared to 2.349 million tons in 2019. Total sales volume outside of Mexico of
finished steel products increased 14% to 1.202 million tons in 2020, compared to 1.055 million tons in 2019, while total Mexican sales
decreased 4%, from 1.294 million tons in 2019, compared to 1.239 million tons in 2020. The average price of steel products increased 1%
in 2020 compared to 2019.
Cost of Sales
Our cost of sales decreased
3%, from Ps. 30,067 million in 2019 to Ps. 29,212 million in 2020, which decrease is mainly attributable to a 6.5% decrease in the average
cost per ton of steel products sold. Cost of sales as a percentage of net sales was 81% in 2020 and 88% in 2019. We experienced higher
cost of sales at our Republic facilities, mainly as a result of (i) higher labor costs corresponding to our U.S. operations, and (ii)
the higher cost of raw materials, which our U.S. operations use in the production of SBQ steel. Hourly wages at our Mexican operations
were approximately U.S.$1.9 (Ps. 37) per hour in 2020 and U.S.$1.9 (Ps. 36) per hour in 2019, compared to U.S.$34 (Ps. 678) and U.S.$50.6
(Ps. 954) per hour for 2020 and 2019, respectively, at our U.S. operations. Although raw material costs are similar in the United States
of America and Mexico, our U.S. operations produce higher value-added SBQ steel, which requires more expensive raw materials such as chromium,
nickel, molybdenum and other alloys. Our Mexican operations require these alloys to a lesser extent, because they produce commodity steel
as well as SBQ steel.
Gross Profit
Our gross profit was Ps. 6,658
million in 2020 compared to a Ps. 4,104 million gross profit in 2019. This increase in gross profit is attributable mainly to an increase
of 92,000 tons of finished steel products shipped, a 1% increase in the average price of steel products sold, and a 6.5% decrease in the
average cost per ton of steel products sold. As a percentage of net sales, our gross profit was 18% in 2020 and our gross profit was 12%
in 2019.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) increased 23%, to Ps. 2,019 million in 2020, compared to Ps. 1,637 million in 2019. The variation
of Ps. 382 million corresponds to the increase of Ps. 270 million in the Mexican segment (mainly expenses originated from depreciation
and legal expenses) and the increase of Ps. 140 million in the Brazil segment (expenses from new companies and higher depreciation expenses).
In 2020 and 2019, our general and administrative expenses included Ps. 11.2 million and 10 million of amortization of the tangible and
intangible assets registered principally in connection with the acquisition of Republic.
Administrative expenses as
a percentage of net sales were 6% in 2020 and 5% in 2019. Depreciation and amortization expense were Ps. 422 million in 2020 compared
to Ps. 220 million in 2019.
Other (Income) Expense, Net
We recorded other expense,
net, of Ps. 547 million in 2020, reflecting (i) income of Ps. 232 million related to the sale of scrap, (ii) income of Ps. 257 million
from a tax benefit in our operations in Brazil.
We recorded other income,
net, of Ps. 137 million in 2019, reflecting (i) income of Ps. 3 million related to the sale of scrap, (ii) expense of Ps. 125 million
for debugging accounts, (iii) income of Ps. 6 million for recovery of insurance companies and (iv) expense related to other financial
operations of Ps. 21 million.
55
Interest Income
We recorded interest income
of Ps. 108 million in 2020 compared to Ps. 146 million in 2019. This decrease is attributable mainly to interest charged to affiliated
companies.
Interest Expense
We recorded interest expense
of Ps. 54 million in 2020 compared to Ps. 55 million in 2019. This decrease is attributable mainly to the lower use of financial services.
Foreign Exchange Loss (Gain)
We recorded a foreign exchange
loss of Ps. 363 million in 2020 compared to a foreign exchange loss of Ps. 785 million in 2019; this foreign exchange loss reflected the
6% depreciation of the peso against the dollar in 2020, compared to the 4% appreciation of the Mexican peso against the dollar in 2018.
Income Tax
In 2020 we recorded an income
tax provision of Ps. 2,078 million, which included an income tax provision of Ps. 1,831 million (includes Ps. 554.4 million of the income
tax derived from a review of the Tax Administration System) (SAT) and an income tax expense provision for deferred income taxes of Ps.
247 million. In 2019 we recorded an income tax provision of Ps. 3,276 million, which included an income tax provision of Ps. 2,324 million
(includes Ps. 2,324 million of the income tax derived from a review of the Tax Administration System) (SAT) and an income tax provision
for deferred income taxes of Ps. 202 million.
Our effective income tax rates
for 2020 and 2019 were 27.9% and 58.2%, respectively. According to the Income Tax Law in Mexico, the tax rate for the year 2020 and years
thereafter is 30%. We have implemented the practice of recognizing the benefit derived from the amortization of tax losses for the period
in which such losses are actually amortized. In 2020 and 2019, we amortized tax losses which generated a benefit on income tax of approximately
Ps. 17 million and Ps. 987 million, respectively. These effects caused our effective tax rates during 2020 to be lower than the statutory
tax rate.
Net Income (Loss)
We recorded net profit of
Ps. 2,798 million in 2020, compared to net loss of Ps. 1,640 million in 2019. The net profit for the year 2020 compared to the net loss
in 2019 is mainly as a result of (i) a 1% increase in the average price of steel products sold, (ii) a 3% decrease in the average cost
per ton of steel products sold, (iii) the decrease in the foreign exchange loss in 2020 to Ps. 363 million compared to Ps. 785 million
in 2019 and (iv) the decrease in the provision of income taxes in 2020 to Ps. 1,919 million compared to Ps. 3,276 million in 2019.
56
Mexican Segment
Statements of Comprehensive Income
Comparison of Years Ended December 31, 2019 and 2020
Net Sales
Net sales increased 6%, to
Ps. 19,661 million in 2020 compared to Ps. 18,531 million in 2019. This increase resulted principally from a 8.8% increase in the average
price per ton of steel products in 2020 compared to 2019.
Shipments of finished steel
products decreased 2.5%, to 1.332 million tons in 2020, compared to 1.367 million tons in 2019.
Cost of Sales
Our cost of sales increased
3.5%, from Ps. 14,935 million in 2019 to Ps. 15,459 million in 2020, which increase is mainly attributable to the increase in the average
cost per ton of steel products sold. As a percentage of net sales, our cost of sales was 79% in 2020, compared to 81% in 2019.
Gross Profit
Our gross profit increased
17%, to Ps. 4,202 million in 2020 compared to Ps. 3,596 million in 2019. This increase is attributable mainly to an increase of 9% in
the average price of steel products sold. As a percentage of net sales, our gross profit was 21% in 2020, compared to 19% in 2019.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) increased 31.7%, to Ps. 1,118 million in 2020, compared to Ps. 848 million in 2019. The increase
of Ps. 270 million were mainly expenses originated by depreciation and legal costs.
Administrative expenses as
a percentage of net sales were 6% in 2020 and 5% in 2019. Depreciation and amortization expense were Ps. 283 million in 2020 compared
to Ps. 147 million in 2019.
Other Expense (Income), Net
We recorded other income,
net, of Ps. 53 million in 2020, reflecting an income related to the sale of scrap,
We recorded other expense,
net, of Ps. 175 million in 2019, reflecting (i) an income of Ps. 3 million related to the sale of scrap, (ii) income of Ps. 6 million
for recovery of insurance companies, (iii) other expense of Ps. 130 million for debugging accounts and (iv) other expense, net, related
to other financial operations of Ps. 54 million.
Interest Income
We recorded interest income
of Ps. 107 million in 2020 compared to Ps. 146 million in 2019. This interest income corresponds mainly to affiliates.
Interest Expense
We recorded interest expense
of Ps. 5 million in 2020, corresponding mainly to related party transactions that are eliminated in the consolidated statement of income,
compared to Ps. 3 million of interest income in 2019.
Foreign Exchange Gain (Loss)
We recorded a foreign exchange
loss of Ps. 484 million in 2020 compared to a foreign exchange gain of Ps. 628 million in 2019; this foreign exchange reflected the 5.6%
depreciation of the Mexican peso against the dollar in 2019.
Income Tax
In 2020, we recorded an income
tax provision of Ps. 1,748 million, which included an income tax provision of Ps. 1,460 million and an income tax provision for deferred
income taxes of Ps. 288 million. In 2019, we recorded an income tax provision of Ps. 3,505 million, which included an income tax provision
of Ps. 3,492 million (includes Ps. 2,733 million of the income tax derived from a review of the Tax Administration System) (SAT) and an
income tax provision for deferred income taxes of Ps. 13 million.
According to the Income Tax Law in Mexico, the
tax rate for 2020 and thereafter is 30%.
Net Income
We recorded net income of
Ps. 1,008 million in 2020, compared to net loss of Ps. 1,412 million in 2019. This variance is attributable mainly to; (i) an increase
of 8% in the average price of steel products sold, (ii) the increase of Ps. 269 million in our administrative expenses, (iii) a foreign
exchange loss of Ps. 484 million in 2020 compared to Ps. 628 million of foreign exchange loss in 2019 and (iv) the decrease in the provision
of income taxes in 2020 to Ps. 1,748 million compared to Ps. 3,505 million in 2019.
57
USA Segment
Statements of Comprehensive Income
Comparison of Years Ended December 31, 2019
and 2020
Net Sales
Net sales decreased 22%, to
Ps. 5,549 million in 2020 compared to Ps. 7,120 million in 2019. This decrease resulted principally from a decrease of 61,000 tons in
shipments of finished steel products.
Shipments of finished steel
products decreased 20%, to 237,000 tons in 2020, compared to 298,000 tons in 2019.
The average price of steel
products in pesos decreased 2.1% in 2020 compared to 2019.
Cost of Sales
Our cost of sales decreased
26.7%, from Ps. 7,753 million in 2019 to Ps. 5,677 million in 2020, the decrease is mainly due to a decrease of approximately 20% in tons
of shipments of finished steel products and the 8% decrease in the average cost per ton of steel products sold. Cost of sales as a percentage
of net sales was 102% in 2020, compared to 109% in 2019.
Gross Profit (Loss)
Our gross loss was Ps. 128
million in 2020 compared to a Ps. 632 million gross loss in 2019. As a percentage of net sales, our gross loss was (2%) in 2020, mainly
attributable to a decrease of approximately 20% in tons of shipments of finished steel products and a decrease of 8%, approximately, in
the average cost per ton of steel products sold, compared to a gross loss of (9%) in 2019. The selling steel prices throughout the year
also impacted our margin since prices for steel products charged to our customers were gradually lower than our costs of raw material
purchases as a result of the time lag between the production and sales cycles.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) was Ps. 241 million in 2020, compared to Ps. 268 million in 2019.
Administrative expenses as
a percentage of net sales were 4% in 2020 and 4% in 2019. Depreciation and amortization expense were Ps. 25 million in 2020 compared to
Ps. 50 million in 2019.
Other Income, Net
We recorded other income,
net, of Ps. 506 million in 2020, related to scrap metal sold during the period.
We recorded other income,
net, of Ps. 71 million in 2019, reflecting (i) other income, net, of Ps. 38 million for debugging accounts and (ii) other income, net,
of Ps. 33 million related to other financial operations.
Interest Income
We recorded an interest income of Ps. 0 million in 2020
compared to Ps. 0 million in 2019.
Interest Expense
We recorded an interest expense of
Ps. 16 million in 2020 compared to Ps. 85 million in 2019.
Foreign Exchange Gain (Loss)
We recorded a foreign exchange
gain of Ps. 2 million in 2020 compared to a foreign exchange gain of Ps. 3 million in 2019.
Income Tax
In 2020, we recorded an income
tax profit provision of Ps. 1,528 million and an income tax profit provision for deferred income taxes of Ps. 220 million for deferred
income taxes. In 2019, we recorded an income tax profit provision of Ps. 237 million.
Net loss
We recorded a net profit of
Ps. 4 million in 2020, compared to a net loss of Ps. 674 million in 2019. Our net income in 2020 is attributable mainly to a decrease
in the average cost of steel tons produced This compared to 2019, which was mainly impacted due to a decrease of 61,000 tons in shipments
of finished steel products and a decrease of 8% in the average cost of steel products sold.
58
Brazil Segment
Statements of Comprehensive Income
Comparison of Years Ended December 31, 2019
and 2020
Net Sales
Net sales increased 25% to
Ps. 10,659 million in 2020 compared to Ps. 8,520 million in 2019. This increase resulted principally from an increase of 186,000 tons
of shipments of finished steel products.
Shipments of finished steel
products increased to 870,500 tons in 2020 compared to 684,000 tons in 2019 (including the shipment of the new plants acquired in 2018,
Cariacica and Itauna.
The average price of steel
products in pesos decreased 1.7% in 2020 compared to 2019.
Cost of Sales
Our cost of sales increased
to Ps. 8,075 million in 2020 compared to Ps. 7,380 million in 2019. This increase is mainly attributable to the increase of the shipments
of finished steel products of 186,000 tons in 2020.
The average cost per ton of
steel products sold decreased 14% compared to 2019. Cost of sales as a percentage of net sales was 76% in 2020, compared to 87% in 2019.
Gross Profit
Our gross profit was Ps. 2,584
million in 2020 compared to Ps. 1,140 million of gross profit in 2019. This increase in gross profit is attributable mainly to an increase
of 186,000 tons of finished steel products shipped, a 1.7% decrease in the average price of steel products sold, and a 14% decrease in
the average cost per ton of steel products sold. As a percentage of net sales, our gross profit was 24% in 2020, compared to 13% of gross
profit in 2019.
Administrative Expenses
Our administrative expenses
(including depreciation and amortization) were Ps. 661 million in 2020 compared to Ps. 521 million in 2019. Operating expenses as a percentage
of net sales were 6% in 2020 and 2019. Expenses for new companies acquired in 2018 increased the administrative expenses.
Depreciation and amortization expenses were Ps.
220 million in 2020 compared to Ps. 126 million in 2019.
Other Expense, Net
We recorded other expense, net of Ps.12 million
in 2020.
We recorded other expense, net, of Ps. 32 million
in 2019, for debugging accounts.
Interest Expense
We recorded an interest expense of
Ps. 66 million in 2020 compared to Ps. 111 million in 2019.
Foreign Exchange Gain (Loss)
We recorded a foreign exchange
loss of Ps. 1,096 million in 2020. This foreign exchange loss reflected the 29% depreciation of the Brazilian real against the dollar
in 2020 compared to 2019 compared to a foreign exchange loss of Ps. 177 million in 2019.
Income Tax
In 2020 we recorded an income
tax provision for deferred income taxes of Ps. 211 million compared to Ps. 8 million of income tax provision in 2019.
Net Income (Loss)
We recorded a net income of
Ps. 537 million in 2020 compared to a net income of Ps. 291 million in 2019. The net income for the year 2020 compared to the net income
in 2019 is mainly as a result of an increase of 186,000 tons of finished steel products shipped.
59
B. Liquidity and Capital Resources
On December 31, 2022, our
total consolidated debt was Ps. 5,847 million (U.S.$302,000) of 10.5% medium-term notes ("MTNs") due 1998, which remained
outstanding after we conducted exchange offers for the MTNs in October 1997 and August of 1998. We could not identify the holders of such
MTNs at the time of the exchange offers and as a result such MTNs, which matured in 1998, have not been paid and remain outstanding.
We depend heavily on cash
generated from operations as our principal source of liquidity. Other sources of liquidity have included financing made available to us
by our parent Industrias CH (primarily in the form of equity or debt, substantially all of which was subsequently converted to equity),
primarily for the purpose of repaying third party indebtedness, as well as limited amounts of vendor financing. On February 8, 2007, we
completed a public offering of ADRs and series B shares and raised cash proceeds of approximately Ps. 2,421 million
(
U.S.$214 million).
As of December 31, 2022, we had cash and cash equivalents of Ps. 21,546 million and as of December 31, 2021 we had cash and cash equivalents
of Ps. 15,130 million. We believe that this amount of cash generated from operations will be sufficient to satisfy our currently anticipated
cash requirements, including our currently anticipated capital expenditures.
Our principal use of cash
has generally been to fund our operating activities, to acquire businesses and to fund our capital expenditure programs. The following
is a summary of cash flows for the three years ended December 31, 2020, 2021 and 2022:
Principal Cash Flows
Years ended December 31,
2020
2021
2022
(millions of pesos)
Funds provided by operating activities
3,634
8,387
8,790
Funds used in investing activities
(833
)
(1,010
)
(4,138
)
Funds used in financing activities
(2,086
)
(162
)
2,235
Our net funds provided by
operations were Ps. 8,790 million in 2022 compared to Ps. 8,387 million of net funds provided by operations in 2021. The increase of Ps.
403 million in the net funds provided by operations between 2022 and 2021 originated mainly from operations.
We attribute our net funds
used in investing activities primarily to the acquisition of new facilities, property, plant and equipment and other non-current assets.
Our net funds used in investing activities were Ps. 4,138 million in 2022 compared to Ps. 1,010 million in 2021. In 2022, the acquisition
of property, plant and equipment was Ps.1,696 million, we had interest income of Ps. 446 million, we invested in short-term investments
of Ps- 2,076 million, we had a loss in financial instruments of Ps. 779 million and other non-current assets used for Ps. 33 million.
In 2021 the acquisition of property, plant and equipment was Ps.1,066 million, we had interest income of Ps. 66 million and other non-current
assets used for Ps. 9 million. Our net funds used in investing activities were Ps. 833 million in 2020 compared to Ps. 107 million in
2019. In 2020 the acquisition of property, plant and equipment was Ps.951 million, we had interest income of Ps. 108 million and other
non-current assets used for Ps. 11 million.
Our net funds generated by
financing activities in 2022 were Ps. 2,535 million, compared to Ps. 162 million used by financing activities in 2021. In 2022, we obtained
Ps. 2,381 million in loans from related parties, there was a decrease of Ps. 90 million in the buy-back of our own shares and we paid
interest for Ps. 56 million. In 2021, there was an decrease of Ps. 74 million in the buy-back of our own shares and we paid interest for
Ps. 87 million. Our net funds used by financing activities in 2020 were Ps. 2,086 million, compared to Ps. 211 million used by financing
activities in 2019. In 2020, there was an increase of Ps. 42 million in the buy-back of our own shares, we paid dividends of Ps.1,990
and we paid interest charges of Ps. 54 million.
60
As of December 31, 2022, we
have the following commitments:
On May 1, 2018, the Company
entered into an agreement with ArcelorMittal S.A. in Brazil, for the acquisition of the steel production plants in Cariacica and ltauna
and drawing equipment for the production of wires and derivatives.
The Cariacica unit has the
capacity to produce 600,000 metric tons of liquid steel per year and 450,000 metric tons of rolled steel products. In 2022 and 2021, said
plant has more than 800 employees in both periods and can produce rebar and light structural sections. The factory is located in the city
of Cariacica, next to the city of Victoria, in the state of Espirito Santo, on a land of more than 1,200,000 m2.
The ltauna unit has an installed
capacity to produce 120,000 metric tons per year of rolled steel products, being able to manufacture light structural profiles and rods.
The plant is located in the city of ltauna in the state of Minas Gerais, less than 100 kilometers away from Belo Horizonte, in 2022 and
2021 it has 160 and 145 employees respectively. The factory was leased under a contract expiring in August 2020, however, upon expiration
of said contract, the purchase of the Itaúna factory was formalized. With this acquisition, it is expected to have greater stability
in the market.
Republic has leased certain
equipment, office space and computer equipment under operating contracts that cannot be cancelled. These rents expired on various dates.
During the years ended December 31, 2022 and 2021, the expense related to the income from these operations amounted to USD$0.0 million
and USD$0.0 million, respectively. There are currently no additional obligations beyond 2020.
In January 2013, Republic
entered into an agreement with EnerNOC which enables Republic to receive payments for reducing the electricity consumption during a dispatch
declared by PJM Interconnection as an emergency. The agreement is for 5 years, effective January 31, 2013 and expired on May 31, 2018.
The agreement was extended through May 31, 2022 on that date. In January 2022, Republic entered into a similar agreement with NRG Curtailment
Solutions, Inc. with a term of five years. During the years ended December 31, 2022 and 2021, Republic recognized income of Ps. 11.6 million
(U.S.$0.6 million) and of Ps. 24.6 million (U.S.$1.2 million), respectively.
In January 2018, the Company
entered into a contract with the supplier ECOM, LTDA, for an amount of U.S.$6.3 million (Ps. 124 million) for the purchase of 10,000 MWH
of energy per month, for its subsidiary GV do Brasil Industria e Comercio de Aço LTDA. The monthly payments expire 6 days after
the closing date of the month. The contract ended in February 2020.
On February 22, 2018, a contract
was signed with Primetals Technologies of Italy, the United States of America and Mexico for the reconstruction of the rolling mill and
the supply of a new reheating furnace for the Mexicali plant, which will increase capacity of finished product manufacturing from 17,500
to 22,500 tons per month. As of January 2021, steel bars are already being produced. Currently, some adjustments are being made to start
the production of steel rods and steel profiles. The budget used for this project is U.S.$24 million (Ps. 492 million).
In order to maintain and increase
the continuity and quality of the electric supply in all the Group's clans, the scheme changed from Basic Supply (SSB) to Qualified
Supply Service (SSC), with the provision of acquiring energy in the wholesale electricity market. This project only requires modernization
of the set of equipment that records the consumption measurements of the electrical substations of each plant. We are seeking to achieve
a more efficient, safe, clean and transparent electrical service and more competitive prices than our current costs. The cost of this
project has been U.S.$1.415 million, as of October 2021. The modernization of the Mexicali plan is ongoing.
On December 20, 2020, the
purchase of the Itauna plant was made by Cia. Siderúrgica de Espirito Santo, S.A. to Compañia Itaunense Energia y Participacoes
Real Estate and Real Estate Equipment, located on Rua Clara Chaves street in Villa Santa Maria, city of Itauna, committing to pay R$ 4.0
million reais (U.S. $ 0.7 million) per month, up to a value of R$ 105.0 million reais (U.S. $18.8 million), payments made until June 2022.
61
Our Brazil's facilities
electric energy purchase agreements have been made with different termination dates as of June 30, 2023 with the supplier Newcom for R$9.48
million, another agreement was celebrated with ENEL for R$17.05 million, with termination date on December 31, 2023. With energy suppliers
NEWCOM for R$ 33.9 million and AMERICA for R$16.5 million.
In 2021, Republic signed an
agreement with SMS Group to purchase and build machinery in order to fulfill its contract with GV Do Brasil for the turn key project.
C. Research and Development, Patents and Licenses
The San Luis facilities are
registered with the Mexican Institute of Industrial Property ("IMPI") for the trademarks "SAN" and "Aceros
San Luis." The trademark "Grupo Simec" is registered with the IMPI. On October 11, 2017, Simec International 6, S.A.
de C.V., concluded the registration of the patent "
Fabricación de Aceros de Mecanizado Fácil con Plomo en la Máquina
de Colada Continua
" (Manufacture of Easy Machining Steels with Lead in Continuous Casting Machine) in the IMPI.
D. Trend Information
In the first quarter of 2023,
net sales increased by 26% as compared to the fourth quarter of 2022. Sales in tons of finished steel increased by 13% in the first quarter
of 2023 as compared to the fourth quarter of 2022. Prices of finished products sold in the first quarter of 2023 increased by approximately
12% as compared to the fourth quarter of 2022.
E. Critical Accounting Estimates
The discussion in this section
is based upon our consolidated financial statements, which have been prepared in accordance with IFRS. The preparation of these financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at year-end, and the reported amount of revenues and expenses during the year. Management regularly
evaluates these estimates, including those related to the carrying value of property, plant and equipment and other non-current assets,
inventories and cost of sales, income taxes, foreign currency transactions and exchange differences, liabilities for deferred income taxes,
valuation of financial instruments, obligations relating to employee benefits, potential tax deficiencies, environmental obligations,
and potential litigation claims and settlements. Management estimates are based on historical experience and various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Accordingly, actual results may differ materially from
current expectations under different assumptions or conditions.
Management believes that the
critical accounting policies which require the most significant judgments and estimates used in the preparation of the consolidated financial
statements relate to deferred income taxes, the impairment of property, plant and equipment, impairment of intangible assets, valuation
allowance on accounts receivable and inventories obsolescence. We evaluate the recoverability of operating tax losses (NOL) carry forwards,
and only for those who have probability of being recovered is determined a deferred tax asset. The final realization of deferred tax assets
depends on the generation of taxable profits in the periods when the temporary differences are deductible. Upon carrying out this evaluation,
we considered the expected reversal of deferred tax liabilities, projected taxable profit and planning strategies. Based on the company's
evaluation, it determined the amount of deferred tax assets that is more likely than not to be realized in the future against those taxable
profits.
We evaluate periodically the
adjusted values of our property, plant and equipment and intangible assets to determine whether there is an indication of potential impairment.
Impairment exists when the carrying amount of an asset exceeds net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds
the fair value. Assets to be disposed of are reported at the lower of the carrying amount or realizable value. Significant judgment is
involved in estimating future revenues and cash flows or realizable value, as applicable, of our property, plant and equipment due to
the characteristics of those assets. The class of our assets which most require complex determinations based upon assumptions and estimates
relates to indefinite lived intangibles including goodwill, due to the current market environment.
62
In June of 2015, Republic
Steel temporarily idled the newly constructed electric arc furnace at the Lorain, Ohio, facility in response to the severe economic downturn
in the energy exploration sector following the sharp drop in the price of oil which has led to significant market declines and demand
for product. As a consequence of this event, management determined a triggering event took place to where the long-lived assets at the
Lorain facility may not be fully recoverable. Management performed an analysis of the fair value of the Lorain facility with the assistance
of an independent valuation firm and determined the net book value exceeded the fair value by approximately U.S.$130.7 million (Ps. 2,701
million) and as such recognized an asset impairment of this amount during the year ended December 31, 2015. The fair value determination
at the Lorain facility was based on an independent valuation of the Lorain melt shop assets using the comparable match method of the market
approach. The income approach was not considered an appropriate fair value measurement due to the absence of reliable forecast data as
the facility was idled indefinitely in early 2016.
Management has no near-term
plans to restart the facility, except for the Lorain 9/10" Mill, which is in the process of being recommissioned due to market demand
for cold heading quality steel (CHQ) and special bar quality steel (SBQ). The expectation is that it will be restarted when market conditions
improve substantially, particularly in the oil and gas drilling industry. The Company continues to incur costs to maintain the temporarily
idled Lorain facility and coke, in anticipation of bringing the entire facility back on line. Restarting the facility will require
certain capital expenditures to restore the equipment to productive status. However, there remains significant uncertainty as to if and
when the facility will be restarted and the Company cannot provide any assurances that will restart the facility at all and on economically
feasible terms. During 2022 and 2021, the Company invested in certain improvements in the Lorain facility so as to be better prepared
to reactivate the plant, with USD$ 5.5 and USD$ 15.6 million recorded to construction-in-progress for the years ended December 31, 2022
and 2021, respectively. The construction in progress in the last 3 years amount to USD $27.1 million. Management expects to incur USD$
4.0 million in additional costs related to starting up the facility. The Company has property, plant and equipment with a net book value
of approximately U.S.$61.7 (Ps. 1,194.6 million), U.S.$54.6 (ps. 1,120 million) and U.S.$41.5 (Ps. 827 million) as of December 31, 2022,
2021 and 2020, respectively, pertaining to the Lorain, Ohio, facility, after recording an impairment charge of U.S. $130.7 million (Ps.
2,701 million) in 2015 (the impairment charge did not impact the cash flows as it was not a cash expenditure). Management further assessed
if there were any impairments at the Company's other asset groups in accordance with IFRS and determined that as of December 31,
2021, no other asset groups were impaired based on current projections. No further impairment was considered necessary or appropriate.
As discussed in note 9 to
our audited financial statements included elsewhere in this Annual Report, management periodically evaluates the potential degradation
of coke inventory to determine whether it remains suitable as a blast furnace input for our operations or, alternatively, should be made
available for sale to other companies using other blast furnaces. Each year we hire a third-party expert to evaluate the impairment of
coke and determine its fair value. The fair value of coke has been decreasing, as can be seen in the following table, and its valuation
is impacted by the exchange rate of the peso against the U.S. dollar:
Net
Tons
Metric
Tons
U.S.$
    Cost
(1)
Cost
U.S.$/MT
Market
U.S.$/MT
(2)
Market
Value
(1)
12/31/2020
Coke inventory
150,509
136,541
U.S.$
99,932,739.59
U.S.$
731.88
U.S.$
350.00
U.S.$
47,789,350.00
2021
Sale of Coke
0
0
0
12/31/2021
Coke inventory
150,509
136,541
U.S.$
99,932,739.59
U.S.$
731.88
U.S.$
465.50
U.S.$
63,559,835.50
2022
Sale of Coke
325
295
0
12/31/2022
Coke inventory
150,184
136,246
U.S.$
99,716,832.59
U.S.$
731.88
U.S.$
469.00
U.S.$
63,899,374.00
(
1)
In 2022, the applicable exchange rate was 19.36 per 1 U.S. dollar. In 2021, the applicable exchange rate was 20.52 per 1 U.S. dollar. In 2020, the applicable exchange rate was 19.93 pesos per 1 U.S. dollar.
(2)
Market price of Furnace coke quoted by Platts "SBB STEEL MARKETS DAILY" - 66/65 CCSR - FOB N.China
63
In assessing the recoverability
of the goodwill and other intangibles, we must make assumptions regarding estimated future cash flows and other factors to determine the
fair value of the respective assets. We perform an annual review in the fourth quarter of each year, or more frequently if indicators
of potential impairment exist, to determine if the carrying value of recorded goodwill is impaired. The impairment review process compares
the fair value of the reporting unit in which goodwill resides to its carrying value. We estimate the reporting unit's fair value
based on a discounted future cash flow approach that requires estimating income from operations. In order to estimate our cash flows used
in impairment computations, we considered the following:
●
our history of earnings;
●
our history of capital expenditures;
●
the remaining useful lives of our primary assets;
●
current and expected market and operating conditions; and
●
our weighted average cost of capital.
Other intangible assets are
mainly comprised of trademarks, customer list and non-competition agreements. When impairment indicators exist, or at least annually for
indefinite live intangibles, we determine our projected revenue streams over the estimated useful life of the asset. In order to obtain
undiscounted and discounted cash flows attributable to each intangible asset, such revenues are adjusted for operating expenses, changes
in working capital and other expenditures as applicable, and discounted to net present value using the risk adjusted discount rates of
return. As of December 31, 2021 and 2022, there was no impairment charge to other intangible assets.
As a result of the downturn
in the construction industry in Mexico during 2009 and the negative impact the downturn had on our operations mainly at the San Luis facilities,
in which goodwill resides we adjusted the key assumptions used in the valuation model. As of December 31, 2021 and 2022, there was no
impairment charge related to the San Luis facilities.
As of December 31, 2022, the
main key assumptions used in the valuation models of the San Luis reporting unit are as follows:
●
discount rate: 14.9%; and
●
sales: we estimate a decrease in sales volume of approximately 10.6% in 2023, mainly attributable to a decrease in volume due to the industries' consolidation process. After 2024, no sales increases in volume terms are considered in the valuation model. For the years after 2023, we estimate only an increase in sales prices in line with estimated inflation.
If these estimates or their
related assumptions for prices and demand change in the future, we may be required to record additional impairment charges for these assets.
With respect to valuation
allowance on accounts receivable, on a periodic basis management analyzes the recoverability of accounts receivable in order to determine
if, due to credit risk or other factors, some receivables may not be collected. If management determines that such a situation exists,
the book value of the non-recoverable assets is adjusted and charged to the income statement through an increase in the doubtful accounts
allowance. This determination requires substantial judgment by management. As a result, final losses from doubtful accounts could differ
significantly from estimated allowances.
64
We apply judgment at each
balance sheet date to determine whether the slow-moving inventory is impaired. Inventory is impaired when the carrying value is greater
than the net realizable value.
The reserve for environmental
liabilities represent the estimated environmental remediation costs that we believe are going to incur. These estimates are based on currently
available data, existing technology, the current laws and regulations and take into account the likely effects of inflation and other
economic and social factors. The time in which we could incur these costs cannot be determined reliably at this time due to the absence
of deadlines for remediation under the laws and regulations which apply to remediation costs will be made.
New Accounting Pronouncements
New standards and amendments issued but not yet
effective for year ending December 31, 2022
The following new standards and amendments are
not yet effective but may have an impact on the financial statements of the Group in a future period.
☐
Amendments to IAS 1 - Classification of Liabilities as Current
or Non-current
☐
Amendments to IFRS 10 and IAS 28 - Sale or contribution of
assets between an investor and its associate or joint venture
☐
Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure
of Accounting Policies
☐
Amendments to IAS 8 - Disclosure of Accounting Policies and
Definition of Accounting Estimates
☐
Amendments to IAS 12 - Deferred tax related to assets and
liabilities arising from a single transaction
Amendments to IAS 1 'Presentation of financial
statements' clarify requirements for the presentation of liabilities in the statement of financial position as current or non-current.
The meaning of settlement of a liability is also clarified. The amendments are applicable for annual periods commencing on or after 1
January 2023.
Amendments to IFRS 10 'Consolidated financial
statements' and IAS 28 'Investments in associates' clarify the accounting treatment for sales or contribution of assets
between an investor and its associates or joint ventures. Where the non-monetary assets constitute a business, the investor will recognize
the full gain or loss on the sale or contribution of assets. Otherwise, the gain or loss is recognized by the investor only to the extent
of the other investor's interests in the associate or joint venture. The amendments have been deferred until IASB has finalized
its research project on the equity method.
Amendments to Disclosure of Accounting Policies
and Definition of Accounting Estimates modify:
●
IFRS 7, to clarify that information about measurement bases
for financial instruments is expected to be material to an entity's financial statements;
●
IAS 1, to require entities to disclose their material accounting
policy information rather than their significant accounting policies;
●
IAS 8, to clarify how entities should distinguish changes
in accounting policies and changes in accounting estimates;
65
●
IAS 34, to identify material accounting policy information
as a component of a complete set of financial statements; and
●
IFRS Practice Statement 2 Making Materiality Judgements, to
provide guidance on how to apply the concept of materiality to accounting policy disclosures.
Amendments to Deferred tax related to assets and
liabilities arising from a single transaction modify IAS 12 to clarify the accounting for deferred tax on transactions that, at the time
of the transaction, give rise to equal taxable and deductible temporary differences. In specified circumstances, entities are exempt from
recognizing deferred tax when they recognize assets or liabilities for the first time. The amendments clarify that the exemption does
not apply to transactions for which entities recognize both an asset and a liability and that give rise to equal taxable and deductible
temporary differences. This may be the case for transactions such as leases and decommissioning, restoration and similar obligations.
Entities are required to recognize deferred tax on such transactions.
The Standard amends IFRS 1 to require deferred
tax related to leases and decommissioning, restoration and similar obligations to be recognized by first-time adopters at the date of
transition to International Accounting Standards, despite the exemption set out in IAS 12.
At the date of issuance of
our consolidated financial statements, these new standards have not had any effect on our financial information.
Item 6. Directors, Senior Management and
Employees
A. Directors and Senior Management
Our Board of Directors
Our board of directors is
responsible for managing our business. Pursuant to our by-laws, the board of directors shall consist of a maximum of 21 but not less than
five members elected at an ordinary general meeting of shareholders. Our board of directors currently consists of five directors, each
of whom is elected at the annual shareholders' meeting for a term of one year with an additional period of thirty days, if a successor
has not been appointed. The board of directors may appoint provisional directors until the shareholders' meeting appoints the new
directors. Under the Mexican Securities Market Law and our by-laws, at least 25% of our directors must be independent. Under the law,
the determination as to the independence of our directors made by our shareholders' meeting may be contested by the CNBV. In compliance
with our by-laws and applicable Mexican law, our board of directors meets on a quarterly basis and resolutions adopted by a majority of
directors at the meeting are valid resolutions.
Election of the Board of Directors
At each shareholders'
meeting for the election of directors, the holders of shares are entitled pursuant to our by-laws to elect the directors. Each person
(or group of persons acting together) holding 10% of our capital stock is entitled to designate one director.
The current members of our
board of directors were nominated and elected to such position at the 2022 general meeting of shareholders as proposed by Industrias CH.
We expect that Industrias CH will be in a position to continue to elect the majority of our directors and to exercise substantial influence
and control over our business and policies and to influence us to enter into transactions with Industrias CH and affiliated companies.
However, our by-laws provide that at least 25% of our directors must be independent from us and our affiliates, and our board of directors
has passed a resolution requiring the approval of at least two independent directors for certain transactions between us and our affiliates
which are not our subsidiaries.
Under Mexican law, a majority
shareholder has no fiduciary duty to minority shareholders but may not act contrary to the interests of the corporation for the majority
shareholder's benefit. Such a majority shareholder is required to abstain from voting on any matter in which it directly or indirectly
has a conflict of interest and can be liable for actual and consequential damages if such matter passes as a result of its vote in favor
thereof. In addition, the directors of a Mexican corporation owe a duty to act in a manner which, in their independent judgment, is in
the best interests of the corporation and all its shareholders.
66
Our board of directors adopted
a code of ethics in December 2002.
Authority of the Board of Directors
The board of directors is
our legal representative. The board of directors must approve, among other matters, the following:
●
our general strategy;
●
annual approval of the business plan and the investment budget;
●
capital investments not considered in the approved annual budget for each fiscal year;
●
proposals to increase our capital or that of our subsidiaries;
●
with input from the Audit Committee, on an individual basis: (i) any transactions with related parties, subject to certain limited exceptions, (ii) our management structure and any amendments thereto, and (iii) the election of our chief executive officer, his compensation and removal for justified causes; (iv) our financial statements and those of our subsidiaries, (v) unusual or non- recurrent transactions and any transactions or series of related transactions during any calendar year that involve (a) the acquisition or sale of assets with a value equal to or exceeding 5% of our consolidated assets or (b) the giving of collateral or guarantees or the assumption of liabilities, equal to or exceeding 5% of our consolidated assets, and (vi) contracts with external auditors and the chief executive officer annual report for the shareholders' meeting;
●
calling shareholders' meetings and acting on their resolutions;
●
any transfer by us of shares in our subsidiaries;
●
creation of special committees and granting them the power and authority, provided that the committees will not have the authority which by law or under our by-laws is expressly reserved for the board of directors or the shareholders;
●
determining how to vote the shares that we hold in our subsidiaries; and
●
the exercise of our general powers in order to comply with our corporate purpose.
Meetings of the board of directors
will be validly convened and held if a majority of our members are present. Resolutions at the meetings will be valid if approved by a
majority of the members of the board of directors, unless our by-laws require a higher number. The chairman has a tie-breaking vote. Notwithstanding
the board's authority, our shareholders pursuant to decisions validly taken at a shareholders' meeting at all times may override
the board.
Duty of Care and Duty of Loyalty
The Mexican Securities Market
Law imposes a duty of care and a duty of loyalty on directors. The duty of care requires our directors to act in good faith and in the
best interests of the company. In carrying out this duty, our directors are required to obtain the necessary information from the executive
officers, the external auditors or any other person to act in the best interests of the company. Our directors are liable for damages
and losses caused to us and our subsidiaries as a result of violating their duty of care.
67
The duty of loyalty requires
our directors to preserve the confidentiality of information received in connection with the performance of their duties and to abstain
from discussing or voting on matters in which they have a conflict of interest. In addition, the duty of loyalty is violated if a shareholder
or group of shareholders is knowingly favored or if, without the express approval of the board of directors, a director takes advantage
of a corporate opportunity. The duty of loyalty is also violated, among other things, by (i) failing to disclose to the audit and corporate
practices committee or the external auditors any irregularities that the director encounters in the performance of his or her duties or
(ii) disclosing information that is false or misleading or omitting to record any transaction in our records that could affect our financial
statements. Directors are liable for damages and losses caused to us and our subsidiaries for violations of this duty of loyalty. This
liability also extends to damages and losses caused as a result of benefits obtained by the director or directors or third parties, as
a result of actions of such directors.
Our directors may be subject
to criminal penalties of up to 12 years' imprisonment for certain illegal acts involving willful misconduct that result in losses
to us. Such acts include the alteration of financial statements and records.
Liability actions for damages
and losses resulting from the violation of the duty of care or the duty of loyalty may be exercised solely for our benefit and may be
brought by us, or by shareholders representing 5% or more of our capital stock, and criminal actions only may be brought by the Mexican
Ministry of Finance, after consulting with the CNBV. As a safe harbor for directors, the liabilities specified above (including criminal
liability) will not be applicable if the director acting in good faith (i) complied with applicable law, (ii) made the decision based
upon information provided by our executive officers or third-party experts, the capacity and credibility of which could not be subject
to reasonable doubt, (iii) selected the most adequate alternative in good faith or if the negative effects of such decision could not
have been foreseeable, and (iv) complied with shareholders' resolutions provided the resolutions do not violate applicable law.
The members of the board are
liable to our shareholders only for the loss of net worth suffered as a consequence of disloyal acts carried out in excess of their authority
or in violation of our by-laws.
In accordance with the Mexican
Securities Market Law, supervision of our management is entrusted to our board of directors, which shall act through an audit and corporate
practices committee for such purposes, and to our external auditor. The audit and corporate practices committee (together with the board
of directors) replaces the statutory auditor (
comisario
) that previously had been required by the Mexican Corporations Law. See
Item 6.C. "— Committees" below.
The following table sets forth
the names of the members of our board of directors and the year of their initial appointment:
Name
Director
Since
Rufino Vigil González
2001
Raúl Arturo Pérez Trejo
2003
Luis García Limón
2011
Rodolfo García Gómez de Parada
2001
Alfonso Barragán Galindo
2019
Biographical Information of our Board of Directors
Rufino Vigil González
.
Mr. Vigil was born in 1948. He is currently the chairman of our board of directors and has been a member of the board of directors
since 2001. Since 1973, Mr. Vigil has been chief executive officer of Operadora de Manufacturera de Tubos, S.A. de C.V., a steel related
products corporation. From 1988 to 1993, Mr. Vigil was a member of the board of directors of a Mexican investment bank and from 1971 to
1973 he was a construction corporation manager. In December 2019, he was appointed general director.
Raúl Arturo Pérez
Trejo
. Mr. Pérez was born in 1959. He has been a member of our board of directors since 2003, and is an independent director
for purposes of Mexican law, and is the chairman of our Audit Committee. Mr. Pérez has also served since 1992 as the chief financial
officer of a group that produces and sells structural steel racks for warehousing, aluminum and other industrial storage.
68
Luis García Limón
.
Mr. García was born in 1944. He was our chief executive officer and is still a member of our board of directors since 2011. From
1982 to 1990 he was general director of Compañía Siderúrgica de Guadalajara, S.A. de C.V. ("
CSG
"),
from 1978 to 1982 he was Operation Director of CSG, from 1974 to 1978 he was general manager of Moly Cop and Pyesa, and from 1969-1974
he was Engineering Manager of CSG. In addition, from 1967 to 1969 Mr. García was the director of electrical installation of a construction
company.
Rodolfo García
Gómez de Parada
. Mr. García was born in 1953. He has been a member of our board of directors since 2001 and is an
independent director for purposes of Mexican law. He has been the tax advisor of Industrias CH since 1991 and also serves as member of
the board of directors of a group of retail stores since 1990.
Alfonso Barragán
Galindo
.
Mr. Barragán was born in 1953. He is an independent director for purposes of Mexican law and has been appointed
to our board of directors and the Audit Committee in 2019. Mr. Barragán is a labor lawyer and since 1978 has worked at La Comer,
a group of self-service stores for which he is the Director of the Legal Department since 2016.
Executive Officers
The following table sets forth
the names of our executive officers, their current position with us and the year of their initial appointment to that position.
Name
Position
Position
Held Since
Rufino Vigil González
Chief Executive Officer
2019
Mario Moreno Cortez
Finance Coordinator
2012
Armando Rueda Granados
Chief Operating Officer
2021
Rufino Vigil González
.
Mr. Vigil was born in 1948. He is currently the chairman of our board of directors and has been a member of the board of directors
since 2001. Since 1973, Mr. Vigil has been chief executive officer of Operadora de Manufacturera de Tubos, S.A. de C.V., a steel related
products corporation. From 1988 to 1993, Mr. Vigil was a member of the board of directors of a Mexican investment bank and from 1971 to
1973 he was a construction corporation manager. In December 2019 he was appointed general director for Simec.
Mario Moreno Cortez.
Mr. Moreno was born in 1968. He is currently our Finance coordinator. From 1998 to 2010, he was the general accountant within
the main subsidiaries of Grupo Simec. Previously Mr. Moreno worked in various departments of the financial area within certain of our
principal subsidiaries.
Armando Rueda Granados
.
Mr. Rueda was born in 1965. He is currently our chief operating officer. From 1998 to 2017, he has been working in several operational
departments, like machining and laminations. From 2017 to 2021, he worked as operational controller.
Our chief executive officer
and executive officers are required, under the Mexican Securities Market Law, to act for our benefit and not that of a shareholder or
group of shareholders. Our chief executive is required, principally, to (i) implement the instructions of our shareholders' meeting
and our board of directors, (ii) submit to the board of directors for approval the principal strategies for the business, (iii) submit
to the Audit Committee proposals for the systems of internal control, (iv) disclose all material information to the public and (v) maintain
adequate accounting and registration systems and mechanisms for internal control. Our chief executive officer and our executive officers
will also be subject to liability of the type described above in connection with our directors.
69
Role of Mr. Sergio Vigil González:
Mr. Sergio Vigil González
is the chief executive officer of Industrias CH, which, together with its wholly-owned subsidiaries, currently hold approximately 1% of
our series B shares. Mr. Vigil also functions in a senior management role for the Company, although he holds no formal title at the Company. In
this function, Mr. Vigil directs business strategies for the Company, negotiates potential acquisitions and directs intercompany loans,
among other things. Our board of directors is aware of Mr. Vigil's role at the Company and he is formally authorized by specific
authority on a case-by-case basis of our board of directors as a signatory of the Company. For example, in May 2018, Mr. Sergio Vigil
executed contracts on behalf of the Company with respect to the acquisition and lease transfer of two plants in Brazil from Arcelor Mittal
Brasil, S.A. Mr. Vigil does not receive any compensation for his role. Mr. Vigil is the brother of our controlling shareholder and chairman
of our board of directors, Rufino Vigil González.
The business address of our
directors and executive officers is our principal executive headquarters.
B. Compensation
For the years ended December
31, 2022 and 2021, we paid no fees to our five directors, and the aggregate compensation our executive officers earned was approximately
Ps. 120.1 million and Ps. 78.3 million, respectively. We do not provide pension, retirement or similar benefits to our directors in their
capacity as directors. Our executive officers are eligible for retirement and severance benefits required by Mexican law on the same terms
as all other employees, and we do not separately set aside, accrue or determine the amount of our costs that is attributable to executive
officers.
C. Board Practices
As described in Item 6.A above,
our board of directors is responsible for managing our business. The current members of our board of directors were elected to such position
at our annual ordinary shareholders' meeting held on April 25, 2022, for a term of one year. None of our directors or executive
officers are entitled to benefits upon termination under their service contracts with us, except for what is due to them according to
the Mexican Federal Labor Law
(Ley Federal del Trabajo)
.
Committees
Our by-laws provide for an
audit and corporate practices committee to assist the board of directors with the management of our business.
Audit and Corporate Practices Committee
Our audit and corporate practices
committee ("Audit Committee") is governed by our by-laws and Mexican law. Our by-laws provide that the audit and corporate
practices committee shall be at least three members, all of which must be independent directors. The chairman of the audit and corporate
practices committee is elected by our shareholders' meeting, and the board of directors appoints the remaining members.
The audit and corporate practices
committee is currently composed of three members. Raúl Arturo Pérez Trejo was appointed as chairman of the audit and corporate
practices committee at our annual ordinary shareholders' meeting held on April 25, 2022, and Alfonso Barragán Galindo and
Rodolfo García Gómez de Parada were re-elected as members. Raúl Arturo Pérez Trejo has been ratified as the
"audit committee financial expert." In accordance with the by-laws of Grupo Simec, the Audit and Corporate Practices Committee
is made up exclusively of independent directors and a minimum of 3 members. The Chairman of said Committee is appointed by the Shareholders'
Meeting, and the rest of its members may be appointed by the Board of Directors.
The audit and corporate practices
committee is responsible, among others, for (i) supervising our external auditors and analyzing their reports, (ii) analyzing and supervising
the preparation of our financial statements, (iii) informing the board of our internal controls and their adequacy, (iv) requesting reports
of our board of directors and executive officers whenever it deems appropriate, (v) informing the board of any irregularities that it
may encounter, (vi) receiving and analyzing recommendations and observations made by the shareholders, members of the board, executive
officers, our external auditors or any third party and taking the necessary actions, (vii) calling shareholders' meetings, (viii)
supervising the activities of our chief executive officer, (ix) providing an annual report for the annual shareholders' meeting,
(x) providing opinions to our board of directors, (xi) requesting and obtaining opinions from independent third parties and (xii) assisting
the board in the preparation of annual reports and other reporting obligations.
70
The chairman of the audit
and corporate practices committee, shall prepare an annual report for the annual shareholders' meeting with respect to the findings
of the audit and corporate practices committee, which shall include (i) the status of the internal controls and internal audits and any
deviations and deficiencies thereof, taking into consideration the reports of external auditors and independent experts, (ii) the results
of any preventive and corrective measures taken based on results of investigations in respect of non-compliance of operating and accounting
policies, (iii) the evaluation of external auditors, (iv) the main results from the review of our financial statements and those of our
subsidiaries, (v) the description and effects of changes to accounting policies, (vi) the measures adopted as result of observations of
shareholders, directors, executive officers and third parties relating to accounting, internal controls, and internal or external audits;
(vii) compliance with shareholders' and directors' resolutions; (viii) observations with respect to relevant directors and
officers; (ix) the transactions entered into with related parties; and (x) the remuneration paid to directors and officers.
Our audit and corporate practices
committee met at least quarterly in 2022.
D. Employees
As of December 31, 2022, we
had 5,092 employees (3,066 were employed at our Mexico facilities, of whom 1,408 were unionized, 625 were employed at Republic facilities,
of whom 465 were unionized and 1,401 were employed at our Brazil plants, of whom 1,315 were unionized) compared to 5,331 employees (3,177
were employed at our Mexico facilities, of whom 1,524 were unionized, 815 were employed at Republic facilities, of whom 620 were unionized
and 1,339 were employed at our Brazil plants, of whom 1,248 were unionized) in 2021.
The unionized employees in
each of our Mexican facilities are affiliated with different unions. Salaries and benefits of our Mexican unionized employees are determined
annually and biannually, respectively, through collective bargaining agreements. Set forth below is the union affiliation of the employees
of each of our Mexican facilities and the expiration date of the current collective bargaining agreements.
●
Guadalajara facilities:
Sindicato de Trabajadores en la Industria Siderúrgica y Similares en el Estado de Jalisco. The contract expires on February 14, 2024.
●
Mexicali facilities
: Sindicato de Trabajadores de la Industria Procesadora y Comercialización de Metales de Baja California. The contract expires on March 1, 2025.
●
Apizaco facilities
: Sindicato Nacional de Trabajadores de Productos Metálicos, Similares y Conexos de la República Mexicana. The contract expires on April 1, 2023.
●
Cholula facilities
: Sindicato Industrial "Acción y Fuerza" de Trabajadores Metalúrgicos Fundidores, Mecánicos y Conexos CROM del Estado de Puebla. The contract expires on January 31, 2024.
●
San Luis facilities
: At the Aceros San Luis facility: Sindicato de Empresas adherido a la CTM, the contract expires on January 15, 2024; and at the Aceros DM facility: Sindicato de Trabajadores de la Industria Metal Mecánica, Similares y Conexos del Estado de San Luis Potosí CTM, the contract expires on January 24, 2024.
We have had good relations
with the unions in our facilities. The collective bargaining agreements are renegotiated every two years, and wages are adjusted every
year.
Republic is the only subsidiary
of the Group which offers other benefits and pension plans to their employees. Republic's benefit plans to its employees are described
below.
71
Collective Bargaining Agreements
As of December 31, 2022, 74%
of Republic's workers are covered by a collective bargaining agreement with the United Steelworkers (USW) that was extended in August
2019 through August 15, 2022.  The extended agreement renews all the provisions, understandings and agreements set forth in the January
1, 2012 Basic Labor Agreement. During 2022, the Company negotiated a labor agreement with the USW for the period August 16, 2022 through
August 15, 2027. The extended agreement provides that the Company's quarterly contributions to fund the Republic Retirement VEBA
Benefit Trust (the "Benefit Trust") be reduced from U.S.$2.6 million (Ps. 50 million) to U.S.$0.25 million (Ps. 4.8 million)
beginning in August 15, 2016. Effective August 16, 2019, the extended agreement provides for profit sharing contributions based on the
Company's quarterly pretax income, as defined in the labor agreement ("EBT"): 3% of EBT between $0 and $50 million per
quarter and 4% of EBT over $50 million per quarter. Effective August 16, 2022, the Company shall not be required to make contributions
to the Benefit Trust. Starting July 1, 2027, the Company's required contribution will be $4.00 per hour worked by USW represented
employees.
For the Mexican operations,
approximately 46% of the employees are under collective bargaining agreements, which expire as described above.
For the Brazil operations,
approximately 94% of the employees are under collective bargaining agreements, with
Sindicato dos Metalúrgicos de Pindamonhangaba,
Moreira César e Roseira afiliado a CUT
, which expires on August 31, 2020 (plant in Pindamonhangaba
)
and
Sindicato
dos Trabalhadores nas Industrias Metalúrgicas, Mecânicas, de Material Elétrico e Eletrônico do Estado do Espirito
Santo
(plant in Cariacica
),
which expires on September 30, 2023
.
Defined Contribution Plans
Steelworkers Pension Trust
Republic participates in the
Steelworkers Pension Trust (SPT), a defined benefit multi-employer pension plan. While this plan provides defined benefits as a result
of lack of information, the Company accounts for the plan as a defined contribution plan. Specifically, the plan does not maintain accounting
records for purposes of IFRS presentation and does not provide enough information to allocate amounts between participating employers.
The Company's obligations
to the plan are based upon fixed contribution requirements. The Company contributes a fixed dollar amount of U.S.$1.68 (Ps. 32.5) per
hour for each covered employee's contributory hours, as defined under the plan.
Participation in a multi-employer
pension plan agreed to under the terms of a collective bargaining agreement differs from a traditional qualified single employer defined
benefit pension plan. The SPT shares risks associated with the plan in the following respects:
-
Contributions to the SPT by the Company may be used to provide benefits to employees of other participating employers;
-
If a participating employer stops contributing to the SPT, the unfunded obligations of the plan may be borne by the remaining participating employers; and
-
If Republic chooses to stop participating in the SPT, the Company may be required to pay an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
On March 21, 2011, the Board
of Trustees of the SPT elected funding relief which has the effect of decreasing the amount of required minimum contributions in near-term
years, but will increase the minimum funding requirements during later plan years. As a result of the election of funding relief, the
SPT's zone funding under the Pension Protection Act may be impacted.
72
In addition to the funding
relief election, the Board of Trustees also elected a special amortization rule, which allows the SPT to separately amortize investment
losses incurred during the SPT's December 31, 2008 plan year-end over a 29 year period, whereas they were previously required to
be amortized over a 15 year period.
Republic's participation
in the SPT for the annual periods ended December 31, 2022 and 2021, is outlined in the table below.
EIN/ Pension
Pension
Protection Act
Zone Status
(a)
FIP/RP Status
Pending/
Republic
                                            Steel Contributions
(U.S.$
                                            in thousands)
Surcharge
Imposed
(c)
Expiration of Collective
Bargaining
Pension Fund
Plan Number
2022
2021
Implemented
(b)
2022
2021
2022
2021
Agreement
Steelworkers Pension Trust
23-6648508/499
Green
Green
No
$
479
$
2,038
No
No
August 15, 2027
(a)
The zone status is based on information that Republic received from the plan and is certified by the plan's actuary. Among other factors: plans in the green zone are at least 80% funded, plans in the yellow zone are less than 80% funded, and plans in the red zone are less than 65% funded.
(b)
Indicates if a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented.
(c)
Indicates whether there were charges to Republic from the plan.
Republic has not been listed
in the plans' Forms 5500 as providing more than five percent of the total contributions for any plan years.
There have been no significant
changes that affect the comparability of 2022 and 2021 contributions.
VEBA Benefit Trust
Republic is required to
make quarterly contributions to the VEBA Benefit Trust as determined by the terms of the USW collective bargaining agreement. The VEBA
Benefit Trust is a health and welfare plan for USW retiree healthcare benefits and is not a "qualified" plan under the regulations
of the Employee Retirement Income Security Act of 1974 (ERISA). Under the terms of the extended collective bargaining agreement referred
to above, the Benefit Trust contributions have been reduced from U.S.$2.6 million (Ps. 53.3 million) to U.S.$0.25 million (Ps. 5 million)
million per quarter, effective August 16, 2016. Effective August 16, 2019, the extended agreement provides for profit sharing contributions
based on the Company's quarterly pretax income, as defined in the labor agreement ("EBT"): 3% of EBT between $0 and
$50 million per quarter and 4% of EBT over $50 million per quarter. Effective July 1, 2022, the Company's contribution to the Benefit
Trust will be $4.00 per hour worked by USW represented employees.
For the years ended December
31, 2022 and 2021, the Company recorded expenses of Ps. 5.8 million (U.S.$0.3 million) and Ps. 10.2 million (U.S.$0.5 million), respectively,
related to the Benefit Trust.
Republic recorded combined
expenses of Ps. 36.8 million (U.S.$1.9 million) and Ps. 51.3 million (U.S.$2.5 million) for the years ended December 31, 2022 and 2021,
respectively, related to the funding obligations of the Benefit Trust and SPT.
73
401(k) Plans
Republic has a defined contribution
401(k) retirement plan that covers substantially all salaried and nonunion hourly employees. This plan is designed to provide retirement
benefits through company contributions and voluntary deferrals of employees' compensation. The Company funds contributions to this
plan each pay period based upon the participant's age and service as of January first of each year. The amount of the Company's
contribution is equal to the monthly base salary multiplied by the appropriate percentage based on age and years of service. The contribution
becomes 100% vested upon completion of three years of vesting service. In addition, employees are permitted to make contributions into
a 401(k) retirement plan through payroll deferrals. The Company provides a 25.0% matching contribution for the first 5.0% of payroll that
an employee elects to contribute. Employees are 100% vested in both their and the Company's matching 401(k) contributions. For the
years ended December 31, 2022 and 2021, the Company recorded expense of Ps. 21.3 million
(
U.S.$1.1 million) and Ps. 20.5 million
(
U.S.$1 million), respectively, related to this defined contribution retirement plan.
Employees who are covered
by the USW labor agreement are eligible to participate in the defined contribution 401(k) retirement plan through voluntary deferrals
of employees' compensation. There are no Company contributions or employer matching contributions relating to these employees.
Profit Sharing Plans and Incentive Compensation
Plans
The labor agreement includes
a profit sharing plan to which Republic is required to contribute. The extended agreement modified the plan to the following quarterly
pretax income, as defined in the labor agreement ("EBT"): 3% of EBT between $0 and $25 million per quarter; 4% of EBT between
$25 and $75 million per quarter; and 5% of EBIT over $75 million per quarter. For the years ended December 31, 2022 and 2021, the Company
recorded expenses of $0.3 and $0.5 million related to the profit sharing plan.
Republic has a profit sharing
plan for all salaried and nonunion hourly employees. During 2022 and 2021, the profit sharing plan was based upon achieving certain inventory
and shipment targets. No expense was recorded during the year ended December 31, 2022 and a expense of $0.5 million in 2021.
E. Share Ownership
Industrias CH and its direct
wholly-owned subsidiaries currently hold approximately 76% of our series B shares. At April 28, 2023, Rufino Vigil González, the
chairman of our board of directors, owned, directly or indirectly, approximately 63% of the shares of Industrias CH. Other than Mr. Rufino
Vigil, each director and member of senior management beneficially owns less than 1% of our series B shares. In addition, see Item 7.A.
"Major Shareholders" for the beneficial share ownership of Industrias CH.
Item 7. Major Shareholders and Related
Party Transactions
A. Major Shareholders
As of April 26, 2023, we had
462,032,883 shares of series B common stock outstanding. Based on information available to us, we believe that, other than as described
below, our officers and directors do not beneficially own any series B shares or ADSs. Accordingly, on an individual basis, and as a group,
our directors and executive officers beneficially owned less than one percent of any class of our shares. None of our directors or officers
holds any options to purchase series B shares, ADSs or preferred shares. Prior to June 2002, our capital stock also included series A
shares. On June 5, 2002, we converted all of our series A shares to series B shares on a one-for-one basis.
Industrias CH and its direct
wholly-owned subsidiaries currently hold approximately 76.19% of our series B shares. At April 28, 2023, Rufino Vigil González,
the chairman of our board of directors, owned, directly or indirectly, approximately 63.3% of Industrias CH.
Our major shareholders do
not have voting rights different from the rights of our other shareholders.
74
The following table shows
the ownership of our series B shares as of December 31, 2022.
Name of Shareholder
Number of
shares
owned
% of
shares
owned
Industrias CH, S.A.B. de C.V
275,369,337
55.3
%
Tuberías Procarsa, S.A. de C.V.
(1)
99,461,866
20.0
%
Aceros y Laminados Sigosa, S.A. de C.V.
(1)
4,377,776
0.9
%
Joist Estructuras, S.A. de C.V.
(2)
6,188,406
1.2
%
Industrial de Herramientas CH, S.A. de C.V.
(2)
2,240,628
0.5
%
Public Investors
74,497,875
15.0
%
Treasury Shares
35,573,326
7.1
%
Total
497,709,214
100
%
(1)
A subsidiary of Industrias CH.
(2)
Companies directly or indirectly owned by members of the Vigil family.
At April 26, 2023, 462,032,883
series B common shares were held in Mexico by approximately 45 shareholders who were record holders in Mexico (several shareholders were
not disclosed due to confidentiality) and 12 were ADR record holders in the United States of America. The ADR represent 1,622,691 series
B common shares.
B. Related Party Transactions
We have engaged from time
to time in a number of transactions with certain of our shareholders and companies that are owned or controlled, or are under common control,
directly or indirectly, by our controlling shareholder, Industrias CH, S.A.B. de C.V., or its affiliates and/or the Vigil family. These
transactions were made on terms that we believe were not less favorable than those obtainable on an arm's-length basis. See Note
20 to our consolidated financial statements included herein for additional information.
Loans to Related Parties
Our related party transactions
include loans made to the following related parties: Perfiles Comerciales Sigosa, S.A. de C.V. ("Sigosa"), Industrias CH,
Proyectos Comerciales el Ninzi, S.A. de C.V. ("Ninzi"), Operadora Compañía Mexicana de Tubos S.A de C.V., Compañía
Manufacturera de Tubos, S.A. de C.V. and Compañía Laminadora Vista Hermosa, S.A. de C.V.
Sigosa Loan
In 2016, we entered into a
loan arrangement with Sigosa, a subsidiary of Industrias CH. The purpose of the loan was to provide funding in connection with a strategic
joint venture in the seam-welded tube business line between Tuberías Procarsa, S.A. de C.V. ("Procarsa"), a subsidiary
of Industrias CH, and Quality Tube, S.A. de C.V. The funding was provided to Procarsa through a series of intercompany loans amongst subsidiaries
of Industrias CH. The loan to Sigosa was memorialized under a current account agreement, dated as of November 30, 2016. The current account
agreement provided that the term of the loan was indefinite but could be terminated by either party upon 30 day's written notice.
In addition, the current account agreement provided that amounts advanced under the agreement would bear interest at the Interbank Interest
Rate of Equilibrium (TIIE) (
Tasa de Interés Interbancaria de Equilibrio
) plus 1%, and that interest will accrue and be payable
upon the final repayment and termination of the loan.
As of December 31, 2017, the
outstanding balance was Ps. 806.4 million, consisting of outstanding principal of Ps. 721.4, and accrued interest of Ps. 85.0 million
(consisting of accrued interest of Ps. 24.6 million in 2016 and Ps. 60.4 million in 2017). As of December 31, 2018, the outstanding balance
of the loan was Ps. 579.0 million, resulting from payments in the amount of Ps. 297.0 million during 2018, plus an adjustment of Ps. 4.0
million related to the conversion from U.S. dollars to pesos, plus accrued interest in 2018 of Ps. 65.6 million. During 2019, payments
of U.S.$428,367 were received, resulting in a balance pending collection of U.S.$142,268, as of December 31, 2019. In the event that Sigosa
fails to repay the outstanding balance, it will be paid by Industrias CH. As of December 31, 2022, there is a balance pending collection
derived from loan interest for $145,910 (USD $7,536,068), (balance pending collection as of December 31, 2021 $154,605).
75
Ninzi Loan
In August 2016, we entered
into a loan arrangement with Proyectos Comerciales el Ninzi, S.A. de C.V., a subsidiary of Controladora VG, S.A. de C.V. ("CVG")
and an affiliate of the Company. CVG is a holding company that is 100% owned by the members of the Vigil family, and is controlled by
Mr. Rufino Vigil, chairman of our board of directors. In 2016, we advanced net proceeds of Ps. 1,549.4 million to Ninzi to facilitate
the acquisition of companies engaged in the seam-welded tube business line. As of December 31, 2016, the outstanding balance of the loan
was Ps. 1,571.0 million, which included Ps. 18.9 million of accrued interest and Ps. 2.8 million of value added tax. As of December 31,
2017, the outstanding balance of the loan was Ps. 1,695.9 million, which included Ps. 124.9 million of accrued interest. As of December
31, 2018, the balance of the outstanding loan was Ps. 376.8 million, as a result of Ps. 1,455.1 million in loan payments made by Ninzi
to the Company, offset by accrued interest of Ps. 136.0 million. Interest on this loan is charged at the Interbank Interest Rate of Equilibrium
(TIIE) (
Tasa de Interés Interbancaria de Equilibrio
) plus 1% and will accrue and become payable upon the final repayment
and termination of the loan. While certain negotiations and due diligence of acquisitions were ongoing, Ninzi used the loan proceeds to
purchase an aggregate amount of 29,007,216 shares of series B common stock in the Mexican open market. The value of the shares purchased
by Ninzi increased, resulting in an unrealized gain of Ps. 125.3 million. After adding interest and taxes payable, Ninzi paid the Company
Ps. 165.1 million in 2018 to provide us with the benefit of the unrealized gain. As of December 31, 2018, Ninzi did not own any series
B common shares of the Company. In 2018, we had loans and collection interests with Proyectos Comerciales el Ninzi, S.A. de C.V., which
were liquidated in 2019.
Other Loans to Related Parties
In 2017, we made two loans
to Industrias CH. The first loan was for U.S.$21.4 million and accrues interest at a rate of LIBOR plus 1%. The second loan was for Ps.
89.4 million and accrues interest at a rate of TIIE plus 1%. Interest will accrue and be paid upon the final repayment and termination
of the loans. In 2018, we made two additional loans to Industrias CH. The first loan was for U.S.$25.4 million and accrues interest at
a rate of TIIE plus 1%. The second loan was for Ps. 186.7 million and accrues interest at a rate of TIIE plus 1%. Interest will accrue
and be paid upon the final repayment and termination of the loans. The agreed interest rate 2019 for these loans is the equivalent of
the Interbank interest rate plus 1 percentage point. These loans were granted in U.S. dollars and pesos. In January 1, 2022, an agreement
was signed to leave the outstanding loan amount in Mexican pesos. As of December 31, 2022, the outstanding amount, including interest,
was Ps. 959,153, and as of December 31, 2021, the outstanding amount was Ps. 858,510. In pesos $707,851 plus interest of $215,357, plus
VAT of 33,945, resulting in a total of $959,153 (as of December 31, 2021, the loan was $186,752 plus interest of $59,054, plus VAT of
$9,449, resulting in a total of $255,255).
In 2018, the Company entered
into a loan agreement with Operadora Compañía Mexicana de Tubos S.A de C.V. for U.S.$1.9 million. The principal balance
accrued interest at a rate of LIBOR plus 1%. The outstanding principal and accrued interest on this loan was paid in full in May 2019.
In 2018, the Company entered
into a loan agreement with Compañía Manufacturera de Tubos, S.A. de C.V. for U.S.$2.2 million. The principal balance accrued
interest at a rate of LIBOR plus 1%. The outstanding principal and accrued interest on this loan was paid in full in May 2019.
In 2018, the Company entered
into a loan agreement with Compañía Laminadora Vista Hermosa, S.A. of C.V. for U.S.$9.3 million. The principal balance accrued
interest at a rate of LIBOR plus 1%. The outstanding principal and accrued interest on this loan was paid in full in May 2019.
76
The Company entered a loan
agreement with Perfiles Comerciales Sigosa, S.A. of C.V.. The principal balance accrued interest. The outstanding principal and accrued
interest on this loan was Ps. 145,910 as of December 31, 2022, and as of December 31, 2021, the outstanding amount was Ps. 154,605.
Loans from Related Parties
We have also received loans
from related parties for the purpose of financing acquisitions, debt redemptions, and bank loan amortization and interest payments. These
related party transactions include loans received from the following related parties: Industrias CH, S.A.B. de C.V., Tuberias Procarsa,
S.A. de C.V., Procarsa Tube and Pipe Co. and Pytsa Industrial de México, S.A. de C.V. These loans were primarily received in U.S.
dollars, in an aggregate amount of approximately U.S.$50.0 million. The term of the loans was indefinite and they all accrued interest
at a rate of 0.25% per annum. As of December 31, 2017, the outstanding balances of the loans (translated to pesos) were as follows: Industrias
CH, S.A.B. de C.V. in the amount of Ps. 226.8 million, Tuberias Procarsa, S.A. de C.V. in the amount of Ps. 591.8 million, Procarsa Tube
and Pipe Co. in the amount of Ps. 59.6 million and Pytsa Industrial de México, S.A. de C.V. in the amount of Ps. 102.6 million.
As of December 31, 2022, we have a loan from Operdaora de Perfiles Sigosa, S.A. de C.V. in the amount of Ps. 2,381 million.
Purchases and Sales
From time to time, we purchase
and/or sell steel products, primarily "billet," to Industrias CH and its affiliates. In 2020, 2021 and 2022 such purchases
totaled, Ps. 0 million, Ps. 0 million, and Ps. 81,754 million, respectively. In addition, in 2020, 2021 and 2022 we sold Ps. 0 million,
Ps. 0 million and Ps. 157,134 million of steel products to Industrias CH and its affiliates, respectively. We believe that terms of these
transactions were not less favorable than terms that would be available on an arm's-length basis.
As of December 31, 2022, we
have accounts payable corresponding to the purchase of finished products from the following related parties: Ferrovisa, S.A. de C.V. in
the amount of Ps. 7.1 million, Aceros y Laminados Sigosa, S.A. de C.V. in the amount of Ps.24.5 million, Industrias CH in the amount of
Ps. 245.4 million, Operadora de Perfiles Sigosa, S.A. de C.V. in the amount of Ps. 2.8 million, Operadora Pytsa Industrial, S.A. de C.V.
in the amount of Ps. 8.4 million, Perfiles Comerciales Sigosa, S.A. de C.V. in the amount of Ps. 3.8 million, Compania Manufacurera de
Tubos, S.A. de C.V. in the amount of Ps. 9.8 million, Compania Laminadora Vista Hermosa, S.A. de C.V. in the amount of Ps. 0.5 million,
Operadora Compañía Mexicana de Tubos, S.A. de C.V. in the amount of Ps.7.6 million and other related parties in the amount
of Ps.1.1 million.
Service Agreements
We have service agreements
with Industrias CH and certain of its affiliates, pursuant to which Industrias CH and its affiliates provide administrative, business,
financial and legal services to us and our subsidiaries. The term of the service agreements are indefinite. We make payments to Industrias
CH on a monthly basis. Under the service agreement, in 2020, 2021 and 2022, we paid Ps. 199 million, Ps. 113 million and Ps. 121 million,
respectively, to Industrias CH.
C. Interests of Experts and Counsel
Not applicable.
Item 8. Financial Information
A. Consolidated Statements and Other Financial
Information
See Item 18. "Financial
Statements" and "Index to Financial Statements."
77
Legal Proceedings
Mexico
On January 19, 2017, we received
a letter issued by the General Director of Crimes and Sanctions of the
Comisión Nacional Bancaria y de Valores
(National
Banking and Securities Commission) (the "CNBV"), notifying us that certain actions in connection with the repurchase of our
own shares could be contrary to the provisions of the
Ley del Mercado de Valores
(Securities Market Law) (the "LMV").
In December 2017, the General Direction of Crimes and Sanctions of the CNBV fined the Company with the amount of Ps. 545,000. Grupo Simec
appealed for reconsideration before the CNBV itself, which was favorable to Grupo Simec in 2018, and the fine was left without effect.
During the year 2018, Grupo
Simec and some of its subsidiaries have been audited by the tax authorities of Mexico with respect to fiscal years from 2013 to 2017.
The tax which the authority pretends to impose are non-existent taxes, which we have been litigating through various means including "amparo",
lawsuits, resources of revocation in some cases and nullity lawsuit in others. As of December 31, 2018, the payment has not been enforceable
in any of the disputed matters. The amount of tax credits being appealed in court ascends to $5,880 million. During 2020 and 2019 financial
years, some of the Simec Group subsidiaries that have oversight acts affected tax payments and expenses through Remedial Agreements signed
between the companies and the Tax Administration Service (SAT) during the aforementioned years for an amount of $554.4 and $2,323.7 million.
All lawsuits regarding the tax credits were solved, the amount was $5,880 million.
The tax authorities in Mexico
have the right to review the previous five years and could determine differences in taxes payable, plus corresponding adjustments, interest
and fines.
On January 6, 2021, a preliminary
dumping rate of 66.7% was imposed on our exports of rebar to the United States of America; following the U.S. Department of Commerce's
physical review carried out at our San Luis Potosí plant, arguing deficiencies and adverse facts during the information process.
Such dumping rate was ratified on June 1, 2022. A preliminary dumping rate of 6.35% was imposed and will be ratified in the first half
of 2023.
United States of America and Canada
On February 13, 2017, the
SEC notified us that it was conducting an informal, and non-public, inquiry into the Company in connection with our internal controls.
After cooperating with the SEC, we settled certain internal controls charges with the SEC on January 29, 2019. We agreed to retain an
independent consultant to remediate our material weaknesses and to pay a civil monetary penalty in the amount of U.S.$200,000.
Related to the agreement signed
on December 14, 2018, with the SEC to correct 4 internal control weaknesses reported in the 20-F form of 2018, the international firm
Protiviti was hired as independent consultant to assess the implemented internal controls, to ensure that transactions made are correctly
recorded in accordance with Mexican and other countries laws, where the company operates.
In connection with a sales
and use tax audit by the Ohio Department of Taxation covering the period from January 1, 2009 through December 31, 2012, an assessment
of U.S.$2.5 million (Ps. 47.2 million) (including interest of $0.4 million, Ps. 7.6 million) was issued against Republic on December 9,
2016.
Republic also received an
appraisal notice dated December 11, 2020 for $1,631,827 (including interest of $339,885) covering the period January 1, 2014 to September
30, 2018.
The Company disagrees with
the assessment in its entirety and has filed a Petition for Reassessment on January 30, 2017, February 9, 2022 and September 2022, appealing
the assessment with the Ohio Board of Tax Appeals. No resolution has been obtained from any of the appeals.
On June 29, 2021, a summons
was received from the SEC, requesting information on the Group's inter-company accounts, including with related parties, from January
2016 to December 2019 and on operations purchase and sale of own shares. On August 31, 2021, a letter was received from the Vice Presidency
of Stock Market Supervision of the National Banking and Securities Commission (CNBV) of Mexico, requesting the same information as in
the SEC subpoena.
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The staff of the Division
of Enforcement (the "Division") of SEC is conducting an investigation by into the Company's public disclosures regarding
the Company's Internal Controls over Financial Reporting for Fiscal Years 2019 through 2021 (the "Inquiry"). The Company
received a subpoena for information pursuant to a non-public formal order of investigation for the Inquiry.
On July 13, 2022, the Company
has received an oral "Wells Notice" (subsequently confirmed in writing) from the Division setting forth a preliminary determination
by the Division to recommend an enforcement action against the Company and several of its present and former officers and directors alleging
violations of Securities Act Section 17(a); Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 10b-5, 13a-1, 13a-13,
and 13a-15; and providing false Sox 302 Certifications. A Wells Notice is a notice of an intent on the part of the Division staff to recommend
an enforcement action and not a finding of wrongdoing. Upon receipt of a Wells Notice, the recipient is afforded an opportunity to present
its positions with respect to the Division staff's recommendations prior to any decision by the Commission on whether enforcement
proceedings will be authorized or any finding by the Commission with respect to any wrongdoing. Any enforcement action would need to be
approved by the Commission before formally being brought.
The Company maintains that
the actions of the Company and its current and former officers and employees were appropriate and did not violate the federal securities
laws. The Company did not make a Wells submission and intends to defend itself vigorously if charges are brought. The Inquiry is continuing,
and the Company has made productions of information to the Division. The Company will continue to comply with the requests of the Division
in connection with the Inquiry.
The Company cannot predict
the ultimate outcome of the Inquiry and any related legal and administrative proceedings which could include a variety of outcomes including
the institution of administrative or civil injunctive proceedings involving the Company and/or current or former employees and/or officers,
the imposition of fines and other penalties, remedies and/or sanctions, and modifications to compliance programs. It is not possible to
accurately predict at this time when matters relating to the Inquiry will be completed, what if any actions may be taken by the Commission
or the effect that such actions may have on our business, prospects, operating results and financial condition, which could be material.
The tax authorities in the
United States of America have the right to review the previous three years and could determine differences in taxes payable, plus corresponding
adjustments, surcharges and fines.
For the years 2015-2016 and
2017-2018, the Canada Revenue Agency (CRA) estimated a tax on sales omitted by Republic of U.S.$4.1 million plus interest for the 2015-2016
period and of U.S.$6.4 million plus interest for the period 2017-2018. Republic does not agree on the amounts and has filed an Objection
notice on September 2018 and July 2019, respectively. This was solved favorably during the year ended December 31, 2021.
The tax authorities in Canada
have the right to review the previous four years and could determine differences in taxes payable, plus corresponding adjustments, surcharges
and fines.
Our operations in the United
States of America and Canada have been the subject of various environmental claims, including those described below. The resolution of
any claims against us may result in significant liabilities.
California Department of Toxic Substances Control, DTSC
In September 2002, the Department
of Toxic Substances Control (DTSC) inspected Pacific Steel's (PS) facilities based on an alleged complaint from neighbors due to
PS's excavating to recover scrap metal on its property and on a neighbor's property, which PS rents from a third party (BNSF
Railway). In this same month, DTSC issued an enforcement order of imminent and substantial endangerment determination, which alleges that
certain soil piles, soil management and metal recovery operations may cause an imminent and substantial danger to human health and the
environment. Consequently, DTSC sanctioned PS for violating the Hazardous Waste Control Laws in the State of California and imposed an
obligation to make necessary changes to the location. On July 26, 2004, DTSC filed a Complaint for Civil Penalties and Injunctive Relief
against PS in San Diego Superior Court. On July 26, 2004, the court issued a judgment, whereby PS was obligated to pay U.S.$235,000 (Ps.
5 million). This payment was made by PS in 2004 and 2005.
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On June 6, 2010, the DTSC
and the San Diego Department of Environmental Health (DEH) inspected the facilities of PS, in response to a general complaint. On August
10, 2010 DTSC and DEH conducted a second inspection and found seven infractions. The DEH was satisfied with the compliance of PS on those
issues. On October 19, 2010 the technical division of the DTSC recommended to the enforcement division of DTSC that it impose significant
penalties upon PS as a result of such infractions.
The land remediation was suspended
at the beginning of 2011 due to the inefficiency of the process, which was verified by several studies. As an alternative, once the necessary
permits were obtained from the authorities in Mexico, in November 2011, the Mexicali plant began the process of importing raw soil for
final disposal in a secure landfill based in Nuevo León, once the metal content was separated, which metal content is used as raw
material in the smelting process. As of today, PS has completed the importing of raw soil for disposition in the state of Nuevo León.
The disposition of a stack
estimated at 8,000 tons of material classified RCRA (hazardous for Federal purposes) was also considered for shipment to Mexico. The process
began in early 2013, but to date they have been very slow to grant the permits. On April 9, 2015, a letter from the California Attorney
General Department of Justice (Attorney General) was received pursuant to which PS was required, in the absence of obtaining permission
from the Mexican authorities, to present a program for transporting the pile of contaminated soil classified as RCRA to an authorized
confinement in the United States of America at the latest on April 22, 2015. This letter warned that PS must ship the stack no later than
July 9, 2015, or risk DTSC proceeding with a civil lawsuit seeking the maximum amount of fines established by law and corresponding legal
redress.
On April 21, 2015, PS sent
a letter to the Attorney General explaining that the authorities in Mexico had not denied permission to the Company but had simply requested
that it present its application in a different format, which had already been presented and reviewed by the authority on April 17, 2015.
On July 23, 2015, the Attorney
General denied the extension requested by PS and demanded the immediate shipment of the RCRA stack to an authorized landfill. PS began
transporting the RCRA soil on July, 29, 2015, and completed removal of the RCRA stack by September 12, 2015 with a total of 3,000 metric
tons.
On January 5, 2016, the Attorney
General and PS filed a "final judgment and order on consent" or Consent Judgment in San Diego Superior Court. The parties
negotiated the Consent Judgment, which includes the following terms:
●
PS must pay U.S.$138,000 as a civil penalty for alleged violations of the 2004 Corrective Action Consent Agreement.  PS has made all of the required payments to DTSC as of December 31, 2017.
●
PS agreed to remove the RCRA stack and send it to an approved landfill. The Judgment indicates that the Company complied with this commitment by October 2, 2015.
●
After removing the RCRA stack, the Company must take samples of the soil in the area where the stack of land was located. Samples were taken and the results indicate that the soil had pollution levels which, although not equal to those of the RCRA stack, exceed the limits set by the State of California. On April 7, 2016, the Attorney General and DTSC demanded that the Company remove the soil 10 feet across and 2 feet deep on the perimeter of the area where the stack of RCRA land was located and dispose of it in an approved confinement. On August 5, 2016, DTSC informed PS that it did not need to remove the soil in the vicinity of the former RCRA stack that exceeds California hazardous waste standards.  Instead, PS and DTSC entered into a Tolling Agreement on August 10, 2016, which tolls for two years (until August 10, 2018) the statute of limitations for DTSC to challenge PS's compliance with the Consent Judgment.  This Agreement was extended in August 10, 2018, for an additional period of two years, effective December 2018 and ending August 10, 2020. This agreement was extended until August 10, 2021, when the DTSC decided not to extend it.
80
●
PS shall continue to meet the conditions of the
    final judgment of 2016, the corrective measures, and all tasks arising therefrom, which were entered in the same court in 2004. On May
    29, 2019, PS presented a new work plan proposal (IM workplan) to the DTSC to remedy the leased land to BNSF Railway. On October 21,
    2021, the Company submitted the final draft of the IM work plan. On May 31, 2022, DTSC approved the work plan. No litigation was filed
    against the DTSC approval which is now final.
On December 6, 2022, the DTSC sent a letter requesting
    a preliminary study and a work plan implementation schedule, both documents were delivered on February 3, 2023. DTSC has not responded
    to either document.
On January 13, 2023, BNSF Railway issued a contract
    termination notice to PS, notifying BNSF's unilateral termination of two lease contracts with PS which ended on February 12 and 22, 2023,
    through its legal counsel informed PS that no longer has access to BNSF Railway property. DTSC is entering into a voluntary agreement
    with BNSF to implement a work plan.
As of the date of this report, we cannot estimate
the costs of implementing the work plan of the provisional measures due to the uncertainty of whether BNSF or PS will implement the work
and the DTSC authorizations to whom they designate and their approval date.
Environmental Liabilities
As is the case with most steel
producers in the United States of America, we could incur significant costs related to environmental compliance activities and remediation
stemming from historical waste management practices or other environmental issues at Republic's facilities. At December 31, 2022
and 2021, we had a reserve to cover probable environmental liabilities totaling Ps. 48.4 million (U.S.$2.5 million) and Ps. 51.3 million
(U.S.$2.5 million), respectively. The reserve includes incremental direct costs of remediation efforts and post remediation monitoring
costs that are expected to be included after corrective actions are complete. As of December 31, 2022 and 2021, the current and non-current
portions, Ps. 19.3 million (U.S.$1 million) and Ps. 20.5 million (U.S.$1 million), respectively, of the environmental reserve are included
in other accrued liabilities and accrued environmental liabilities, respectively, in the accompanying consolidated statement of financial
position. The Company is not otherwise aware of any material environmental remediation liabilities or contingent liabilities relating
to environmental matters with respect to the Republic's facilities for which the establishment of an additional reserve would be
necessary at this time. To the extent the Company incurs any such additional future costs, these costs will most likely be incurred over
a number of years. However, future regulatory action regarding historical waste management practices at the Company's facilities
and future changes in applicable laws and regulations may require the Company to incur significant costs that may have a material adverse
effect on the Company's future financial performance.
Brazil
On September 5, 2017, Grupo
Simec and GV do Brasil were notified of an arbitration procedure brought by SMS Concast before the International Court of Arbitration
(ICC), in which the payment of U.S.$1.4 million is requested (Ps.27.6 million), plus additional expenses, for additional costs incurred
in the construction and assembly of the steel plant area in Brazil. On November 6, 2017, the Company filed a response, suing SMS Concast
for various items that amount to U.S.$5 million (approximately Ps. 98.3 million) approximately. On February 26, 2020 the arbitrators sentenced
our companies to individual and joint payments of various amounts and in different currencies. In March 2021, it was agreed with the actor
to terminate the matter by paying U.S. $450,000, after several date changes, the payment was made on July 8, 2021.
The tax authorities in Brazil
have the right to review the previous five years and could determine differences in taxes payable, plus corresponding adjustments, surcharges
and fines.
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Dividends and Dividend
Policy
We typically do not pay dividends
to our shareholders with certain specific exceptions. At the Ordinary General Shareholders' Meeting held on February 10, 2020, a
Ps. 1,990 million dividend was approved from the net tax profit account for the profits generated until December 31, 2013, which was paid
in full on March 10, 2020. Aside from this dividend, because we intend to devote a substantial portion of our future cash flows to funding
our expansion plan and working capital requirements, we do not currently expect to pay additional dividends in the near future. We may
consider paying dividends in the future based on a number of factors, including our results of operations, financial condition, cash requirements,
tax considerations, future prospects and other factors that our board of directors and our shareholders may deem relevant, including the
terms and conditions of any future debt instruments that might limit our ability to pay dividends. For a description of shareholders'
and holders of ADS' rights to receive dividends and the conditions to declare and pay dividends, see Item 10.B. "Memorandum
and Articles of Association – Dividends and Distributions."
B. Significant Changes
Except as disclosed elsewhere
in this annual report, we have not experienced any significant changes since the date of our consolidated financial statements included
herein.
Item 9. The Offer and Listing
Our series B shares are listed
on the Mexican Stock Exchange under the ticker symbol "SIMEC B" and the ADSs are listed on the NYSE American under the ticker
symbol "SIM." The ADSs are issued by The Bank of New York as depositary under a Deposit Agreement, dated as of July 8, 1993,
as amended, among us, the depositary and the holders from time to time of ADRs.
Item  10. Additional Information
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
Our principal objects and
purposes, as expressed in the Second Clause of our by-laws, are to engage in the control of companies dedicated to the manufacture, processing
and distribution of diversified SBQ steel and structural products.
The following is a summary
of certain rights of holders of our capital stock, including brief summaries of material provisions of our by-laws and Mexican law. This
summary is not exhaustive and does not contain all information that may be important to you. For more complete information, you should
read our by-laws, which have been filed as an exhibit to this annual report and incorporated by reference herein.
Board of Directors
The Mexican Securities Market
Law imposes a duty of care and a duty of loyalty on directors. The duty of care, which generally requires that directors: (i) obtain the
information reasonably necessary to make decisions; (ii) request from officers and auditors information that is relevant to a decision
to be made; (iii) postpone board of directors meetings when a director is not present, has not arrived on time or has not been provided
with the same information as other directors; (iv) deliberate and vote, including if requested with the presence only of the other directors
and the secretary of the board. Directors will breach their duty of care and be subject to liability when damage is caused to the issuer
by any of the following: (i) failure to attend board, shareholders' or committee meetings, which failure prevents such meeting from
being duly held; (ii) failure to reveal relevant information to the board of directors or to an applicable committee, subject to legal
or contractual limitations on disclosure of such information; or (iii) failure to comply with the duties imposed by the Mexican Securities
Market Law or the issuer's by-laws. Failure of directors to act with due care makes the relevant directors jointly and severally
liable for damages and losses caused to the issuer and its subsidiaries, which may be limited in the company's by-laws or by resolution
of the shareholders' meeting, except in the case of willful misconduct or illegal acts. Liability for breach of the duty of care
may also be covered by indemnification provisions and director and executive officer insurance policies.
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The duty of loyalty primarily
consists of maintaining the confidentiality of information received in connection with the performance of the director's duties,
and abstaining from discussing or voting on matters where the director has a conflict of interest. Directors will have breached their
duty of loyalty in the following cases: (i) if without justification they utilize their position to gain benefits for themselves or third
parties, including an individual shareholder or group of shareholders; (ii) if they vote on or participate in deliberations concerning
an issue on which they have a conflict of interest; (iii) if they do not reveal the conflicts of interests they have; (iv) if they deliberately
favor an individual shareholder or group of shareholders to the detriment of others; (v) if they approve related party transactions without
observing the related guidelines under the Mexican Securities Market Law; (vi) if they utilize property of the issuer for their own benefit
or that of third parties in contravention of relevant policies; (vii) if they make undue use of privileged information; or (viii) if,
for themselves or third parties, they take advantage of a corporate opportunity. A violation of the duty of loyalty makes the relevant
directors jointly and severally liable for damages and losses caused to the issuer and its subsidiaries, and in every case require removal
from their positions. Unlike the duty of care, liability for breach of the duty of loyalty may not be limited by the company's by-laws,
by resolution of the shareholders' meeting or otherwise, nor may indemnification provisions or insurance policies cover such liability.
Our directors may be subject
to criminal penalties of up to 12 years' imprisonment for certain illegal acts involving willful misconduct that result in losses
to us, which include, among others, altering financial statements or records. In terms of the General Law of Commercial Companies and
our by-laws, only the shareholders' meetings can determinate compensation for the directors. Our directors cannot individually exercise
any of our borrowing powers. We do not have any retirement plan. Shareholders, or a group of shareholders, that control 10% of our shares
can name a director and (in that director's absence) an alternate director.
Voting Rights and Shareholders' Meetings
Each series B share entitles
its holder to one vote at any meeting of our shareholders. Each series L share would entitle its holder to one vote at any meeting at
which holders of series L shares are entitled to vote. Holders of series L shares would be entitled to vote only on the following matters:
●
our transformation from one type of corporation to another;
●
to elect one member of our board of directors pursuant to the provisions of our by-laws and the Securities Market Law;
●
any merger or corporate spin-off in which we are not the surviving entity;
●
our dissolution or liquidation;
●
cancellation of the registration of our shares with the National Registry of Securities; and
●
any action that would prejudice the rights of holders of series L shares and not prejudice the other classes of shares similarly. A resolution on any such action requires the affirmative vote of a majority of all outstanding series L shares.
Shareholders may vote by proxy
duly appointed in writing. Under Mexican law, holders of shares of any series are also entitled to vote as a class on any action that
would prejudice the rights of holders of shares of such series but not rights of holders of shares of other series, and a holder of shares
of such series would be entitled to judicial relief against any such action taken without such a vote. Our board of directors or other
party calling for shareholder action initially would determine whether an action requires a class vote on these grounds. A negative determination
would be subject to judicial challenge by an affected shareholder, and a court ultimately would determine the necessity for a class vote.
There are no other procedures for determining whether a proposed shareholder action requires a class vote, and Mexican law does not provide
extensive guidance on the criteria to be applied in making such a determination.
83
Under Mexican law and our
by-laws, we may hold three types of shareholders' meetings: ordinary, extraordinary and special. Ordinary shareholders' meetings
are those called to discuss any issue not reserved for extraordinary shareholders' meeting. An annual ordinary shareholders'
meeting must be convened and held within the first four months following the end of each fiscal year to discuss, among other things, the
board of director's report on our financial statements, the chief executive officer's report on our operations during the
preceding year, a report on fulfillment of our tax obligations of the last fiscal year and the Audit Committee's report with respect
to the preceding year, the appointment of members of the board of directors and the chairman of the Audit Committee, declaration of dividends
and the determination of compensation for members of the board of directors and for members of the Audit Committee. Under the Mexican
Securities Market Law, our ordinary shareholders' meeting, in addition to those matters described above, will have to approve any
transaction representing 20% or more of our consolidated assets, executed in a single or a series of transactions, during any fiscal year.
Extraordinary shareholders'
meetings are those called to consider any of the following matters:
●
voluntary dissolution of the company;
●
an increase or decrease in a company's minimum fixed capital;
●
change in corporate purpose or nationality;
●
any transformation, merger or spin-off involving the company;
●
any stock redemption or issuance of preferred stock or bonds;
●
the cancellation of the listing of our shares with the National Securities Registry or on any stock exchange;
●
any other amendment to our by-laws; and
●
any other matters for which applicable Mexican law or our by-laws specifically require an extraordinary meeting.
Special shareholders'
meetings are those that shareholders of the same series or class call and hold to consider any matter particularly affecting the relevant
series or class of shares.
Shareholders' meetings
are required to be held in our corporate domicile, which is Guadalajara, Jalisco. Calls for shareholders' meetings must be made
by the chairman or the secretary of the board of directors or the chairman of our Audit Committee. Any shareholder or group of shareholders
representing at least 10% of our capital stock has the right to request that the chairman of the board of directors or the chairman of
the Audit Committee call a shareholders' meeting to discuss the matters indicated in the relevant request. If the chairman of the
board of directors or the chairman of the Audit Committee fail to call a meeting within 15 calendar days following receipt of the request,
the shareholder or group of shareholders representing at least 10% of our capital stock may request that the call be made by a competent
court.
Calls for shareholders'
meetings must be published in the official gazette of the state of Jalisco or any major newspaper located in the City of Guadalajara,
Jalisco, at least 15 calendar days prior to the date of the meeting. Each call must set forth the place, date and time of the meeting
and the matters to be addressed. Calls must be signed by whomever makes them, provided that calls made by the board of directors or the
Audit Committee must be signed by the chairman, the secretary or a special delegate appointed by the board of directors or the Audit Committee
as appropriate, for that purpose. Shareholders' meetings will be validly held and convened without the need of a prior call or publication
whenever all the shares representing our capital are duly represented.
84
To be admitted to any shareholders'
meeting, shareholders must: (i) be registered in our share registry; and (ii) at least 24 hours prior to the commencement of the meeting
submit (a) an admission ticket issued by us for that purpose, and (b) a certificate of deposit of the relevant stock certificates issued
by the Secretary or by a securities deposit institution, a Mexican or foreign bank or securities dealer in accordance with the Mexican
Securities Market Law. Shareholders may be represented at any shareholders' meeting by one or more attorneys-in-fact, and these
representatives may not be one of our directors. Representation at shareholders' meetings may be substantiated pursuant to general
or special powers of attorney or by a proxy executed before two witnesses.
At or prior to the time of
the publication of any call for a shareholders' meeting, we will provide copies of the publication to the depositary for distribution
to the holders of ADSs. Holders of ADSs are entitled to instruct the depositary as to the exercise of voting rights pertaining to the
Series B shares.
Quorum
Ordinary meetings are regarded
as legally convened pursuant to a first call when shares representing more than 50% of our capital are present or duly represented. Resolutions
at ordinary meetings of shareholders are valid when approved by a majority of the shares present at the meeting. Any number of shares
represented at an ordinary meeting of shareholders convened pursuant to a second or subsequent call constitutes a quorum. Resolutions
at ordinary meetings of shareholders convened pursuant to a second or subsequent call are valid when a majority of the shares present
at the meeting approves them.
Extraordinary shareholders'
meetings are regarded as legally convened pursuant to a first call when shares representing at least 75% of our capital are present or
duly represented, and extraordinary shareholders' meetings convened pursuant to a second or subsequent call are regarded as legally
convened when shares representing 50% of our capital are present or duly represented. Resolutions at extraordinary meetings of shareholders
are valid when approved by 50% of our outstanding shares. Special meetings of holders of series L shares are governed by the same rules
applicable to extraordinary general meeting of holders of series B shares. The quorum for an extraordinary general meeting at which holders
of series L shares may not vote is 75% of the series B shares, and the quorum for an extraordinary general meeting at which holders of
L shares are entitled to vote is 75% of the outstanding capital stock. Whether on first, second or subsequent call, actions at an extraordinary
general meeting generally may be taken by a majority vote of the series B shares outstanding and, on matters which holders of series L
shares are entitled to vote, a majority vote of all the outstanding capital stock.
Our by-laws also establish
that a delisting of our shares requires the vote of holders of 95% of our capital stock.
No Right of Redemption
The Mexican Securities Market
Law and our by-laws provide that our shareholders do not have redemption rights for their shares.
Registration and Transfer
Our shares are registered
with the National Securities Registry, as required under the Mexican Securities Market Law and regulations issued by the CNBV. Our shares
are evidenced by share certificates in registered form, and registered dividend coupons may be attached thereto. Our shareholders either
may hold their shares directly, in the form of physical certificates, or indirectly, in book-entry form, through institutions that have
accounts with INDEVAL.
INDEVAL is the holder of record
in respect of all such shares held in book-entry form. INDEVAL will issue certificates on behalf of our shareholders upon request. INDEVAL
participants, brokers, banks, other financial entities or other entities approved by the CNBV maintain accounts at INDEVAL. We maintain
a stock registry and only those persons listed in such stock registry, and those holding certificates issued by INDEVAL indicating ownership,
and any relevant INDEVAL participants, will be recognized as our shareholders.
85
Dividends and Distributions
At the annual general ordinary
shareholders' meeting, the board of directors submits our financial statements for the previous fiscal year, together with their
report on us, to the series B shareholders for approval. Under our by-laws and Mexican law, our annual net income, based upon our audited
financial statements, is applied as follows: (i) five percent of our net earnings must be allocated to a legal reserve fund, until such
fund reaches an amount equal to at least 20% of our then current capital stock, (ii) thereafter, a certain percentage of net earnings
may be allocated to any general or specific reserve fund, and (iii) the remainder of any net earnings is allocated as determined by the
majority of our shareholders and may be distributed as dividends. All shares that are fully paid and outstanding at the time a dividend
or other distribution is declared are entitled to share equally in any or other distribution. We will distribute through INDEVAL cash
dividends on shares held through INDEVAL. Any cash dividends on shares evidenced by physical certificates will be paid by surrendering
to us the relevant dividend coupon registered in the name of its holder.
To the extent that we declare
and pay dividends on our shares, owners of ADSs at the time a dividend or other distribution is declared will be entitled to receive any
dividends payable in respect of the series B shares underlying their ADSs, subject to the terms of the Deposit Agreement. Cash dividends
will be paid to the depositary in pesos, and, except as otherwise provided in the Depositary Agreement, which provides that the depositary
will convert them into U.S. dollars and pay them to the holders of ADSs net of currency expenses and applicable fees.
A shareholder's entitlement
to uncollected dividends lapses within five years following the stated payment date, in favor of us.
For additional tender offer
and insider trading rules applicable to our securities pursuant to Mexican Law, see "Market Information."
Changes in Capital Stock
Increases and reductions of
our share capital must be approved at an ordinary or extraordinary shareholders' meeting, subject to the provisions of our by-laws
and the Mexican Corporations Law.
Subject to the individual
ownership limitations set forth in our by-laws, in the event of an increase of our capital stock, other than (i) in connection with mergers,
(ii) for the conversion of convertible debentures as provided in Section 210 Bis of the Mexican General Law on Negotiable Instruments
and Credit Transactions, (iii) for purposes of conducting a public offering of such shares or (iv) for the resale of shares maintained
in our treasury as a result of repurchase of shares conducted on the Mexican Stock Exchange, our shareholders will have a preemptive right
to subscribe and pay for new stock issued as a result of such increase in proportion to their shareholder interest at that time. This
preemptive right must be exercised by any method provided in Section 132 of the Mexican Corporations Law, by subscription and payment
of the relevant stock within fifteen business days after the date of publication of the corresponding notice to our shareholders in the
official gazette of the state of Jalisco or in one of the newspapers of general circulation in Guadalajara, Jalisco, Mexico, provided
that if at the corresponding meeting all of our shares are duly represented, the fifteen business day period shall commence on the date
of the meeting. Preemptive rights cannot be waived in advance and cannot be traded separately from the corresponding shares that give
rise to such right.
Holders of ADSs may exercise
preemptive rights in limited circumstances. If a holder of series B shares or ADSs were unable or unwilling to exercise its preemptive
rights in connection with such a capital increase, such holder's proportionate share of dividends and other distributions and voting
rights would decline. In addition, depending on the series of shares increased and the pattern in which preemptive rights were exercised,
such a capital increase might increase or reduce the portion of our capital stock represented by series B shares and ADSs or increase
or reduce the proportionate voting rights of such holder.
Our capital stock may be reduced
by resolution of a shareholders' meeting taken pursuant to the rules applicable to capital increases. Our capital stock also may
be reduced upon withdrawal of a shareholder as provided in Section 206 of the Mexican Corporations Law, see "—Voting Rights
and Shareholders' Meetings" above, or by repurchase of our own stock in accordance with the Mexican Securities Market Law,
see "Share Repurchases" below.
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Share Repurchases
We may choose to acquire our
own shares through the Mexican Stock Exchange on the following terms and conditions:
●
the acquisition must be carried out through the Mexican Stock Exchange;
●
the acquisition must be carried out at market price, unless a public offer or auction has been authorized by the CNBV;
●
the acquisition must be carried out against our net worth (stockholder´s equity) without adopting a reduction in capital stock or against our capital stock, and the shares so acquired will be held as treasury stock without any requirement to adopt a reduction in capital stock. No shareholder consent is required for such purchases.
●
the amount and price paid in all share repurchases must be made public;
●
the annual ordinary shareholders meeting must determine the maximum amount of resources to be used in the fiscal year for the repurchase of shares;
●
we may not be delinquent on payments due on any outstanding debt issued by us that is registered with the National Securities Registry; and
●
any acquisition of shares must be in conformity with the requirements of Article 54 of the Mexican Securities Market Law, and we must maintain a sufficient number of outstanding shares to meet the minimum trading volumes required by the stock markets on which our shares are listed.
The economic and voting rights
corresponding to repurchased shares may not be exercised during the period in which we own such shares, and such shares are not deemed
to be outstanding for purposes of calculating any quorum or vote at any shareholders' meeting during such period.
The shares and negotiable
instruments representing title to shares belonging to us or, as the case may be, issued but unsubscribed treasury shares, may be placed
with the investing public without the need for a shareholders' meeting or board resolution. As such, the provisions of Article 132
of the Mexican Corporations Law do not apply.
In our Ordinary Shareholders
Meeting held on September 14, 2016, an increase in the reserve for repurchase of shares of Ps. 1,000 million was approved and the total
reserve at December 31, 2017, amounts to Ps. 2,000 million.
In our Ordinary Shareholders
Meeting held on April 23, 2018, an increase in the reserve for repurchase of shares of Ps. 3,000 million was approved and the total reserve
at April 23, 2018, amounts to Ps. 5,000 million. In 2018, we repurchased 27,553,643 shares, and we resold 150,000. At December 31, 2018,
we had 31,066,207 treasury shares. In the year 2018 we registered a loss of Ps. 4.2 million in the repurchase of shares. In 2019, we repurchased
2,663,719 shares, and we did not resell any shares. In 2019, we approved total reserve repurchase of Ps7 million. On December 31, 2020,
we had 34,223,573 treasury shares. In 2020, we did not register a gain or loss in the repurchase of shares. In 2020, we did not register
a gain or loss in the repurchase of shares. At December 31, 2021, we had 35,194,691 treasury shares. In 2021, we did not register a gain
or loss in the repurchase of shares. At December 31, 2022, we had 35,573,326 treasury shares. In 2022, we did not register a gain or loss
in the of shares.
Ownership of Capital Stock by Subsidiaries
Our subsidiaries may not,
directly or indirectly, invest in our shares, except for shares acquired as part of an employee stock option plan and in conformity with
the Mexican Securities Market Law.
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Delisting
Pursuant to the Mexican Securities
Market Law, in the event that we decide to cancel the registration of our shares in the National Securities Registry and the listing of
our shares on the Mexican Stock Exchange, or if the CNBV orders such cancellation, we will be required to conduct a tender offer for the
shares held by minority shareholders and to create a trust with a term of six months, with amounts sufficient to purchase all shares not
participating in the tender offer. Under the law, our controlling shareholders will be secondarily liable for these obligations. The price
at which the shares must be purchased in the offer must be the greater of (i) the average of the trading price on the Mexican Stock Exchange
during the last 30 days on which the shares were quoted prior to the date on which the tender offer is made or (ii) the book value of
such shares as determined pursuant to our latest quarterly financial information filed with the CNBV and the Mexican Stock Exchange. If
the CNBV orders the cancellation, we must launch the tender offer within 180 days from the date of their request. If we initiate it, under
the Mexican Securities Market Law, the cancellation must be approved by 95% of our shareholders.
Other Provisions
Information to Shareholders.
The Mexican Corporations Law establishes that companies, acting through their boards of directors, must annually present a report
at a shareholder's meeting that includes:
●
a report of the directors on our financial statements, as well as on the policies followed by the directors and on the principal existing projects;
●
a report explaining the principal accounting and information policies and criteria followed in the preparation of the financial information;
●
a statement of the financial condition of the company at the end of the fiscal year;
●
a statement showing the results of operations of the company during the preceding year, as well as changes in the company's financial condition and capital stock during the preceding year;
●
a report of the chief executive officer on the operations of the company during the preceding year;
●
a report of the fulfillment of the company's tax obligations of the last fiscal year;
●
a report of the Audit Committee with respect to the preceding year; and
●
the notes which are required to complete or clarify the above mentioned information.
In addition to the foregoing,
our by-laws provide that our board of directors also should prepare the information referred to above with respect to any subsidiary that
represents at least 20% of our net worth (based on the financial statements most recently available).
Shareholders' Conflict
of Interest.
Under Mexican law, any shareholder that has a conflict of interest with respect to any transaction must abstain from
voting thereon at the relevant shareholders' meeting. A shareholder that votes on a transaction in which its interest conflicts
with ours may be liable for damages in the event the relevant transaction would not have been approved without such shareholder's
vote.
Liquidation.
In the
event we are liquidated, the surplus assets remaining after payment of all our creditors will be divided among our shareholders in proportion
to their respective share holdings. Shares that are only partially paid will participate in the distribution in the proportion that they
were paid. The general extraordinary shareholders' meeting at which the liquidation resolution is made, will appoint one or more
liquidators.
Foreign Investment.
Ownership
by foreign investors of shares of Mexican corporations in certain economic sectors is regulated by the Foreign Investment Law and the
regulations thereunder. The Ministry of the Economy and the National Commission on Foreign Investment are responsible for the administration
of the Foreign Investment Law and Regulations.
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Pursuant to the Mexican Foreign
Investment Law and Regulations, foreign investors may acquire up to 100% of the capital stock of Mexican companies or entities in the
steel industry. In accordance with our by-laws, Mexican and non-Mexican nationals may own all series of our share capital. We have registered
any foreign owner of our shares, and the depositary with respect to the ADSs representing our shares, with the National Registry of Foreign
Investment
(Registro Nacional de Inversión Extranjera)
.
Forfeiture of Shares
.
As required by Mexican law, our by-laws provide that "any alien who at the time of incorporation or at any time thereafter acquires
an interest or participation in the capital of the corporation shall be considered, by virtue thereof, as Mexican in respect thereof and
shall be deemed to have agreed not to invoke the protection of his own government, under penalty, in case of breach of such agreement,
of forfeiture of such interest or participation in favor of the Mexican nation." Under this provision, a non-Mexican shareholder
is deemed to have agreed not to invoke the protection of his own government by asking such government to interpose a diplomatic claim
against the Mexican government with respect to the shareholder's rights as a shareholder but is not deemed to have waived any other
rights it may have, including any rights under the U.S. securities laws, with respect to its investment in us. If the shareholder invokes
such governmental protection in violation of this agreement, its shares could be forfeited to the Mexican government. Mexican law requires
that such a provision be included in the by-laws of all Mexican corporations unless such by-laws prohibit ownership of shares by non-Mexican
persons or entities.
Duration
. Our existence
under our by-laws is indefinite.
Certain Differences between Mexican and U.S.
Corporate Law
You should be aware that the
Mexican Corporations Law and the Mexican Securities Market Law, which apply to us, differ in certain material respects from laws generally
applicable to U.S. corporations and their shareholders.
Independent Directors
The Mexican Securities Market
Law requires that 25% of the directors of Mexican public companies must be independent, but the Audit Committee must be comprised entirely
of independent directors. One alternate director may be appointed for each principal director, provided that the alternates for the independent
directors are also deemed independent. Under Mexican law, certain individuals, including insiders, controlling individuals, major clients
and suppliers, and any relatives of such individuals, are per se deemed as non-independent. In addition, under Mexican law, the determination
as to the independence of our directors made by our shareholders' meeting may be contested by the CNBV. The independent directors
are required under our by-laws to meet as often as necessary to fulfill their responsibilities. Independent directors are not required
under Mexican law or our by-laws to meet without the presence of non-independent directors and management.
Pursuant to the rules and
regulations of the New York Stock Exchange, 50% of the directors of listed companies must be independent, and foreign companies subject
to reporting requirements under the U.S. federal securities laws and listed on the New York Stock Exchange must maintain an audit committee
comprised entirely of independent directors as defined in the United States of America federal securities laws. Further, independent directors
are required to meet on a regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive
session without the presence of non-independent directors and management.
Audit-Committee
For differences among Mexican
Securities Market Law, which apply to us, and laws generally applicable to U.S. corporations regarding audit-committees, see "Item
6. Directors, Senior Management and Employees—C. Board Practices—Committees—Audit and Corporate Practices Committee."
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Mergers, Consolidations,
and Similar Arrangements
A Mexican company may merge
with another company only if a majority of the shares representing its outstanding capital stock approve the merger at a duly convened
general extraordinary shareholders' meeting, unless the company's by-laws impose a higher threshold. Dissenting shareholders
are not entitled to appraisal rights. Creditors have ninety days to oppose a merger judicially, provided they have a legal interest to
oppose the merger.
Under Delaware law, with certain
exceptions, a merger, consolidation, or sale of all or substantially all the assets of a corporation must be approved by the board of
directors and a majority of the outstanding shares entitled to vote thereon. Under Delaware law, a shareholder of a corporation participating
in certain major corporate transactions, under certain circumstances, may be entitled to appraisal rights pursuant to which the shareholder
may receive payment in the amount of the fair market value of the shares held by the shareholder (as determined by a court) in lieu of
the consideration the shareholder would otherwise receive in the transaction. Delaware law also provides that a parent corporation, by
resolution of its board of directors and without any shareholder vote, may merge with any subsidiary of which it owns at least 90% of
each class of share capital. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights.
Anti-Takeover Provisions
Subject to the approval of
the CNBV, the Mexican Securities Market Law permits public companies to include anti-takeover provisions in their by-laws that restrict
the ability of third parties to acquire control of the company without obtaining approval of the company's board of directors if
such provisions (i) are approved by a majority of the shareholders, with no more than 5% of the outstanding capital shares voting against
such provisions, (ii) do not exclude any shareholder(s) or group of shareholder(s) and (iii) do not restrict, in an absolute manner, a
change of control
Under Delaware law, corporations
can implement shareholder rights plans and other measures, including staggered terms for directors and super-majority voting requirements,
to prevent takeover attempts. Delaware law also prohibits a publicly-held Delaware corporation from engaging in a business combination
with an interested shareholder for a period of three years after the date of the transaction in which the shareholder became an interested
shareholder unless:
●
prior to the date of the transaction in which the shareholder became an interested shareholder, the board of directors of the corporation approves either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder;
●
upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owns at least 84% of the voting stock of the corporation, excluding shares held by directors, officers, and employee stock plans; or
●
at or after the date of the transaction in which the shareholder became an interested shareholder, the business combination is approved by the board of directors and authorized at a shareholders' meeting by at least 66.67% of the voting stock which is not owned by the interested shareholder.
Shareholders' Suits
Pursuant to the Mexican Securities
Market Law, only a shareholder or group of shareholders holding at least 5% of our outstanding shares may bring a claim against some or
all of our directors, secretary of the board of directors or relevant executives for violation of their duty of care or duty of loyalty.
In addition, such shareholder or group of shareholders must include in its claim the amount of damages or losses caused to the company
and not only the damages or losses caused to the shareholder or group of shareholders bringing the claim, provided that any amount recovered
as indemnification arising from the liability action will be for the benefit of the company, and not for the benefit of the shareholder
or group of shareholders. The shareholder or group or shareholders must demonstrate the direct and immediate link between the damage or
loss caused to the company, and the acts alleged to have caused it. There is no requirement for the shareholder or group of shareholders
to hold the shares for a certain period of time in order to bring a claim.
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If the court determines that
the shareholder or group of shareholders that initiated the claim acted in bad faith, such shareholder or group of shareholders will be
liable to pay the legal fees and legal proceeding expenses.
The statute of limitations
for these actions is five years from the date on which the act or event that caused the damage or loss occurred. These actions must be
brought in the federal or local courts in Guadalajara, Jalisco (Mexico) and the court must personally notify the parties that have been
sued, and must comply with all other legal formalities in order to satisfy the due process requirements of the Mexican Constitution.
Process must be served on
the defendant personally, or, in the defendant's absence, process can be served by a judicial officer on the defendant's domicile
whether or not the defendant is present. A method of service that does not comply with these requirements could be considered void. Class
action lawsuits are not permitted under Mexican law.
Shareholder Proposals
Under Mexican law and our
by-laws, holders of at least 10% of our outstanding capital stock are entitled to appoint one member of our board of directors.
Delaware law does not include
a provision restricting the manner in which nominations for directors may be made by shareholders or the manner in which business may
be brought before a meeting.
Calling of Special Shareholders'
Meetings
Under Mexican law and our
by-laws, the board of directors, the chairman of the board of directors or the chairman of the Audit Committee may call a shareholders'
meeting. Any shareholder or group of shareholders with voting rights representing at least 10% of our capital stock may request that the
chairman of the board of directors or the Audit Committee call a shareholders' meeting to discuss the matters indicated in the written
request. If the chairman of the board of directors or the chairman of the Audit Committee fail to call a meeting within 15 calendar days
following date of the written request, the shareholder or group of shareholders may request that a competent court call the meeting. A
single shareholder may call a shareholders' meeting if no meeting has been held for two consecutive years or if matters to be dealt
with at an ordinary shareholders' meeting have not been considered.
Delaware law permits the board
of directors or any person who is authorized under a corporation's certificate of incorporation or by-laws to call a special meeting
of shareholders.
Cumulative Voting
Under Mexican law, cumulative
voting for the election of directors is permitted.
Under Delaware law, cumulative
voting for the election of directors is permitted if expressly authorized in the certificate of incorporation.
Staggered Board of Directors
Mexican law does not permit
companies to have a staggered board of directors, while Delaware law does permit corporations to have a staggered board of directors.
Approval of Corporate Matters
by Written Consent
Mexican law permits shareholders
to take action by unanimous written consent of the holders of all shares entitled to vote. These resolutions have the same legal effect
as those adopted in a general or special shareholders' meeting. The board of directors may also approve matters by unanimous written
consent.
Delaware law permits shareholders
to take action by written consent of holders of outstanding shares having more than the minimum number of votes necessary to take the
action at a shareholders' meeting at which all voting shares were present and voted.
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Amendment of Certificate
of Incorporation
Under Mexican law, it is not
possible to amend a company's certificate of incorporation (
acta constitutiva
). However, the provisions that govern a Mexican
company are contained in its by-laws, which may be amended as described below. Under Delaware law, a company's certificate of incorporation
generally may be amended by a vote of holders of a majority of the outstanding stock entitled to vote thereon (unless otherwise provided
in the certificate of incorporation), subsequent to a resolution of the board of directors proposing such amendment.
Amendment of By-laws
Under Mexican law, amending
a company's by-laws requires shareholder approval at an extraordinary shareholders' meeting. Mexican law requires that at
least 75% of the shares representing a company's outstanding capital stock be present at the meeting in the first call (unless the
by-laws require a higher threshold) and that the resolutions be approved by a majority of the shares representing a company's outstanding
capital stock.
Under Delaware law, holders
of a majority of the outstanding stock entitled to vote and, if so, provided in the certificate of incorporation, the directors of the
corporation, have the power to adopt, amend, and repeal the by-laws of a corporation.
C.
Material Contracts
None.
D.
Exchange Control
There are no legislative or
legal provisions currently in force in Mexico or arising under our by-laws restricting the payment of dividends to holders of our common
stock not resident in Mexico, except for regulations restricting the remittance of dividends and other payments in compliance with United
Nations sanctions. There are no limitations, either under the laws of Mexico or in our by-laws, on the right of foreigners to hold or
vote on shares of our common stock.
E.
Taxation
The following summary contains
a description of the material U.S. and Mexican federal income tax consequences of the purchase, ownership and disposition of the series
B shares or ADSs by a "non-Mexican holder" (as defined below) that is an individual citizen or resident of the United States
of America, a corporation created or organized in or under the laws of the United States of America or any state thereof (including the
District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where
a court within the United States of America is able to exercise primary supervision over the administration of the trust and one or more
United States of America persons (as defined in the U.S. Internal Revenue Code of 1986, as amended) have the authority to control all
substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic
trust) (a "U.S. holder"), but it does not purport to be a comprehensive description of all of the tax considerations that
may be relevant to an owner of the series B shares or ADSs. In particular, the summary deals only with U.S. holders that will hold the
series B shares or ADSs as capital assets and use the U.S. dollar as their functional currency and does not address the tax treatment
of a U.S. holder that owns or is treated as owning 10% or more of our outstanding shares (measured by vote or value). In addition, the
summary does not address the effects of the U.S. Medicare tax on net investment income, the indirect effects on persons who hold equity
interests in a holder, or any U.S. or Mexican state or local tax considerations that may be relevant to U.S. holders. This summary also
does not address U.S. federal income tax consequences applicable to U.S. holders that are subject to special tax rules, such as certain
U.S. expatriates, REITs, RICs, banks, securities or currency dealers, traders in securities that mark their securities to market, insurance
companies, tax-exempt entities, persons liable for the alternative minimum tax, taxpayers that are required to prepare certified financial
statements or file financial statements with certain regulatory or governmental agencies, persons that hold ADSs or series B shares as
a hedge or as part of a straddle, conversion transaction or other risk reduction transaction for tax purposes, estates and trusts, partnerships,
S corporations or other pass-through entities for U.S. federal income tax purposes. If a partnership (or other pass-through entity for
U.S. federal income tax purposes) holds the series B shares or ADSs, the tax treatment of such partnership or a partner in such partnership
generally will depend upon the status of the partner and the activities of the partnership. Partnerships holding series B shares or ADSs,
and partners in such partnerships should consult their own tax advisors regarding the tax consequences of an investment in series B shares
or ADSs.
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The summary is based upon
the federal income tax laws of the United States of America and Mexico as in effect and available on the date of this annual report, including
the provisions of the income tax treaty between the United States of America and Mexico and protocol thereto (the "Tax Treaty"),
all of which are subject to change, possibly with retroactive effect in the case of U.S. federal income tax law. Prospective investors
in the series B shares or ADSs should note that no rulings have been or are expected to be sought from the U.S. Internal Revenue Service
(the "IRS") with respect to any of the U.S. federal tax consequences discussed below, and no assurance can be given that the
IRS will not take contrary positions. Prospective investors in the series B shares or ADSs should consult their own tax advisors as to
the U.S., Mexican or other tax consequences of the purchase, ownership and disposition of the series B shares or ADSs, including, in particular,
the effect of any foreign, state or local tax laws and their entitlement to the benefits, if any, afforded by the Tax Treaty.
For purposes of this summary,
the term "non-Mexican holder" shall mean a holder of series B shares or ADSs that is not a resident of Mexico and that will
not hold the series B shares or ADSs or a beneficial interest therein in connection with the conduct of a trade or business through a
permanent establishment or fixed base in Mexico.
An individual is a resident
of Mexico for tax purposes if he established his residence in Mexico. When the individual in question has a residence in another country,
the individual will be deemed a resident in Mexico if his "center of vital interests" is located in Mexico. This will be deemed
to occur if (i) more than 50% of the aggregate income realized by such individual in the calendar year is from a Mexican source or (ii)
the principal center of his professional activities is located in Mexico.
A Mexican national who files
a change of tax residence notice with a country or jurisdiction that does not have a comprehensive exchange of information agreement with
Mexico and in which his income is subject to a preferred tax regime pursuant to the provisions of the Mexican Income Tax Law will be considered
a Mexican resident for tax purposes during the year the notice is filed and during the following three years. Unless otherwise proven,
a Mexican national is deemed a resident of Mexico for tax purposes.
An entity in Mexico is a resident
of Mexico if it maintains its principal place of business or its place of effective management in Mexico. If non-residents of Mexico are
deemed to have a permanent establishment in Mexico for tax purposes, all income attributable to the permanent establishment will be subject
to Mexican taxes, in accordance with applicable Mexican tax law.
In general, for U.S. federal
income tax purposes, holders of ADSs will be treated as the beneficial owners of the series B shares represented by those ADSs.
Taxation of Dividends
Mexican Tax Considerations
Under Mexican Income Tax Law
provisions (
Ley del Impuesto Sobre la Renta
), dividends paid to non-Mexican holders with respect to the series B shares (including
the shares represented by the ADSs) are not subject to Mexican withholding tax.
Dividends paid from distributable
earnings that have not been subject to corporate income tax are subject to a corporate-level dividend tax at a rate of 42.86% for 2022.
The corporate-level dividend tax on the distribution of earnings is not final and may be credited against income tax payable during the
fiscal year in which the dividend tax was paid and for the following two years. Dividends paid from distributable earnings, after corporate
income tax has been paid with respect to these earnings, are not subject to this corporate-level dividend tax. Currently, dividend distributions
are not subject to individual withholding taxes for shareholder recipients thereof.
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Dividends or profits distributed
by legal entities resident in Mexico that are paid to natural persons and persons residing abroad on profits generated since fiscal year
2014, are subject to an additional Income Tax rate of 10%; this additional tax will be withheld by the legal person who distributes the
dividend and its payment is considered definitive. In this case, the rates established in the agreement to avoid double taxation between
Mexico and the United States of America can be applied.
Distributions made by us to
our shareholders other than as dividends, including capital reductions, amortization of shares or otherwise, would be subject to taxation
in Mexico at the corporate rate of 30% in 2022, or at the rate mentioned above, as the case may be.
U.S. Federal Income Tax
Considerations
The gross amount of any distributions
paid with respect to the series B shares or the ADSs (including any amounts withheld for Mexican taxes), to the extent paid out of our
current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be taxable as dividends and generally
will be includible in the gross income of a U.S. holder as ordinary income on the date on which the distributions are received by the
U.S. holder, in the case of series B shares, or the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends
received deduction allowed to certain corporations under the U.S. Internal Revenue Code of 1986, as amended. Subject to certain exceptions
for short-term and hedged positions, the U.S. dollar amount of dividends received by non-corporate U.S. holders (including individuals)
with respect to the series B shares and ADSs will be subject to taxation at a maximum rate of 20% if the dividends are "qualified
dividends." Dividends paid on the series B shares and ADSs generally will be treated as qualified dividends if (A) we were not,
in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign
investment company ("PFIC") and (B) (i) we are eligible for the benefits of a comprehensive income tax treaty with the United
States of America that the IRS has approved for the purposes of the qualified dividend rules or (ii) the series B shares or ADSs, as applicable,
are readily tradable on an established securities market in the United States of America. The Tax Treaty has been approved for the purposes
of the qualified dividend rules and we believe that we are eligible for the benefits of the Tax Treaty. Further, as discussed below, we
do not believe that we are a PFIC. Therefore, we believe that dividends paid to a non-corporate U.S. holder with respect to the series
B shares and ADSs generally will be treated as qualified dividends. U.S. holders should consult their own tax advisors in this regard
in light of their particular circumstances.
To the extent that a distribution
exceeds our current and accumulated earnings and profits for a taxable year, it generally will first be treated as a non-taxable return
of basis to the extent thereof, and thereafter as capital gain from the sale of the series B shares or ADSs. However, we do not expect
to keep earnings and profits in accordance with U.S. federal income tax principles. Therefore, a U.S. holder should expect that a distribution
will generally be treated as a dividend (as discussed above).
Distributions, which will
be made in pesos, will be includible in the income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate
in effect on the date they are received by such U.S. holder, in the case of series B shares, or by the depositary, in the case of ADSs,
whether or not they are converted into U.S. dollars. If the pesos received as a dividend are converted into U.S. dollars on the date they
are received, a U.S. holder generally will not be required to recognize foreign currency gain or loss in respect of the dividend income.
If the pesos received as a dividend are not converted into U.S. dollars on the date of receipt, you will have a U.S. federal income tax
basis in the pesos equal to their United States of America dollar value on the date of receipt. U.S. holders should consult their own
tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received that are converted into U.S. dollars
on a date subsequent to receipt.
Subject to certain conditions
and limitations (including a minimum holding period requirement), Mexican withholding taxes on dividends, if any, may be treated as foreign
taxes eligible for credit against a U.S. holder's U.S. federal income tax liability. Dividend income generally will constitute foreign
source "passive category income" or, in the case of certain U.S. holders, "general category income" for U.S. foreign
tax credit purposes.
Distributions of additional
series B shares or ADSs that are made as part of a pro rata distribution to all our stockholders generally will not be subject to U.S.
federal income tax.
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Taxation of Dispositions of Shares or ADSs
Mexican Tax Considerations
Gain on the sale or other
disposition of ADSs by a U.S. holder will generally not be subject to Mexican tax. Deposits and withdrawals of series B shares in exchange
for ADSs will not give rise to Mexican tax or transfer duties.
Gain on the sale of series
B shares by a U.S. holder will not be subject to any Mexican tax if the transaction is carried out through the Mexican Stock Exchange
or other stock exchange or securities markets approved by the Mexican Ministry of Finance and Public Credit. Gain on sales or other dispositions
of series B shares made in other circumstances generally would be subject to Mexican tax at a rate of 30% for 2022 of gains realized from
the disposition.
Under the Tax Treaty, a U.S.
holder that is eligible to claim the benefits of the Tax Treaty will be exempt from Mexican tax on gains realized on a sale or other disposition
of series B shares in a transaction that is not carried out through the Mexican Stock Exchange or such other approved securities markets,
so long as the holder did not own, directly or indirectly, 25% or more of our share capital (including ADSs) during the twelve-month period
preceding the sale or other disposition, and the value of those shares does not derive mainly from immovable property located in Mexico.
Specific formalities apply to claim such treaty benefits.
U.S. Federal Income Tax
Considerations
Upon the sale or other taxable
disposition of the series B shares or ADSs, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference
between the amount realized on the sale or other taxable disposition and such U.S. holder's U.S. federal income tax basis in the
series B shares or ADSs. Gain or loss recognized by a U.S. holder on such sale or other taxable disposition generally will be long-term
capital gain or loss if, at the time of the sale or other taxable disposition, the series B shares or ADSs have been held for more than
one year. Under current law, long-term capital gain recognized by a non-corporate U.S. holder (including individuals) generally is subject
to a maximum U.S. federal income tax rate of 20%. The deduction of a capital loss is subject to limitations for U.S. federal income tax
purposes. Deposits and withdrawals of series B shares by U.S. holders in exchange for ADSs will not result in the realization of gain
or loss for U.S. federal income tax purposes.
Gain, if any, realized by
a U.S. holder on the sale or other taxable disposition of series B shares or ADSs will be treated as U.S. source income for U.S. foreign
tax credit purposes. Consequently, if a Mexican withholding tax is imposed on the sale or disposition of the units or ADSs, a U.S. holder
that does not receive sufficient foreign source income from other sources may not be able to derive effective U.S. foreign tax credit
benefits in respect of these Mexican taxes. U.S. holders should consult their own tax advisors regarding the application of the foreign
tax credit rules to their investment in, and disposition of, series B shares or ADSs.
A U.S. holder that receives
pesos upon sale or other disposition of the series B shares will realize an amount equal to the U.S. dollar value of the pesos upon the
date of sale (or in the case of cash basis and electing accrual basis taxpayers, the settlement date). A U.S. holder will have a U.S.
federal income tax basis in the pesos received equal to the U.S. dollar value of the pesos received translated at the same rate the U.S.
holder used to determine the amount realized on its disposal of the series B shares. Any gain or loss realized by a U.S. holder on a subsequent
conversion of the pesos into U.S. dollars generally will be a U.S. source ordinary income or loss. U.S. holders should consult their own
tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received that are converted into U.S. dollars
on a date subsequent to receipt.
Other Mexican Taxes
There are no Mexican inheritance,
gift, succession or value added taxes applicable to the ownership, transfer or disposition of the series B shares or ADSs by non-Mexican
holders; provided, however, that gratuitous transfers of the series B shares or ADSs may in certain circumstances cause a Mexican federal
tax to be imposed upon the recipient. There are no Mexican stamp, issue, registration or similar taxes or duties payable by non-Mexican
holders of the series B shares or ADSs.
95
Passive Foreign Investment
Company (PFIC)
Based on our audited financial
statements and relevant market and shareholder data, we believe that we are not a PFIC for U.S. federal income tax purposes with respect
to our 2020, 2021 and 2022 taxable years, and we expect to operate in such a manner so as to not become a PFIC. If, however, we are or
become a PFIC, a U.S. holder could be subject to additional U.S. federal income taxes on gain recognized with respect to the series B
shares or ADSs and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules.
U.S. Backup Withholding
Tax and Information Reporting Requirements
In general, information reporting
requirements will apply to certain payments to a U.S. holder of dividends in respect of the series B shares or ADSs or the proceeds received
on the sale or other disposition of the series B shares or ADSs that are paid to such U.S. holder within the United States of America
(and in certain cases, outside the United States of America), unless such U.S. holder is an exempt recipient. A backup withholding tax
may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification number to the paying agent or fails
to establish an exemption or otherwise comply with these provisions. Amounts withheld as backup withholding tax will be creditable against
the U.S. holder's U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided that the required information
is furnished to the U.S. Internal Revenue Service.
Foreign Account Tax Compliance
Act ("FATCA")
Sections 1471 through 1474
of the Code impose a 30% withholding tax on certain types of payments made to foreign financial institutions, unless the foreign financial
institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain U.S.
persons or U.S.-owned entities, annually report certain information about such accounts, and withhold 30% on certain payments to account
holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution
is otherwise exempt from those requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a non-financial
foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information
regarding each substantial U.S. owner. Failure to comply with the additional certification, information reporting and other specified
requirements imposed under FATCA could result in the 30% withholding tax being imposed on certain "pass-through" payments
with respect to series B shares or ADSs held through a non-U.S. entity. However, under current guidance, withholding under FATCA will
apply to certain "pass-through" payments no earlier than the date that is two years after publication of final U.S. Treasury
Regulations defining the term "foreign pass-through payments." Prospective investors should consult their own tax advisors
regarding FATCA and its effect on them.
F.
Dividends and Paying Agents
Not applicable.
G.
Statements by Experts
Not applicable
H.
Documents on Display
Statements contained in this
annual report regarding the contents of any contract or other document are not necessarily complete, and, where the contract or other
document is an exhibit to the annual report, each of these statements is qualified in all respects by the provisions of the actual contract
or other documents.
We are subject to the informational
requirements of the Exchange Act. Accordingly, we file reports and other information with the SEC, including annual reports on Form 20-F
and reports on Form 6-K. The SEC maintains an internet website at
www.sec.gov
from which you can electronically access this annual
report and the other materials that we file with the SEC.
96
As a foreign private issuer,
we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act. For example, we are not required
to prepare and issue quarterly reports. However, we are required to file with the Commission, promptly after it is made public or filed,
information that we make public in Mexico, file with the Mexican Stock Exchange or the CNBV or distribute to our security holders. As
a foreign private issuer, we are exempt from Exchange Act rules regarding proxy statements and short-swing profits.
I.
Subsidiary Information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures
About Market Risk
We are exposed to market risk,
which is the potential risk of loss in fair values, cash flows or earnings due to changes in interest rates and foreign currency rates
(primarily the peso/dollar exchange rate), as a result of our holdings of financial instrument positions. Our financial instruments include
cash and cash equivalents, trade and other accounts receivable, accounts payable, long-term debt securities and related party debt. We
do not maintain a trading portfolio. Our borrowings are entirely denominated in Mexican pesos. We do not utilize derivative financial
instruments to manage our market risks with respect to our financial instruments. Historically, based on the last ten years of data, devaluation
of the Mexican peso has been 4% lower than the Mexico's inflation.
We are exposed to market risk
due to fluctuations of the purchase price of natural gas. To limit our exposure, we have in the past, and may in the future, used derivative
financial instruments, which consist of natural gas swap contracts. These contracts are recognized on our balance sheet at fair value.
The swaps are considered as cash flow hedges since the cash flow exchanges under the swap are highly effective in mitigating exposure
to natural gas price fluctuations. The change in fair value of the swaps is recorded as part of comprehensive income in stockholders'
equity for those contracts that are designated as accounting hedges until such time as the related item hedged is recorded in income.
At that time, the hedging instrument's fair value is recorded in income. For those contracts that are not designated as accounting
hedges, the change in fair value is recorded directly into income. We do not believe our market risk with respect to these natural gas
futures contracts is material. As of December 31, 2022, we did not have natural gas cash-flow exchange contracts or swaps.
Market Risk Measurement
We measure our market risk
related to our financial instruments based on changes in interest rates and foreign currency rates utilizing a sensitivity analysis. The
sensitivity analysis measures the potential loss in fair values, cash flows and earnings based on a hypothetical increase in interest
rates and a decline in the peso/dollar exchange rate. We used market rates as of December 31, 2022 on our financial instruments to perform
the sensitivity analysis. We believe that these potential changes in market rates are reasonably possible in the near-term (one year or
less). Based upon our analysis of the impact of a 150 basis point increase in interest rates and a 15% decline in the peso/dollar exchange
rate, we have determined that such increase in interest rates and such decline in the peso/dollar exchange rate would not have a material
adverse effect on our earnings. Because there is no active trading market for our debt instruments, we are not able to determine the impact
of these changes on the fair value of those debt instruments. The sections below describe our exposure to interest rates and currency
rates including the impact of changes in these rates on our earnings.
Interest Rate Exposure
We are exposed to changes
in short-term interest rates as we invest in short-term dollar-denominated interest bearing investments. On the liability side, we utilize
fixed rate debt, and our financial debt was less than U.S.$1 million as of December 31, 2022. The floating rate debt is exposed to changes
in interest expense and cash flows from changes in LIBOR, while the fixed rate debt is mostly exposed to changes in fair value from changes
in medium term interest rates. Based on an immediate 150 basis point rise in interest rates, we estimate that our earnings before taxes
would not be significantly affected.
97
Currency Rate Exposure
Our primary foreign currency
exchange rate exposure relates to our debt securities as well as our dollar-denominated trade payables. Our principal currency exposure
is to changes in the peso/dollar exchange rate. We estimate that a 15% decline in the peso/dollar exchange rate would result in a decrease
in our earnings before taxes of approximately Ps. 0.58 million (U.S.$0.03 million).
The sensitivity analysis is
an estimate and should not be viewed as predictive of our future financial performance. Additionally, we cannot assure that our actual
losses in any particular year will not exceed the amounts indicated above. However, we do believe that these amounts are reasonable based
on the financial instrument portfolio at December 31, 2022 and assuming that the hypothetical market rate changes selected by us in our
market risk analysis occur during 2022. The sensitivity analysis does not give effect to the impact of inflation on its exposure to increases
in interest rates or the decline in the peso/dollar exchange rate.
Item 12.  Description of Securities Other
than Equity Securities
A.
Debt Securities
Not applicable.
B.
Warrants and Rights
Not applicable.
C.
Other Securities
Not applicable.
D.
American Depositary Shares
Fees and Charges
The Bank of New York Mellon
serves as the depositary for our ADSs. The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing
shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making
distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay
the fees. The depositary may collect its annual fee for depositary services by deductions from cash distributions or by directly billing
investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide
fee-attracting services until its fees for those services are paid.
ADS holders are also required
to pay additional fees for certain services provided by the depositary, as set forth in the table below.
Depositary service
Fee payable by ADR holders
Issuance and delivery of ADSs, including issuances resulting from a distribution of shares or rights or other property
Up to U.S.$5.00 per 100 ADSs (or portion thereof)
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
Up to U.S.$5.00 per 100 ADSs (or portion thereof)
Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs
Registration for the transfer of shares
Registration or transfer fees that may from time to time be in effect
Cash distribution fees
U.S.$0.02 or less per ADS
Depositary services
U.S.$0.02 or less per ADS
98
In addition, holders may be
required to pay a fee for the distribution or sale of securities. Such fee (which may be deducted from such proceeds) would be for an
amount equal to the lesser of (1) the fee for the issuance of ADSs that would be charged as if the securities were treated as deposited
shares and (2) the amount of such proceeds.
Fees and Payments by the Depositary to the Company
Fees Incurred in Past Annual Period
We did not receive any reimbursement from the depositary
in 2022.
Fees to be Paid in the Future
The Bank of New York Mellon,
as depositary, has agreed to reimburse us for expenses they incur that are related to establishment and maintenance expenses of the ADS
program. The depositary has agreed to reimburse us for its continuing annual stock exchange listing fees. The depositary has also agreed
to pay the standard out-of-pocket maintenance costs for the ADSs, which consist of the expenses of postage and envelopes for mailing annual
and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required
tax forms, stationery, postage, facsimile, and telephone calls. It has also agreed to reimburse us annually for certain investor relationship
programs or special investor relations promotional activities. In certain instances, the depositary has agreed to provide additional payments
to us based on any applicable performance indicators relating to the ADS facility. There are limits on the amount of expenses for which
the depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary
collects from investors.
The depositary collects its
fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or
from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the
amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary
services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants
acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
99
PART
II
Item 13. Defaults, Dividends Arrearages and
Delinquencies
None.
Item 14.  Material Modifications to the
Rights of Security Holders and Use of Proceeds
None.
Item 15.  Controls
and Procedures
A.
Disclosure Control and Procedures
Our principal executive officer
(CEO) and our principal financial officer (CFO), after evaluating the effectiveness of our disclosure controls and procedures (as defined
in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this annual report, have concluded that, as of such date, our internal
control over financial reporting was effective.
B.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act,
and for its assessment of the effectiveness of internal control over financial reporting. In making this assessment, it used the criteria
established in the Internal Control Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Our internal control system is designed to provide reasonable assurance as to the reliability of the published financial statements under
applicable International Financial Reporting Standards. Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurances
with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness of the internal
control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
The effectiveness of our internal
control over financial reporting as of December 31, 2022 has been audited by Marcelo de los Santos y Cía., S.C., a member of Moore
Global Network, independent registered public accounting firm, as stated in their report which appears in Item 15.C as required by item
15.B(4) of Form 20-F.
Our management was able to
assess the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, it used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013) in the Internal Control - Integrated
Framework. Based on its assessment and those criteria, our management determined that internal controls over financing reporting were
effective on December 31, 2022.
100
C.
Attestation Report of the Independent Registered Public Accounting Firms
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of Grupo Simec, S.A.B. de C.V.
Opinion on Internal Control over Financial Reporting
We have audited Grupo SIMEC S.A.B. de C.V. and
subsidiaries (the Company's) internal control over financial reporting as of December 31, 2022, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States of America) (PCAOB), the consolidated statements of financial position
and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows of the Company, and our report
dated April 28, 2023, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company's management is responsible
for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying "
Management´s Annual Report on Internal Control Over Financial Reporting
".
Our responsibility is to express an opinion of the Company's internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
Definition and Limitations of Internal Control
over Financial Reporting
A Company internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A Company's internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the
Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Marcelo de los Santos y Cía., S.C.
Member of Moore Global Network Limited
/s/ Carlos de los Santos Anaya
San Luis Potosí, S.L.P., México
Apr 28, 2023
101
D.
Changes in Internal Control Over Financial Reporting
There are no changes in internal
control during 2022.
Item 16. Reserved
Item 16A. Audit Committee Financial Expert
Our board of directors has
determined that it has at least one "audit committee financial expert," as defined in Item 16.A of Form 20-F, serving on the
Audit Committee. Raúl Arturo Pérez Trejo is the director whom the board of directors has determined to be an audit committee
financial expert. Holders of ADSs should understand that this designation is a disclosure requirement of the SEC related to Mr. Pérez's
experience and understanding with respect to certain accounting and auditing matters. For more information about Mr. Trejo's relevant
experience see Item 6.A. "— Directors and Senior Management."
The designation does not impose
on Mr. Pérez any duties, obligations or liability that are greater than those which are generally imposed on him as a member of
the Audit Committee and board of directors, and his designation as an audit committee financial expert pursuant to this SEC requirement
does not affect the duties, obligations or liability of any other member of the Audit Committee or board of directors. Mr. Pérez
is "independent" as such term is defined in the listing standards of the NYSE American.
Item 16B. Code of Ethics
In 2002, we adopted a code
of ethics that applies to all of our employees and directors, including our principal executive officer, principal financial officer and
principal accounting officer. In 2021 and 2022, we did not amend our code of ethics in any manner, nor did we grant any waiver from any
provision of the code of ethics to any person. We will provide to any person without charge, upon written or oral request, a copy of such
code of ethics. Requests should be directed to: Grupo Simec, S.A.B. de C.V., Attention: Mario Moreno Cortez, telephone number: 011-52-33-3770-6700.
Item 16 C. Principal Accountant Fees and Services
Our Audit Committee has engaged
Marcelo de los Santos y Cía, S.C., a practice member of Moore Global Network, as independent auditors to audit our consolidated
financial statements as of and for the year ending December 31, 2022.
102
Audit Fees
. We paid
Ps. 13.2 million (U.S.$0.68 million) in fees to Marcelo de los Santos y Cia., S.C. in connection with the audit of our annual consolidated
financial statements for the year ended December 31, 2022, which are included in this annual report. We paid Ps. 12.3 million (U.S.$0.6
million) in fees to Marcelo de los Santos y Cia., S.C. in connection with the audit of our annual consolidated financial statements for
the year ended December 31, 2021, which are included in this annual report. We paid Ps. 12.0 million in fees to Marcelo de los Santos
y Cia., S.C. in connection with the audit of our annual consolidated financial statements for the year ended December 31, 2020, which
are included in this annual report. We paid Ps. 6.6 million (U.S.$0.34 million) in fees to Doeren Mayhew & Co. Certified public accountants
and advisors, P.C. a practice member of Moore Global Network Limited, in connection with the audit of our annual financial statements
of the United States of America segment for the year ended December 31, 2022. We paid Ps. 6.6 million (U.S.$0.32 million) in fees to Doeren
Mayhew & Co. Certified public accountants and advisors, P.C. a practice member of Moore Global Network Limited, in connection with
the audit of our annual financial statements of the United States of America segment for the year ended December 31, 2021. We paid Ps.
6.6 million (U.S.$0.33 million) in fees to MSPC Certified public accountants and advisors, P.C. a practice member of Moore Global Network
Limited, in connection with the audit of our annual financial statements of the United States of America segment for the year ended December
31, 2020. We paid Ps. 2.2 million (U.S.$0.11 million) in fees to Moore Prisma in connection with the audit of our annual financial statements
of the Brazil segment for the year ended December 31, 2022.We paid Ps. 0.7 million (U.S.$0.04 million) in fees to Moore Lima Lucchesi
in connection with the audit of our annual financial statements of the Brazil segment for the year ended December 31, 2021. We paid Ps.
0.7 million (U.S.$0.04 million) in fees to Moore Lima Lucchesi in connection with the audit of our annual financial statements of the
Brazil segment for the year ended December 31, 2020.
Audit Related Fees
.
In 2022 and 2021, we did not incur any expenses associated with audit related fees.
Tax Fees
. In 2022 and
2021, we did not incur any expenses associated with tax compliance.
Other Fees
. We paid
no other fees to Marcelo de los Santos y Cía. S.C., Moore Global Network Limited or Moore Global Prisma in 2022 and 2021.
Pre-Approval Policies.
Our Audit Committee has adopted a formal policy on auditor independence requiring it to approve all professional services rendered
by our independent auditor prior to the commencement of the specified services. The Audit Committee will consider annually and, if appropriate,
approve the provision of audit services by our independent auditor and consider and, if appropriate, pre-approve the provision of certain
defined audit and non-audit services. The Audit Committee also will consider on a case-by-case basis and, if appropriate, approve specific
engagements that are not otherwise pre-approved. Any proposed engagement that does not fit within the definition of a pre-approved service
may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the
Audit Committee for action by written consent.
The Audit Committee approved
all of the services incurred in 2021 and 2022, described as "Audit Fees," "Audit Related Fees," "Tax Fees,"
and "Other Fees," in accordance with our policy on auditor independence.
Item 16D. Exemptions from the Listing Standards
for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by
the Issuer and Affiliated Purchasers
Neither we nor any affiliated purchasers made any equity
security purchases during 2022.
Item 16F. Change in Registrant's Certifying
Accountant
Not applicable.
103
Item 16G. Corporate Governance
Our ADS are listed on the
NYSE American. Section 110 of the NYSE American Company Guide provides that the NYSE American will consider the laws, customs and practices
of an issuer's country of domicile, to the extent not contrary to the U.S. securities laws, and may grant exemptions from the NYSE
American listing standards based on these considerations. Our following corporate governance practices differ from the NYSE American listing
standards in the following ways:
Board of Directors Composition,
Nomination and Board Meetings
. Under the NYSE American Company Guide, listed companies are generally required to have a majority of
their board of directors be "independent" as defined by the NYSE American Company Guide. Pursuant to the Mexican Securities
Market Law, our board of directors must be composed of a maximum of 21 members, of which at least 25% must be independent. Currently,
as permitted under the Mexican Securities Market Law and our by-laws, our board of directors consists of five directors, of which three
are considered to be "independent." The board of directors is elected by the shareholders at the annual meeting, for a one-year
term with the option to be reelected, as determined by the shareholders. One alternate director may be appointed for each director, provided
that independent alternates are appointed for the independent directors. In accordance with Mexican law, our shareholders determine directors'
independence during the annual shareholders meeting, but this independence determination may be challenged by the CNBV. Our board of directors
meets at least quarterly and resolutions are binding if adopted by a majority of the directors present at a meeting.
Nominating and Compensation
Committees.
Under the NYSE American Guide, board of director nominations generally must be selected, or recommended for the board's
selection, by either a nominating committee comprised solely of independent directors or by a majority of the independent directors. Further,
compensation of the chief executive officer of a listed company and all other officers must be determined, or recommended to the board
of directors for determination, either by a compensation committee comprised of independent directors or by a majority of the independent
directors on the board of directors.
Audit Committee and Auditors.
Our Audit Committee is governed by: (i) our by-laws and (ii) Mexican law. Our Audit Committee is made up of at least three independent
directors, appointed by the board of directors. Our shareholders appoint and/or remove the chairman of the Audit Committee at the annual
shareholders meeting. In accordance with Mexican law, the Audit Committee must provide an opinion regarding any transaction with a related
party, outside of the ordinary course of business. Such transactions must also be approved by the board of directors.
Under Mexican law, we must
be audited by an independent public accountant that has received a "quality control review," as defined by the general rules
issued by the CNBV. These general rules require accounting firms rendering external audit services, to fulfill higher independence standards,
as well as issuing and following quality control internal policies and manuals in accordance with the rules issued by the Mexican Institute
of Public Accountants (
Instituto Mexicano de Contadores Públicos, A.C.
).
Quorum Requirements and
Shareholders' Approval
. The NYSE American minimum quorum requirement for a shareholder meeting is one-third of the outstanding
shares of common stock. In addition, a company listed on NYSE American is required to state its quorum requirement in its by-laws. In
compliance with Mexican law, shareholders representing 50% of our capital stock must be present to conduct business at the first call
for ordinary shareholders meetings, dealing with general matters. If a quorum is not reached, there is no minimum quorum requirement for
a second or subsequent call. Resolutions approved at ordinary shareholders' meetings are valid when approved by a majority of the
shares present. On the other hand, shareholders representing 75% of our capital stock must be present to conduct business at the first
call for extraordinary shareholders meeting dealing with modifications to the our by-laws. If a quorum is not reached, shareholders representing
50% of our capital stock must be present at the meeting in a second or subsequent call. Resolutions at extraordinary shareholders meetings
are valid if approved by shares representing more than 50% of our capital stock. However, resolutions regarding the (i) quorum requirements,
(ii) minority shareholders' rights, (iii) merger, spin-off and conversion are valid if approved by at least 75% of our capital stock.
Furthermore, resolutions regarding our registration with the National Securities Registry (
Registro Nacional de Valores
) are valid
if approved by at least 95% of our capital stock. Class II Series "L" Shares, representative of our capital stock with limited
economic and corporate rights, are not taken into account when determining the quorum at the general shareholders' meeting. Currently
there are no Class II Series "L" Shares outstanding. In addition, under Mexican law, we may not be required to obtain shareholder
approval for certain issuances of shares in excess of 20% of our outstanding shares, as would be required in certain circumstances by
the NYSE American Company Guide.
Code of Conduct and Ethics
.
In compliance with Mexican law, we have a code of conduct and ethics for our directors or executive officers. Also, our directors'
and executive officers' conduct is subject to the applicable provisions of the Mexican Securities Market Law and the regulations
issued by the CNBV.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not applicable.
104
PART
III
Item 17. Financial Statements
See "Item 18—Financial Statements."
Item 18. Financial Statements
See our Consolidated Financial Statements beginning
on page F-1.
Item 19. Exhibits
Pursuant to the rules and regulations of the SEC,
we have filed certain agreements as exhibits to this annual report on Form 20-F. Documents filed as exhibits to this annual report:
Exhibit
Number
Item
1.1
Amended and Restated by-laws (estatutos sociales) of the registrant translated into English (incorporated herein by reference to Exhibit 1.1 to the annual report for the fiscal year ended December 31, 2021 filed with the SEC on May 18, 2022).
2.1
Form of Amended and Restated Deposit Agreement among the registrant, The Bank of New York, and all Holders and Beneficial Owners from time to time of any American Depositary Receipts.**
2.2
Form of American Depositary Receipt.**
2.3
Description of American Depositary Receipts (incorporated herein by reference to Exhibit 2.3 to the annual report for the fiscal year ended December 31, 2021 filed with the SEC on May 18, 2022).
4.1
Stock Purchase Agreement by and Among PAV Republic, Inc., The Shareholders of PAV Republic, Inc., SimRep Corporation and Industrias C.H., S.A. de C.V.*
4.2
2007-2008 Rounds Supply Agreement by and Between Republic, Inc. and United States of America Steel Corporation.*
4.3
Stock Purchase Agreement, dated as of February 21, 2008, among the Sellers (as defined therein) and Grupo Simec, S.A.B. de C.V. relating to the acquisition of 100% of the shares of Grupo San.***
8.1
List of subsidiaries, their jurisdiction of incorporation and names under which they do business.
12.1
Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2
Certification of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1
Certifications of chief executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation LinkbaseDocument.
101.DEF
Inline XBRL Taxonomy Extension Definition LinkbaseDocument.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation LinkbaseDocument.
104
Cover Page Interactive Data File (formatted as InlineXBRL and contained in Exhibit 101).
*
Previously filed with the SEC as an exhibit and incorporated by reference to our Registration Statement on Form F-1, File No. 333-138239.
**
Previously filed with the SEC as an exhibit and incorporated by reference to Post-Effective Amendment No. 1 to our Registration Statement on Form F-6, File No. 033-48173.
***
Previously filed with the SEC as an exhibit and incorporated by reference to our Annual Report on Form 20-F, filed on July 1, 2008.
105
SIGNATURES
The registrant hereby certifies
that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this
annual report on its behalf.
GRUPO SIMEC, S.A.B. DE C.V.
By:
/s/ Rufino Vigil González
Rufino Vigil González
Chief Executive Officer
By:
/s/ Mario Moreno Cortez
Mario Moreno Cortez
Finance Coordinator
Dated: May 1, 2023
106
Grupo
Simec, S.A.B. de C.V. and Subsidiaries
(A
Subsidiary of Industrias CH, S.A.B. de C.V.)
Consolidated
Financial Statements
For
the years ended December 31, 2022, 2021 and 2020
Index
Content
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Statements of Financial Position
F-3
Consolidated Statements of Comprehensive
Income
    (Loss)
F-4
Consolidated Statements of Changes in Stockholders' Equity
F-5
Consolidated Statements of Cash Flows
F-6
Index to the Notes to the Consolidated
Financial
    Statements
F-7 - F-41
F-
1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders
of Grupo Simec, S.A.B. de C.V.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated statements of financial position of Grupo Simec, S.A.B. de C.V. and its subsidiaries (the
"Company") as of December 31, 2022, and 2021, and the related consolidated statements of comprehensive income (loss), changes
in stockholders' equity, and cash flows, for each of the years in the three-year period ended December 31, 2022, and the related notes
(collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements
present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021 and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"),
the Company´s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), and
our report dated April 28, 2023 expressed an unqualified opinion.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical
Audit Matters
Critical
audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
Marcelo
de los Santos y Cía., S.C.
San Luis Potosí, S.L.P., México
April 28, 2023
Member
of Moore Global Network Limited
ID
3281
/s/
Carlos de los Santos Anaya, C.P.A.
We
have served as the Company's auditor since 2016.
F-
2
Grupo
Simec, S.A.B. de C.V. and Subsidiaries
(A
subsidiary of Industrias CH, S.A.B. de C.V.)
Consolidated
Statements of Financial Position
For
the years ended December 31, 2022 and 2021
(In
thousands of Mexican pesos)
Note
2022
2021
Assets
Current assets:
Cash and cash equivalents
6
$
21,546,386
$
15,130,192
Trade receivables, net
7
6,633,415
6,418,157
Related parties' receivables
20
104,803
70,232
Recoverable taxes
8
404,922
454,758
Other receivables, net
563,590
443,140
Prepaid expenses
1,479,560
1,505,893
Inventory
9
12,791,311
11,748,113
Total current assets
43,523,987
35,770,485
Non-current related parties' receivables
20
648,281
648,281
Non-current loans to related parties
20
1,105,063
1,070,158
Non-current inventory, net
9
1,488,819
1,528,330
Property, plant and equipment, net
10
16,782,893
16,012,749
Investments in financial instruments
11
1,758,605
Intangible assets and other non-current assets, net
12
2,325,255
2,312,569
Total assets
$
67,632,903
$
57,342,572
Liabilities and stockholders' equity
Current liabilities:
Short-term debt
13
$
5,847
$
6,196
Accounts payable trade
14
9,410,419
6,910,451
Related parties payable
20
2,692,456
312,913
Other accrued liabilities
14
697,631
1,060,864
Payable tax
941,294
560,965
Income tax
1,405,994
2,210,535
Total current liabilities
15,153,641
11,061,924
Non-current liabilities:
Employee benefits
15
169,375
162,843
Deferred income tax
16
4,223,149
4,105,124
Other liabilities
92,362
212,613
Total Non-current liabilities
4,484,886
4,480,580
Total liabilities
19,638,527
15,542,504
Contingencies and Commitments
25 and 26
-
-
Stockholders' equity:
17
Capital stock
2,832,268
2,832,268
Additional paid-in capital
4,575,233
4,575,233
Retained earnings
38,101,948
30,239,277
Repurchase of own capital stock reserve
2,733,722
2,823,851
Accumulated Other comprehensive income (loss), net
19
(
286,442
)
1,288,278
Total controlling interest
47,956,729
41,758,907
Non-controlling interest
18
37,647
41,161
Total stockholders' equity
47,994,376
41,800,068
Total liabilities and stockholders' equity
$
67,632,903
$
57,342,572
Notes
are part of these consolidated financial statements.
F-
3
Grupo Simec, S.A.B. de
C.V. and Subsidiaries
(A
subsidiary of Industrias CH, S.A.B. de C.V.)
Consolidated
Statements of Comprehensive Income (Loss)
For
the years ended December 31, 2022, 2021 and 2020
(In
thousands of Mexican pesos, except income per share figures)
Note
2022
2021
2020
Net sales
$
54,159,247
$
55,620,356
$
35,869,314
Cost of sales
21
(
39,683,861
)
(
39,968,186
)
(
29,211,724
)
Gross profit
14,475,386
15,652,170
6,657,590
Administrative expenses
21
(
2,456,700
)
(
2,042,642
)
(
2,019,328
)
Other income (expense), net
22
71,845
(
77,406
)
546,749
Interest income and dividends
445,879
65,948
107,826
Interest expense
(
56,352
)
(
87,445
)
(
53,746
)
Loss on financial instruments
(
778,649
)
Foreign exchange loss, net
(
540,828
)
325,011
(
363,164
)
Income before income taxes
11,160,581
13,835,636
4,875,927
Income taxes
16
(
3,299,522
)
(
4,389,769
)
(
2,077,844
)
Net income for the year
7,861,059
9,445,867
2,798,083
Comprehensive (loss) for the year:
Translation effects of foreign subsidiaries
(
1,259,355
)
(
589,961
)
(
357,217
)
Other stock instruments
19
(
317,267
)
Total other comprehensive (loss) for the year, net of income taxes
(
1,576,622
)
(
589,961
)
(
357,217
)
Comprehensive income (loss) for the year, net of tax
$
6,284,437
$
8,855,906
$
2,440,866
Net income attributable to:
Controlling interest
$
7,862,671
$
9,444,208
$
2,798,188
Non-controlling interest
(
1,612
)
1,659
(
105
)
Net income for the year
$
7,861,059
$
9,445,867
$
2,798,083
Comprehensive income (loss) attributable to:
Controlling interest
$
6,287,951
$
8,850,755
$
2,429,656
Non-controlling interest
(
3,514
)
5,151
11,210
Comprehensive income for the year
$
6,284,437
$
8,855,906
$
2,440,866
Income per share:
Weighted average shares outstanding (in thousands of shares)
462,375
462,810
463,483
Income per share (controlling interest) (Mexican pesos)
4-n
$
17.00
$
20.41
$
6.04
Notes
are part of these consolidated financial statements.
F-
4
Grupo
Simec, S.A.B. de C.V. and Subsidiaries
(A
subsidiary of Industrias CH, S.A.B. de C.V.)
Consolidated
Statements of Changes in Stockholders' Equity
For
the years ended December 31, 2022, 2021 and 2020
(In
thousands of Mexican pesos)
Capital
Stock
Additional
paid-in
capital
Retained
earnings
Repurchase
of own capital
stock reserve
Accumulated
Other
comprehensive
income (loss),
net (Note 19)
Total
controlling
Interest
Non-
controlling
Interest
Total
stockholders'
equity
Balance at January 1, 2020
$
2,832,268
$
4,575,233
$
19,986,881
$
2,940,332
$
2,250,263
$
32,584,977
$
24,800
$
32,609,777
Repurchase of own capital stock, net
(
41,984
)
(
41,984
)
(
41,984
)
Dividends paid
(
1,990,000
)
(
1,990,000
)
(
1,990,000
)
Comprehensive income (loss)
2,798,188
(
368,532
)
2,429,656
11,210
2,440,866
Balance at December 31, 2020
$
2,832,268
$
4,575,233
$
20,795,069
$
2,898,348
$
1,881,731
$
32,982,649
$
36,010
$
33,018,659
Repurchase of own capital stock, net
(
74,497
)
(
74,497
)
(
74,497
)
Comprehensive income (loss)
9,444,208
(
593,453
)
8,850,755
5,151
8,855,906
Balance as of December 31, 2021
$
2,832,268
$
4,575,233
$
30,239,277
$
2,823,851
$
1,288,278
$
41,758,907
$
41,161
$
41,800,068
Repurchase of own capital stock, net
(
90,129
)
(
90,129
)
(
90,129
)
Comprehensive income (loss)
7,862,671
(
1,574,720
)
6,287,951
(
3,514
)
6,284,437
Balance as of December 31, 2022
$
2,832,268
$
4,575,233
$
38,101,948
$
2,733,722
$
(
286,442
)
$
47,956,729
$
37,647
$
47,994,376
Notes
are part of these consolidated financial statements.
F-
5
Grupo
Simec, S.A.B. de C.V. and Subsidiaries
(A
Subsidiary of Industrias CH, S.A.B. de C.V.)
Consolidated
Statements of Cash Flows
For
the years ended December 31, 2022, 2021 and 2020
(In
thousands of Mexican pesos)
2022
2021
2020
Operating activities:
Net income for the year
$
7,861,059
$
9,445,867
$
2,798,083
Adjustments for:
Depreciation and amortization
1,116,872
1,175,108
1,452,271
Employee benefits
6,532
979
12,072
Interest income from investing activities
(
445,879
)
(
65,948
)
(
107,826
)
Loss in financial instruments
778,649
Interest expense from financing activities
56,352
87,445
53,746
Income tax
3,299,522
4,389,769
2,077,844
12,673,107
15,033,220
6,286,190
Changes in operating assets and liabilities:
(Increase) in Trade receivables
(
440,424
)
(
1,807,289
)
(
795,682
)
(Increase) / decrease in Related parties receivables
(
69,476
)
(
78,941
)
98,874
(Increase) in Inventory
(
1,541,781
)
(
2,715,001
)
(
777,419
)
(Increase) in Other receivables, recoverable taxes and prepaid expenses
(
204,519
)
(
31,192
)
(
1,727,200
)
Increase in Accounts payable trade
2,375,610
836,406
1,066,393
(Decrease) in Related parties payables
(
8,453
)
(
38,598
)
(
113,155
)
(Decrease) in Accounts payable other and accrued liabilities and taxes other than income taxes
(
3,834,758
)
(
2,811,273
)
(
404,126
)
Net cash flows provided by operating activities
8,949,306
8,387,332
3,633,875
Investing activities:
Acquisition of property, plant and equipment
(
1,696,485
)
(
1,066,422
)
(
951,205
)
Decrease (increase) in other non-current assets
(
32,758
)
(
9,199
)
10,708
Acquisition of other equity instruments
(
2,075,872
)
Loss on financial instruments
(
778,649
)
Interest income collected
445,879
65,948
107,826
Net cash flows (used) by investing activities
(
4,137,885
)
(
1,009,673
)
(
832,671
)
Financing activities:
Loan from related
    parties
2,381,464
Repurchase and placement of own capital stocks, net
(
90,129
)
(
74,497
)
(
41,984
)
Dividends paid
(
1,990,000
)
Interest expense
(
56,352
)
(
87,445
)
(
53,746
)
Net cash flows used (provided) in financing activities
2,234,983
(
161,942
)
(
2,085,730
)
Increase in cash and cash equivalents
7,046,404
7,215,717
715,474
Cash and cash equivalents at beginning of year
15,130,192
7,727,698
7,446,447
Effects of exchange rate changes on the balance of cash and cash equivalents held in foreign currencies
(
630,210
)
186,777
(
434,223
)
Cash and cash equivalents at end of year
$
21,546,386
$
15,130,192
$
7,727,698
Notes
are part of these consolidated financial statements.
F-
6
Grupo
Simec, S.A.B. de C.V. and Subsidiaries
Notes
to the Consolidated Financial Statements
For
years ended December 31, 2022, 2021 and 2020
(In
thousands of Mexican pesos, except foreign currency and where indicated)
1.
Nature
                                            of business
Grupo
Simec, S.A.B. de C.V. is a
stock exchange corporation
with
variable equity,
constituted under the laws
of Mexico on August 22, 1990, with a duration of
99
years. The Company is a subsidiary of Industrias CH, S.A.B. de C.V. (Industrias
CH or ICH). The business headquarters are located in Guadalajara, Jalisco, Mexico and the administrative offices are located on
601 Rd. Lazaro Cardenas, ZIP Code 44440.
The
main activity of Grupo Simec, S.A.B. de C.V. and its subsidiaries (Simec or the Company) is manufacturing, processing and distribution
of steel and steel alloys products in Mexico, the United States of America (USA) and Brazil.
Shares
of the Company are listed on the Mexican Stock Exchange (BMV) and the Company´s American Depositary Receipts are listed on the
New York Stock Exchange (NYSE).
2.
Significant
                                            events
a.
On June 11, 2021, a contract was signed for the purchase of fixed assets from Kobelco, for USD $
10.0
million, for wire production, located in Silao Guanajuato. (CHQ Wire Mexico, S.A. de C.V.)
3.
Application
                                            of new and amended standards and interpretations and standards not in force yet
The
consolidated financial statements of Grupo Simec, S.A.B. de C.V. and its Subsidiaries for the periods presented have been prepared in
accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
IFRS also includes all current International Accounting Standards (IAS), in force, as well as all related interpretations issued by the
IFRS Interpretations Committee (IFRIC), including those issued previously by the Standing Interpretations Committee. The company applied
the effective IFRS as of December 31, 2022.
International
Financial Reporting Standards, not in force yet.
Following
are the amendments that could have an effect on Simec financial information, which were issued by the IASB (International Accounting
Standards Board) but are not yet effective as of the date of these financial statements.
The
following new standards and amendments are not yet effective but may have an impact on the financial statements of the Group in a future
period.
+
Amendments
to IAS 1 - Classification of Liabilities as Current or Non-current
+
Amendments
to IFRS 10 and IAS 28 - Sale or contribution of assets between an investor and its associate or joint venture
+
Amendments
to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies
+
Amendments
to IAS 8 - Disclosure of Accounting Policies and Definition of Accounting Estimates
+
Amendments
to IAS 12 - Deferred tax related to assets and liabilities arising from a single transaction
Amendments
to IAS 1 'Presentation of financial statements' clarify requirements for the presentation of liabilities in the statement
of financial position as current or non-current. The meaning of settlement of a liability is also clarified. The amendments are applicable
for annual periods commencing on or after 1 January 2023.
Amendments
to IFRS 10 'Consolidated financial statements' and IAS 28 'Investments in associates' clarify the accounting
treatment for sales or contribution of assets between an investor and its associates or joint ventures. Where the non-monetary assets
constitute a business, the investor will recognise the full gain or loss on the sale or contribution of assets. Otherwise, the gain or
loss is recognised by the investor only to the extent of the other investor's interests in the associate or joint venture. The
amendments have been deferred until IASB has finalised its research project on the equity method.
F-
7
Amendments
to Disclosure of Accounting Policies and Definition of Accounting Estimates modify:
●
IFRS
7, to clarify that information about measurement bases for financial instruments is expected to be material to an entity's financial
statements;
●
IAS
1, to require entities to disclose their material accounting policy information rather than their significant accounting policies;
●
IAS
8, to clarify how entities should distinguish changes in accounting policies and changes in accounting estimates;
●
IAS
34, to identify material accounting policy information as a component of a complete set of financial statements; and
●
IFRS
Practice Statement 2 Making Materiality Judgements, to provide guidance on how to apply the concept of materiality to accounting policy
disclosures.
Amendments
to Deferred tax related to assets and liabilities arising from a single transaction modify IAS 12 to clarify the accounting for deferred
tax on transactions that, at the time of the transaction, give rise to equal taxable and deductible temporary differences. In specified
circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the first time.
The
amendments clarify that the exemption does not apply to transactions for which entities recognise both an asset and a liability and that
give rise to equal taxable and deductible temporary differences. This may be the case for transactions such as leases and decommissioning,
restoration and similar obligations. Entities are required to recognise deferred tax on such transactions.
The
Standard amends IFRS 1 to require deferred tax related to leases and decommissioning, restoration and similar obligations to be recognised
by first-time adopters at the date of transition to International Accounting Standards, despite the exemption set out in IAS 12.
Simec
is evaluating the impact these changes could have on its financial statements.
4.
Basis
                                            of preparation and presentation of the consolidated financial statements
The
consolidated financial statements have been prepared in accordance with IFRS as discussed in Note 3, based on historical costs. Historical
cost is generally based on the fair value of the consideration given in exchange for assets.
Consolidation
basis - The consolidated financial statements include the financial statements of Grupo Simec, S.A.B. de C.V. and the entities
controlled by the Company (its subsidiaries). Control is obtained when the company possesses the power to govern the financial and operative
policies of an entity in order to obtain benefits from its activities. The results of subsidiaries acquired or sold during the year are
included in the consolidated statements of comprehensive income from the date of acquisition or up to the date of sale, as the case may
be. Total comprehensive income (loss) of subsidiaries is attributed both to the Company and to the non-controlling interests even if
the non-controlling interests have a deficit balance.
Within
the consolidation process, adjustments are made to the financial statements of the subsidiaries to adapt their accounting policies so
that they are aligned with those used by the Company. All significant intercompany transactions and balances between the consolidated
companies are eliminated during consolidation.
Changes
in investments in subsidiaries of the Company that do not result in a loss of control are recorded as equity transactions. The book value
of the company's non-controlling investments and shares is adjusted to reflect changes in the corresponding investments in subsidiaries.
Any difference between the amount by which non-controlling shares are adjusted and the fair value of the consideration paid or received
is recognized directly and is attributed to the owners of the company.
When
the company loses control of a subsidiary, the profit or loss in the provision is calculated as the difference between (i) the sum of
the fair value of the consideration received and the fair value of any retained ownership interest and (ii) the prior book value of assets
(including commercial credit) and liabilities of the subsidiary and any non-controlling participation. The amounts previously recognized
in other comprehensive income items related to the subsidiary are recorded (that is, reclassified to profit or loss or transferred directly
to retained earnings) in the same manner established for the case of the disposal of significant assets or liabilities. The fair value
of any investment retained by the former subsidiary on the date of loss of control is regarded as the fair value for initial recognition
in its subsequent accounting treatment, according to IAS 39, financial instruments: Recognition and valuation, or, where appropriate,
the cost in the initial recognition of an investment in an associate or entity under joint control.
F-
8
As
of December 31, 2022, and 2021, the subsidiaries of Grupo Simec, S.A.B. de C.V. included in the consolidation are the following:
Percentage of equity owned
2022
2021
Subsidiaries established in Mexico:
Compañía Siderúrgica de Guadalajara, S.A. de C.V.
99.99
%
99.99
%
Arrendadora Simec, S.A. de C.V.
100.00
%
100.00
%
Simec International, S.A. de C.V.
100.00
%
100.00
%
Compañía Siderúrgica del Pacifico, S.A. de C.V.
99.99
%
99.99
%
Coordinadora de Servicios Siderúrgicos de Calidad, S.A. de C.V. (7)
100.00
%
100.00
%
Industrias del Acero y del Alambre, S.A. de C.V.
99.99
%
99.99
%
Procesadora Mexicali, S.A. de C.V.
99.99
%
99.99
%
Servicios Simec, S.A. de C.V.
100.00
%
100.00
%
Sistemas de Transporte de Baja California, S.A. de C.V.
100.00
%
100.00
%
Operadora de Servicios Siderúrgicos de Tlaxcala, S.A. de C.V. (7)
100.00
%
100.00
%
Operadora de Metales, S.A. de C.V. (7)
100.00
%
100.00
%
Administradora de Servicios Siderúrgicos de Tlaxcala, S.A. de C.V.
100.00
%
100.00
%
CSG Comercial, S.A. de C.V.
99.95
%
99.95
%
Operadora de Servicios de la Industria Siderúrgica ICH, S.A. de C.V.
100.00
%
100.00
%
Corporación Aceros DM, S.A. de C.V. and subsidiaries (1)
100.00
%
100.00
%
Acero Transportes San, S.A. de C.V. (1)
100.00
%
100.00
%
Simec Acero, S.A. de C.V.
100.00
%
100.00
%
Corporación ASL, S. A. de C.V.
99.99
%
99.99
%
Simec International 6, S.A. de C.V. (7)
100.00
%
100.00
%
Simec International 7, S.A. de C.V.
99.99
%
99.99
%
Simec International 9, S.A.P.I. de C.V.
100.00
%
100.00
%
Corporativos G&DL, S.A. de C.V. (7)
100.00
%
100.00
%
Orge, S.A. de C.V.
99.99
%
99.99
%
Siderúrgica del Occidente y Pacifico, S.A. de C.V.
100.00
%
100.00
%
RRLC, S.A.P.I. de C.V.
99.99
%
95.10
%
Grupo Chant, S.A.P.I. de C.V.
99.99
%
97.61
%
Aceros Especiales Simec Tlaxcala, S.A. de C.V.
100.00
%
100.00
%
Gases Industriales de Tlaxcala, S.A. de C.V.
100.00
%
100.00
%
GSIM de Occidente S.A. de C.V.
100.00
%
100.00
%
Fundiciones de Acero Estructural, S.A. de C.V.
100.00
%
100.00
%
Siderúrgicos Noroeste, S.A. de C.V.
100.00
%
100.00
%
Simec Siderúrgico, S.A. de C.V.
100.00
%
100.00
%
Subsidiaries established in foreign countries:
SimRep Corporation and Subsidiaries (3) (4) (5)
99.41
%
99.41
%
Pacific Steel, Inc. (4)
100.00
%
100.00
%
Pacific Steel Projects, Inc. (4)
100.00
%
100.00
%
Simec Steel, Inc. (4)
100.00
%
100.00
%
Simec USA, Corp. (4)
100.00
%
100.00
%
Undershaft Investments, NV. (6)
100.00
%
100.00
%
GV do Brasil Industria e Comercio de Aço LTDA (2)
100.00
%
100.00
%
Companhia Siderurgica do Espiritu Santo S.A. (2)
100.00
%
100.00
%
(1)
Companies located in San Luis Potosi. For purposes of this report constitute the "Grupo San".
(2)
Companies located in Brazil.
(3)
ICH owns
0.59
% of the shares in this company at December 31, 2022.
(4)
Companies established in the United States of America, except a subsidiary of SimRep which is established in Canada.
(5)
SimRep as an individual company has no significant operations or assets, except for its investment in Republic Steel. For purposes of this report, these companies are named "Republic".
(6)
Company established in Curaçao.
(7)
Companies that have lost the entire capital stock, except Operadora de Metales, S.A. de C.V. and which only has lost 2/3 of their capital stock.
F-
9
Summary
of the main accounting policies
- The preparation of the consolidated financial statements requires the company's
management make certain estimates and use certain assumptions to value some of the items in the financial statements and to make the
disclosures required in the same. However, actual results may differ from these estimates. The Company's management, using its
professional judgment, believes that the estimates made and assumptions used were adequate under the circumstances. The significant
accounting policies of the Company are those mentioned below:
a.
Conversion of foreign subsidiaries financial statements
- The functional and reporting currency of the Company is the Mexican peso ($). The financial statements of foreign subsidiaries were translated to Mexican pesos in accordance with International Accounting Standard (IAS) 21,
The Effects of Changes in Foreign Exchange Rates
. Under this standard, the first step to convert financial information from operations abroad is the determination of the functional currency. The functional currency is the currency of the primary economic environment of the foreign operation or, if different, the currency that mainly impacts its cash flows.
The
U.S. dollar (US Dollar or USD$) was considered as the functional currency of all the U.S. subsidiaries and Brazilian real for subsidiaries
established in Brazil; therefore, the financial statements of these subsidiaries abroad were converted to Mexican pesos applying:
-
The
                                            exchange rates at the balance sheet date, to all assets, liabilities and stockholder´s
                                            equity.
-
The
                                            historical exchange rate at revenues, costs and expenses.
The
conversion differences are carried directly to the consolidated statements of comprehensive income as other comprehensive income under
the caption translation effects of foreign subsidiaries.
Relevant
exchange rates used in the conversion of the financial statements of foreign subsidiaries were as follows (Mexican pesos per one U.S.
dollar):
Current exchange rate as of December 31, 2022
19.36
Current exchange rate as of December 31, 2021
20.52
Average exchange rate for the year ended December 31, 2022 (*)
20.12
Average exchange rate for the year ended December 31, 2021 (*)
20.28
Current exchange rate as of April, 28, 2023
18.10
(*)
Average exchange rate used to translate revenues, costs and expenses of the companies mentioned above.
b.
Business combinations
- Acquisitions of subsidiaries and businesses units are accounted for using the acquisition method. The consideration for each acquisition is valued at its fair value on the date of exchange of the transferred assets, liabilities incurred or assumed and capital instruments issued by the Company in exchange for control of the acquired. The costs related to the acquisition are recognized in the results when incurred.
At
the date of acquisition, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, except:
-
Deferred
                                            tax assets or liabilities and liabilities or assets related to employee benefit arrangements,
                                            which are recognized and measured in accordance with IAS 12,
Income Taxes,
and IAS
                                            19,
Employee Benefits,
respectively.
-
Assets
                                            (or disposal groups) that are classified as held for sale in accordance with IFRS 5,
Non-
current
Assets Held for Sale and Discontinued Operations,
are measured in accordance with
                                            that Standard.
F-
10
Any
excess of the cost of acquisition for the Group's interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities of the associated company recognized at the date of acquisition is recognized as goodwill. Goodwill is included in the carrying
amount of the investment and is assessed for impairment annually. Any excess of the Group's interest in the net fair value of the assets,
liabilities and contingent liabilities over the cost of acquisition, after the reassessment, is immediately recognized in profit and
loss.
When
the consideration transferred by the Company in a business combination includes assets or liabilities resulting from a contingent consideration
arrangement, the contingent consideration is measured at its acquisition-date fair value and later adjustments to the consideration are
recognized against goodwill, providing that it has arisen from reliable information on the fair value at the acquisition date and occur
during the 'measurement period' (which cannot exceed one year from the acquisition date). All other subsequent adjustments
are recognized in profit or loss.
The
subsequent accounting for changes in the fair value of the contingent estimates that do not qualify as measurement period adjustments
depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at
subsequent reporting dates. Contingencies classified as assets or liabilities are remeasured at subsequent reporting dates in accordance
with IAS 37,
Provisions, Contingent Liabilities and Contingent Assets
, as appropriate, with the corresponding gain or loss being
recognized in profit or loss.
When
a business combination is achieved in stages, the Company's previously held equity interest in the acquiree are remeasured to fair
value at the acquisition date (i.e. the date when the Company obtains control) and the resulting gain or loss, if any, is recognized
in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have been previously recognized
in other comprehensive income (loss) are reclassified to profit or loss where such treatment would be appropriate if that interest were
disposed of.
If
the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the
Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during
the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances
that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.
c.
Cash and cash equivalents and temporary investments
- Cash consists of deposits in bank accounts that do not generate interest. Cash equivalents consists in temporary investments referred to as short-term fixed income investments whose original maturity is less than three months. These investments are reported at cost plus accumulated interest. The value so determined approximates their fair value.
Temporary
investments in equity instruments are measured at the fair value prevailing at the date of the financial statements. Subsequent changes
in the fair value are recognized in profit or loss.
d.
Allowances
for doubtful accounts
- The Companies recognize an estimation for expected credit loss, based on the historical
experience of credit losses in their accounts receivable, current conditions and reasonable and sustainable forecasts of the different
quantifiable future events that could affect the amount of future cash flows for recovering accounts receivable. The determination of
the estimate is aligned with the criteria established in IFRS 9, "Financial instruments".
e.
Inventories and cost of sales
- Inventories are stated at the lower of cost or net realizable value. The cost allocation formula used is the average cost. The cost includes acquisition costs of materials, labor and overhead costs related to manufacturing, based on normal activity levels. The net realizable value represents the estimated selling price for inventories less all estimated costs of completion and other necessary to make the sale.
The
Company classifies raw material inventory in the Consolidated Statements of Financial Position based on its expected consumption period,
presenting as long-term inventories those which in accordance with historical data and production trends will not be consumed in the
short-term (one year).
F-
11
The
Company classifies as long-term inventory certain parts and rollers that, according to historical data and trends, showing that such
inventories will not be consumed in the short-term. The Company utilizes coke, a form of coal, as a raw material input to fuel its blast
furnace which has been inactive in Lorain, Ohio USA plant (see Note 9). The Company has
136,246
metric tons (MT) of coke inventory valued
at
1,237
million Mexican pesos (average of USD$
469.0
/MT) on hand at December 31, 2022 and
136,541
MT of coke inventory valued at
1,304
million Mexican pesos (average of USD$
465.5
/MT) on hand at December 31, 2021 that is classified as long-term in the accompanying Consolidated
Statements of Financial Position.
The
Company follows the practice of providing a reserve for slow-moving inventory, considering the total of products and raw materials (including
coke) with a turnover above one year, which is recorded in the statement of financial position and against account is the cost of sales.
The
cost of sales of the Company includes inventory costs, outbound freight charges, purchasing and receiving costs, inspection costs, and
warehousing costs in cost of goods sold. Vendor payment incentives are recorded as a reduction to cost of goods sold.
f.
Property
,
plant and equipment
- Property, plant and equipment are
r
ecorded at acquisition cost less any recognized impairment
loss. Cost includes all expenses related to acquisition and installation and, for qualifying assets, borrowing costs (interest) capitalized
in accordance with the Company's accounting policy. Depreciation is recognized so as to write off the cost of assets (other than
land and properties under construction) less their residual values over their useful lives, using the straight-line method, and commences
when the assets are ready for their intended use. The estimated useful lives, residual values and depreciation method are reviewed at
the end of each reporting period, with the effect of any change in estimates accounted for on a prospective basis.
An
item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined
as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
The
initial estimated useful lives of the Company's main assets are as follows:
Years
Buildings
10
to
65
Machinery and equipment
5
to
40
Transportation equipment
4
Furniture, chattels and computer equipment
3
to
10
Repair
and maintenance costs that significantly increase productive capacity or extend the useful lives of existing plant and equipment are
capitalized. Supplies, comprising of spare parts and consumables for internal use are classified under property, plant and equipment
and expensed as incurred in the manufacturing process. All other repair and maintenance costs are expensed as incurred. Capital expenditures
for projects that cannot be put into use immediately are included in constructions and machinery in-progress. When constructions and
machinery in-progress are completed, they are transferred to depreciable assets.
g.
Leases
- IFRS 16 "Leases". These provisions consist of recognizing an asset for the right to use the underlying asset and
a liability for the lease thereof on the start date of the lease. The right-of-use asset is valued at acquisition cost less accumulated
depreciation and, where appropriate, impairment losses; the Lease Liability is valued at the present value of future lease payments to
be made and any other payment for the right to use the underlying asset in the lease term that has not been made at the start date of
the lease. The company applied the exception established in paragraph 5 of IFRS 16, where the lease agreements signed are short-term
and there is no reasonable certainty that they would be extended after their expiration.
h.
Costs for loans
- Costs for loans directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are ready for their intended use or sale.
Investment
income earned on the temporary investment of specific loans pending their expenditure on qualifying assets is deducted from the costs
for loans eligible for capitalization.
All
other costs for loans are recognized in profit or loss in the period in which they are incurred.
F-
12
i.
Intangible assets
- Intangible assets with definite useful lives that are acquired separately are carried at cost, less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for, on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Expenditure
on research activities is recognized as an expense in the period in which it is incurred.
An
internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if,
and only if, all of the following have been demonstrated:
-
The
                                            technical feasibility of completing the intangible asset so that it will be available for
                                            use or sale;
-
The
                                            intention to complete the intangible asset and use or sell it;
-
The
                                            ability to use or sell the intangible asset;
-
How
                                            the intangible asset will generate probable future economic benefits;
-
The
                                            availability of adequate technical, financial and other resources to complete the development
                                            and to use or sell the intangible asset; and
-
The
                                            ability to measure reliably the expenditure attributable to the intangible asset during its
                                            development.
The
amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the
intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized,
development expenditure is recognized in profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible
assets that are acquired separately.
Intangible
assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the
acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination
are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are
acquired separately.
An
intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses
arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount
of the asset, are recognized in profit or loss.
j.
Goodwill
- Goodwill arising from a business combination is carried as an asset at cost as established at the date of acquisition of the control of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Company's cash-generating units that would be expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
F-
13
k.
Impairment of tangible and intangible assets other than goodwill
- At the end of each reporting period or more frequently when impairment potential identified, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any of such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than it´s carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.
An
impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case
the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the
asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating
unit) in prior years. For purposes of allocation of goodwill when there is business combination will be distributed among each of the
cash generating units of the acquiring entity, expected synergy benefits. A reversal of an impairment loss is recognized immediately
in profit or loss and allocated to the assets of that unit, the carrying amount of an asset other than goodwill attributable to a reversal
of an impairment loss of value shall not exceed the carrying amount that would have been obtained if had not recognized an impairment
loss in value for the asset in prior periods. Unless the related asset is recognized at a revalued amount, in which case the reversal
of the impairment loss is treated as a revaluation increase.
The
reversal of the impairment loss is recorded on profit and loss, unless the corresponding asset recognizes a restated amount, in which
case the reversal of the impairment loss is treated as a restatement increase.
l.
Provisions
- Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The
amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet
date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, it´s carrying amount is the present value of those cash flows.
m.
Employee benefits
- The costs of direct benefits and defined benefit and defined contribution retirement plans are recognized as an expense when employees have rendered service entitling them to the right to receive those benefits.
The
retirement benefit liability is determined based on the present value of the defined benefit obligation at the date of the statement
of financial position. Any compensation included in the determination of the liability premiums corresponds to seniority premiums for
retirement. Actuarial gains and losses are recognized on profit or loss for the year. The retirement benefit liability and the related
net cost of the period are determined under the projected unit credit method based on projected salaries and certain assumptions determined
by independent actuaries.
F-
14
Liabilities
for employee benefits recognized in the consolidated statement of financial position represent the present value of the defined benefit
obligation.
Republic
operates various employee benefit plans. The contributions to these benefit plans are either contractually determined by the terms of
a collective bargaining agreement with the United Steelworkers or they are under the terms of a defined contribution plan. Accordingly,
the company pays fixed contributions to separate entities and they are expensed in the period in which the employees rendered the services
entitling them to the benefits.
n.
Earnings per share
- Income per share is calculated by dividing net income or loss related to the controlling interests, by the weighted average shares outstanding during each year presented.
o.
Income taxes
- Income taxes represents the sum of the tax currently payable and deferred taxes.
-
Current
                                            tax
-   The Company incurs Income Tax (ISR) (See note 15) which is recorded in
                                            the result in the year in which it is determined. Determined ISR is based on fiscal earnings.
                                            Fiscal earning differs from the gain reported in the Consolidated Comprehensive Income Statement,
                                            due to taxable income or deductible expenses in other years and items which are never taxable
                                            or deductible. The tax liability for the Company is computed using statutory rates promulgated
                                            or substantially approved at the end of the period on report.
-
Deferred
                                            tax
- Deferred tax is recognized on differences between the carrying amounts
                                            of assets and liabilities in the financial statements and the corresponding tax basis using
                                            the liability method. Deferred tax liabilities are generally recognized for all taxable temporary
                                            differences, and deferred tax assets are generally recognized for all deductible temporary
                                            differences to the extent that it is probable that taxable profits will be available against
                                            which those deductible temporary differences can be utilized. Such assets and liabilities
                                            are not recognized if the temporary difference arises from goodwill or from the initial recognition
                                            (other than in a business combination) of other assets and liabilities in a transaction that
                                            affects neither the taxable profit nor the accounting profit.
The
carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced by a valuation allowance to the extent that
it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.
Deferred
tax assets and liabilities are computed using the tax rates that are expected to apply in the period in which the liability is settled
or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The
effects of changes in the statutory rates are accounted for in the period that includes the enactment date. The measurement of deferred
tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities.
Deferred
tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and
liabilities on a net basis.
The
Company follows the practice of recognizing the benefit from the amortization of acquired or generated tax losses in current earnings
that are amortized.
-
Current
                                            and deferred tax for the period
- Current and deferred tax are recognized as
                                            an expense or income in periodic profit or loss, except when they relate to items that are
                                            recognized in other comprehensive income (loss) or directly in equity, in which case, the
                                            current and deferred tax are also recognized in other comprehensive income (loss) or directly
                                            in equity, respectively.
-
Interests
                                            on recoverable tax balances
- Interest on recoverable tax balances are presented
                                            in the consolidated statements of comprehensive income as interest income.
F-
15
p.
Foreign currencies transactions
- In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. In the case of non-monetary items, which arise from the payment or collection of anticipated considerations, are recognized at the exchange rate in force of the date of the transaction.
Exchange
differences are recognized in profit or loss in the period in which they arise except for:
-
Exchange
                                            differences on foreign currency borrowings relating to assets under construction for future
                                            productive use,  which are included in the cost of those assets and are recorded as an
                                            adjustment to interest costs on those foreign currency borrowings;
-
Exchange
                                            differences on transactions entered into in order to hedge certain foreign currency risks;
                                            and
-
Exchange
                                            differences on monetary items receivable from or payable to a foreign operation for which
                                            settlement is neither planned nor likely to occur (therefore forming part of the net investment
                                            in the foreign operation), which are recognized initially in other comprehensive income and
                                            reclassified from equity to profit or loss on sale of all or part of the net investment.
q.
Financial instruments
- Financial assets and financial liabilities are recognized when a group entity becomes a part to the contractual provisions of the instrument.
Financial
assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
r.
Financial assets
- Financial assets are classified in accordance with IFRS 9 Financial Instruments ("IFRS 9") into financial assets that are subsequently measured at amortized cost, at fair value through Other Comprehensive Income (OCI) or at fair value through profit or loss based on the Company's business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Financial
assets at amortized cost
Financial
assets are measured at amortized cost when the objective of holding the financial assets is to obtain contractual cash flows, and the
contractual terms of the financial asset give rise on specified dates to cash flows that are only payments of principal and interest
on the principal amount. Financial assets are initially recognized at fair value plus transaction costs and subsequently recorded at
amortized cost using the effective interest rate method, with changes in carrying value recognized in the statement of income. They are
included in current assets except for maturities greater than 12 months from the closing date, which are included in non-current assets.
The Group's financial assets, measured at amortized cost, are mainly presented as "Trade accounts and notes receivable", "Other
accounts and notes receivable", and "Accounts receivable from related parties" in the consolidated statement of financial
position.
Financial
assets at fair value through OCI
These
are financial assets held for the purpose of obtaining contractual cash flows and the sale of the financial assets, and the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount.
The
Company's investments in certain equity instruments have been designated to be measured at fair value through OCI in accordance with
MFRS 9. In connection with this designation, any amount presented in OCI will not be transferred to the consolidated statement of income.
Dividends on these equity instruments are recognized in the consolidated statement of income when the right to pay the dividend is established,
and it is probable that such dividend will be paid to the Company.
F-
16
Financial
assets at fair value through profit or loss
These
are financial assets held for trading. A financial asset is classified in this category if it is acquired for the purpose of selling
in the near term. Derivative financial instruments are also included in this category unless they are designated as hedging instruments.
Assets in this category are classified as current assets if they are expected to be settled within 12 months, otherwise they are classified
as non-current assets.
Derecognition
The
Group assesses the expected credit losses associated with its financial assets recorded at fair value through OCI. The applicable impairment
method depends on whether there has been a significant increase in credit risk.
For
notes and trade receivables, the Company applies a simplified approach permitted by MFRS 9, which requires that expected losses over
the life of the asset be recognized upon initial recognition of the notes and trade receivables
s.
Financial liabilities
- Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Financial liabilities are classified as either financial liabilities "at fair value through profit or loss" or "other financial liabilities".
Financial
liability at fair value with changes through profit or loss is a financial liability classified as held for trading or it is designated
as at fair value with changes through profit or loss.
A
financial liability is classified as held for trading if:
-
It
                                            has been acquired principally for the purpose of repurchasing it in the near term;
-
On
                                            initial recognition, it is part of a portfolio of identified financial instruments that the
                                            Company manages together and has a recent actual pattern of short-term profit-taking; or
-
It
                                            is a derivative that has not been designated as a hedging instrument and fulfils the condition
                                            to be effective.
A
financial liability other than a financial liability held for trading may be designated as at fair value through profit or loss upon
initial recognition if:
-
Such
                                            designation eliminates or significantly reduces a measurement or recognition inconsistency
                                            that would otherwise arise; or
-
The
                                            yield of a group of financial assets, financial liabilities or both, is administered and
                                            assessed based on its fair value, according to an investment strategy or risk management
                                            that the Company has documented and provided internal information over that group, based
                                            on its fair value; or
-
It
                                            forms part of a contract containing one or more embedded derivatives, and IAS 39,
Financial
                                            Instruments: Recognition and Measurement,
permits the entire combined contract (asset
                                            or liability) to be designated as at fair value through profit or loss.
-
Financial
                                            liabilities at fair value through profit or loss are recorded at fair value, with any gains
                                            or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized
                                            in profit or loss incorporates any interest paid on the financial liability and is included
                                            in the 'other gains and losses' line item in the consolidated statement of comprehensive
                                            income.
-
Other
                                            financial liabilities including borrowings are subsequently measured at amortized cost using
                                            the effective interest method. The effective interest method is a method of calculating the
                                            amortized cost of a financial liability and of allocating interest expense over the relevant
                                            period. The effective interest rate is the rate that exactly discounts estimated future cash
                                            payments through the expected life of the financial liability, or (where appropriate a shorter
                                            period), to the net carrying amount on initial recognition.
F-
17
-
The
                                            Company derecognizes financial liabilities when, and only when, the Company's obligations
                                            are discharged, cancelled or expire. The difference between the carrying amount of the financial
                                            liability derecognized and the consideration paid and payable is recognized in profit or
                                            loss at that time.
t.
Derivative financial instruments
- The Company sometimes uses derivative financial instruments for hedging risks associated with natural gas prices; this commodity is used for the production of goods, for which it conducted studies on historical consumption, future requirement and commitments acquired, thus diminishing its exposure to risks other than its normal operating risks.
These
derivatives are initially recognized at fair value at the date the derivative contracts are entered into and subsequently are remeasured
to the fair value at the end of reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative
is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature
of the hedge relationship.
To
mitigate the risks associated with changes in natural gas prices occurring naturally as a result of the supply and demand on international
markets, the Company uses natural gas cash-flow exchange contracts or natural gas swaps to offset fluctuations in the price of natural
gas, whereby the Company receives a floating price and pays a fixed price. Fluctuations in natural gas prices from volumes consumed are
recognized as part of the Company's operating cost.
At
the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along
with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the
hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting exposure to changes
in fair values or cash flows of the hedged item attributable to the hedged risk.
The
effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other
comprehensive income and accumulated under the heading of
fair value of derivative financial instruments,
net of the corresponding
income taxes. The gain or loss relating to the ineffective portion of hedge instrument is recognized immediately in profit or loss, and
is included in the cost of sales line item.
The
Company periodically evaluates the changes in cash flows of the derivative instrument to analyze if the swaps are highly effective for
mitigating the exposure to natural gas price fluctuations. A hedge instrument is considered to be highly effective when changes in its
fair value or cash flows of the primary position are compensated on a regular or cumulatively basis, by changes in fair value or cash
flows of the hedging instrument in a range between
80
% and
125
%.
Amounts
previously recognized in other comprehensive income are reclassified to profit or loss in the periods when the hedged item is recognized
in profit or loss, in the same line of the consolidated statement of comprehensive income as the recognized hedged item. However, when
the hedged forecasted transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses
previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial
asset or non-financial liability.
Hedge
accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated,
or exerted, or when it no longer qualifies for hedge accounting. Any gain or loss accumulated from the hedge instrument that had been
recognized in other comprehensive income and accumulated in equity at that time remains in equity until the forecast transaction is ultimately
recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized
immediately in profit or loss.
u.
Revenue from contracts with customers
- Revenue from contracts with customers is recognized when control of the goods or services is transferred to the customer in an amount that reflects the consideration to which the company expect to be entitled in exchange for those goods and services.
F-
18
Sale
of goods
Revenue
from products sales manufactured by the Company ("the products") is recognized at the point in time when control of the asset
is transferred to the customer, normally generally on delivery of the parts. The normal credit term is 30 to 90 days upon delivery.
The
Company does not have any obligations to be fulfilled in the contracts, which are obligations to be fulfilled separately and in which
a portion of the transaction price should be allocated, other than the delivery of products confirming to the specifications of a customer
purchase order. When determining the transaction price for the sale of products, the Company would consider the possible effects of the
variable consideration, the existence of important financing components, the consideration other than cash and the consideration payable
to the client.
Contract
assets
A
contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs an
obligation by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract
asset is recognized for the earned consideration that is conditional.
Accounts
receivable
A
receivable represents the Company's right to an amount of consideration that is unconditional (i.e., only the passage of time is
required before payment of the consideration is due).
Contract
liabilities and advances from customers
A
contract liability is the obligation to transfer the control over goods or services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers
goods or services to the customer, a contract liability is recognized when the payment is due, and an advance from customers when the
payment is made. Contract liabilities (or advance from customer) are recognized as revenue when the Company performs its performance
obligations under the contract.
v.
Financial information by operating segment
- An operating segment is an identifiable component of the Company that performs business activities, from which it may earn revenues and incur expenses, including those income and expenses related to transactions with other components of the entity and upon which the company has separate financial information that is evaluated regularly by the Board of Directors, in making decisions to allocate resources and assess segment performance.
w.
Environmental liabilities
- The Company and other steel companies are subject to stringent environmental laws and regulations. It is the policy of the Company to endeavor to comply with applicable environmental laws and regulations. The Company established a liability for an amount which the Company believes is appropriate, based on information currently available, to cover costs of environmental remediation it deems probable and estimable. The liability represents an estimate of the environmental remediation costs associated with the required future steps of remediation, based upon management's evaluation of probable outcomes. These estimates are based on currently available facts, existing technology and presently enacted laws and regulations. The precise timing of remediation activities cannot be reliably determined at this time due to the absence of any deadlines for remediation under the applicable environmental laws and regulations pursuant to which such remediation costs will be expended. Accordingly, the Company has not discounted its environmental liabilities. Currently no claims for recovery are netted against the recorded liabilities.
x.
Cost of sales and expenses by function
- The Company classifies its costs and expenses by function in the Consolidated Statements of Comprehensive Income, according to accepted practices for the industry in which it operates.
F-
19
5.
Critical
                                            accounting judgments and key sources of estimates
In
the application of the Company's accounting policies, which are described in Note 4, management is required to make judgments,
estimates and assumptions regarding the carrying amounts of assets and liabilities. The estimates and associated assumptions are based
on historical experience, the future and other factors that are considered to be relevant. Actual results may differ from these estimates.
The
estimates and underlying assumptions are reviewed on an ongoing basis and the resulting changes are recorded on the period in which the
estimate has been modified, if such change affects only that period or in future periods.
a.
Critical
                                            accounting judgments
- The following are the critical
                                            judgments in the application of accounting policies, apart from those involving estimations,
                                            that the management have made in the process of applying the Company's accounting policies
                                            and that have the most significant effect on the amounts recognized in the financial statements:
-
Functional
                                            currency
- The Company's management has evaluated all the indicators
                                            that in its opinion are relevant and has concluded that the Company's functional currency
                                            is the Mexican Peso. Likewise, the Company has concluded that the functional currency of
                                            the companies located abroad are those mentioned in Note 4-a.
b.
Key
                                            information for estimates
-
The following are the key assumptions, and other key sources of estimation at the consolidated
                                            balance sheet date, that have a significant risk of causing a material adjustment to the
                                            carrying amounts of assets and liabilities within the following financial year.
-
Allowance
                                            for expected credit losses
- The practice of creating an allowance for expected
                                            credit losses at the balance sheet date is followed to show the possible losses resulting
                                            from the inability of customers to pay their corresponding debts. The Company calculates
                                            the estimate taking into account the historical experience of credit losses on its accounts
                                            receivable, current conditions and reasonable and supportable forecasts of the different
                                            quantifiable future events that could affect the amount of future cash flows to be recovered
                                            from accounts receivable.
-
Net
                                            realizable value of inventory
- At each balance sheet date, professional judgment
                                            is used to determine any impairment in inventory. Inventory is considered as impaired when
                                            its carrying value is higher than its net realization value.
-
Impairment
                                            of long-lived assets in use
- Management applies professional judgment at each
                                            balance sheet date to determine whether the long-lived assets in use are impaired. Long-lived
                                            assets in use are impaired when the carrying value is greater than the recoverable amount
                                            and there is objective evidence of impairment. The recoverable amount is the present value
                                            of the discounted future cash flows that will generate during the remaining useful life,
                                            or liquidation value (fair value).
-
Estimating
                                            useful lives and residual values of property, plant and equipment
- As described
                                            in Note 4 f, the Company reviews the estimated useful life and residual values of property,
                                            plant and equipment at the end of each annual reporting period.
-
Impairment
                                            of goodwill
- Determining whether goodwill is impaired requires an estimation
                                            of the value in use of the cash-generating units to which goodwill has been allocated. The
                                            value in use calculation requires management to estimate the future cash flows expected to
                                            arise from the cash-generating unit and a suitable discount rate in order to calculate present
                                            value.
-
Employee
                                            Benefits
- The valuation of employee benefits is carried out by independent actuaries
                                            based on actuarial studies. Among others, the following assumptions, which can have an effect
                                            are used:(i) discount rates, (ii) the expected growth rates of wages and (iii) turnover rates
                                            and mortality recognized tables.
F-
20
A
change in the economic, employment and fiscal conditions could modify the estimates.
-
Contingencies
- The Company is subject to transactions or contingent events for which it
                                            uses professional judgment in the development of estimates of probability of occurrence.
                                            Factors that are considered in these estimates are the current legal situation at the date
                                            of the estimate and, the opinion of the legal advisers.
-
Deferred
                                            income tax assets
- The Company reviews the carrying amounts at the end of
                                            each reporting period and reduces deferred income tax assets to the extent that it is not
                                            probable that sufficient taxable profit will be available to allow all or part of the deferred
                                            income tax assets to be utilized. However, there is no assurance that the Company will generate
                                            sufficient taxable profit to allow all or part of its deferred income tax assets to be realized.
-
Valuation
                                            of financial instruments
- The Company has certain types of derivative financial
                                            instruments (gas swaps), and the valuation techniques that includes to determine the fair
                                            value are based in data obtained in observable markets.
The
Company's management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair
value of derivative financial instruments. At December 31, 2022 and 2021 the Company has no derivative financial instruments.
6.
Cash
                                            and cash equivalents and other investments
Cash
and cash equivalents are as follows:
December 31,
2022
2021
Cash
$
4,040,351
$
2,065,311
Cash equivalents (1)
17,506,035
13,064,881
$
21,546,386
$
15,130,192
(1)
Cash equivalents are investments with initial original maturities of less than 90 days and consist primarily of Treasury Bills issued by the United States Treasury Department.
7.
Trade
                                            receivables - Net
The
average collection period on sales of goods is between 30 and 60 days. No interest is charged on the outstanding accounts receivables
from clients. The Company has recognized an allowance for doubtful accounts to show the possible financial loss caused by the inability
of customers to make the corresponding payments. Allowances for doubtful accounts are calculated based on several factors including price
adjustments, likelihood of recovery, aging and historical experience.
Credit
limits and credit scores of customers are reviewed twice a year. On December 31, 2022 and 2021 there were no customers who represent
more than
5
% of the total balance of trade receivables. The Company does not hold any collateral or other credit enhancements over these
balances nor does it have a legal right of offset against any amounts owed by the Company to the counterparty.
Trade
receivables disclosed below include amounts that are past due at the end of the reporting period for which the Company has not recognized
an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered
recoverable. The Company does not hold any collateral. In general terms, the accounts receivable does not show impairment.
Age
of net receivables that are past due were as follows:
At December 31,
2022
2021
30 - 60 days
$
149,250
$
355,633
61 - 90 days
709,781
62,387
91 + days
1,000,937
93,504
Total
$
1,859,968
$
511,524
F-
21
During
the years ended December 31, 2022 and 2021, the movement in the allowance for doubtful accounts was as follows:
2022
2021
Balance at beginning of year
$
224,569
$
233,355
Provisions
25,163
22,247
Cancellation
(
834
)
Account recoveries
(
2,708
)
Translations effects
(
22,466
)
(
28,325
)
Balance at end of year
$
226,432
$
224,569
The
Company recognize an estimation for expected credit loss, based on the historical experience of credit losses in their accounts receivable,
current conditions and reasonable and sustainable forecasts of the different quantifiable future events that could affect the amount
of future cash flows for recovering accounts receivable. In determining the non-recoverable portion of accounts receivable, the Company
considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting
period. The concentration of credit risk is minimum, due to the fact that the customer base is large and unrelated.
8.
Recoverable
                                            taxes
December 31,
2022
2021
Value Added Tax
$
32,686
$
100,838
Income Tax
353,506
353,325
Other
18,730
595
$
404,922
$
454,758
9.
Inventories
December 31,
Current inventory:
2022
2021
Finished goods
$
3,656,990
$
2,772,167
Work-in-process
125,259
355,830
Billets
2,282,093
2,255,933
Raw materials and supplies
5,446,489
5,092,292
Materials, spare parts and rollers
1,264,727
1,271,891
Materials in-transit
15,753
$
12,791,311
$
11,748,113
Non-current
inventory:
December 31,
2022
2021
Coke
$
1,237,188
$
1,303,975
Spare parts
74,361
62,092
Rollers
177,270
162,263
Finished goods
353,095
353,095
1,841,914
1,881,425
Less, valuation allowance at the lower of cost or net realizable value.
(
353,095
)
(
353,095
)
$
1,488,819
$
1,528,330
The
Company has $
1,237,188
and $
1,303,975
of coke inventory on hand as of December 31, 2022 and 2021, respectively (See note
4-e), which the Company would use as an input to its blast furnace in the Lorain facility which is currently idled. Management of the
Company continually evaluates both the idled facility and the coke inventory for impairment. Management periodically evaluates the potential
degradation of the coke inventory and has determined that it continues to be suitable as a blast furnace input or, alternatively, for
sale to other blast furnace facilities. As of March 2023, management considers that there will be recovery in the industries in which
the Company operates; this would result in the blast furnace being restarted in the future. However, the Company has recorded an impairment
to the blast furnace resulting in a book value of zero. The Company has continued incurring certain costs to maintain the assets in Lorain,
including the blast furnace and the coke; such costs are expensed as incurred. In order to restart the blast furnace the Company will
incur expenses for the restoration of the equipment, and there is still uncertainty on the date on which the blast furnace will restart
operation, if ever The Company cannot offer any guarantee of the eventual restarting of the blast furnace or when conditions will become
economically feasible to do so.
F-
22
10.
Property,
                                            plant and equipment
Cost
of property, plant and equipment is as follows (in millions of Mexican pesos):
Land
Buildings
Machinery
and
equipment
Transportation
equipment
Furniture,
mixtures and
computer
equipment
Constructions
and
machinery
in-progress
Total
Balance to January 1, 2021
$
1,316
$
5,440
$
29,637
$
161
$
144
$
1,015
$
37,713
Additions
119
14
569
1
5
358
1,066
Conversion adjustments
(
4
)
(
44
)
(
12
)
303
243
Balance as of December 31, 2021
$
1,431
$
5,410
$
30,194
$
162
$
149
$
1,676
$
39,022
Additions
2
3
286
1
4
1,400
1,696
Conversion adjustments
(
18
)
(
9
)
(
339
)
(
1
)
(
40
)
(
407
)
Balance as of December 31, 2022
$
1,415
$
5,404
$
30,141
$
163
$
152
$
3,036
$
40,311
Accumulated
depreciation of property, plant and equipment is as follows (in millions of Mexican pesos):
Buildings
Machinery and
equipment
Transportation
equipment
Furniture,
mixtures and
computer
equipment
Total
Balance as of January 1, 2021
1,213
$
20,382
$
86
$
81
$
21,762
Depreciation expense
46
1,127
2
0
1,175
Conversion effects
(
9
)
82
(
2
)
1
72
Balance as of December 31, 2021
1,250
$
21,591
$
86
$
82
$
23,009
Depreciation expense
46
1,058
2
0
1,106
Conversion effects
(
10
)
(
575
)
(
2
)
0
(
587
)
Balance as of December 31, 2022
$
1,286
$
22,074
$
86
$
82
$
23,528
The
depreciation expense for the years ended December 31, 2022, and 2021 amounted to $
1,106,263
and $
1,175,108
, respectively.
The
net book value of property, plant and equipment is as follows (in millions of Mexican pesos):
Net Book Value:
Land
Buildings
Machinery
and
Equipment
Transportation equipment
Furniture,
mixtures and
computer
equipment
Constructions
and
machinery in-
progress
Total
Balance as of December 31, 2020
$
1,316
$
4,227
$
9,255
$
75
$
63
$
1,015
$
15,951
Balance as of December 31, 2021
$
1,431
$
4,160
$
8,603
$
76
$
67
$
1,676
$
16,013
Balance as of December 31, 2022
$
1,415
$
4,118
$
8,067
$
77
$
70
$
3,036
$
16,783
F-
23
Until
December 31, 2014, Republic has invested USD $
158.8
million in an electric arc furnace and auxiliar facilities for its steel facility
in Lorain, Ohio, USA, with the intention to satisfy growing customer demand of SBQ. The locality of this steel mill was selected due
to its strategic location close to customers and the availability of skilled labor. Furnace construction started at midyear of 2012 and
the operations started production in July 2014. The furnace steel amount includes of USD $
45.4
million of labor and capitalized indirect
expenses.
This
facility was idled in June of 2015 and management has no near-term plans to restart the facility, except for the Lorain 9/10" Mill,
which is in the process of being recommissioned due to market demand for cold heading quality steel (CHQ) and special bar quality steel
(SBQ). The expectation is that it will be restarted when market conditions improve substantially, particularly in the oil and gas drilling
industry. During 2022 and 2021, the Company invested in certain improvements in the Lorain facility so as to be better prepared to reactivate
the plant, with USD$
5.5
and USD$
15.6
million recorded to construction-in-progress for the years ended December 31, 2022 and 2021, respectively.
The construction in progress in the last 3 years amount to USD $
27.1
million. Management expects to incur USD$
4.0
million in additional
costs related to starting up the facility.
The
Company has property, machinery, and equipment with a net book value of approximately USD$
61.7
, USD$
54.6
and USD$
40.3
million
as of December 31, 2022, 2021 and 2020, respectively, pertaining to the Lorain, Ohio facility after recording an impairment charge of
USD$
130.7
million when the facility was idled.
As
a consequence of this event, management determined a triggering event took place to where the long-lived assets at the Lorain facility
may not be fully recoverable. Management performed an analysis of the fair value of the Lorain facility with the assistance of an independent
valuation firm and determined the net book value exceeded the fair value by approximately U.S.$
130.7
million (Ps.$
2,701
million) and
as such recognized an asset impairment of this amount during the year ended December 31, 2015. The fair value determination at the Lorain
facility was based on an independent valuation of the Lorain melt shop assets using the comparable match method of the market approach.
The income approach was not considered an appropriate fair value measurement due to the absence of reliable forecast data as the facility
was idled indefinitely in early 2016.
Management
further assessed if there were any impairments at the Company's other asset groups in accordance with IFRS and determined that as of
December 31, 2022, no other asset groups were impaired based on current projections. No further impairment was considered necessary or
appropriate.
11.
Investments
                                            in financial instruments
The
balances as of December 31, 2022 are as follows:
2022
Other stock instruments
$
1,758,605
Corresponds
to instruments listed on the Stock Exchange and its fair value is determined using the market prices quoted on the valuation date.
12.
Intangible
                                            and other long-term assets
The
balances as of December 31, 2022 and 2021 are as follows:
2022
Amortization
Assets
Original
Value
Accumulated
amortization
Net
period
(years)
Republic trade mark
$
104,289
$
$
104,289
*
Customers list
63,664
63,664
20
Total from Republic (1)
167,953
63,664
104,289
Customers list
2,205,700
2,205,700
9
San 42 trademark (2)
329,600
329,600
*
Goodwill (2)
1,814,160
1,814,160
*
Total from Grupo San (3)
4,349,460
2,205,700
2,143,760
4,517,413
2,269,364
2,248,049
Other assets
77,206
77,206
$
4,594,619
$
2,269,364
$
2,325,255
F-
24
2021
Amortization
Assets
Original
Value
Accumulated
Amortization
Net
period
(years)
Republic trade mark
$
110,506
$
$
110,506
*
Customers list
67,459
67,459
20
Total from Republic (1)
177,965
67,459
110,506
Customers list
2,205,700
2,205,700
9
San 42 trademark (2)
329,600
329,600
*
Goodwill (2)
1,814,160
1,814,160
*
Total from Grupo San (3)
4,349,460
2,205,700
2,143,760
4,527,425
2,273,159
2,254,266
Other assets
58,303
58,303
$
4,585,728
$
2,273,159
$
2,312,569
*
Intangible assets with undefined useful life.
(1)
Intangible assets from the Republic acquisition.
(2)
The San 42 trademark and the goodwill are presented net of impairment losses recorded in 2009 for $
16,000
and $
2,352,000
, respectively.
(3)
Intangible assets from the Grupo San acquisition.
The
amortization of these assets recorded in net income for the years ended December 31, 2022 and 2021, amounted to $
10,609
and $
10,522
,
respectively.
The
other assets are not subject to amortization and they are primarily comprised of guarantee deposits.
The
reconciliation between the opening and closing balances of each year is presented below:
Assets
Original
Value
Accumulated
amortization
Net
Balance as of December 31, 2020
$
4,719,347
$
(
2,396,391
)
$
2,322,956
Additions
10,520
(
10,520
)
0
Cancellations
(
128,785
)
128,785
0
Adjustment effect of the year
(
15,354
)
4,967
(
10,387
)
Balance as of December 31, 2021
$
4,585,728
$
(
2,273,159
)
$
2,312,569
Additions
10,609
(
10,609
)
0
Cancellations
(
2,505
)
2,505
0
Adjustment effect of the year
787
11,899
12,686
Balance as of December 31, 2022
$
4,594,619
$
(
2,269,364
)
$
2,325,255
13.
Short-term
                                            debt
On
October 22, 1997 and August 17, 1998, the Company offered the holders of medium-term notes of Simec then outstanding to exchange their
bonds at par for new subordinated bonds in third place. The new notes bear semi-annual interest at an annual rate of
10.5
% interest and
principal repayments were semiannual from May 15, 2000 until November 15, 2007. At December 31, 2022 and 2021, the amount of the bonds
not exchanged totaled USD$
0.3
million, plus accrued interest. At December 31, 2022 and 2021, liabilities in pesos for the bonds
not exchanged amounted $
5,847
and $
6,296
, respectively.
F-
25
14.
Accounts payable trade and other accrued liabilities
December 31,
2020
2021
Trade accounts payable
$
9,410,419
$
6,910,451
Other accrued liabilities
697,631
898,404
$
10,108,050
$
7,808,855
15.
Employee benefits
Mexican entities
a.
Collective bargaining agreements
- During 2022, approximately
42
% (
42
% on 2021) of the employees in the Company's Mexican operations are covered by collective bargaining agreements. The Mexican
collective contracts expire in periods greater than one year.
b.
Seniority premium benefits
- In accordance with Mexican
Labor Law, the Company provides seniority premium benefits to its employees under certain circumstances. Such benefits consist of a one-time
payment equivalent to 12 days wages for each year of service (at the employee's most recent salary, but not to exceed twice the
legal minimum wage), payable to all employees with 15 or more years of service, as well as to certain employees terminated involuntarily
prior to the vesting of their seniority premium benefit. These obligations are calculated by independent actuaries using the projected
unit credit method.
c.
Severance benefits
- Further, in accordance with the
Mexican labor laws, the Company also provides statutorily mandated severance benefits to its employees terminated under certain circumstances.
Such benefits consist of a one-time payment of three months' wages plus 20 days' wages for each year of service, payable upon
involuntary termination without just cause. Severance benefits payments are recorded directly in the consolidated statement of comprehensive
income (loss) at the time they are paid, unless they are related to restructuring expenses, which are recorded when there is a present
obligation from past events.
d.
Employee profit sharing (EPS)
- The Mexican Constitution
and the Labor Law grant employees the right to receive a
10
% share of the employers' profits. Employees Profit Sharing is computed
in similar terms to the taxable profit for income tax, excluding mainly the employee's profit sharing paid this year and the amortization
of tax losses and decreasing the non-deductible part of the social security for purposes of income tax. For the years 2022 and 2021, EPS
amounted to $
7,200
and $
0
, respectively. EPS is recorded in the results of operations for the year in which it is incurred.
e.
Governmental defined contribution plans
- Under Mexican
legislation, the Company must make payments equivalent to
2
% of its workers' daily integrated salary (ceiling) to a defined contribution
plan that is part of the retirement savings system. The expense in 2022, 2021 and 2020 was $
24,118
, and $
17,110
and $
12,098
, respectively.
Main actuarial hypothesis used
in the actuarial computations are:
2022
2021
2020
Discount rate
9.10
%
7.55
%
7.00
%
Wage increase rate
5.00
%
5.00
%
4.50
%
Rate of salary increase
4.50
%
4.50
%
4.50
%
F-
26
Employee benefits liability as
of December 31, 2022, 2021 and 2020 are comprised as follows:
Retirement
benefits
Termination
benefits
2022
2021
2020
Vested benefits Obligation (OBA)
$
-
$
-
$
-
$
3,390
$
47,159
Plus, Non-Vested Benefits Obligation
74,007
95,368
169,375
159,453
115,077
Defined Benefits Obligation
74,007
95,368
169,375
162,843
162,236
Projected Net Liability
$
74,007
$
95,368
$
169,375
$
162,843
$
162,236
Net cost for the period booked
in profit and loss is comprised as follows:
Retirement
benefits
Termination
benefits
2022
2021
2020
Service cost
4,933
$
6,065
$
10,998
$
9,299
$
6,736
Net interest
6,573
5,528
12,101
11,121
9,306
Labor cost of past services
(
11,136
)
(
108
)
(
11,244
)
1,806
5,240
Net Cost for the period
$
370
$
11,485
$
11,855
$
22,226
$
21,282
The DBO amount recorded in the
balance sheet as of December 31, 2022 and 2021 are $
169,375
, and $
162,843
, respectively.
2022
2021
Defined benefit obligations (DBO) changes in present
$
162,843
$
162,236
Value
DBO present value at January 1
st
162,843
162,236
Past services labor cost
(
11,244
)
1,806
Current service labor cost
10,998
9,299
Interest expense
12,101
11,121
Paid benefits
(
9,229
)
Actuarial gains and losses in obligations
$
3,906
$
(
21,619
)
DBO present value at December 31
st
$
169,375
$
162,843
Initial PNL
$
162,843
$
162,236
Net cost for the period
11,855
22,226
Paid benefits
(
9,229
)
Previous years effect on profit and loss
3,906
(
21,619
)
Final PNL
$
169,375
$
162,843
Defined benefits obligations (DBO)
$
169,375
$
162,843
Foreign entities (Republic)
Republic is the only subsidiary
of the Company which offers other benefits and pension plans to their employees. Such benefit plans to employees are described below:
F-
27
a.
Collective Bargaining Agreements
As of December 31, 2022, 2021
and 2020
70
%,
76
% and
70
%, respectively of Republic employees are covered by a collective bargaining agreement (labor agreement) with
the United Steelworkers ("USW").
The agreement initially expired on August 15, 2016, was extended for three years through August
15, 2019, and further extended through August 15, 2022.
The extended agreement renews all the provisions, understandings and agreements
set forth in the January 1, 2012 Basic Labor Agreement. The base rates of pay determined under the extended agreement will remain unchanged
from those ruling under the expired agreement as of August 16, 2016. The extended agreement provides that Company's quarterly contributions
to fund the Republic Retirement VEBA Benefit Trust (the "Benefit Trust") be reduced from $
2.6
million to $
0.25
million beginning
in August 15, 2016 through June 30, 2019. Effective July 1, 2019,
the Company's contribution to the Benefit Trust changed to $4.00 per
hour for each hour worked by USW represented employees. Effective August 16, 2019, until June 30, 2022, the Company obligation to finance
the Profit Trust changed again and is limited to the creation of a profit-sharing pool consisting of 3% of the quarterly profits from
$ 0 to 50 million and 4% of the profits of the Company over % 50 million. Effective July 1, 2022, the Company's contribution to
the Beneficiary Trust changes back to a limit of $ 4.00 per hour worked by USW represented employees.
b.
Defined Contribution Plans
Plan for employees-
Republic
participates in the Steelworkers Pension Trust (SPT), a defined benefit multi-employer pension plan. The Company obligations to the plan
are based upon fixed contribution requirements. Republic contributes a fixed amount of USD$
1.68
per hour for each covered employee's contributory
hours, as defined under the plan.
Participation in a multi-employer
pension plan agreed under terms of a collective bargaining agreement differs from a traditional qualified single employer defined benefit
pension plan. The SPT shares risks associated with the plan in the following respects:
I.
Contributions to the SPT by Republic may be used to provide benefits to employees
of other participating employers;
II.
If a participating employer stops contributing to the SPT, the unfunded obligations
of the plan may be borne by the remaining participating employers; and
III.
If Republic chooses to stop participating in the SPT, Republic may be obliged to
pay an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
c.
VEBA Benefit Trust
The Company is required to make
quarterly contributions to the defined contribution plan for post-retirement health benefits VEBA as determined by the terms of the USW
collective bargaining agreement. The Benefit Trust is a health and welfare plan for USW retiree benefits, and is not a "qualified"
plan under the regulations of the Employee Retirement Income Security Act of 1974. For the years ended December 31, 2022, 2021 and 2020,
the Company recorded expenses of USD $
0.3
, USD $
0.5
million and USD $
0
million, respectively, related to this benefits plan.
For the years ended December
31, 2022, 2021 and 2020, Republic recorded combined expenses of USD$
1.9
million, USD$
3.5
and USD$
3.1
million, respectively,
related to the funding obligations of the retirement healthcare and pension benefits.
d.
401(k) Plans
The Company has a 401(k) defined
contribution retirement plan that covers almost all the salaried and nonunion hourly employees. This plan is designed to provide retirement
benefits through Company contributions and voluntary deferrals of employees' compensation. The Company funds contributions to this plan
each pay period, based on the participant's age and years of service as of January first of each year. The amount of the Company contribution
is equal to the monthly base salary multiplied by the appropriate percentage based on age and years of service. The contribution becomes
100
% vested upon completion of three years of vesting service. In addition, employees are permitted to make contributions to this 401(k)-retirement
plan through payroll deferrals. In this case, the Company provides a
25.0
% matching contribution for the first
5.0
% of payroll that an
employee elects to contribute. Employees are
100
% vested in both their and Republic matching 401(k) contributions. For the years ended
December 31, 2022, 2021 and 2020 the Company recorded expense of USD$
1.1
million, USD$
1.0
million and USD$
1.1
million, respectively,
related to this defined contribution retirement plan.
F-
28
Employees who are covered by the
USW labor agreement are eligible to participate in the 401(k) defined contribution retirement plan through voluntary deferrals of employees'
compensation. There are no Company contributions or employer matching contributions relating to these employees.
e.
Profit Sharing and Incentive Compensation Plans
The labor agreement includes a
profit sharing plan to which the Company is required to contribute The extended agreement modified the plan to the following quarterly
pretax income, as defined in the labor agreement ("EBT"): 3% of EBT between $0 and $25 million per quarter; 4% of EBT between
$25 and $75 million per quarter; and 5% of EBT over $75 million per quarter. For the years ended December 2021 and 2020, the company does
not make outlays, because the current year thresholds had not been achieved, USD $ 0.3 million and USD $ 0.5 million of expense was recorded
for the years ended December 31, 2022 and 2021.
Republic has a profit-sharing
plan for all salaried employees and nonunion workers. The profit-sharing plan was based on achieving certain profitability, inventory
and shipments targets. In the year ended December 31, 2022, 2021 and 2020 the Company paid USD
0.0
million, USD $
0.5
and USD $
0.0
million
respectively, under this plan.
16.
Income taxes
The Company is subject to Income
Tax (ISR).
The analysis of the income tax
charged to the results of 2022, 2021 and 2020 is as follows:
2022
2021
2020
Income tax of the year for Mexican companies
$
2,549,851
$
2,564,312
$
1,460,057
Income tax year for foreign companies
599,940
1,253,895
370,860
Deferred tax for Mexican companies
(
119,999
)
(
96,453
)
(
94,604
)
Deferred tax for foreign companies
269,730
668,015
341,531
$
3,299,522
$
4,389,769
$
2,077,844
During 2022, 2021 and 2020, the
income tax expense (benefit) attributable to income was different from the one that will result for applying
30
% (tax rate in Mexico)
before these provisions, as a result of the items shown below:
2022
2021
2020
Expected benefit, expense
$
3,300,413
$
4,084,348
$
1,462,776
Increase (decrease) as a result of:
Inflation effect, net
(
524,640
)
(
577,234
)
(
139,134
)
Impact of the nominal rate differences between the USA and Mexico
29,996
66,343
11,075
Benefit from utilization of tax loss carry-forwards and others (1)
80,166
(
12,086
)
16,173
Others, net (includes permanent items) Income tax expense (2)
413,587
828,398
172,519
Income tax expense
$
3,299,522
$
4,389,769
$
1,523,409
Effective tax rate
29.99
%
31.73
%
31.24
%
(1)
This amount corresponds to the income tax benefit obtained by those companies
that used tax loss carry-forwards in the years presented that were generated previously to 2022, 2021 and 2020	, less the effect of
tax losses incurred by some subsidiaries for which no deferred tax asset was recorded.
F-
29
The Company has tax losses in
some Mexican subsidiaries which, according to the ISR law in Mexico, can be amortized to reduce taxable income generated over the following
ten years. Tax losses can be updated following certain procedures established in the law.
As of December 31, 2022, Grupo
Simec, S.A.B. de C.V. and certain of its Mexican subsidiaries have updated tax losses pending of amortize as follows:
Origin
Date
Expiration
Date
Tax losses
available
2013
2023
7,793
2014
2024
8,729
2015
2025
11,036
2016
2026
386,277
2017
2027
303,647
2018
2028
68,360
2019
2029
953,370
2020
2030
961,943
2021
2031
1,402,495
2022
2032
922,370
$
5,026,020
As of December 31, 2022,
Republic
had USD$ 316.1 million of tax losses pending to amortize for federal tax purposes, of those USD $119.4 million are undefined and
USD $196.7 million expire between 2033 and 2038; USD$ 280.1 million of tax losses for state and local purposes that expire between
2022 and 2040 and approximately USD$ 6.6 million of tax losses at the subsidiary located in Canada, which expire between 2032 and
2040.
As of December 31, 2022, GV do
Brasil Industria e Comercio of Aço LTDA, a subsidiary established in Brazil, had R$
16.546
million Brazilian Reals ($
60
million
of Mexican pesos) of tax losses pending to amortize for federal tax purposes, which do not have an expiration date.
Below is a summary of the effects
of the main temporary differences comprising the deferred income tax liability included in the consolidated statements of financial position.
December 31,
2022
2021
Deferred tax assets:
Allowance for doubtful accounts
$
(
67,930
)
$
(
64,511
)
Advances from customers
464,268
359,795
Deferred tax assets
396,338
295,284
Deferred tax liabilities:
Property, plant and equipment
4,209,513
3,926,450
Intangible assets from Grupo San
381,282
353,661
Provisions
17,199
76,601
Prepaid expenses
11,493
43,696
Total deferred liabilities
4,619,487
4,400,408
Deferred tax liabilities, net
$
4,223,149
$
4,105,124
F-
30
17.
Stockholders' equity
a.
Common stock as of December 31, 2022 and 2021, is as follows:
Number of
shares
(in thousands)
Amount
Fixed capital
90,850
$
441,786
Variable capital
406,859
1,978,444
497,709
2,420,230
Effect of restatement
412,038
Total
497,709
$
2,832,268
Common stock consists of nominative
shares, fully subscribed, without nominal value. Variable capital can be increased without limitation.
All shares correspond to Series
"B". This series is divided in "Class I" with
90,850,050
shares that represent the fixed capital, and "Class
II" with
406,859,164
shares of variable capital stock.
b.
Retained earnings include the statutory legal reserve.
According to the Mexican General Corporate Law, at least
5
% of net profit of the year must be transferred to the legal reserve until the
reserve equals
20
% of capital stock at par value (historical Mexican Pesos). The legal reserve may be capitalized but should not be distributed
unless the entity is dissolved, and it must be replenished if it is reduced for any reason. As of December 31, 2022, and 2021, the legal
reserve of the Company amounted to $
484,046
(nominal pesos), representing
20
% of nominal stockholder´s equity.
c.
As of December 31,2022, a reserve was approved for
$
7,000,000
for the repurchase and placement of own shares ($
5,000,000
at December 31, 2021), for purchase and re-purchase operations,
in order to increase the liquidity of the shares of the Company and promote stability and continuity of their prices through the Mexican
Stock Exchange. As of December 31 2022, and 2021, the Company held
35,573,326
and
35,128,483
shares in treasury, respectively, which amounted
to $
4,266,278
and $
2,176,149
, respectively. The resulting loss in 2022 for the purchase and sale of treasury shares amounted to $
0
(the
0
in $ 2021).
d.
A reconciliation of the number of shares outstanding shows below:
Thousands of shares
2022
2021
Shares outstanding at beginning of year
462,581
463,243
Repurchase of capital shares, net
(
445
)
(
662
)
Shares outstanding at yearend
462,136
462,581
18.
Non-controlling interest
As mentioned in Note 4, Grupo
Simec, S.A.B. de C.V. owns substantially all of the capital stock of its subsidiaries, except for SimRep Corporation and subsidiaries,
where it owns
99.41
%. The non-controlling equity represents the participation in this subsidiary held by minority stockholders and is
presented in the consolidated statement of financial position after controlling interest. The consolidated statement of comprehensive
income presents net income or loss for the full year, as well as comprehensive income or loss for the full year. The distribution in controlling
and non-controlling participation is presented after the consolidated comprehensive income for the year.
The table below shows the changes
for the years ended December 31, 2022 and 2021:
2022
2021
Balance at beginning of year
$
41,161
$
36,010
Share of profits and losses for the year
(
1,612
)
1,659
Share of translation effects of foreign subsidiaries
(
1,902
)
3,492
Balance at the end of the year
$
37,647
$
41,161
F-
31
19.
Accumulated Other comprehensive income (loss)
Conversion
translation
adjustment on
foreign
subsidiaries
Other equity
instruments
Total
Balances as of January 1, 2022
1,288,278
1,288,278
Items that will not be recycled to profit and loss:
Other equity instruments
(
317,267
)
(
317,267
)
Items that can be recycled to profit and loss:
Conversion translation adjustment on foreign subsidiaries
(
1,257,453
)
(
1,257,453
)
Balances as of  December 31, 2022
$
30,825
$
(
317,267
)
$
(
286,442
)
20.
Transactions and balances with related parties
a.
Transactions with related parties, carried out in the ordinary course of business,
were as follows:
2022
2021
2020
Holding company
Interest income
55,848
34,447
41,034
Management staff
Administrative services expenditures
275,063
113,018
199,488
Other related parties
Sales
392,531
391,664
188,082
Purchases
253,931
40,081
27,507
Direct short-term benefits (*)
120,151
78,321
90,562
(*)
Correspond to the salaries, allowances and bonuses paid to
the executives of Simec.
b.
Balances receivable from and payable to related parties are as follows:
December 31,
2022
2021
Short-term
Accounts receivable:
Industrias CH, S.A.B. de C.V.
$
62,055
$
6,073
Cía. Laminadora Vista Hermosa, S.A. de C.V.
974
628
Operadora Compañía Mexicana de Tubos, S.A. de C.V.
824
873
Compañía Manufacturera de Tubos, S.A. de C.V.
2,799
Cía. Tubos y Perfiles Monterrey, S.A. de C.V.
3,371
3,318
Operadora Perfiles Sigosa, S.A. de C.V.
3,999
2,872
Operadora Construalco, S.A. de C.V.
606
519
Aceros y Laminados Sigosa, S.A. de C.V.
16,473
1,638
Arrendadora Norte de Matamoros, S.A. de C.V.
1,294
1,294
Operadora Industrial de Herramientas, S.A. de C.V.
816
Joist del Golfo, S.A. de C.V.
2,582
5,227
Holding Protel, S.A. de C.V.
304
Aceros CH, S.A. de C.V.
130
Sigosa Aceros, S.A. de C.V.
14
18,942
Siderúrgicos del Golfo, S.A. de C.V.
832
940
Perfiles Comerciales Sigosa, S.A. de C.V.
4,125
25,588
Pytsa Industrial de Mexico. S.A. de C.V.
438
438
Aceros y Laminados Sigosa, S.A. de C.V.
820
Acertam, S.A. de C.V.
785
Servicios Estructurales, S.A. de C.V.
3,047
Others
151
246
$
104,803
$
70,232
F-
32
December 31,
2022
2021
Long-term
Accounts receivable:
Industrias CH, S.A.B. de C.V.
$
648,281
$
648,281
$
648,281
$
648,281
Loans to related parties:
Industrias CH, S.A.B de C.V.
$
959,153
$
915,553
Perfiles Comerciales Sigosa, S.A. de C.V.
145,910
154,605
$
1,105,063
$
1,070,158
Total, long-term
$
1,753,344
$
1,718,439
The account receivable with
Industrias CH, S.A.B. de C.V. corresponds mainly to ISR balances to be recovered, due to the fact that some companies consolidated ISR
for tax purposes until 2013 with this company.
Loans:
In USD
25,400
, equivalent to
$
521,208
Mx. Pesos, plus interest for $
120,494
, plus VAT of $
18,596
, resulting a total for $
660,298
as of December 31, 2021. As of January
2022 an amending Agreement was made where the balance as of that date remains in Mexican pesos.
As of December 31,2021 a loan
in pesos from Industrias CH, S.A.B. de C.V. for $
186,752
plus interest of $
59,054
plus the IVA of $
9,449
for a balance of $
255,255
.
These granted loans in USD and
pesos including interest amount to $
959,153
as of December 31, 2022. (2021 $
915,553
).
As of December 31, 2022, including
the loan in USD converted into pesos, were as follows: $
707,851
plus interests of
217,357
, plus VAT of $
33,945
, with a total of $
959,153
.
As of December 31, 2022, there
is a receivable from Perfiles Comerciales Sigosa, S.A. de C.V., derived from loan interest of $
145,910
(USD $
7,742,685
), and a balance
receivable of $
154,605
, as of December 31, 2021.
2022
2021
Accounts payable:
Aceros y Laminados Sigosa, S.A. de C.V.
$
24,455
$
7,155
Industrias CH, S.A.B. de C.V.
245,388
214,294
Perfiles Comeciales Sigosa, S.A. de C.V.
3,802
3,802
Holding Protel, S.A. de C.V.
251
251
Compañia Laminadora Vista Hermosa, S.A. de C.V.
518
445
Operadora Perfiles Sigosa, S.A. de C.V.
2,800
2,074
Operadora Pytsa Industrial, S.A. de C.V.
8,353
11,603
Comercializadora Sigosa, S.A. de C.V.
2,532
Compañia Manufacturera de Tubos, S.A. de C.V.
9,837
7,174
Operadora Compañia Mexicana de Tubos, S.A. de C.V.
7,583
7,090
Sigosa Aceros, S.A. de C.V.
7
48,096
Cía. Mexicana de Perfiles y Tubos, S.A. de C.V.
595
595
Industrias Procarsa, S.A. de C.V.
139
156
Ferrovisa, S.A. de C.V.
7,069
7,458
Other
195
188
$
310,992
$
312,913
F-
33
The other accounts payable correspond
to services and / or purchases of finished products according to their activity.
Loans from related parties:
Operadora de Perfiles Sigosa, S.A. de C.V.
$
2,381,464
$
$
2,381,464
$
$
2,692,456
$
312,913
This balance corresponds to a
current account loan granted by Operadora de Perfiles Sigosa, S.A. de C.V. (Sigosa), to be invested in Treasury Bonds; the interest derived
from said investment upon expiration thereof, will be delivered to Sigosa.
21.
Cost of sales and expenses by their nature
At the years ended at December
31, 2022, 2021 and 2020, the cost of sales and administration expenses consist of the following:
2022
2021
2020
Raw materials and consumables
$
27,080,462
$
26,298,681
$
16,343,140
Electrical energy
2,586,918
3,530,134
2,820,667
Ferroalloys
2,232,759
2,396,516
1,617,352
Refractories
767,691
810,315
629,758
Oxygen
297,302
293,217
248,029
Electrodes
542,117
444,201
434,265
Gas and fuels
1,541,817
1,161,994
767,823
Labor
2,272,304
2,024,419
1,831,225
Operation materials
1,366,947
1,339,692
1,033,597
Depreciation and amortization
1,116,872
1,175,108
1,452,271
Maintenance
1,250,897
1,561,716
1,262,728
Other expenses
1,084,475
974,835
2,790,197
$
42,140,561
$
42,010,828
$
31,231,052
2022
2021
2020
Cost of sales
$
39,683,861
$
39,968,186
$
29,211,724
Administrative expenses
2,456,700
2,042,642
2,019,328
$
42,140,561
$
42,010,828
$
31,231,052
F-
34
22.
Other income (expenses), net
The components of other income
(expenses) net, in the years ended December 31, 2022, 2021 and 2020, are the following:
2022
2021
2020
Cancellation of balances
$
$
(
157,834
)
$
Land treatments in Pacific Steel, Inc.
(
3,327
)
(
2,088
)
(
2,708
)
Attorney's fees
Bad debt estimate
(
21,983
)
(
19,398
)
Other expenses
(
25,310
)
(
179,320
)
(
2,708
)
Sale of scrap
2,450
9,993
232,157
Recovery of losses
327
9,623
Brazil tax benefits
256,698
Update of balances in favor in taxes
85,597
64,915
Agreements with clients
27,869
Other income
8,781
17,383
32,733
Other income
97,155
101,914
549,457
Other income and other (expenses), net
$
71,845
$
(
77,406
)
$
546,749
23.
Financial instruments
a.
Capital risk management
- The Company manages its capital
to ensure that its subsidiaries will be able to continue as a going concern while maximizing the return to its stockholders through the
reinvestment of earnings. The Company's general strategy has not been altered in recent years. The Company's policy is to
not obtain bank loans or any other financing transaction.
b.
Market risk
- Market risk is the risk that the fair
value of future cash flows of a financial instrument fluctuates due to changes in market. Market prices include the foreign exchange risk,
interest rate risk and the raw material prices risk.
c.
Foreign exchange risk management
- The Company undertakes
certain transactions denominated in foreign currencies, hence, exposures to exchange rate fluctuations arise. The exposures in exchange
rate are managed within the settings of the approved policies. The book value of the monetary assets and monetary liabilities denominated
in foreign currency at the end of the reporting period are as follows (includes foreign subsidiaries):
December 31,
2022
2021
Short - term assets
$
28,953,307
$
20,783,197
Short - term liabilities
10,367,193
8,434,451
Net monetary asset position in foreign currency
$
18,586,114
$
12,348,746
Equivalent in U.S. Dollars (thousands)
USD$
959,952
USD$
601,917
d.
Credit risk management
- Credit risk refers to the
risk that a counterpart will default on its contractual obligations resulting in financial loss for the Company. The Company has adopted
a policy of only dealing with creditworthy counterparties. The Company only transacts with entities that have a risk grade equivalent
to the investment grade and higher. The Company investigates and rates its major customers. The Company exposure and the credit ratings
of its counterparties are continuously monitored and the accumulated value of transactions concluded is spread amongst approved counterparties.
Credit exposure is controlled by counterparty limits that are reviewed and approved annually by the risk management committee.
F-
35
Trade receivables consist of
a large number of customers dedicated to construction and automotive industries, distributed in different geographic areas. Ongoing credit
evaluation is performed on the financial condition of accounts receivable.
The Company does not have significant
credit risk exposure with any single counterparty or any group of counterparties having similar characteristics. The Company defines that
the counterparties that have similar characteristics are considered related parties. Concentration of credit risk to any other counterparty
did not exceed
5
% of gross monetary assets at any time during the year.
The credit risk on liquid funds
and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international
credit-rating agencies.
e.
Liquidity risk and risk tables
- Ultimate responsibility for
liquidity risk management rests in the board of directors, which has established an appropriate liquidity risk management framework for
the management of the Company's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity
risk by maintaining adequate reserves, banking and credit facilities, by continuously monitoring forecast and actual cash flows, and by
matching the maturity profiles of financial assets and liabilities. The following table sets out details of additional bank lines of credit
(to be used as letter of credits) that the Company has at its disposal to reduce liquidity risk. These lines of credit are obtained by
the Company and one part of them has been used for some of the subsidiaries of Industrias CH, S.A.B. de C.V.:
(In thousands of US dollars)
December 31,
2022
2021
Bank loans credit lines:
Drawn balances
$
200,000
$
350,000
Undrawn balances
169,035
183,942
Available line balance
$
30,965
$
166,058
24.
Financial information by segments
The Company analyses its information
by region, due to the operational structure and the organization of its business. Information used for making decisions is based on such
regions. The Company's sales are made in Mexico, the United States of America and Brazil. The Mexican segment includes the plants
in Mexicali, Guadalajara, Tlaxcala and San Luis Potosi. The USA segment includes seven Republic plants six of which are located in the
United States (Ohio, Indiana and New York) and one in Canada (Ontario). The plant in Canada stopped operating in 2018. The Brazilian segment
includes the plants in Pindamonhangaba, Cariacica and Itaúna. The segments are engaged in the manufacturing and sale of long steel
products intended mainly for the building and automotive industries.
Year ended December 31, 2022
Mexico
USA
Brazil
Eliminations
between
segments
Total
Net sales
$
30,914,890
$
5,867,193
$
17,377,164
$
$
54,159,247
Cost of sales
(
21,575,758
)
(
5,764,239
)
(
12,343,864
)
(
39,683,861
)
Gross profit (loss)
9,339,132
102,954
5,033,300
14,475,386
Administrative expenses
(
1,096,330
)
(
286,611
)
(
1,618,151
)
544,392
(
2,456,700
)
Other income (expenses), net
(
71,202
)
1,015,586
140,205
(
1,012,744
)
71,845
Interest income and dividends
415,704
30,175
445,879
Interest expense
(
485
)
(
55,867
)
(
383,646
)
383,646
(
56,352
)
Loss on financial instruments
(
778,649
)
(
778,649
)
Exchange rate gain (loss), net
(
540,770
)
(
58
)
(
60,625
)
60,625
(
540,828
)
Income (loss) before income taxes
7,267,400
806,179
3,111,083
(
24,081
)
11,160,581
Income taxes
(
2,565,834
)
(
88,679
)
(
645,009
)
(
3,299,522
)
Net income (loss) for the year
$
4,701,566
$
717,500
$
2,466,074
$
(
24,081
)
$
7,861,059
Depreciation and Amortization
$
627,078
$
236,601
$
253,193
$
1,116,872
Total assets
44,025,917
12,930,111
14,149,332
$
(
3,472,457
)
67,632,903
Total liabilities
8,375,028
7,243,113
7,492,843
(
3,472,457
)
19,638,527
Acquisitions of property, plant and equipment
151,783
252,116
1,292,586
1,696,485
F-
36
Year ended December 31, 2021
Mexico
USA
Brazil
Eliminations
between
segments
Total
Net sales
$
29,678,133
$
8,216,595
$
17,725,628
$
$
55,620,356
Cost of sales
(
21,337,462
)
(
7,159,354
)
(
11,471,370
)
(
39,968,186
)
Gross profit (loss)
8,340,671
1,057,241
6,254,258
15,652,170
Administrative expenses
(
907,798
)
(
256,875
)
(
877,969
)
(
2,042,642
)
Other income (expenses), net
(
77,530
)
454,303
1,793
(
455,972
)
(
77,406
)
Interest income
65,631
317
65,948
Interest expense
(
28,904
)
(
61,494
)
(
96,486
)
99,439
(
87,445
)
Exchange rate gain (loss), net
325,389
(
378
)
(
120,300
)
120,300
325,011
Income (loss) before income taxes
7,717,459
1,193,114
5,161,296
(
236,233
)
13,835,636
Income taxes
(
2,472,751
)
(
477,380
)
(
1,439,638
)
(
4,389,769
)
Net income (loss) for the year
$
5,244,708
$
715,734
$
3,721,658
$
(
236,233
)
$
9,445,867
Depreciation and amortization
$
667,167
$
270,119
$
237,822
$
1,175,108
Total assets
47,917,643
10,836,083
8,815,051
$
(
10,226,205
)
57,342,572
Total liabilities
7,828,384
5,544,135
12,396,190
(
10,226,205
)
15,542,504
Acquisitions of property, plant and equipment
367,496
288,487
410,439
1,066,422
Year ended December 31, 2020
Mexico
USA
Brazil
Eliminations
between
segments
Total
Net sales
$
19,660,889
$
5,549,366
$
10,659,059
$
$
35,869,314
Cost of sales
(
15,459,258
)
(
5,677,213
)
(
8,075,253
)
(
29,211,724
)
Gross profit (loss)
4,201,631
(
127,847
)
2,583,806
6,657,590
Administrative expenses
(
1,117,817
)
(
240,726
)
(
660,785
)
(
2,019,328
)
Other income (expenses), net
52,656
505,946
(
11,854
)
546,749
Interest income
107,605
222
0
107,826
Interest expense
(
5,108
)
(
16,104
)
(
66,007
)
33,473
(
53,746
)
Exchange rate gain (loss), net
(
483,822
)
1,510
(
1,096,416
)
1,215,564
(
363,164
)
Income before income taxes
2,755,145
123,001
748,744
1,249,037
4,875,927
Income taxes
1,747,568
118,926
211,350
2,077,844
Net income for the year
$
1,007,577
$
4,075
$
537,394
$
1,249,037
$
2,798,083
Depreciation and Amortization
$
693,362
$
332,186
$
426,723
$
1,452,271
Total assets
33,386,043
9,237,831
5,807,121
$
(
2,927,348
)
45,503,647
Total liabilities
6,944,579
4,797,682
3,670,075
(
2,927,348
)
12,484,988
Acquisitions of property, plant and equipment
278,700
41,054
631,451
951,205
F-
37
25.
Contingencies
As of December 31, 2022, the
Company has the following contingencies:
a.
Pacific Steel, Inc. (PS), a subsidiary located in National
City in San Diego County, California, United States of America, for which the main activity is the purchase and sale of scrap, has the
following environmental contingencies:
California
Department of Toxic Substances Control
On September 2002, the Department
of Toxic Substances Control (DTSC) inspected PS facilities based on an alleged complaint from neighbors due to PS's excavating to
recover scrap metal on its property and on a neighboring property, which PS rents from a third party (BNSF Railway). In this same month,
DTSC issued an enforcement order of imminent and substantial endangerment determination, which alleges that certain soil piles, soil management
and metal recovery operations may cause an imminent and substantial danger to human health and the environment; consequently, DTSC sanctioned
PS for violating Hazardous Waste Control Laws in the State of California and imposed the obligation to remedy the site. On July 26, 2004,
in an effort to continue with this order, DTSC filed against PS a Complaint for Civil Penalties and Injunctive Relief in San Diego Superior
Court. On July 26, 2004,
the court issued a judgment, whereby PS was obligated to pay USD$ 0.2 million, which has been paid.
On June 6, 2010, the DTSC and
the San Diego Department of Environmental Health (DEH) inspected the facilities of PS, in response to a general complaint. On August 10,
2010 DTSC and DEH conducted a second inspection and found seven infractions. The DEH is satisfied with the compliance of PS on those issues;
however, on October 19, 2010 the technical division of the DTSC recommended to the legal division of DTSC that it impose significant penalties.
The land remediation was suspended
at the beginning of 2011 due to the inefficiency of the process, which was verified by several studies. As an alternative, once the necessary
permits were obtained from the authorities in Mexico, the Mexicali plant began the process of importing non-RCRA soil for final disposal
in a secure landfill based in Nuevo Leon State. This landfill is deposited after the separation of the metal content, which is used as
raw material in the melting process. PS has completed the shipment of non-RCRA soil for final disposal in Nuevo Leon State.
The disposition of a stack estimated
at
8,000
tons of material classified RCRA (hazardous for Federal purposes) was also considered for shipment to Mexico. The process began
in early 2013, but the response from the authorities was slow. Therefore, on April 9, 2015, a letter from the California Attorney General
Department of Justice (Attorney General) was received where PS is required to, in the absence of obtaining permission from the Mexican
authorities; present a program for transport the pile of contaminated soil classified as RCRA to an authorized confinement in the United
States at the latest on April 22, 2015. This letter warned that PS must ship the RCRA soil no later than July 9, 2015, or risk DTSC proceeding
with a civil lawsuit seeking the maximum amount of fines established by law and corresponding legal redress.
On April 21, 2015, PS sent a
letter to the Attorney General explaining that the authorities in Mexico had not denied permission to the Company but had simply requested
that it present its application in a different format, which had already been presented and reviewed by the authority on April 17, 2015.
On July 23, 2015,
the Attorney
General denied the extension requested by PS and demanded the immediate shipments of the RCRA stack to an authorized landfill. PS began
transporting RCRA soil on July, 29, 2015, and completed removal of the RCRA stack by September 12, 2015 with a total of 3,000 metric tons.
F-
38
On January 5, 2016, the Attorney
General and PS stipulated to filing a "final judgment and order on consent" or Consent Judgment in San Diego Superior Court.
The parties negotiated the Consent Judgment, which includes the following terms:
-
PS to pay USD$
0.138
million as a civil penalty for alleged
violations of the 2004 Corrective Action Consent Agreement. PS has made all of the required payments to DTSC as of December 31, 2017.
-
Remove the RCRA soil pile and send it to an approved landfill.
The Judgment indicates that the Company complied with this commitment by October 2, 2015.
-
After eliminating the soil pile of RCRA, the Company should take samples of the
floor in which it was located. Samples were taken and the results indicate that the floor had pollution levels that exceeded the limits
established by Government. In April 7, 2016, the General Prosecutor and the DTSC required that the Company would turn over the floor ten
feet wide and two feet down in the perimeter of the area in which was located the soil pile RCRA and to dispose it in an approved confinement.
In turn, PS convinced to DTSC to reach a Turnpike Agreement at august 10, for which would be paid during two years (up to August 10, 2018).
The Agreement was extended, as of August 10, 2018, for a two years additional period, in force up to August 10, 2020. These Agreement
had another extension, in force up to August 10, 2021. And has not been renewed.
-
The Company shall continue to meet the conditions of the
final judgment, the corrective measures, and all tasks arising from this, which were entered in the same court in 2004.
On May 29, 2019, the company
submitted a proposal with a new work plan (IM Work Plan) to DTSC to conduct soil remediation on the BNSF Railway lease. On October 21,
2021, The Company submitted the final draft of the IM work plan which DTSC has agreed to that proposal or work plan, on May 31, 2022.
No litigation was filed against the DTSC approval which is now final.
On December 6, 2022, the DTSC
sent a letter requesting a preliminary study and a work plan implementation schedule, both documents were delivered on February 3, 2023.
DTSC has not responded to either document.
On January 13, 2023, BNSF Railway
issued a contract termination notice to PS, notifying BNSF's unilateral termination of two lease contracts with PS which ended on February
12 and 22, 2023, through its legal counsel informed PS that no longer has access to BNSF Railway property. DTSC is entering into a voluntary
agreement with BNSF to implement a work plan.
As of the date of this report,
we cannot estimate the costs of implementing the work plan of the provisional measures due to the uncertainty of whether BNSF or PS will
implement the work and the DTSC authorizations to whom they designate and their approval date.
b.
As with most steel producers in United States of
America, Republic could incur significant costs related to environmental issues in the future, including those arising from environmental
compliance activities and remediation stemming from historical waste management practices at the Republic's facilities. The reserve
created to cover probable environmental liabilities of USD$
2.5
million, USD$
2.5
million and USD$
2.5
million were recorded as of
December 31, 2022, 2021 and 2020, respectively. The reserve includes incremental direct costs of remediation efforts and post-remediation
monitoring costs that are expected to be paid after corrective actions are complete. As of December 31, 2022, 2021 and 2020, the current
and non-current portions of the reserve amounted to USD$
1.0
million, USD$
1.0
million and USD$
1.5
million, respectively, are included
payable and accumulated liabilities in the short and long term, respectively, in the Consolidated Statements of Financial Position.
c.
The Company is not aware of any material environmental
remediation liabilities or contingent liabilities relating to environmental matters with respect to facilities, for which the establishment
of an additional reserve would be necessary at this time. In the event that, in the future, the Company incurs in any such additional
expenses, these costs will most likely be incurred over a number of years. However, future regulatory action regarding historical waste
management practice in the facilities of Republic PS and future changes in applicable laws and regulations may require the Company to
incur significant costs that may have a material adverse effect on the future financial performance of the Company.
F-
39
d.
The Company is involved in a series of lawsuits and
legal claims that have arisen during the normal course of its operations. The Company and its legal advisors do not expect the outcome
of these matters to have any significant adverse effect on the Company's financial position and results of operations, therefore it has
not been recognized any liabilities for such lawsuits and claims.
e.
Mexican tax authorities have the right to review,
at least the previous five years and could determine differences in taxes payable, plus any corresponding adjustments, surcharges and
fines.
f.
Tax authorities in the United States of America have
the right to review, at least the previous three years and could determine differences in taxes payable, plus its corresponding adjustments,
surcharges and fines.
g.
Canadian tax authorities have the right to review,
at least the previous four years and could determine differences in taxes payable, plus its corresponding adjustments, surcharges and
fines.
h.
Brazilian tax authorities have the right to review,
at least the previous five years and could determine differences in taxes payable, plus its corresponding adjustments, surcharges and
fines.
i.
On September 5, 2017, Grupo Simec and GV do Brasil
were notified of the arbitration procedure filed by SMS Concast at the International Court of Arbitration (ICC), which demands the payment
of USD $
1.4
million plus expenses, for additional costs incurred in the construction and assembly of the steelmaking area of the Brazilian
plant. On November 6, 2017, the companies of the Group replied to the demand and filed a counterclaim against SMS Concast for the amount
of USD $
5
million, which GV do Brasil utilized on the equipment to work properly. On February 26, 2020, The company was notified of the
judgment. In March 2021, it was agreed with the actor to conclude the matter by paying USD $
450
thousand dollars, after several changes
of dates, the payment was made on July 8, 2021.
j.
Related to Republic Steel's audits of GST for
the periods 2015-2016 and 2017-2018 made by the Canadian Revenue Agency (CRA), amounts of USD $
4,178,517
plus interest for the period
2015-2016 and USD $
6,372,306
plus interest for the period 2017-2018 were determined by the CRA. The Company presented a notice of objection
for the 2015-2016 period on September 2018 and another for the 2017-2018 period on March 2021. This matter was settled during the year
ended December 31, 2021.
k.
In connection with a sale and use tax audit by the
Ohio Department of Taxes covering the period from January 1, 2009 to December 31, 2012, an assessment of $
2,452,028
(including interests
of $
394,138
) against the Company was issued, on December 9, 2016.
Republic also received an appraisal
notice dated December 11, 2020 for $
1,631,827
(including interest of $
339,885
) covering the period January 1, 2014 to September 30, 2018.
The Company does not agree with
the evaluation in its entirety and has filed Reevaluation Petitions on January 30, 2017, on February 9, 2022 and on September 2022, appealing
the assessment to the Ohio Board of Tax Appeals. As of the date of this report, no resolution has been obtained on this appeals.
Due to the nature of this matter
and the uncertainty of the resolution on the appeal that is in the early stages, the Company has not recorded an expense in the fiscal
year 2022, 2021 or 2020 that recognizes the evaluation or any estimated amount of liquidation.
26.
Commitments
a.
On May 1, 2018, the Company signed a contract with ArcelorMittal S.A. in Brazil,
for the acquisition of Cariacica and Itauna steels for rent, producing plants and wire drawing equipment for the production of wires and
derivatives.
The Cariacica
unit has the capacity to produce
600
thousand metric tons of liquid steel per year and
450
thousand metric tons of rolled steel products.
This plant has in 2021 and 2020 more than 800 and 500 employees in 2019, and can produce rod and light structural profiles. The factory
is located in the city of Cariacica, next to the city of Victoria, in the state of Espírito Santo on a land of more than
1,200,000
square meters.
F-
40
The Itauna
unit has an installed capacity to produce
120
thousand metric tons per year of steel laminate products and can manufacture light structural
profiles and rods. The plant is located in the city of Itauna in the state of Minas Gerais, less than 100 kilometers away from Belo Horizonte
and in 2022, 2021 and 2020 has 160,145 and 114 employees, respectively. The factory was leased under a contract expiring in August 2020.
After its expiration, the plant was acquired.
b.
Republic leases certain equipment, office space and computer equipment under non-cancelable
operating leases. The leases expire at various dates through 2020. During the years ended December 31, 2022, 2021 and 2020, rental expenses
relating to operating leases amounted to USD$
0.0
, USD$
0.0
million, and USD$
0.1
million, respectively. Currently there are
no additional obligations post-2020.
c.
In January 2013, The Company reached a contract with EnerNOC, which allows Republic
to receive payments for reduction in the electric energy consumption during a term declared by PJM Interconnection as an Emergency. The
contract is for
5
years starting at January 31, 2013 and concluded at May 31, 2018. At that date, the Agreement was extended up to May
31, 2021.In January 2021, the company entered into a similar agreement with NRG Curtailment Solutions, Inc. with a term of
five years
.
The Company recognized an income for both contracts in 2022, 2021 and 2020 for USD $
0.6
million, USD$
1.2
million and USD $
1.1
million,
respectively.
d.
On February 22, 2018, a contract was signed with Primetals Technologies of Italy,
United States of America and Mexico, for the construction of the Lamination train and the supply of a new reheating furnace for the Mexicali
plant, thereby increasing capacity manufacturing for the manufacture of finished product from
17,500
to
22,500
tons per month. From January
2021, flat bars are being produced. As of today, some adjustments are being made to start the production of rebar in May 2021, and light
structures in June 2021. Naturally, the COVID pandemic delayed significantly the process. USD $
24
million from budget has already been
spent.
e.
In order to maintain and increase the continuity and quality of the electricity
supply in all the Group's plants, the scheme change from Basic Supply (SSB) to the Qualified Supply Service (SSC), with the provision
of acquiring energy in the wholesale electricity market. With the implementation of this project, which only requires the modernization
of the set of equipment that records the consumption measurements of the electrical substations of each plant, it seeks to achieve a more
efficient, safe, clean and transparent electrical service and more competitive prices than those current. The cost of this project as
of October is USD$
1
million
415
thousand, and the only thing missing is the installation in Mexicali due to the lack of conditions in
the wholesale electricity market.
f.
On December 20, 2020, we purchased the Itauna plant by Cia. Siderúrgica
de Espirito Santo, S.A. to Compañia Itaunense Energia y Participacoes Inmueble y Equipo Inmueble, located on Rua Clara Chaves at
villa Santa Maria, Itauna city, committing to pay R$
4.0
million reais per month, up to a total value of R$
105.0
million reais, such
payments have to be made until June 2022.
g.
For our Brazil's facilities electric energy purchase agreements have been
made with different termination dates as of June 30, 2023 with the supplier Newcom for R$
9.48
million, another agreement was celebrated
with ENEL for R$
17.05
million, with termination date on December 31, 2023. With energy suppliers NEWCOM for R$
33.9
million and AMERICA
for R$
16.5
million.
27.
Subsequent events
Our company actively conducts
ongoing reviews of our commercial practices in Mexico and other countries to avoid, as much as possible, the imposition of tariff rates
on our products. On January 16, 2020, a preliminary tariff of
6.75
% was imposed on our corrugated rod exports to the United States of
America. After the review from their Department of Commerce (DOC), the tariff was reduced to
1.46
%. after the review from the Department
of Commerce (DOC), the Company did not participate in the period of November 1, 2018 to October 31, 2019, The dumping rate that was established
was
4.93
% published in September 2021 for which the company made a payment of USD $
189
thousand dollars on March 30, 2022.
On January 6, 2021, the dumping
review process began for the period from November 1, 2019 to October 31, 2020. On November 30, 2021, the DOC published a preliminary dumping
rate for the Company of
66.70
% arguing and/or justifying deficiencies in the information, the Company decided to appeal this result. The
appeal is in process.
On December 7, 2022, the US Department
of Commerce (USDOC) published in the Federal Register the rate of
6.35
% as a preliminary result of the antidumping process for rebar producers
and exporters, in the period from November 1, 2020 to October 31, 2021, the final result must be published by the USDOC no later than
June 2023, so the company will be subject to the payment of this countervailing fee for rebar exports for one year.
28.
Consolidated financial statements issuance
These consolidated
financial statements have been issued on April 28, 2023 by Ing. Rufino Vigil Gonzalez and C.P. Mario Moreno Cortez, General Director and
Financial Coordinator of Grupo Simec, S.A.B. de C.V., for the approval of the Audit Committee and, where appropriate, by the Board of
Director.
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