UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-11176

Group Simec, S.A.B. de C.V.

(Translation of Registrant’s Name Into English)

Av. Lazaro Cardenas 601, Colonia la Nogalera, Guadalajara, Jalisco, Mexico 44440

(Address of principal executive office)

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

Form 20-F [X] Form 40-F [_]

Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)

Yes        [_] No              [X]

Indicate by check mark whether the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)

Yes        [_] No              [X]

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes        [_] No              [X]

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-___________.)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRUPO SIMEC ANNOUNCES RESULTS OF OPERATIONS FOR THE FIRST NINE MONTHS OF 2018

GUADALAJARA, MEXICO, October 26, 2018- Grupo Simec, S.A.B. de C.V. (NYSE: SIM) (“Simec”) announced today its results of operations for the nine-month period ended September 30, 2018.

Comparative first nine months of 2018 vs. first nine months of 2017

Net Sales

Net sales of the Company increased to Ps. 26,880 million in the first nine months of 2018 compared to Ps. 21,892 million in the first nine months of 2017. Shipments of finished steel products increased 1% to 1 million 631 thousand tons in the first nine months of 2018 compared to 1million 617 thousand tons in the first nine months of 2017. Total sales outside of Mexico in the first nine months of 2018 increased 19% to Ps. 11,532 million compared to Ps. 9,710 million in the same period of 2017. Mexican sales increased 26% from Ps. 12,182 million in the first nine months of 2017 to Ps. 15,348 million in the same period of f 2018. The increase in sales for the first nine months of 2018 is due to an increase in the average selling price in 22% and a higher volume of shipments compared to the first nine months of 2017 (14 thousand tons equivalent to 1% increase).

Cost of Sales

Cost of sales increased 24% from Ps. 18,154 million in the first nine months of 2017, to Ps. 22,465 million in the first nine months of 2018. Cost of sales as a percentage of net sales represented 84% in the first nine months of 2018 while in the first nine months of 2017 represented 83%. Cost of sales by steel ton increased approximately 23% in the first nine months of 2018 over the same period of 2017 due to a higher price in inputs.

Gross Profit

Gross profit of the Company for the first nine months of 2018 increased 18% from Ps. 3,738 million in the first nine months of 2017, to Ps. 4,415 million in the first nine months of 2018. Marginal profit as percentage of net sales in the first nine months of 2018 was of 16% while in the first nine months of 2017 was of 17%. The gross profit increase is given by a better average selling price.

General, Selling and Administrative Expense

Selling, general and administrative expenses decreased 15%, from Ps. 965 million in the first nine months of 2017 to Ps. 820 million in the same period of 2018, selling, general and administrative expenses represented 3% to the 2018 and 4% to the 2017 of the net sales for both periods.

Other Income (Expenses,) net

The Company recorded other expenses net for Ps. 20 million during the first nine months of 2018 while in the same period of 2017 the other income net by this concept was of Ps. 8 million.

Operating Income

Operating income increased 31% from Ps. 2,765 million for the first nine months of 2017 compared to Ps. 3,615 million in the first nine months of 2018. Operating income as percentage of net sales was 13% in both periods. The increase in operating income is due to better average sales prices.

Ebitda

The Ebitda increased 15%, from Ps. 3,856 million in the first nine months of 2017 as a result of a net income of Ps. 2,031 million, plus minority stake of Ps. 152 million, less income taxes of Ps. 25 million, plus comprehensive financial cost of Ps. 607 million, plus depreciation of Ps. 1,091 million to Ps 4,419 million in the same period of 2018 as a result of a net income of Ps. 3,186 million, less minority stake of Ps. 30 million, plus income taxes of Ps. 251 million, plus comprehensive financial cost of Ps. 148 million, plus depreciation of Ps. 804.

Comprehensive Financial Cost

Comprehensive financial cost for the first nine months of 2018 represented an expense of Ps. 148 million compared with an expense of Ps. 607 million for the first nine months of 2017. The net interest expense was of Ps. 17 million for the first nine months of 2018, compared with a net interest income of Ps. 4 million in the same period of 2017. Likewise, we record an exchange loss of Ps. 131 million in the first nine months of 2018 compared with an exchange loss of Ps. 611 million in the first nine months of 2017 due to the slip in the exchange rate of the Ps. against the dollar of 5% in the first nine months of 2018.

Income Taxes

The Company recorded an expense of Ps.251 million for the net income tax during the first nine months of 2018, (includes a deferred expense tax of Ps. 124 million) compared with an income of Ps. 25 million of income tax for the first nine months of 2017 (includes a deferred income tax of Ps. 174 million).

Net Income

As a result of the foregoing, the Company recorded an increase in net income of 57% to pass of Ps. 2,031 million in the first nine months of 2017 to Ps. 3,186 million of the same period of 2018.

Liquidity and Capital Resources

At September 30, 2018, Simec’s total consolidated debt consisted of U.S. $ 302,000 of 8 7/8% medium-term notes (“MTN's”) due 1998, or Ps. 5.7 million (accrued interest on September 30, 2018 was U.S. $ 641,000, or Ps. 12.1 million). At December 31, 2017, Simec’s total consolidated debt consisted of U.S. $ 302,000 of 8 7/8% medium-term notes (“MTN's”) due 1998, or Ps. 6.0 million (accrued interest on December 31, 2017 was U.S. $ 640,000, or Ps. 12.6 million).

Comparative third quarter of 2018 vs. second quarter of 2018

Net Sales

Net sales of the Company increased to pass of Ps. 9,073 million during the second quarter of 2018 to Ps. 9,858 million in the third quarter of 2018. Shipments of finished steel products increased to 538 thousand tons in the third quarter of 2018 from 537 thousand tons in the second quarter of the same year. Total sales outside of Mexico in the third quarter of 2018 increased 23% to get to Ps. 4,544 million compared to Ps. 3,681 million of the second quarter of the same year. Mexican sales in the third quarter

of 2018 decreased to Ps. 5,314 million compared to Ps. 5,392 million in the second quarter of the same year. The average selling price increased 8% in the third quarter of 2018 compared to the second quarter of the same year.

Cost of Sales

Cost of sales increased to P s. 8,420 million in the third quarter of 2018 from Ps. 7,706 million in the second quarter of 2018. Cost of sales as a percentage of net sales represented 85% for both periods. The cost of sales by ton increases 9% in the third quarter of 2018 compared to the second quarter of the same year, due mainly to increase of some supplies for the manufacture of steel.

Gross Profit

Gross profit of the Company for the third quarter of 2018 increased 5% to pass of Ps. 1,367 million in the second quarter of 2018 to Ps. 1,438 million in the third quarter of same year. Gross profit as a percentage of net sales in the third quarter of 2018 was of 15% compared to 15% in the second quarter of the same year. The increased in the gross profit in the third quarter of 2018 is due to an increased in the average selling price.

General, Selling and Administrative Expense

Selling, general and administrative expense decreased 5% to pass of Ps. 281 million in the second quarter of 2018 to Ps. 267 million in the third quarter of the same year, and as percentage of net sales represented 3% for both periods.

Other (Expenses) Income, net

The Company recorded other income net for Ps. 0.3 million during the third quarter of 2018 compared to other income net for Ps. 43 million in the second quarter of 2018.

Operating Income

The Operating income was of Ps. 1,171 million in the third quarter of 2018 compared to Ps. 1,129 million in the second quarter of the same year. Operating income as percentage of net sales represented 12% for the third quarter of 2018 and 12% for the second quarter of 2018.

Ebitda

The Ebitda show an increase of 4%, to pass of Ps 1,387 million in the second quarter of 2018 as a result of a net income of Ps. 682 million, less minority stake of Ps. 40 million, plus income taxes of Ps. 274 million, plus comprehensive financial cost of Ps. 213 million, plus depreciation of Ps. 258 million to Ps. 1,449 million in the third quarter of the same year as a result of a net income of Ps. 1,391 million, plus minority stake of Ps. 51 million, plus income taxes of Ps. 107 million, less comprehensive financial cost of Ps. 378 million, plus depreciation of Ps. 278 million.

Comprehensive Financial Cost

Comprehensive financial cost of the Company in the third quarter of 2018 represented an income of Ps. 378 million compared with an expense of Ps. 213 million for the second quarter of 2018. The comprehensive financial cost is comprised for: the net interest income of Ps. 5 million in the third quarter of 2018 compared to net interest expense of 373 million in the second quarter of the same year. Also, we record a net exchange profit of Ps. 373 million in the third quarter of 2018 compared a net exchange expense of Ps. 182 million in the second quarter of the same year.

Income Taxes

The Company have been recorded Ps. 107 million of expense tax during the third quarter of 2018, (includes a deferred expense tax of Ps. 123 million) compared with the Ps. 274 million of expense for the second quarter of the same year, (includes a deferred expense tax of Ps. 156 million).

Net Income

As a result of the foregoing, the Company recorded a net income of Ps. 1,391 million in the third quarter of 2018 compared to a net income of Ps. 682 million for the second quarter of 2018.

Comparative third quarter of 2018 vs. third quarter of 2017

Net Sales

Net sales of the Company increased 45% from Ps. 6,810 million during the third quarter of 2017 to Ps. 9,858 million in the third quarter of 2018. Sales in tons of finished steel increased to 538 thousand tons in the third quarter of 2018 from 533 thousand tons in the third quarter of 2017. Sales outside of Mexico increased 59% from Ps. 2,855 million in the third quarter of 2017 to Ps. 4,544 million in the third quarter of 2018. Mexican sales increased 34% from Ps. 3,955 million in the third quarter of 2017 to Ps. 5,314 million in the third quarter of 2018. The average sales price increased approximately 43% in the third quarter of 2018, compared to the same period of the 2017.

Cost of Sales

Cost of sales increased 44% in the third quarter of 2018 compared to the third quarter of 2017 from Ps. 5,856 million in the third quarter of 2017 to Ps. 8,420 million in the third quarter of 2018. With respect to sales, the cost of sales of the third quarter of 2017 represented 86% compared to 85% for the third quarter of 2018. The average cost of raw materials used to produce steel products increased in 42%, due to an increase of raw materials prices.

Gross (Loss) Profit

Gross profit of the Company for the third quarter of 2018 increased 51% from Ps. 954 million in the third quarter of 2017 compared to Ps. 1,438 million in the third quarter of 2018. Gross profit as a percentage of net sales for the third quarter of 2018 was 15% compared to 14% of the third quarter of 2017. The increase in gross profit is given by better mix products shipped and better average sales price.

General, Selling and Administrative Expense

The selling, general and administrative expense increased 18% in the third quarter of 2018 to Ps. 267 million in the third quarter of 2018 from Ps. 227 million in the third quarter of 2017. Selling, general and administrative expense as a percentage of net sales represented 3% during both periods.

Other Income (Expenses), net

The company recorded other income net of Ps. 0.3 million in the third quarter of 2018 compared with other income net of Ps. 5 million for the third quarter of 2017.

Operating (Loss) Income

Operating income increased from Ps. 732 million in the third quarter of 2017 compared to Ps. 1,171 million in the third quarter of 2018, this represent 60% of increase between both quarters. The operating

income as a percentage of net sales was 12% for the third quarter of 2018 compared to 11% for the third quarter of 2017. The increase in the operating income is due to a better mix products shipped and better average sales price.

Ebitda

The Ebitda of the third quarter increased 35% from Ps 1,072 million in the third quarter of 2017 as a result of a net income of Ps. 737 million, plus minority stake of Ps. 113 million, plus income taxes of Ps. 27 million, less comprehensive financial cost of Ps. 145 million, plus depreciation of Ps. 340 million to Ps. 1,449 million of the same period of 2018, as a result of a net income of Ps. 1,391 million, plus minority stake of Ps. 51 million, plus income taxes of Ps. 107 million, less comprehensive financial cost of Ps. 378 million, plus depreciation of Ps. 278 million.

Comprehensive Financial Cost

Comprehensive financial cost of the Company for the third quarter of 2018 represented a net income of Ps. 378 million compared with an income of Ps. 145 million for the third quarter of 2017. The comprehensive financial cost is comprised for: the net interest income of Ps. 1 million in the third quarter of 2017, compared to a net interest income of Ps. 5 million for the same period of 2018. Also record an exchange gain of Ps. 146 million in the third quarter of 2017 and an exchange gain of Ps. 373 million in the third quarter of 2018.

Income Taxes

The company recorded an expense tax for Ps. 107 million in the third quarter of 2018, (includes a deferred expense tax of Ps. 123 million) compared to an expense of Ps. 27 million for income tax for the third quarter of 2017, (includes an accrual of deferred income tax of Ps. 51 million).

Net Income (Loss)

As a result of the foregoing, the Company recorded a net income of Ps. 1,391 million in the third quarter of 2018 compared to a net income of Ps. 737 million for the same period of 2017.

Any forward-looking information contained herein is inherently subject to various risks, uncertainties and assumptions which, if incorrect, may cause actual results to vary materially from those anticipated, expected or estimated. The company assumes no obligation to update any forward-looking information contained herein.

Grupo Simec, S.A.B. de C.V. and Subsidiaries

(Subsidiary of Industrias CH, S.A.B. de C.V.)

Notes to the consolidated financial statements

Nature of business – The principal activities of Grupo Simec, S.A.B. de C.V. and subsidiaries (the Company) are the manufacture and sale of special bar quality “SBQ” commercial and profiles structural steel products for the automotive and construction industries both in Mexico, the United States (USA) and Canada. The Company is a subsidiary of Industrias CH, S.A.B. de C.V. (Industrias CH). The Company is a private company with limited liability incorporated and existing under the laws of Mexico. The address of its registered office and place of business is Calzada Lazaro Cardenas 601, Guadalajara, Jalisco, Mexico.

The Company has included recurring adjustment accounting estimates considered necessary for presentation of the consolidated financial statements interim no audited according to IAS 34. Comprehensive income for the fourth quarter ended December 31, 2012 is not necessarily an indicator of comprehensive income that could be expected for the year ended December, 31 2012.

The account policies applied to these financial statement are consistent with those applied to the consolidated financial statement at December 31, 2011.

The financial statements presented on this report were prepared under International Financial Reporting Standard (IFRS).

If necessary, further adjustments are done on the financial statements of subsidiaries to adapt their accounting policies that are aligned with those used by other group members. All transactions, balances, income and expenses between companies that are consolidated are eliminated on consolidation.

The changes in investments in subsidiaries of the company that not resulting in a loss of control is recorded as equity transactions. The book value of investments and equity of the company controlled not adjusted to reflect changes in related investments in subsidiaries. Any difference between the amount for which share are adjusted not controlled and the fair value of consideration paid or received is recognized directly in equity and attributed to the owners of the company.

When the company loss control of a subsidiary, the gain or loss on disposal is computed as the difference between (i) the aggregate fair value of compensation received ant the fair value of any retained interest and (ii) the value prior books of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling interest.

The amounts recognized in other comprehensive income items relating to the subsidiary are recorded (ie to income are reclassified or transferred directly to retained earnings) in the same manner established for the case of the availability of assets or liabilities relevant. The fair value of any investment retained in the former subsidiary at the date of loss of control is considered fair value for the initial recognition in subsequent accounting according to IAS 39 “Financial Instruments Recognition and Measurement”, or if applicable, the cost on initial recognition of an investment in an associate or under joint control entity.

Business acquisitions recorded using the purchase method. The consideration given for each acquisition are measured at fair value at the date of exchange, of assets given, liabilities incurred or assumed and equity instruments issued by the company in exchange for control of the acquire. Cost related to the acquisition is recognized in income incurred.

The identifiable assets acquired and liabilities assumed are recognized at the fair value at the acquisition date, except that:

-Assets and liabilities deferred income tax liabilities or assets and related agreements, employee benefits are recognized and valued in accordance with IAS 12, “Income tax and IAS 19, employee benefits, respectively;

-Liabilities or equity instruments related to the replacement by the Company acquired the business incentive base payments in shares, are valued in accordance with IFRS 2, “Share based payment” and.

The assets or group of assets for sale are classified as held for sale under IFRS 5, long term assets available for sale and discontinued operation, are valued pursuant with this standard.

Goodwill is recognized as an asset to the date on which control is acquired, the acquisition date and is valued as the excess of the amount of the consideration paid, plus the value of the non-controlling interest in the business acquired over the fair value of the acquired business share in the previously possessed, if any, on the net at the acquisition date of the identifiable assets acquired and liabilities assumed. If the value of these last is higher, the difference shall be recognized immediately in income as a gain from a bargain purchase.

The non-controlling interest on the acquired business should appraise initially at fair value or proportion of the non-controlling interest on the net value at the date of acquisition of the identifiable assets acquired and liabilities assumed. The choice of the basis of valuation of the non-controlling is done case by case.

When the consideration paid by the Company in a business acquisition includes assets or liabilities resulting from a contingent consideration, it is valued at its fair value at the acquisition date and include as part of the consideration paid.

Changes in the fair value of contingent consideration, which they describe as valuation period settings are adjusted against goodwill retrospectively determined.

The valuation period settings are settings that are determined as a result of information obtained during the “period of valuation”, which can´t exceed one year from the date of acquisition, on facts and

circumstances that existed at the acquisition date. The record of changes in fair value subsequent to the period of valuation is based on the classification of contingent consideration in the statement of financial position. If the contingent consideration is classified as equity, changes in fair value not recorded and the variation may be seen as contingent consideration is recorded in liquid capital. If the contingent consideration is classified an asset or liability, changes in fair value are recognized in accordance with IAS 39 “Financial Instruments Recognition and Valuation, or IAS 37, Provisions. Contingent Liabilities and Contingent assets, as appropriate, and corresponding gain or loss is recorded in the utility.

The initial recognition of business acquisition is not completed at the end of the reporting period, in which acquisition occurs, the Company reported provisional amounts for the items whose recognition is incomplete. During the period of valuation, the Company recognizes adjustments to provisional amounts recognized asset or liability or additional requirements to reflect new information obtained about facts and circumstances that existed at the acquisition date, which if known, would have affected the valuation of amounts recognized at that time.

At September 30, 2018 the subsidiaries of Grupo Simec, S. A. B. de C. V. included in the consolidation are as follows.

Percentage of equity owned

3. Summary of significant account policies.

As a result of early adoption of IFRS as mentioned in Note 1, the financial statements have been prepared in accordance with IFRS-1, First-time Adoption of International Financial Reporting Standards.

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 foreign operations 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 is considered as the functional currency of the U.S. subsidiaries, SimRep Corporation and Subsidiaries, Inc (Republic) and Pacific Steel Inc. and the Brazilian real for GV do Brasil Industria e Comercio de Aco LTDA., therefore the financial statements of these subsidiaries were translated into Mexican pesos by applying:

Relevant exchange rates used in the preparation of the consolidated financial statements were as follows (Mexican pesos per one U.S. dollar):

Cash consists of deposits in bank accounts that do not generate interest. Cash equivalents consists in temporary investments refer to short- term fixed income investments whose original maturity is less than three months. These investments are expressed at cost plus accrued yields. The value so determined is similar to their fair value

The Company follows the practice of recording an estimation of an allowance for doubtful accounts, which is computed considering the balance of customer with age higher than one year, those under litigation or the possible loss for non-fulfillment of the customer. Actual result may differ materially from these estimates in the future.

Inventories are recorded at the lower of acquisition cost and production, which cost do not exceed the market value or net realizable value. The allocation of cost used is the average cost method. The net realization value represent the estimated selling price for inventories less all costs to complete all necessary costs and for sale.

The Company classifies the raw materials inventory on the balance according to the expected date of consumption but she represented as long term inventory who according to historical data and trends, are not consumed in the short term (one year).

The Company follows the practice of creating a reserve for slow moving inventory, considering all of products and raw materials with turnover greater than one year.

Land is not depreciated.

Property, plant and equipment fail to recognize when they are available or when no future economic benefits expected from its use. The gain or (loss) arising on the disposal or retirement of assets, is the difference between income from the sale and book value of the asset and is recognized in income.

The estimated useful lives of the main assets of the Company are:

The assets held under finance leases are recognized as assets of the Company at their fair value at inception of the lease, or if lower, the present value of minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease liability.

Lease payments are apportioned between the finance charge and the reduction of lease obligation in order to achieve a constant interest rate on the remaining balance of the liability. Finance cost are charged directly to income, unless they can be directly attributable to qualifying assets, in which case it is capitalized in accordance with the general policy of the Company for borrowing costs. Contingent rents are recognized as expenses in the period incurred.

Income payments under operating leases are charged to expense using the straight line method during the period corresponding to the lease, but is more representative of another systematic basis is more representative of the pattern of the benefits of leasing for the user. Contingent rents are recognized as expenses in the period incurred.

If the Company receives incentives to enter an operating lease, these are recognized as a liability and the added benefit of them is recognized as a reduction of rental expenses on a straight-line basis, unless it sis representative as another systematic basis is more representative of the pattern of benefits to the user.

The income obtained by the temporary investment of specific borrowings pending funds to be used in qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing cost are recognized in income during the period they are incurred.

Disbursements arising from research activities are recognized as an expense in the period in which incurred.

An internally generated intangible asset arising out of activities of development (or from the development phase of an internal project) is recognized if and only if all the following have been demonstrated.

The amount initially recognized for internally generated intangible asset is the sum of expenditure incurred from the time that the item meets the conditions for recognition set out above. When you can´t recognize an internally generated intangible asset, the development expenditure is expensed in the period incurred Subsequent to initial recognition, internally generated intangible asset is recognized at cost less accumulated depreciation and any accumulated impairment losses, on the same basis intangibles assets acquired separately.

When an intangible asset acquired in a business combination and recognized separately from goodwill, its cost is its fair value at the acquisition date (which is considered as its cost). Subsequent to initial recognition, an intangible asset acquired in a business combination are recognized at cost less accumulated depreciation and any accumulated impairment losses, on the same basis as intangible assets acquired separately.

An intangible asset is left to recognize when it is available or when no future economic benefits are expected to use. The gain or (loss) obtained arising from the lowering of intangible, calculated as the difference between the net disposal proceeds and its carrying amount is recognized in earnings.

The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period under review, taking into account the risk and uncertainties that surround obligation. When a provision is valued using cash flows estimated to settle the present obligation, its carrying amount represent the present value of those cash flows.

When expected to recover from a third party of some or all the economic benefits required to settle a provision is recognized a receivable as an asset if it is virtually certain to be received the disbursement and the amount of the receivable can be valued reliably.

In the case of defined benefit plans, the cost of such benefits are determined using the projected unit credit method, with actuarial valuation carried out at the end of each period being reported. Gain and losses that exceed 10% of the greater of the present value of defined benefit obligations of the Company and the fair value of plan assets at the end of last year, are amortized over the estimated average remaining working lives of employees participating in the plan. The past service costs are recognized immediately to the extent that benefits are acquired otherwise, are amortized using the straight-line method over the average period until the benefits become acquired.

The retirement benefit obligation recognized in the statement of financial position represent the present value of defined benefit obligation, adjusted for gains and losses not recognized and the costs of unrecognized past service, less the fair value of the plan assets. Any asset that arises from this calculation is limited to unrecognized actuarial losses and past service cost, plus the present value of reimbursements and reductions in future contributions to the plan.

Current Income Tax- The current income tax is the higher income tax (ISR) and the flat rate business tax (Flat Tax) and is recognized in income in the year they are incurred. The income tax payable is based on fiscal profits and cash flows of each year respectively. The fiscal profit differs from profit reported in the consolidated statement of comprehensive income due to items of income or expenses taxable and deductible in other years and items that are never taxable or deductible. The company´s liability for taxes due is computed using tax rates enacted or substantially approved at the end of the period over which it is reported.

Deferred Income Tax- The company determined, based on financial projections, determine whether ISR or Flat Tax in the future and recognize the corresponding deferred tax on the tax it paid. Deferred tax is recognized temporary differences between the carrying amount of assets and liabilities included in the financial statements and the corresponding tax base used to determine the tax profit, using the liability method. The deferred tax liability is generally recognized for all temporary tax differences. It recognizes a deferred tax asset, because of all deductible temporary differences, as far as is probable that the future taxable profits available against which to apply those deductible temporary differences.

These assets and liabilities are not recognized if temporary differences arise from goodwill or the initial recognition (other than the business combination) of other assets and liabilities in a transaction that affects neither the tax profit accounting profit.

The carrying value of deferred tax asset should be reviewed at the end of each year and should be reduced to the extent deemed unlikely to have sufficient taxable profits to allow it to recover all or a portion of the asset.

Assets and deferred tax liabilities are computed using tax rates expected to apply in the period when the liability is paid or the asset is realized, based on the rates (and tax act) that have been approved or substantially approved the end of the reporting period under review. The valuation of liabilities and deferred tax assets reflects the tax consequences that would result from the way the Company

expects, at the end of the reporting period under review, to recover or settle the carrying amount of assets and liabilities.

It also recognizes a deferred tax asset for the estimated future effects of tax loss carry-forwards and tax credits recoverable asset. It records a valuation allowance to reduce the balance of deferred tax assets to the amount of future net benefits are more likely than not they do.

Deferred tax assets and deferred tax liabilities are offset when there is a statutory right to offset short-term assets with short term liabilities as they relate to income taxes for the same taxation authority and the Company intends to liquidate its assets and liabilities en a net basis.

Current income tax and deferred income tax period. Current and deferred are recognized as income or expense in profit or loss, except when related items that are recognized out of the income, either in other comprehensive income or (loss) or directly in equity, in which case the tax is also recognized outside of the outcome, or when arising on initial recognition of a business combination.

Interest on balance recoverable taxes- Interest on tax receivables balances are presented in the consolidated statement of comprehensive income as interest income.

Income Tax in the interim period - The income tax is recorded in the interim period based on the estimated annual effective rate.

The exchange rate differences are recognized in the income statement except:

The assets and liabilities are measured initially at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities are increased or decreased from its fair value, as appropriate, on initial recognition, the transaction costs directly attributable to the acquisition of assets or liabilities at fair value through income is recognized immediately in earnings.

The method of the effective interest rate is a method of computed the amortized cost of a financial instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts including all fees on points based on interest paid or received that form an integral of the effective interest rate, transaction costs and other premiums or discounts over the expected life of the debt or financial instrument (where appropriate) in a shorter period, with the carrying amount on initial recognition.

The Company has no financial assets classified as “financial assets at fair value through income”, “preserved at maturity investments” or “financial assets available for sale”,

Accounts receivable, loans and other receivable with fixed or determinable payments that are not trade in an active market are classified as loans and receivable. Loans and receivables are stated at amortized cost using the effective interest method, less any impairment.

Financial assets other than financial assets at fair value through income, are subject testing for effects of impairment at the end of each period which is reported. It is considered that financial assets are impaired when there is objective evidence that as a result of one or more events that occurred after initial recognition of financial asset, the estimated future cash flows of the financial assets have been affected.

The estimates and underlying assumption are reviewed on a regular basis. The reviews at accounting estimates are recognized in the period of the review and future periods if the review affects both current period and to subsequent periods.

Objective evidence of impairment could include:

For certain categories of financial assets such as accounts receivables, assets that have been subjected to testing for effects impairment and have not been impaired as individual, are included in the evaluation of impairment on a collective basis. Among the objective evidence that a portfolio of accounts receivable may be impaired, you could include the past experience of the Company with respect to the collection, an increase in the number of last payments in the portfolio in excess of the average credit period of 60 days as well as changes observable in national and local economic conditions that correlate with default on payments.

For financial assets carried at amortized cost, the amount of impairment loss recognized is the difference between the book value of assets and present value of future cash receipts discounted at the original effective interest rate of the asset financial.

The carrying value of financial assets is reduced by the impairment loss directly for all financial assets except for accounts receivable, where the carrying amount is reduced through an account estimate for doubtful accounts. When you consider that a receivable is uncollectible, it is removed from the estimate. The subsequent recovery of amounts previously deleted become claims against the estimate. Changes in the carrying value of the account of the estimate is recognized in income.

Except for equity instruments available for sale, if, in a subsequent period, the amount of the impairment loss decreases and this decrease can be related objectively to an event that occurs after recognition of impairment, impairment loss previously recognized is reversed through income to the extent that the carrying amount of investment to date reversed the impairment does not exceed the amortized cost would have been if he had not recognized the damage.

The company fails to recognize a financial asset only when the contractual rights on the cash flows of financial assets, and transfers substantially all the risk and benefits inherent to the ownership of financial assets. If the Company neither transfer not retains substantially all the risks and benefits inherent to the ownership and continues to retain control of the asset transferred, the Company recognizes its interest in the asset and liability associated to the amounts that would have to pay. If the Company retains substantially all risks and benefits inherent in ownership of transferred financial asset, the Company continues to recognize the financial asset and also recognizes collateral for loan funds received.

When fully unknown a financial asset, the difference in value of the asset and the amount of the consideration received and the cumulative gain or loss that has been left to recognize in other comprehensive income (loss) and accumulated in the equity is recognized in income.

Not knowing a financial asset in part (where the Company retains the option to repurchase part of a transferred asset, or retains a residual interest that does not result in the retention of substantial risk and benefits property and the company retains control), the Company distributed the previous value of the asset financial between the part that continues to be recognized and the part no longer recognized based on the fair value of those parts of the date of transfer. The difference between the carrying amount allocated to the party is no longer recognized and the amount of the consideration received by such party, and any cumulative gain or loss allocated to it has been recognized in other comprehensive income (loss) will be recognized in income.

Financial liability at fair value through income is a financial liability is classified as held trading or is designated as fair value through income.

A financial liability is classified as held for trading if:

A financial liability other than a financial liability held for trading may be designated as an financial liability at fair value through profit or loss upon initial recognition if:

Financial liabilities at fair value through income are recorded at fair value recognize any gain or loss arising from the remediation in the income statement. The gain or loss recognized in the statement include any dividend or interest earned from the financial asset and is included under the heading “other gains and losses” in the statement of comprehensive income.

Other financial liabilities, including loans, are valued initially at fair value, net of transaction costs. The method of effective interest rate 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 exactly discounts estimated cash payments over the expected life of the financial liability (or, where appropriate, a short period) to the carrying amount financial liabilities on initial recognition.

The Company writes off financial liabilities if and only if, the Company´s obligations are fulfilled, cancelled or expire. The difference between the carrying amount of financial liability discharged from and the consideration paid and payable is recognized in earnings.

t Derivative financial instruments – The Company uses derivative financial instruments to manage its exposure to risk in the changes in natural gas prices, which is used for production, conducting studies on historical volumes, future requirements or commitments, reducing the exposure to risks outside the normal operation of the Company.

Derivatives are initially recognized at fair value at the date the derivative contract subscribe and then remiden at fair value at the end of the reporting period. The gain or loss is recognized in income immediately unless the derivative is designated and is effective as a hedging instrument, in which case the timing of the recognition results depend on the nature of the hedging relationship.

In order to mitigate the risks associated with fluctuations in the price of natural gas, whose price is based on supply and demand from major markets, the Company uses exchange contracts or swaps cash flow of natural gas, where price the Company receives floating and pays fixed price. Fluctuations in the price of this energy input from consumed volumes are recognized as part of the operating costs of the Company.

At the beginning of the hedging relationship, the Company documents the relationship between the hedging instrument and hedged item, along with its risk management objective and strategy of hedging transactions. Additionally, the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting the exposure to change in fair value or changes in cash flows of the hedged item.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flows hedges is recognized in other comprehensive income and accumulated under the title of the fair value of derivative financial instruments, net of profit taxes. Gains and losses on the ineffective portion of the hedging instrument is recognized instrument is recognized immediately in income, and is included in other income (expense)

The Company periodically assesses the changes in cash flows from derivative financial instruments to analyze if the swaps are highly effective in reducing exposure to fluctuations in the price of natural gas. A hedging instrument is considered highly effective when changes in fair value or cash flows of the primary position are compensated on a regular basis or as a whole, by changes in the fair value or cash flows of the hedging instrument in a range between 80% and 125%.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to earning in the periods when the hedged item is recognized in income in the same area of the statement of comprehensive income of hedged item recognized. However, when a forecast transaction that is covered gives rise to the recognition of a non-financial asset or liability is not financial gain or loss previously accumulated in equity are transferred and include in the initial valuation of the cost of the asset does not financial or nonfinancial liabilities.

Hedge accounting is discontinued when the Company reverses the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or no longer meets the criteria for hedge accounting. Any cumulative gain or loss on the hedging instrument that is recognized in equity remain in equity until the forecast transaction is ultimately recognized in the results. When no longer expects the forecast transaction occurs, the cumulative gain or loss in equity is immediately reclassified the results.

u. Revenue recognition – Revenue is recognized in the period in which transfer the risks and benefits of inventories to customer who purchased them, which usually coincides with the delivery of products to customers in fulfilling their orders. Net sales represent the goods sold at list price, less returns received and discounts.

V. Segments Information – Segment information is presented in accordance with the region and due to the operation business is presented in accordance with the information used by management for decision making purposes.

w. Earnings (loss) per share

Income per share is calculated by dividing controlling net income or loss, by the weighted average shares outstanding during each year presented.