UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 20-F
 
(Mark One)
 
  ☐
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, 2021

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
 
Date of event requiring this shell company report ________________
 
For the transition period from _________to_____________
 
Commission file number 333-14194
 
GRUPO TMM, S.A.B.
(Exact name of Registrant as specified in its charter)
 
TMM GROUP
(Translation of Registrant’s name into English)
 
United Mexican States
(Jurisdiction of incorporation or organization)
 
Paseo de la Reforma No. 296, P.19.
Colonia Juárez,
06600 México City, Mexico
(Address of principal executive offices)
 
Luis Rodolfo Capitanachi Dagdug
(5255) 5629 8866
luis.capitanachi@tmm.com.mx
Paseo de la Reforma No. 296, P.19.
Colonia Juárez,
06600 México City, Mexico
 (Name, Telephone, E-mail and/or Facisimile 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
None
N/A
N/A

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Title of each class
American Depositary Shares (“ADSs”), each representing
five Ordinary Participation Certificates
(Certificados de Participación Ordinaria)
(“CPOs”)
 
CPOs, each representing one nominative common share,
without par value (“Share”)
 
Shares

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.
 
102,182,841 Shares
 
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 “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):
 
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. ☐
 
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. ☐
 
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 ☑
 
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
 
Yes ☐  No ☐
 
TABLE OF CONTENTS
Page

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ITEM 1.
 2
ITEM 2.
 2
ITEM 3.
 2
ITEM 4.
 23
ITEM 4A.
 46
ITEM 5.
 46
ITEM 6.
 63
ITEM 7.
 68
ITEM 8.
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ITEM 9.
 71
ITEM 10.
 72
ITEM 11.
 84
ITEM 12.
 86
     

87
ITEM 13.
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ITEM 14.
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ITEM 15.
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ITEM 16B.
 88
ITEM 16C.
 88
ITEM 16D.
 89
ITEM 16E.
 89
ITEM 16F.
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ITEM 16G.
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ITEM 16G.
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ITEM 16H.
 89
ITEM 16I.
 89
     

89
ITEM 17.
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ITEM 18.
 89
ITEM 19.
 91
   
EX-2.5:
DESCRIPTION OF SECURITIES REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT
EX-8.1:
LIST OF SUBSIDIARIES
EX-12.1:
CERTIFICATION
EX-12.2:
CERTIFICATION
EX-13.1:
CERTIFICATION
EX-13.2:
CERTIFICATION
EX-15.1:
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

i
Grupo TMM, S.A.B. and Subsidiaries
 
Introduction

In this Annual Report, references to “$,” “Ps,” “Mx. pesos,” “Pesos” or “pesos” are to Mexican Pesos and references to “US$,” “U.S. dollars,” “Dollars” or “dollar” are to United States Dollars. This Annual Report contains translations of certain Dollar amounts into Pesos at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the Dollar amounts actually represent such Peso amounts or could be converted into Pesos at the rates indicated or at any other rate. In this Annual Report on Form 20-F except as otherwise provided, references to “we,” “us,” “our” and “Company” mean Grupo TMM, S.A.B. and its consolidated subsidiaries, and “Grupo TMM” means “Grupo TMM, S.A.B.”

Presentation of Financial Information

Our financial statements are reported in Mexican pesos and prepared in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The financial information included in this Annual Report was approved by the Company’s shareholders at the Annual General Shareholders’ Meeting, which took place on April 29, 2022.

Market and Industry Data

This Annual Report includes certain market and industry data and projections obtained from official government bodies, industry publications and surveys, public filings, and internal company sources. The thid-party materials from which these data and projections were obtained generally state that the information included therein was collected from sources believed to be reliable, but we cannot provide any assurance as to the accuracy or completeness of such information, which we have not independently verified. While we are not aware of any misstatements regarding any market or industry data and projections presented in this Annual Report, such data and projections involve risks and uncertainties and are subject to change based on various factors, including those discussed in the section entitled “Risk Factors.”

Forward-Looking Information

This Annual Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such forward-looking statements are based on the beliefs of the Company’s management as well as on assumptions made. Actual results could differ materially from those included in such forward-looking statements. Readers are cautioned that all forward-looking statements involve risks and uncertainty.

The following factors, among others described in this Annual Report, could cause actual results to differ materially from such forward-looking statements:


 ■
our ability to generate sufficient cash from operations to meet our obligations, including the ability of our subsidiaries to generate sufficient distributable cash flow and to distribute such cash flow in accordance with our existing agreements with our lenders and strategic partners and applicable law;


■
Mexican, U.S. and global economic, political and social conditions;


■
uncertainties related to the ongoing conflict between Russia and Ukraine, including the extent and duration of shortages in the supply of key raw materials, commodities and products;


■
conditions affecting the international shipping and transportation markets or the oil and gas industry;

2
Grupo TMM, S.A.B. and Subsidiaries


 ■
uncertainties concerning the continuing COVID-19 pandemic and related governmental responses;


■
conditions resulting from future pandemics, epidemics or other outbreaks of infectious diseases and governmental responses thereto;


■
our ability to reduce corporate overhead costs;


■
the availability of capital to fund our expansion plans;


■
our ability to utilize a portion of our current and future tax loss carryforwards (“Net Operating Losses” or “NOLs”);


■
changes in fuel prices;


■
changes in legal or regulatory requirements in Mexico or the United States;


■
market and interest rate fluctuations;


■
competition in geographic and business areas in which we conduct our operations;


■
the adverse resolution of litigation and other contingencies;


■
the ability of management to manage growth and successfully compete in new businesses;


■
the ability of the Company to diversify its customer base; and


■
the ability of the Company to repay, restructure or refinance its indebtedness.

Readers are urged to read this entire Annual Report including, but not limited to, the section entitled “Risk Factors,” and carefully consider the risks, uncertainties and other factors that affect our business. The information contained in this Annual Report is subject to change without notice. Readers should review future reports filed by us with the SEC and the Bolsa Mexicana de Valores (the “Mexican Stock Exchange”). We undertake no obligation to publicly update or revise any forward-looking statements included in this Annual Report, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.

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

Risk Factors

Our business is subject to various risks and uncertainties that have the potential to materially and adversely affect our business, results of operation, financial condition and future prospects. This Annual Report includes information on risks relating to our business, operations and financial condition, indebtedness, and ownership of our Shares and ADSs, as well as risks related to Mexico and investments in Mexican companies like Grupo TMM. These are not the only risks we face, but if any of them were to occur, either alone or together with additional risks and uncertainties not currently known to us, or that we do not currently consider material, the value of our Shares or ADSs may decline and you may lose all or part of your investment. Accordingly, before deciding whether to invest in our Shares or ADSs, you should review the other information regarding our business contained in this Annual Report, including the Audited Consolidated Financial Statements and the related notes thereto, as well as other reports filed by us with the SEC and Mexican Stock Exchange.

2
Grupo TMM, S.A.B. and Subsidiaries

Risk Factor Summary

Risks Relating to our Business


 ■
Our business has been and may continue to be adversely affected by the COVID-19 pandemic, and may be adversely affected by future pandemics, epidemics or other outbreaks of infectious diseases and governmental responses thereto.


■
Uncertainties relating to our financial condition in our recent past and other factors raised substantial doubt about our ability to continue as a going concern and could have resulted in our dissolution under Mexican corporate law.


■
If the time charter arrangements for the vessels we operate are terminated or expire, our business could be adversely affected.


■
Our results from operations are dependent on fuel expenses.


■
We may be unable to successfully expand our businesses.


■
Significant competition could adversely affect our future financial performance.


■
Downturns in certain cyclical industries in which our customers operate could have adverse effects on our results of operations.


■
Over time, asset values may fluctuate substantially and, if these values are lower at a time when we are attempting to dispose of an asset, we may incur a loss.


■
Our growth depends upon continued growth and demand for the maritime, ports and terminals, and logistics industries which may have been at or near the peak of their upward trend and rates have already been at or near historical highs. These factors may lead to reductions and volatility in rates and profitability.


■
Our growth depends on our ability to expand relationships with existing charterers and other customers and to obtain new charterers and customers, for which we will face substantial competition.


■
The aging of the vessels we operate may result in increased operating costs in the future, which could adversely affect our earnings.


■
Our results of operations may be adversely affected by operational risks inherent in the transportation and logistics industry.


■
Our operations are subject to extensive environmental and safety laws and regulations and we may incur costs that have a material adverse effect on our financial condition as a result of our liabilities under or potential violations of environmental and safety laws and regulations.


■
Potential labor disruptions could adversely affect our financial condition and our ability to meet our obligations under our financing arrangements.

3
Grupo TMM, S.A.B. and Subsidiaries


 ■
The conflict between Russia and Ukraine may have a material adverse effect on our business, financial condition, liquidity and results of operation.


■
Continuing world tensions, including as the result of the war between Russia and Ukraine, other armed conflicts, terrorist attacks, the COVID-19 pandemic and trade disputes could have a material adverse effect on our business.


■
Our information technology systems may be subject to security incidents or interruptions in network connectivity which could have an material adverse effect on our business.


■
Our customers may take actions that may reduce our revenues.


■
Our financial statements may not give you the same information as financial statements prepared under United States accounting rules.

Risks Relating to our Indebtedness


 ■
Our substantial indebtedness could adversely affect our financial condition and impair our ability to operate our business, and we may not be able to pay the interest on and principal amount of our indebtedness.


■
Grupo TMM is primarily a holding company and depends upon funds received from its operating subsidiaries to make payments on its indebtedness.


■
Restrictive covenants in our financing agreements may restrict our ability to pursue our business strategies.


■
We have to service our debt with revenues mostly generated in Mexican pesos. This could adversely affect our ability to service our debt in the event of a devaluation or depreciation in the value of the Mexican peso against the dollar.


■
Our variable rate debt subjects us to risks associated with an increase in interest rates, which could increase the amount of our debt service obligations.

Risks Relating to Mexico


 ■
Economic, political, social and public health conditions may adversely affect our business.


■
Mexico is an emerging market economy, with attendant risks to our results of operations and financial condition.


■
Currency fluctuations or the devaluation and depreciation of the Peso could limit the ability of the Company and others to convert Pesos into U.S. dollars or other currencies which could adversely affect our business, financial condition and results of operations.


■
High interest rates in Mexico could increase our financing costs.


■
Developments in other emerging market countries or in the United States may affect us and the prices of our securities.


■
Mexico may experience high levels of inflation in the future, which could adversely affect our results of operations.


■
Political events and declines in the level of oil production in Mexico could affect the Mexican economy and our business, financial condition and results of operations.

4
Grupo TMM, S.A.B. and Subsidiaries


 ■
Political events in the United States could have a material adverse effect on our business, financial condition and results of operations.


■
If oil prices decline as from current levels, our clients may reduce spending on exploration and production projects, resulting in a decrease in demand for our services.


■
Mexican antitrust laws may limit our ability to expand through acquisitions or joint ventures.


■
Investors may not be able to enforce judgments against the Company.

Risks Relating to Ownership of our Equity


 ■
The protection afforded to minority shareholders in Mexico is different from that afforded to minority shareholders in the United States.


■
Holders of ADSs may not be entitled to participate in any future preemptive rights offering, which may result in a dilution of such holders equity interest in our company.


■
The Company is controlled by the Serrano Segovia family.


■
A change in control may adversely affect us.


■
Our ADSs trade on the over-the-counter (“OTC”) market, which may limit the liquidity and price of our ADSs more than if the ADSs were quoted or listed on a national securities exchange.

Detailed Risk Factors

Risks Relating to our Business

Our business has been and may continue to be adversely affected by the COVID-19 pandemic, and may be adversely affected by future pandemics, epidemics or other outbreaks of infectious diseases and governmental responses thereto.

Our operations are subject to risks related to pandemics, epidemics or other infectious disease outbreaks, including the continuing COVID-19 pandemic, which was initially declared a pandemic by the World Health Organization (“WHO”) on March 11, 2020. Government efforts to combat the COVID-19 pandemic, including the enactment or imposition of travel bans, quarantines and other emergency public health measures, have negatively affected economic conditions and the demand for shipping and transportation services globally and within the Gulf of Mexico, which in turn negatively affected our operations and the operations of our customers. Although demand for shipping and transportation services rebounded during 2021 as restrictive public health measures were substantially curtailed or eliminated as vaccination programs expanded, future developments regarding the COVID-19 pandemic remain highly uncertain.  In particular, the emergence and spread of new virus variants, some of which may prove resistant to currently approved vaccines, may result in the reintroduction of or increase in restrictive measures aimed at combating the spread of COVID-19 and its variants.  As a result, our vessels may be unable to call on ports, or may be restricted from disembarking from ports, located in areas affected by COVID-19. Further, such measures may restrict our ability to conduct operations at our ports, terminals and warehousing businesses.

The extent to which our business, results of operations and financial condition may be negatively affected by the COVID-19 pandemic or future pandemics, epidemics or other outbreaks of infectious diseases is highly uncertain and will depend on numerous evolving factors that we cannot predict, including, but not limited to (i) the duration and severity of the infectious disease outbreak; (ii) the imposition of restrictive measures to combat the outbreak and slow disease transmission; (iii) the introduction of financial support measures to reduce the impact of the outbreak on the economy; (iv) volatility in the demand for and price of oil and gas; (v) shortages or reductions in the supply of essential goods, services or labor; and (vi) fluctuations in general economic or financial conditions tied to the outbreak, such as a sharp increase in interest rates or reduction in the availability of credit. We cannot predict the effect that an outbreak of a new COVID-19 variant or strain, or any future infectious disease outbreak, pandemic or epidemic may have on our business, results of operations and financial condition, which could be material and adverse.

5
Grupo TMM, S.A.B. and Subsidiaries

Uncertainties relating to our financial condition in our recent past and other factors raised substantial doubt about our ability to continue as a going concern and could have resulted in our dissolution under Mexican corporate law.

In accordance with the Mexican Companies Act (The Ley General de Sociedades Mercantiles), when a company has accumulated losses in excess of two-thirds of its capital stock, the dissolution of the company may be adopted by the shareholders of the company at an Extraordinary Shareholders Meeting called by the company’s board of directors upon the request of shareholders representing at least 33% of the company’s capital stock. At the Extraordinary Shareholders Meeting, the shareholders may vote to either dissolve the company or approve any corporate strategy for addressing the accumulated losses.

Additionally, the Mexican Bankruptcy Act (Ley de Concursos Mercantiles) provides that any third party with legal interest may request the judicial authorities to declare the dissolution of the company. A third person is considered to have a legal interest to request dissolution if the person is a creditor of the company and (i) the company has failed continuously with its payment obligations to the third person and the amount of the failure represents at least 35% of all the obligations of the company, and (ii) the company does not have sufficient assets to satisfy at least 80% of the payment obligations in respect of which it has failed to make the required payments at the time of the request.

Although we generated a profit for the years ended December 31, 2019, 2018 and 2017, respectively, we accumulated losses in each of the years ended December 31, 2021 and 2020, respectively. Our ability to continue as a going concern is subject to our ability to generate sufficient profits and/or obtain necessary funding from outside sources and there can be no assurance that we will continue to be able to generate such profits or obtain such funding.

As of May 10, 2022, the Company had not received any request for an Extraordinary Shareholders Meeting concerning the prior accumulated losses of the Company, nor had the Company received notice of any request to judicial authorities to declare a dissolution of the Company.

If the time charter arrangements for the vessels we operate are terminated or expire, our business could be adversely affected.

As of March 31, 2022, we operated thirteen offshore vessels on time charter to PEMEX Exploración y Producción (“PEP”). PEP is a subsidiary of Petróleos Mexicanos, the national oil company of Mexico (“PEMEX”).  In addition, as of March 31, 2022, we operated four offshore vessels under chartering agreements with private companies in the spot market for time periods of one year or less and nine offshore vessels and one product tanker were without a contract. In the event that these time charter agreements are terminated or expire without being renewed, we will be required to seek new bareboat or time charter agreements for these vessels. We cannot be sure that bareboat or time charters will be available for the vessels following termination or expiration, or that bareboat or time charter rates in effect at the time of such termination or expiration will be comparable to those in effect under the existing time charters or in the present market. In the event that bareboat or time charters are not available on terms acceptable to us, we may operate those vessels in the spot market. Because charter rates in the spot market are subject to greater fluctuation than longer term bareboat or time charter rates, any failure to maintain existing, or enter into comparable, charter agreements could adversely affect our operating results.

Our results from operations are dependent on fuel expenses.

Our parcel tanker operations consume significant amounts of energy and fuel, the cost of which has fluctuated significantly worldwide in recent years. With respect to our other operations, our customers pay for the fuel consumption. We currently meet, and expect to continue to meet, our fuel requirements through purchases from various suppliers at North American market prices. In addition, instability caused by imbalances in the worldwide supply and demand of oil may result in increases in fuel prices. For example, international crude oil prices have increased substantially following Russia’s invasion of Ukraine in late February 2022. Our fuel expense represents a significant portion of our operating expenses in our parcel tanker operations, and there may be increases in the price of fuel that cannot be hedged or transferred to the final user of our transportation services. We cannot assure you that our operations would not be materially adversely affected in the future if energy and fuel costs increase from current levels.

6
Grupo TMM, S.A.B. and Subsidiaries

We may be unable to successfully expand our businesses.

Future growth of our businesses will depend on a number of factors, including:


 ◾
the continued identification, evaluation and participation in niche markets;


◾
the identification of joint venture opportunities or acquisition candidates;


◾
our ability to enter into acquisitions on favorable terms;


◾
our ability to finance any expansion of our business;


◾
our ability to hire and train qualified personnel, and to maintain our existing managerial base;


◾
the successful integration of any acquired businesses with our existing operations; and


◾
our ability to manage expansion effectively and to obtain required financing.

In order to maintain and improve operating results from new businesses, as well as our existing businesses, we will be required to manage our growth and expansion effectively. However, the management of new businesses involves numerous risks, including difficulties in assimilating the operations and services of the new businesses, the diversion of management’s attention from other business concerns and the disadvantage of entering markets in which we may have no or limited direct or prior experience. Our failure to effectively manage our businesses could preclude our ability to expand our businesses and could have a material adverse effect on our results of operations.

Significant competition could adversely affect our future financial performance.

Certain of our business segments face significant competition, which could have a material adverse effect on our results of operations.

Our international and domestic maritime operations have faced significant competition, mainly from U.S., Mexican and other international shipping companies acting directly or through a Mexican intermediary. In our logistics operations division, our services have faced intense competition, including price competition, from a large number of U.S., Mexican, and other international logistics companies. Our ports and terminals operations also face significant competition from companies that have expanded Mexican port facilities and related services in recent years. We cannot assure you that we will not lose business in the future due to our inability to respond to competitive pressures by decreasing our prices without adversely affecting our gross margins and operational results.

Downturns in certain cyclical industries in which our customers operate could have adverse effects on our results of operations.

The shipping, ports and terminals, and logistics industries are highly cyclical, generally tracking the cycles of the world economy. Although transportation markets are affected by general economic conditions, there are numerous specific factors within each particular market segment that may influence operating results. Some of our customers do business in industries that are highly cyclical, including the oil and gas and automotive sectors. The COVID-19 pandemic precipitated a large drop in demand in these sectors as countries imposed restrictions on domestic and cross-border travel and commercial activity in an effort to prevent or slow the spread of the virus.  Although domestic and cross-border travel and commercial activity rebounded during 2021 as restrictive public health measures were substantially curtailed or eliminated as vaccination programs expanded, a reintroduction of pandemic-related restrictions or any sustained downturn in these sectors could have a material adverse effect on our operating results. Also, some of the products we transport have had a historical pattern of price cyclicality, which has typically been influenced by the general economic environment and by industry capacity and demand. We cannot assure you that prices and demand for these products will not decline in the future, adversely affecting those industries and, in turn, our financial results.

7
Grupo TMM, S.A.B. and Subsidiaries

Over time, asset values may fluctuate substantially and, if these values are lower at a time when we are attempting to dispose of an asset, we may incur a loss.

The value of our assets may fluctuate substantially over time due to a number of different factors, including:


 ■
prevailing economic conditions in the market;


■
a substantial or extended decline in world trade;


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increases in the supply of vessel capacity;


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increased port and terminal capacity;


■
prevailing charter rates;


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restrictions arising from emergency public health measures; and


■
the cost of retrofitting or modifying existing ships and other assets, as a result of technological advances, changes in applicable environmental or other regulations or standards, or otherwise.

In the future, if the market values of our assets deteriorate significantly, we may be required to record an impairment charge in our financial statements, which could adversely affect our results of operations. If a vessel charter terminates, we may be unable to re-charter the vessel at an acceptable rate and, rather than continue to incur costs to maintain and finance the asset, may seek to dispose of it. Our inability to dispose of a vessel or other asset at a reasonable price could result in a loss on its sale and adversely affect our results of operations and financial condition.

Our growth depends upon continued growth and demand for the maritime, ports and terminals, and logistics industries which may have been at or near the peak of their upward trend and rates have already been at or near historical highs. These factors may lead to reductions and volatility in rates and profitability.

The maritime, ports and terminals, and logistics industries are cyclical and volatile in terms of rates and profitability. In the future, rates and demand for vessels and other equipment and services may fluctuate as a result of changes in the size of and geographic location of supply and demand for oil and related products, as well as changes in the corresponding industry regulations. These and other factors affecting the supply and demand for maritime, ports and terminals, and logistics services in general are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.

The factors that influence demand for our services include:

8
Grupo TMM, S.A.B. and Subsidiaries


 ■
supply and demand for products suitable for shipping, ports and terminals, and logistics services;


■
changes in global production of products transported by vessels or for which we render other services;


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the distance cargo products are to be moved by sea or land;


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the globalization of manufacturing;


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global and regional economic and political conditions;


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changes in seaborne and other transportation patterns, including changes in the distances over which cargoes are transported;


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environmental and other regulatory developments;


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technological advancements;


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currency exchange rates;


■
weather and natural disasters; and


■
global and regional public health developments.

The factors that influence our services capacity include:


 ■
the number of newbuilding vessel deliveries and the scrapping rate of similar vessels;


■
the Mexican foreign trade balance;


■
the price of steel and other raw materials;


■
changes in environmental and other regulations that may limit the useful life of vessels and other assets;


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the number of vessels or other assets that are out of service;


■
port congestion; and


■
the existence of emergency public health measures that may require us to suspend or curtail some of our businesses.

Our ability to re-charter the vessels we operate upon the expiration or termination of their current charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, the prevailing state of the charter market for vessels. If the charter market is depressed when vessels’ charters expire, we may be forced to re-charter the vessels at reduced rates or even possibly a rate whereby we incur a loss, which may reduce our earnings or make our earnings volatile. The same issues will exist if we acquire additional vessels and attempt to obtain multi-year time charter arrangements as part of our acquisition and financing plan.  Similarly, in our ports and terminals and logistics divisions, our ability to renew or extend our services agreements will be subject to current market conditions and other competitors.

Our growth depends on our ability to expand relationships with existing charterers and other customers and to obtain new charterers and customers, for which we will face substantial competition.

Our principal objectives include acquiring and operating additional vessels in conjunction with entering into additional long-term, fixed-rate time charters for these ships, as well as entering into new long-term service contracts for our ports and terminals and logistics businesses. The process of obtaining new long-term contracts is highly competitive and generally involves an intensive screening process and competitive bids, and often extends for several months. Shipping charters and service contracts are awarded based upon a variety of factors relating to the contractor, including:

9
Grupo TMM, S.A.B. and Subsidiaries


 ■
industry relationships and reputation for customer service and safety;


■
experience and quality operations (including cost effectiveness);


■
quality and experience of operating personnel;


■
the ability to finance vessels and other assets at competitive rates and financial stability in general;


■
relationships with shipyards and the ability to get suitable berths;


■
relationships with ship owners and the ability to obtain suitable second-hand vessels and equipment;


■
construction management experience, including the ability to obtain on-time delivery of new ships and other assets according to customer specifications;


■
willingness to accept operational risks pursuant to the charter or other services, such as allowing termination for force majeure events, among others; and


■
competitiveness of the bid in terms of overall price.

We expect substantial competition from a number of experienced companies, including state-sponsored entities and major shipping, ports and terminals, and logistics companies. Some of these competitors have significantly greater financial resources than we do, and can therefore operate larger fleets, provide additional services, and potentially offer better rates. This competition may cause greater price competition for time charters and the other services we offer. As a result of these factors, we may be unable to expand our relationships with existing customers or to obtain new customers on a profitable basis, if at all, which would have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends to our stockholders.

The aging of the vessels we operate may result in increased operating costs in the future, which could adversely affect our earnings.

In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. As the vessels we operate age, we will incur increased costs. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of a vessel may also require expenditures for alterations or the addition of new equipment to vessels and may restrict the type of activities in which vessels may engage. We cannot assure you that, as the vessels we operate age, market conditions will justify such expenditures or will enable us to profitably operate the vessels during the remainder of their expected useful lives.

Our results of operations may be adversely affected by operational risks inherent in the transportation and logistics industry.

The operation of vessels and other machinery relating to the shipping and cargo business involves an inherent risk of catastrophic marine disaster, mechanical failure, collisions, property losses to vessels, piracy, cargo loss or damage and business interruption due to outbreaks of infectious diseases or political actions in Mexico and in foreign countries. In addition, the operation of any harbor and seagoing vessel is subject to the inherent possibility of catastrophic marine disasters, including oil spills and other environmental accidents, and the liabilities arising from owning and operating vessels in international trade. Any such event may result in a reduction of revenues or increased costs. The Company’s vessels are insured for their estimated value against damage or loss, including war, terrorism acts, and pollution risks and we also carry other insurance customary in the industry.

10
Grupo TMM, S.A.B. and Subsidiaries

We maintain insurance to cover the risk of partial or total loss of or damage to all of our assets including, but not limited to, harbor and seagoing vessels, port facilities, port equipment, land facilities and offices. In particular, we maintain marine hull and machinery and war risk insurance on our vessels, which covers the risk of actual or constructive total loss. Additionally, we have protection and indemnity insurance for damage caused by our operations to third persons. With certain exceptions, we do not carry insurance covering the loss of revenue resulting from a downturn in our operations or resulting from vessel off-hire time on certain vessels. In certain instances, and depending on the ratio of insurance claims to insurance premiums paid, we may choose to self-insure our over-the-road equipment following prudent guidelines. We cannot assure you that our insurance would be sufficient to cover the cost of damages suffered by us or damages to others, that any particular claim will be paid or that such insurance will continue to be available at commercially reasonable rates in the future.

Additionally, some shipping, ports and terminals, and logistics activities decrease substantially during periods of bad weather. Such adverse weather conditions can adversely affect our results of operations and profitability if they occur with unusual intensity, during abnormal periods, or last longer than usual in our major markets, especially during peak shipping periods.

Our operations are subject to extensive environmental and safety laws and regulations and we may incur costs that have a material adverse effect on our financial condition as a result of our liabilities under or potential violations of environmental and safety laws and regulations.

Our operations are subject to general Mexican federal and state laws and regulations relating to the protection of the environment. The Mexican Attorney General for Environmental Protection (Procuraduría Federal de Protección al Ambiente) is empowered to bring administrative and criminal proceedings and impose corrective actions and economic sanctions against companies that violate environmental laws, and temporarily or permanently close non-complying facilities. The Mexican Ministry of Environmental Protection and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales or “SEMARNAT”) and other ministries have promulgated compliance standards for, among other things, water discharge, water supply, air emissions, noise pollution, hazardous substances transportation and handling, and hazardous and solid waste generation. Under the environmental laws, the Mexican government has implemented a program to protect the environment by promulgating rules concerning water, land, air and noise discharges or pollution, and the transportation and handling of wastes and hazardous substances.

We are also subject to the laws of various jurisdictions and international conferences with respect to the discharge of hazardous materials, wastes and pollutants into the environment.

While we maintain insurance against certain of these environmental risks in an amount which we believe is consistent with amounts customarily obtained in accordance with industry norms, we cannot assure you that our insurance will be sufficient to cover damages suffered by us or that insurance coverage will always be available for these possible damages. Furthermore, such insurance typically excludes coverage for fines and penalties that may be levied for non-compliance with environmental laws and regulations.

We anticipate that the regulation of our business operations under federal, state and local environmental laws and regulations will increase and become more stringent over time. We cannot predict the effect, if any, that the adoption of additional or more stringent environmental laws and regulations would have on our results of operations, cash flows, capital expenditure requirements or financial condition.

Our maritime operations provide services to transport petrochemical products and refined clean and dirty petroleum products, respectively. See Item 4. “Information on the Company — Business Overview — Maritime Operations.” Under the United States Oil Pollution Act of 1990 (“OPA” or “OPA 90”), responsible parties, including ship owners and operators, are subject to various requirements and could be exposed to substantial liability, and in some cases unlimited liability, for removal costs and damages, including natural resource damages and a variety of other public and private damages resulting from the discharge of oil, petroleum or related substances into the waters of the United States. In some jurisdictions, including the United States, claims for spill clean-up or removal costs and damages would enable claimants to immediately seize the ships of the owning and operating company and sell them in satisfaction of a final judgment. The existence of comparable statutes enacted by individual states of the United States, but requiring different measures of compliance and liability, creates the potential for similar claims being brought in the United States under state law. In addition, several other countries have adopted international conventions that impose liability for the discharge of pollutants similar to OPA. If a spill were to occur in the course of operation of one of our vessels carrying petroleum products, and such spill affected the waters of the United States or another country that had enacted legislation similar to OPA, we could be exposed to substantial or unlimited liability. Additionally, our vessels carry bunkers (ship fuel) and certain goods that, if spilled, under certain conditions, could cause pollution and result in substantial claims against us, including claims under international laws and conventions, OPA and other U.S. federal, state and local laws. Further, under OPA and similar international laws and conventions, we are required to satisfy insurance and financial responsibility requirements for potential oil spills and other pollution incidents. Penalties for failure to maintain the financial responsibility requirements can be significant and can include the seizure of the vessel.

11
Grupo TMM, S.A.B. and Subsidiaries

The vessels we operate must also meet stringent operational, maintenance and structural requirements, and they are subject to rigorous inspections by governmental authorities such as the U.S. Coast Guard for those vessels that operate within U.S. territorial waters. Non-compliance with these regulations could give rise to substantial fines and penalties.

We could have liability with respect to contamination at third-party facilities in the United States where we have transported hazardous substances or wastes under the U.S. Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) and comparable state laws (known as state Superfund laws). CERCLA and the state Superfund laws impose joint and several liability for the cost of investigation and remediation, natural resources damages, certain health studies and related costs, without regard to fault or the legality of the original conduct, on certain classes of persons with respect to the release into the environment of certain substances.  These persons, commonly called “potentially responsible parties” or “PRPs,” include the current and certain prior owners or operators of and persons that arranged for the disposal or treatment of hazardous substances at sites where a release has occurred or could occur. In addition, other potentially responsible parties, adjacent landowners or other third parties may initiate cost recovery actions or toxic tort litigation against PRPs under CERCLA or state Superfund law or state common law.

The U.S. Clean Water Act imposes restrictions and strict controls regarding the discharge of wastes into the waters of the United States. The Clean Water Act and comparable state laws provide for civil, criminal and administrative penalties for unauthorized discharges of pollutants. In the event of an unauthorized discharge of wastes or pollutants into waters of the United States, we may be liable for penalties and could be subject to injunctive relief.

Potential labor disruptions could adversely affect our financial condition and our ability to meet our obligations under our financing arrangements.

As of March 31, 2022, we had 808 employees, approximately 5% of whom were unionized. The compensation terms of the labor agreement with these employees are subject to renegotiation on an annual basis and all other terms are renegotiated every two years. If we are not able to negotiate these provisions favorably, strikes, boycotts or other disruptions could occur, and these potential disruptions could have a material adverse effect on our financial condition and results of operations and on our ability to meet our payment obligations under our financing arrangements. As of the date of this Annual Report, the COVID-19 outbreak has not negatively affected our relations with our employees.  We cannot, however, assure you that the effects of COVID-19 will not lead to any labor disruptions in the future.

In addition, in connection with the labor commitments included in the United States-Mexico-Canada Agreement (“USMCA”), the successor to the North American Free Trade Agreement (“NAFTA”), the Mexican government has enacted significant reforms aimed at protecting the rights of workers. These include ratification of the International Labor Organization’s Convention C098, the “Right to Organize and Collective Bargaining Convention”, and revisions to the Mexican Federal Labor Law (Ley Federal del Trabajo) aimed at prohibiting discrimination and workplace harassment, establishing new labor courts and judicial protections for workers, enhancing the transparency of procedures for the negotiation of collective bargaining agreements, and ensuring the voting rights of workers on matters such as union contracts and representation. These developments, together with substantial increases in Mexico’s general minimum wage, have spurred increased demands from workers and labor unions for salary and benefit increases. We cannot predict how these developments may affect our business, results of operations or its financial condition. Any increased demands by our unionized workers may lead to higher labor costs, which could have a negative impact on our business, results of operations or financial condition.

12
Grupo TMM, S.A.B. and Subsidiaries

The conflict between Russia and Ukraine may have a material adverse effect on our business, financial condition, liquidity and results of operation.

International financial and commodities markets are experiencing heightened volatility and disruption following Russia’s military invasion of Ukraine in February 2022. Although the ultimate duration and effect of the ongoing conflict remains uncertain, it has created significant disruptions in international markets, including heightened volatility in the credit and financial markets and significant increases in the prices of raw materials and other commodities, particularly oil and gas. Russia’s invasion has triggered the imposition of sanctions and other penalties by the United States, European Union and other countries against Russia and certain associated persons and entities, including the removal of certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system. Additional potential sanctions and penalties have also been threatened or remain under consideration, the ultimate effects of which remain uncertain. We are continuing to monitor the conflict in Ukraine and its effect on international markets, including any related supply chain disruptions or increases in the cost of fuel or other input costs, which may have a material adverse effect on our business, financial condition, liquidity and results of operations.

Continuing world tensions, including as the result of wars, other armed conflicts, terrorist attacks, the COVID-19 pandemic and trade disputes could have a material adverse effect on our business.

Continuing world tensions, including those relating to Russia, Ukraine, the Middle East, North Korea, Venezuela, Libya and various other African countries, the COVID-19 pandemic, trade disputes between the United States, China, and various other countries, as well as terrorist attacks in various locations and related unrest, have increased worldwide political and economic instability and depressed economic activity in the United States and globally, including the Mexican economy.

The continuation or escalation of existing armed hostilities or the outbreak of additional hostilities as a consequence of further acts of terrorism or otherwise could cause a further downturn and/or significant disruption to the economies of the United States, Mexico and other countries. The continued threat of terrorism within the United States and abroad and the potential for military action and heightened security measures in response to such threat may cause significant disruption to commerce throughout the world, including restrictions on cross-border transport and trade. Furthermore, the Mexican government’s efforts to combat illegal drug cartels have caused public safety issues that may hinder Mexico’s economic growth and could prompt additional restrictions on cross-border transport and trade.

The continuing COVID-19 pandemic, and the various restrictions on global trade and commerce instituted by countries to combat the spread of the virus, have had a negative impact on the global economy and may trigger significant future cross-border trade disputes. Further increases in global tensions and trade disputes may reduce the demand for our services and have a material adverse effect on our results of operations and financial condition.

Our information technology systems may be subject to security incidents or interruptions in network connectivity which could have an material adverse effect on our business.

Our business is supported by a robust platform of information and communications technology systems, including hardware and software which are susceptible to security incidents or disconnections from the local and/or global computer networks. We have employed various cybersecurity defenses and measures to protect our systems from the risks of cyberattacks and implemented sophisticated means of monitoring communications. Threats are constantly evolving, however, and our protection measures could be compromised, which could result in unauthorized access to our systems. File abduction, data corruption alteration, spread of computer viruses, installation of malware or ransomware or other malicious acts intended to disrupt our operations are a constant threat, and if our systems are affected by a security incident or service outage, we may experience a decrease in operational performance, an increase in operating costs and damage to our reputation. Any significant security breaches or disruptions to the connectivity or performance of our information technology systems could have a material adverse effect on our operating results and financial condition.

13
Grupo TMM, S.A.B. and Subsidiaries

Our customers may take actions that may reduce our revenues.

If our customers believe that our financial condition will result in a lower quality of service, they may discontinue use of our services. Additionally, some customers may demand lower prices. While we have contracts with some of our customers that prevent them from terminating our services or which impose penalties on customers who terminate our services, it may be impractical or uneconomical to enforce these agreements in Mexican courts. If any of these events occurs, our revenues will be reduced.

Our financial statements may not give you the same information as financial statements prepared under United States accounting rules.

Our financial statements are prepared in accordance with IFRS. IFRS differs from U.S. GAAP in certain significant respects, including, among others, the recognition of revaluation property, plant and equipment, the classification of minority interest in accordance with net identifiable assets, the nonrecognition of employees’ profit sharing, capitalized interest recognition, consolidation of subsidiaries, the acquisition of shares of subsidiaries from minority stockholders and the determination of deferred income taxes. For this and other reasons, the presentation of financial statements and reported earnings prepared in accordance with IFRS may differ in significant respects from the presentation of financial statements and reported earnings prepared in accordance with U.S. GAAP.

Risks Relating to our Indebtedness

Our substantial indebtedness could adversely affect our financial condition and impair our ability to operate our business, and we may not be able to pay the interest on and principal amount of our indebtedness.

As of March 31, 2022, Grupo TMM’s total debt amounted to $488.7 million, which includes $95.3 million of bank debt owed to several different banks, $35.8 million owed to non-institutional lenders and $357.6 million of liabilities associated with our long-term leases, primarily the lease of warehouses for use in our warehousing operations; of this debt, $184.1 million is short-term debt, and $304.6 million is long-term debt. Under IFRS, transaction costs in connection with financings are required to be presented as a part of debt.

As of December 31, 2021, our total debt amounted to $532.6 million, which includes $104.2 million of bank debt owed to several different banks, $618.5 million owed to non-institutional lenders and $409.9 million of liabilities associated with our long-term leases, primarily the lease of warehouses for use in our warehousing operations; of this debt, $178.5 million is short-term debt, and $354.1 million is long-term debt.

Although we have taken various measures to reduce our level of indebtedness, our level of indebtedness remains substantial and could have important consequences, including the following:


 ■
limiting cash flow available for capital expenditures, acquisitions, working capital and other general corporate purposes because a substantial portion of our cash flow from operations must be dedicated to servicing debt;


■
increasing our vulnerability to a downturn in economic or industry conditions;


■
exposing us to risks inherent in interest rate fluctuations because future borrowings may be at interest rates that are higher than current rates, which could result in higher interest expenses;


■
limiting our flexibility in planning for, or reacting to, competitive and other changes in our business;


■
placing us at a competitive disadvantage compared to our competitors that have less debt and greater operating and financing flexibility than we do;


■
limiting our ability to engage in activities that may be in our long-term best interest; and

14
Grupo TMM, S.A.B. and Subsidiaries


 ■
limiting our ability to borrow additional money to fund our working capital and capital expenditures or to refinance our existing indebtedness, or to enable us to fund the acquisitions contemplated in our business plan.

Our ability to service our indebtedness will depend upon future operating performance, including the ability to increase revenues significantly, renew our existing services contracts and control expenses. Future operating performance depends upon various factors, including prevailing economic, financial, competitive, legislative, regulatory, business, public health and other factors that are beyond our control.

If we cannot generate sufficient cash flow from operations to service our indebtedness we may default under our various financing facilities. If we default under any such facility, the relevant lender or lenders could then take action to foreclose against any collateral securing the payment of such facility. Certain of our assets have been pledged to secure our financing facilities. See Item 4. “Information on the Company — Property, Vessels and Equipment.”

Grupo TMM is primarily a holding company and depends upon funds received from its operating subsidiaries to make payments on its indebtedness.

Grupo TMM is primarily a holding company and conducts the majority of its operations, and holds a substantial portion of its operating assets, through numerous direct and indirect subsidiaries. As a result, Grupo TMM relies on income from dividends and fees related to administrative services provided to its operating subsidiaries for its operating income, including the funds necessary to service its indebtedness.

Under Mexican law, profits of Grupo TMM’s subsidiaries may only be distributed upon approval by such subsidiaries’ shareholders, and no profits may be distributed by its subsidiaries to Grupo TMM until all losses incurred in prior fiscal years have been offset against any sub-account of Grupo TMM’s capital or net worth account. In addition, at least 5% of profits must be separated to create a reserve (reserva legal) until such reserve is equal to 20% of the aggregate value of such subsidiary’s capital stock (as calculated based on the actual nominal subscription price received by such subsidiary for all issued shares that are outstanding at the time).

There is no restriction under Mexican law upon Grupo TMM’s subsidiaries remitting funds to it in the form of loans or advances in the ordinary course of business, except to the extent that such loans or advances would result in the insolvency of its subsidiaries, or for its subsidiaries to pay Grupo TMM fees or other amounts for services.

To the extent that Grupo TMM relies on dividends or other distributions from subsidiaries that it does not wholly own, Grupo TMM will only be entitled to a pro rata share of the dividends or other distributions provided by such subsidiaries.

Restrictive covenants in our financing agreements may restrict our ability to pursue our business strategies.

Some of our financing agreements contain a number of restrictive covenants and any additional financing arrangements we enter into may contain additional restrictive covenants. These covenants restrict or prohibit many actions, including our ability, or that of our subsidiaries, to, among others:


 ■
incur additional indebtedness;


■
create or suffer to exist liens;


■
prepay certain debt;


■
make certain restricted payments, including the payment of dividends;


■
carry out certain investments;


■
engage in certain transactions with shareholders and affiliates;

15
Grupo TMM, S.A.B. and Subsidiaries


 ■
use assets as security in other transactions;


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issue guarantees to third parties;


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sell assets; and


■
engage in certain mergers and consolidations or in sale-leaseback transactions.

If we fail to comply with these and other restrictive covenants, our obligation to repay our indebtedness may be accelerated. If we cannot pay the amounts due under our financing facilities, the relevant lender or lenders could then take action to foreclose against any collateral securing the payment of such facility or facilities.

We have to service our debt with revenues mostly generated in Mexican pesos. This could adversely affect our ability to service our debt in the event of a devaluation or depreciation in the value of the Mexican peso against the dollar.

As of March 31, 2022, approximately 41.2% of our debt was denominated in dollars. As of the date of this Annual Report, we do not generate sufficient revenue in dollars from our operations to service all of our dollar-denominated debt. Consequently, we have to use revenues generated in Mexican pesos to service our dollar-denominated debt. A devaluation or depreciation in the value of the Mexican peso, compared to the dollar, could adversely affect our ability to service our debt. As of December 31, 2021, the Mexican peso depreciated 2.8% against the dollar as compared to the same date in 2020. As of March 31, 2022, the Mexican peso had appreciated 2.7% since December 31, 2021.

Fluctuations in the Mexican peso/dollar exchange rate could lead to shifts in the types and volumes of Mexican imports and exports, negatively impacting results on some of our businesses. Although a decrease in the level of exports may be offset by a subsequent increase in imports, any offsetting increase might not occur on a timely basis, if at all. Future developments in U.S.-Mexican trade beyond our control may result in a reduction of freight volumes or in an unfavorable shift in the mix of products and commodities we carry.

Our variable rate debt subjects us to risks associated with an increase in interest rates, which could increase the amount of our debt service obligations.

We are exposed to the impact of interest rate changes, primarily through our variable rate debt facilities that require us to make interest payments based on the Mexican Interbank Equilibrium Interest Rate (“TIIE”) or the Secured Overnight Financing Rate (“SOFR”). If interest rates increase significantly, our debt service obligations on this variable rate debt would increase, which could have an adverse effect on our earnings and cash flow. Further, as the use of SOFR as a reference rate was adopted only recently in January 2022 following a transition away from the London Interbank Offered Rate (“LIBOR”), we cannot predict the consequences that this transition will have on our debt service obligations and financing costs.  There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. The transition to SOFR may result in an increase in our debt service obligations and financing costs, and could otherwise adversely affect our business, financial condition, liquidity and results of operations.

Risks Relating to Mexico

Economic, political, social and public health conditions may adversely affect our business.

Our financial performance may be significantly affected by general economic, political, social and public health conditions in the markets where we operate. Most of our operations and assets are located in Mexico. As a result, our financial condition, results of operations and business may be affected by the general condition of the Mexican economy, the valuation of the Peso as compared to the U.S. dollar, Mexican inflation, interest rates, regulations, taxation, social or political instability, and economic, political, social and public health developments in Mexico. Many countries in Latin America, including Mexico, have suffered significant economic, political, social and public health crises in the past, and these events may occur again in the future. Instability in the region has been caused by many different factors, including:

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Grupo TMM, S.A.B. and Subsidiaries


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significant governmental influence over local economies;


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substantial fluctuations in economic growth;


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high levels of inflation;


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changes in currency values;


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exchange controls or restrictions on expatriation of earnings;


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high domestic interest rates;


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wage and price controls;


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changes in governmental economic or tax policies;


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imposition of trade barriers;


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unexpected changes in regulation; and


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overall economic, political, social and public health instability.

Mexico is an emerging market economy, with attendant risks to our results of operations and financial condition.

Mexico has historically experienced uneven periods of economic growth. Mexico’s gross domestic product (“GDP”) increased 2.1%, 2.2%, 4.8% in 2017, 2018, 2021, respectively, but decreased 0.2% in 2019 and 8.2% in 2020. For 2022, the Banco de Mexico Consensus Board1 estimates that GDP in Mexico is expected to increase by approximately 1.7%, while inflation is expected to be 6.8%. We cannot assure you that these estimates will prove to be accurate. The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican governmental actions concerning the economy and state-owned enterprises could have a significant impact on Mexican private sector entities in general and on us in particular, as well as on market conditions, prices and returns on Mexican securities, including our securities.

Currency fluctuations or the devaluation and depreciation of the Peso could limit the ability of the Company and others to convert Pesos into U.S. dollars or other currencies which could adversely affect our business, financial condition and results of operations.

Severe devaluation or depreciation of the Peso may also result in governmental intervention or disruption of international foreign exchange markets. This may limit our ability to transfer or convert Pesos into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our dollar-denominated indebtedness and adversely affect our ability to obtain foreign currency and other imported goods. The Mexican economy has suffered current account balance of payment deficits and shortages of foreign exchange reserves in the past. While the Mexican government does not currently restrict, and for more than twenty years has not restricted, the right or ability of Mexican or foreign persons or entities to convert Pesos into U.S. dollars or to transfer other currencies outside of Mexico, the Mexican government could institute restrictive exchange control policies in the future. To the extent that the Mexican government institutes restrictive exchange control policies in the future, our ability to transfer or convert Pesos into U.S. dollars for the purpose of making timely payments of interest and principal on indebtedness would be adversely affected.

 
1
The Banco de Mexico Consensus Board comprises 38 economic analysts and consultants specialized in the Mexican and international economies.

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Grupo TMM, S.A.B. and Subsidiaries

Pursuant to the provisions of the USMCA, if Mexico experiences serious balance of payment difficulties or the threat thereof in the future, Mexico would have the right to impose foreign exchange controls on investments made in Mexico, including those made by U.S. and Canadian investors. Any restrictive exchange control policy could adversely affect our ability to obtain U.S. dollars or to translate Pesos into U.S. dollars for purposes of making interest and principal payments to our creditors to the extent that we may have to make those translations. This could have a material adverse effect on our business and financial condition.

High interest rates in Mexico could increase our financing costs.

Although interest rates in Mexico are currently below the highs experienced in recent years, Mexico historically has had, and may again have, high real and nominal interest rates. The 28-day TIIE averaged 7.05%, 8.00%, 8.32%, 5.71% and 4.63% in 2017, 2018, 2019, 2020 and 2021, respectively, and for the three-month period ended March 31, 2021, it averaged 6.03%. To the extent our debt is incurred in Mexican Pesos at interest rates linked to the TIIE or any other Mexican interest rate index, any increase in such rates will increase our financing costs.

Developments in other emerging market countries or in the United States may affect us and the prices of our securities.

The market value of securities of Mexican companies, the economic and political situation in Mexico and our financial condition and results of operations are, to varying degrees, affected by economic and market conditions in other emerging market countries and in the United States. Although economic conditions in other emerging market countries and in the United States may differ significantly from economic conditions in Mexico, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value or trading price of securities of Mexican issuers, including our securities, or on our business.

Our operations, including demand for our products or services and the price of our floating rate debt, have also historically been adversely affected by increases in interest rates in the United States and elsewhere. Although in recent years interest rates have remained low, if interest rates rise, the interest payments on our floating rate debt and the cost of refinancing our financing arrangements at maturity will rise as well.

Mexico may experience high levels of inflation in the future, which could adversely affect our results of operations.

Mexico has a history of high levels of inflation, and may experience high inflation in the future. The annual inflation rates for the last five years, as measured by changes in the National Consumer Price Index, as provided by Banco de México, were:

2017
    
6.77
%
2018
    
4.83
%
2019
    
2.83
%
2020
    
3.15
%
2021
    
7.36
%
2022 (annualized as of April )
    
7.68
%

Mexico’s level of inflation has in recent years been reported at higher levels than the annual inflation rate of the United States and Canada. The United States and Canada are Mexico’s main trading partners. We cannot give any assurance that the Mexican inflation rate will decrease, increase or maintain its current level for any significant period of time. A substantial increase in the Mexican inflation rate as currently in effect would have the effect of increasing some of our costs, which could adversely affect our financial condition and results of operations, as well as our ability to service our debt obligations. High levels of inflation may also affect the balance of trade between Mexico and the United States, and other countries, which could adversely affect our results of operations.

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Grupo TMM, S.A.B. and Subsidiaries

Political events and declines in the level of oil production in Mexico could affect the Mexican economy and our business, financial condition and results of operations.

Mexican political events may significantly affect our operations. On December 1, 2018, Andres Manuel Lopez Obrador, a member of the National Regeneration Movement Party (“MORENA”), began a six-year term as president of Mexico following his victory in the July 1, 2018 presidential election. Under the 2012-2018 government of President Enrique Peña Nieto, significant changes in laws, policies and regulations aimed at fostering growth in certain key sectors of the Mexican economy were enacted, including the energy and transportation sectors. Currently, MORENA has a majority in both chambers of the Mexican Congress, giving it considerable power to pass new legislation or modify or terminate existing legislation, including potential modifications to the Mexican Constitution. President Andrés Manuel López Obrador and members of his administration have expressed a desire to modify and/or terminate certain structural reforms to the Mexican economy, including the 2013 Energy Reforms. The new administration has already succeeded in enacting various changes to Mexican laws and public policy and is seeking further changes, which may increase political uncertainty or have negative effects on the Mexican economy. Recently in April 2022, Mexico’s Chamber of Deputies rejected the government’s constitutional reform proposal to guarantee the State the generation of at least 54% of the electricity needed by the market over private companies, which have focused on renewable energy and natural gas. We cannot provide any assurances that political developments in Mexico, over which we have no control, will not have an adverse effect on our business, financial condition or results from operations.

Mexico’s daily oil production statistics indicate that production has declined over the past eight years (2014-2021) at a compounded average rate of 4.9%, a trend that could continue in the coming years. In contrast, during the same period of time, imports of gasoline and diesel for domestic consumption grew 2.2%, and currently represent more than 70% of Mexico’s domestic consumption.

Experts have concluded that if the Mexican government does not follow through with its implementation of reforms designed to promote private investment in the energy sector, or fails to make further investments to increase PEMEX’s technological capabilities, Mexico’s oil production may drop considerably, weakening the financial position of the Mexican government.  For its part, the administration of President Andrés Manuel López Obrador has taken steps to limit new private investment in Mexico’s oil and gas industry, including the cancellation of bidding rounds for the award of new upstream production sharing contracts and farm-out agreements. Such actions may have a detrimental effect on Mexico’s oil production levels, which may in turn reduce the demand for our transportation services from Pemex and other oil and gas industry customers.

Finally, the Mexican economy in the past has suffered balance of payment deficits and shortages in foreign exchange reserves, and we cannot assure you that these deficits and shortages will not occur in the future.

Political events in the United States could have a material adverse effect on our business, financial condition and results of operations.

The United States is Mexico’s primary trading partner, and receives over 80% of Mexico’s total exports. A deterioration in trade relations between Mexico and the United States could have a negative effect on Mexico’s economic growth and its transportation and shipping industry in particular.

In January 2021, Joseph R. Biden became the 46th President of the United States of America.  As of the date of this Annual Report, President Biden’s administration and has not proposed substantial revisions to U.S. trade policies, including the renegotiation or termination of trade agreements, or proposed the imposition of border taxes, higher tariffs or other measures which would increase the price of goods imported into the United States, particularly from Mexico. Future decisions by the current U.S. administration, including with respect to U.S. laws and policies governing foreign trade and foreign trade relations, could have a negative impact on the Mexican economy by reducing the level of commercial activity between Mexico and the United States or or effecting a slowdown in direct U.S. foreign investment in Mexico, which could adversely affect our business and our results of operations.

In November 2018, the United States, Mexico and Canada signed the USMCA, which replaced NAFTA. The United States, Mexico and Canada ratified the USMCA on January 29, 2020, June 19, 2020 and March 13, 2020, respectively. As a result, the USMCA took effect on July 1, 2020. We cannot predict the impact the USMCA will have on our industry or the changes to international trade that may result, and consequently, we cannot predict what effect it will have on our business and our results of operations. If the United States withdraws from or makes material changes to the USMCA or other international trade agreements to which it is a party, trade barriers and other costs associated with trade between the United States and Mexico may increase, which could have a material adverse effect on our business, financial condition and results of operations.

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Grupo TMM, S.A.B. and Subsidiaries

If oil prices decline from current levels, our clients may reduce spending on exploration and production projects, resulting in a decrease in demand for our services.

Oil and natural gas prices, as well as market expectations of potential changes in these prices, significantly impact the level of worldwide drilling and production services activities. Reduced demand for oil and natural gas or periods of surplus oil and natural gas generally result in lower prices for these commodities and often impact the economics of planned drilling projects and ongoing projects, resulting in the curtailment, reduction, delay or postponement of such projects for an indeterminate period of time. When drilling and production activity and spending declines, vessel daily rates and utilization for our offshore vessels historically decline as well.

Worldwide oil prices increased moderately in 2021, with demand increasing as countries eased restrictions on travel and economic activity in response to increased vaccination against, and prior exposure to, COVID-19 and its variants. As of the date of this Annual Report, prices have increased from their 2020 lows, reaching levels last experienced in 2014. If oil and natural gas prices decline from current levels for a sustained period, oil and gas exploration and production companies are likely to cancel or curtail their drilling programs and lower production spending on existing wells, thereby reducing demand for our services.

Any prolonged reduction in the overall level of oil and gas exploration and development activities, whether resulting from an accelerated transition to renewable energy sources, changes in the price of oil, natural gas or otherwise, could materially and adversely affect us by negatively impacting:


 ■
our revenues, cash flows and profitability;


■
the fair market value and profitability of our vessels;


■
our ability to maintain or increase our borrowing capacity;


■
or ability to obtain additional capital to finance our business and make acquisitions, and the cost of that capital;


■
the collectability of our receivables; and


■
our ability to retain skilled personnel whom we would need in the event of an upturn in the demand for our services.

If any of the foregoing were to occur, it could have a material adverse effect on our business and financial results.

The following table shows the high, low, average and period-end spot prices of Mexican crude oil as reported by the Bank of Mexico in U.S. dollars for the periods indicated below.

   
Spot price of Mexican crude oil
  
Year Ended December 31,
  
High(1)
    
Low(1)
    
Average(1)
    
End of
Year(2)
  
                         
2017
    
56.19
      
39.20
      
46.38
      
56.19
  
2018
    
77.73
      
44.69
      
62.12
      
44.69
  
2019
    
65.83
      
43.65
      
56.13
      
56.14
  
2020
    
59.35
      
(2.37
)
    
35.70
      
47.16
  
2021
    
79.22
      
47.12
      
64.66
      
71.29
  

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Grupo TMM, S.A.B. and Subsidiaries

   
Spot price of Mexican crude oil
  
Monthly,
  
High(3)
    
Low(3)
    
Average(3)
    
End of Month(4)
  
Year 2022
                        
January
    
83.11
      
70.90
      
77.75
      
83.11
  
February
    
91.80
      
83.60
      
86.90
      
91.80
  
March
    
119.62
      
90.96
      
104.42
      
119.62
  
April
    
105.50
      
91.93
      
98.55
      
105.50
  
May(5)
    
104.18
      
104.18
      
104.18
      
104.18
  


(1)
The highest, lowest and average spot price of Mexican crude oil in U.S. dollars reported by Banco de México during the relevant year.
(2)
The spot price on the last day of each relevant year.
(3)
The highest, lowest and average spot price in the relevant month.
(4)
The spot price on the last day of each relevant month.
(5)
Through May 6, 2022.

Mexican antitrust laws may limit our ability to expand through acquisitions or joint ventures.

Mexico’s federal antitrust laws and regulations may affect some of our activities, including our ability to introduce new products and services, enter into new or complementary businesses or joint ventures and complete acquisitions. In addition, the federal antitrust laws and regulations may adversely affect our ability to determine the rates we charge for our services and products. Approval of the Comisión Federal de Competencia, or Mexican Antitrust Commission, is required for us to acquire and sell significant businesses or enter into significant joint ventures and we cannot assure you that we would be able to obtain such approval.

Investors may not be able to enforce judgments against the Company.

Investors may be unable to enforce judgments against us. We are a stock corporation, organized under the laws of Mexico. Substantially all our directors and officers reside in Mexico, and all or a significant portion of the assets of those persons may be located outside the United States. It may not be possible for investors to effect service of process within the United States upon those persons or to enforce judgments against them or against us in U.S. courts, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. Additionally, it may not be possible to enforce, in original actions in Mexican courts, liabilities predicated solely on the U.S. federal securities laws and it may not be possible to enforce, in Mexican courts, judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of the U.S. securities laws.

Risks Relating to Ownership of our Equity

The protection afforded to minority shareholders in Mexico is different from that afforded to minority shareholders in the United States.

Under Mexican law, the protections afforded to minority shareholders are different from, and may be less than, those afforded to minority shareholders in the United States. Under Mexican law, there is no procedure for class actions as such actions are conducted in the United States and there are different procedural requirements for bringing shareholder lawsuits against companies. Therefore, it may be more difficult for minority shareholders to enforce their rights against us, our directors or our controlling shareholders than it would be for minority shareholders of a U.S. company.

In accordance with the Mexican Companies Act (Ley General de Sociedades Mercantiles), shareholders representing at least 33% of our capital stock can request that the Board of Directors call an Extraordinary Shareholders Meeting to vote on proposals included by the shareholders in their request to the Board.

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Grupo TMM, S.A.B. and Subsidiaries

Holders of ADSs may not be entitled to participate in any future preemptive rights offering, which may result in a dilution of such holders equity interest in our company.

Under Mexican law, if we issue new shares for cash as a part of a capital increase, we generally must grant our stockholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage in our company. Rights to purchase shares in these circumstances are commonly referred to as preemptive rights. We may not be legally permitted to allow holders of ADSs in the United States to exercise preemptive rights in any future capital increase unless (1) we file a registration statement with the SEC with respect to that future issuance of shares or (2) the offering qualifies for an exemption from the registration requirements of the U.S. Securities Act of 1933, as amended. At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC, as well as the benefits of preemptive rights to holders of ADSs in the United States and any other factors that we consider important in determining whether to file a registration statement.

If we do not file a registration statement with the SEC to allow holders of ADSs in the United States to participate in a preemptive rights offering or if there is not an exemption from the registration requirements of the U.S. Securities Act of 1933 available, the equity interests of holders of ADSs would be diluted to the extent that ADS holders cannot participate in a preemptive rights offering.

The Company is controlled by the Serrano Segovia family.

The Serrano Segovia family controls the Company through Vanessa Serrano Cuevas’s direct and indirect ownership of our Shares as from December 31, 2021, and members of the Serrano Segovia family serve as members of our Board of Directors. Holders of our ADSs may not vote at our shareholders’ meetings. Each of our ADSs represents five CPOs. Holders of CPOs are not entitled to exercise any voting rights with respect to the Shares held in the Master Neutral Investment Trust (Fideicomiso Maestro de Inversion Neutra) (the “CPO Trust”). Such voting rights are exercisable only by the trustee, which is required by the terms of the trust agreement to vote such Shares in the same manner as the majority of the Shares that are not held in the CPO Trust that are voted at any shareholders’ meeting. Currently the Serrano Segovia family owns a majority of the Shares that are not held in the CPO Trust. As a result, the Serrano Segovia family will be able to direct and control the policies of the Company and its subsidiaries, including mergers, sales of assets and similar transactions. See Item 7. “Major Shareholders and Related Party Transactions — Major Shareholders.”

A change in control may adversely affect us.

In the past, a portion of the Shares and ADSs of the Company held by the Serrano Segovia family was pledged to secure indebtedness of the Serrano Segovia family and entities controlled by them and may from time to time in the future be pledged to secure obligations of other of their affiliates. A foreclosure upon any such Shares held by the Serrano Segovia family could result in a change of control under the various debt instruments of the Company and its subsidiaries. Such debt instruments provide that certain change of control events with respect to us will constitute a default and that the relevant lenders may require us to prepay our debt obligations including accrued and unpaid interest, if any, to the date of such repayment. If such a default occurs, we cannot assure you that we will have enough funds to repay our debt.

Our ADSs trade on the over-the-counter (“OTC”) market, which may limit the liquidity and price of our ADSs more than if the ADSs were quoted or listed on a national securities exchange.

Our ADSs currently trade on the OTC market under the ticker symbol GTMAY. The OTC market is a significantly more limited market than a national securities exchange such as the New York Stock Exchange (“NYSE”) or NASDAQ, with generally lower trading volumes and higher price volatility.  Quotation of the ADSs on the OTC market may limit the liquidity and price of the ADSs and could adversely impact our ability to raise capital in the future.

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Grupo TMM, S.A.B. and Subsidiaries
ITEM 4.
INFORMATION ON THE COMPANY

History and Development of the Company

We were formed on August 14, 1987, under the laws of Mexico as a variable capital corporation (sociedad anónima de capital variable) to serve as a holding company for investments by certain members of the Serrano Segovia family.

TMM merged with and into Grupo TMM (formerly Grupo Servia, S.A. de C.V. (“Grupo Servia”)), which was effected on December 26, 2001, leaving Grupo TMM as the surviving entity. Under the terms of the merger, all of the assets, privileges and rights and all of the liabilities of TMM were transferred to Grupo TMM upon the effectiveness of the merger. TMM was founded on September 18, 1958 by a group of private investors, including the Serrano Segovia family.

In December 2001, the boards of directors of TMM and Grupo TMM unanimously approved a corporate reorganization and merger in which TMM was merged with and into Grupo TMM. After the merger, each shareholder of TMM continued to own the same relative economic interest in Grupo TMM as the shareholder owned in TMM prior to the merger. In preparation for the merger, the shareholders of Grupo TMM approved the division (escisión) of Grupo TMM into two companies, Grupo TMM and a newly formed corporation, Promotora Servia, S.A. de C.V. (“Promotora Servia”). Under the terms of the escisión, Grupo TMM transferred all of its assets, rights and privileges (other than its interest in TMM) and all of its liabilities to Promotora Servia. The transfer of assets to Promotora Servia was made without recourse and without representation or warranty of any kind, and all of Grupo TMM’s creditors expressly and irrevocably consented to the transfer of the liabilities to Promotora Servia.

On September 13, 2002, we completed a reclassification of our Series L Shares of stock as Series A Shares. The reclassification combined our two classes of stock into a single class by converting each share of our Series L Shares into one share of our Series A Shares. The reclassification also eliminated the variable portion of our capital stock and we became a fixed capital corporation (sociedad anónima). Following the reclassification, we had 56,963,137 Shares outstanding. As a result of the elimination of the variable portion of our capital stock, our registered name changed from Grupo TMM, S.A. de C.V. to Grupo TMM, S.A.

As a result of a reform to the securities law in Mexico promulgated in June 2006, publicly traded companies in Mexico were transformed by operation of law into Sociedades Anónimas Bursátiles (Public Issuing Corporation) and were required to amend their bylaws to conform them to the provisions of the new law. Accordingly, on December 20, 2006, the Company added the term “Bursátil” to its registered name to comply with the requirements under Mexico’s new securities law, or Ley del Mercado de Valores. As a result, the Company is known as Grupo TMM, Sociedad Anónima Bursátil, or Grupo TMM, S.A.B. In addition, the Series A Shares of the Company were renamed as nominative common shares without par value (“Shares”). The rights afforded by the new Shares are identical to the rights afforded by the former Series A Shares.

On December 15, 2017, as part of corporate restructuring to improve our debt profile, we transferred 85% of the shares of our wholly owned subsidiary, TMM Division Maritima, S.A. de C.V. (“TMMDM”), an owner and operator of supply vessels, tankers and tugboats, to the holders of certificates issued by TMMDM under our Mexican Peso-Denominated Trust Certificates Program (the “Trust Certificates Program”). The Trust Certificates Program involved the issuance to investors of certificates secured by trust assets and denominated in Mexican Pesos, the proceeds of which were used by us to consolidate and refinance the debt related to those vessels, as well as to finance the acquisition of additional vessels as contemplated by our expansion program. As a result of the transfer, we no longer exercise control over TMMDM and our financial statements no longer include TMMDM’s assets, liabilities, and income or loss. Going forward, we continue to operate the supply vessels and tankers owned by TMMDM pursuant to a maritime services contract.

Today, we are a fixed capital corporation listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores) incorporated under the Ley General de Sociedades Mercantiles for a term of 99 years. We are headquartered at Paseo de la Reforma No. 296, P.19. Col. Juárez, C.P. 06600, Alcaldía Cuauhtémoc, México City, México, and our telephone number is +52-55-5629-8866. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, such as Grupo TMM, at http://www.sec.gov. Grupo TMM’s Internet website address is www.tmm.com.mx. The information on Grupo TMM’s website is not incorporated into this Annual Report.

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Grupo TMM, S.A.B. and Subsidiaries

Business Overview

General

We are one of the largest logistics and transportation companies in Mexico, providing a variety of integrated and dynamic logistics and transportation services to premium clients throughout Mexico, including maritime transportation services, ports and terminals management, logistics services and warehousing services.

Maritime Operations. Our Maritime Operations division provides maritime transportation services, including the operation of offshore vessels that provide transportation and other services to the Mexican offshore oil industry, tankers that transport petroleum products within Mexican and international waters, parcel tankers that transport liquid chemical and vegetable oil cargos from and to the United States and Mexico, and dry bulk carriers that transport unpackaged commodities such as steel between South America, the Caribbean and Mexico. As of March 31, 2022, we operate a fleet of 30 vessels, which includes product and chemical tankers, a bulk carrier and a variety of offshore supply vessels.  Of these vessels, 24 are owned by TMMDM and managed, operated and marketed by us pursuant to a maritime services contract.

In addition, we operate a shipyard with integrated services based in the port of Tampico, Mexico through our subsidiary, Inmobiliaria Dos Naciones, S.R.L. de C.V. (“IDN”). IDN is located near offshore oil and gas facilities and key commercial routes between the Southeastern United States and Mexico. IDN provides ship repair services and has two floating drydocks with a capacity of 3,000 metric tons each, one of which will be replaced by a new floating drydock with a capacity of 6,600 metric tons, the construction of which is expected to be completed in the first quarter of 2023. IDN services more than 30 vessels per year and provides us with the necessary capabilities to build additional vessels.

Ports and Terminals Operations. We presently provide general cargo operations at the port of Tuxpan, under a permit granted by the Mexican government, which provides for certain renewal rights. This business unit also provides port agent services to vessel owners and operators in the main Mexican ports. Although we formerly held a 25-year concession to conduct port administration services at the port of Acapulco, our concession expired in June 2021, at which time the Mexican government transferred control to the Mexican Secretary of the Navy (Secretaría de la Marina or “SEMAR”) in keeping with its policy of bringing port services under the control of SEMAR.

Logistics Operations. We provide dedicated logistics services to major manufacturers, including automobile manufacturers and retailers with facilities and operations throughout Mexico. The services that we provide include consulting, analytical and logistics outsourcing services, which encompass the management of inbound movement of parts to manufacturing plants consistent with just-in-time inventory planning practices; logistics network (order-cycle) analysis; logistics information process design; intermodal transport; supply chain and logistics management; product handling and repackaging; local pre-assembly; maintenance and repair of containers in principal Mexican ports and cities and inbound and outbound distribution using multiple transportation modes. Due to the scope of our operations, together with the extent of our experience and resources, we believe that we are uniquely positioned to coordinate the entire supply chain for our customers.

Warehousing Operations. Through our subsidiary, Almacenadora de Depósito Moderno, S.A. de C.V. Auxiliary Credit Organization (“ADEMSA”), we provide warehousing and bonded warehousing facility management services. ADEMSA currently operates over 217,000 square meters of warehousing space throughout Mexico, including 67,353  square meters of direct warehouse space (the largest of which is located in northern Mexico City). Due to its regulated nature, ADEMSA is one of a limited number of warehousing companies authorized by the Mexican government to provide bonded warehousing services and to issue negotiable certificates of deposit.

Set forth below are our total revenues over the last three fiscal years for each of our business segments:

24
Grupo TMM, S.A.B. and Subsidiaries

   
Consolidated Transportation Revenues
(in millions of Pesos)
Years Ended December 31,
  
   
2021
    
2020
    
2019
  
Maritime Operations
  
$
964.1
    
$
751.2
    
$
868.5
  
Ports and Terminals Operations
    
25.3
      
69.3
      
169.8
  
Logistics Operations
    
208.8
      
243.8
      
265.5
  
Warehousing Operations
    
153.5
      
139.0
      
171.9
  
Total
  
$
1,351.7
    
$
1,203.3
    
$
1,475.7
  

Recent Developments

COVID-19 Pandemic

On March 11, 2020, the WHO declared COVID-19 a pandemic.  In response, governments worldwide, including Mexico, implemented various extraordinary measures to control its spread, including travel restrictions, quarantines and the suspension of non-essential activities. Although many of these measures have been relaxed as vaccination programs have expanded, the emergence of new COVID-19 variants such as Omicron has triggered the re-imposition of restrictions on commercial activity in China and other locations with significant links to global trade.  The full effect of the COVID-19 pandemic on our business remains uncertain, and will depend on its duration and its impact on the Mexican and global economies.  Nevertheless, as of the date of this Annual Report, various international banks and multilateral institutions such as the International Monetary Fund have assessed that the COVID-19 pandemic resulted in the worst global economic recession since the Great Depression.  For fiscal years 2020 and 2021, our revenues, particularly in our Ports and Terminals business, decreased significantly due to the COVID-19 pandemic and the various emergency public health measures enacted by governments to combat it.  Although we expect our revenues will improve as extraordinary government measures are lifted and emergency public health restrictions are repealed, at the date of this Annual Report we cannot quantify the adverse effect that a new wave or spread of COVID-19 will have on our results of operations for fiscal year 2022.

In light of these and other conditions beyond our control, our results of operations may be volatile and subject to change rapidly as the COVID-19 situation develops. Accordingly, we have taken various actions to maintain business continuity and strengthen our financial condition, including deferring payments to suppliers and creditors, maintaining our early payment program to help offset the effect of customer payment delays, and other actions to reduce overall expenses.  We are complying with the health and safety protocols established by the Mexican government and have taken steps and implemented policies to safeguard our businesses, employees, and the communities in which we operate from the threats posed by the COVID-19 pandemic.  These steps include, among others, actively cleaning and sanitizing open public areas where we operate and establishing appropriate information technology (“IT”) systems to enable our employees to work remotely.  To ensure the continuity of our operations under pandemic conditions, our IT department has implemented a sophisticated video conferencing and collaborative teamwork platform while also strengthening our cybersecurity policies, allowing our employees to engage remotely in Company activities from the safety of their homes. Moving forward, we will continue to monitor the development of the COVID-19 pandemic closely, including its effect on our business, financial condition and results of operations.

Digitalization Strategy

As part of our Digitalization strategy to enhance our business performance, we have focused on developing software applications in-house instead of buying commercial software products, allowing us to reduce our spending on third-party technology applications. We have developed and implemented a Warehouse Management System (“WMS”) and Customer Relationship Management (“CRM”) platform for use in our warehousing and logistics businesses and a Container Depot Management (“CDM”) platform for maintenance, repair, and port terminal management of shipping containers in our ports and terminals business. We have also developed several proprietary data exchange interfaces which have allowed us to exchange data in real time between our systems and those of our customers, providing them an additional value-added service.

25
Grupo TMM, S.A.B. and Subsidiaries

We have recently updated and optimized the cloud-based virtual system environments employed in our various business segments, allowing us to reduce our operating costs and increase our computing and processing capacity. Our enterprise resource planning (“ERP”) platform, which currently operates on the SAP S4/HANA system, has helped us to streamline our administrative, financial and accounting processes. With this foundation in place, we have commenced implementation of SAP PM (Asset Maintenance) and SAP PS (Project Management) modules. By the third quarter of 2022, we plan to fully migrate to SAP RISE, a cloud-based ERP platform that’ll allow us to reduce operational costs by eliminating the recurring cost of yearly SAP license maintenance and software upgrade fees.

Our main office applications, email, and virtual communication systems run on the Microsoft 365 business platform.  Using the platform’s Microsoft PowerApps, we have developed a Help Desk desktop and mobile application to open technical support cases for our customers, enabling us to assist in managing and resolving their IT support needs. We have also implemented a powerful platform of key performance indicators (“KPIs”) using the PowerBI application, which allows us to pull KPIs from various sourcess and display them in an integrated manner on information dashboards, enhancing our ability to analyze and process crucial business data quickly and efficiently.

The most recent addition to our digital strategy is an online platform for employee training. This platform consists of video tutorials that recreate the most common operations carried out within our internal systems. This training platform helps reduce the learning curve of new employees and improve the knowledge of current ones.

New Mexico City Airport Bonded Warehouse

On February 4, 2022 the new airport in Mexico City (Aeropuerto Internacional Felipe Angeles-AIFA) awarded our wholly owned subsidiary, TMM Almacenadora S.A.P.I. de C.V., a 10-year lease to operate a bonded warehouse of 5,184 square meters within the airport’s cargo terminal. We expect to begin operations during the first quarter of 2023, once all airport cargo is moved from Mexico City International Airport (AICM) to AIFA as ordered by the Ministry of Communication and Transport.
 
Termination of our Concession at the Port of Acapulco

Since June 1996, we had operated the port of Acapulco in association with SSA Mexico through a 25-year concession granted by the Mexican government. Although the concession provided for the possibility of renewal, the administration of president Manuel López Obrador elected to not to renew the concession and to transfer control of the port to SEMAR. As a result, our operations at the port of Acapulco terminated concurrently with the expiration of our concession effective as of June 21, 2021.

Refinancing of Certain Credit Lines

During 2020 and 2021, we refinanced certain of our outstanding credit lines, extending the maturity dates to provide additional support as we continued to navigate disruptions to international trade and demand for our services in the wake of the COVID-19 pandemic.

Construction of a New Floating Drydock

We recently entered into a construction agreement with Westport Orange Shipyard to build a new 6,600 metric tons floating drydock to increase the capacity of our shipyard operations. The project is supported by a 7-year financing agreement with Amegy Bank (Zions Bancorporation N.A.), guaranteed by the U.S. Export-Import Bank (“EXIM Bank”), for up to 85% of the purchase price of the floating drydock. This asset is expected to be received during the first quarter of 2023.

Charter of Specialized “Mud Vessels”

In August 2021, PEMEX awarded us a 3-year contract to operate three specialized “mud vessels” for use in the dredging and clearing of mud, silt, sand or other sediment from the sea bed.

Relocation of Corporate Headquarters

As part of our cost reduction efforts, in 2020 we moved our corporate headquarters to a new location in Mexico City, which we expect will generate significant savings by lowering our lease payments and other corporate costs.

26
Grupo TMM, S.A.B. and Subsidiaries

Vessel Sales

In accordance with our fleet modernization plan, in recent years we have sold or otherwise ceased to operate a number of vessels.  On August 30, 2019, we terminated service to the tugboat “SMR Manzanillo” in connection with its sale to Bricor Servicios Portuarios Mexicanos S.A. de C.V. by TMMDM.  We also terminated service to the tankers “Veracruz” and “Durango” when TMMDM sold them to Mercantile and Maritime Trading PTE LTD on January 29, 2020 and February 6, 2020, respectively, and terminated service to the tanker “Tajín” when TMMDM sold it to Shannon Trading S.A. on February 10, 2020.  On January 8, 2021, we sold the parcel tanker M/T “Olmeca” to Athene Shipping Limited. Most recently, in January 2022 we sold the supply vessel “Isla Colorada” to Buzca Soluciones de Ingenieria, S.A. See Note 29 of the accompanying Audited Consolidated Financial Statements.

RTG Crane Acquisition

In June 2019, we entered into a financing agreement with PNC Bank, N.A., guaranteed by EXIM Bank, to acquire a rubber tyred gantry (“RTG”) crane to replace the the crane used in our automotive sector operations at Aguascalientes. Pursuant to the agreement, the Company received loan proceeds in the amount of US$860 thousand (approximately 85% of the purchase price of the crane), at a fixed rate of 4.40% per annum, with semiannual payments of principal and interest, and maturing in July 2024. See Note 14 of the accompanying Audited Consolidated Financial Statements.

Termination of Tugboats Business in the Port of Manzanillo

Since January 1997, TMM (formerly Servicios Mexicanos en Remolcadores, S.A. de C.V.) has held a concession to provide tugboat services in the port of Manzanillo, including port docking and navigation in and out of channels and port facilities into open waters. In December 2019, TMM sold this concession, 100% of the shares in its tugboat business subsidiary, Snekke S.A. de C.V. and the harbor tugboat “TMM Colima” to an unrelated third party. Following the sale, we exited the harbor towing business, terminating our tugboat services in Manzanillo. In connection with the sale, tugboats “TMM Cuyutlan” and “TMM Tepalcates” were sold to Snekke S.A. de C.V. by TMMDM.

Loss of Offshore Vessel “Subsea 88”

In November 2018, the offshore vessel “Subsea 88” suffered an onboard fire, rendering it inoperable.  The Company reported the incident to its insurance companies, Mexican authorities and the financial institution that provided the capital lease in respect of the vessel.  In June 2019, the Company received the insurance proceeds for the loss of the vessel, the value of the asset was written off and the associated capital lease was terminated.

Acquisition of Liquid Terminal Project in Tuxpan

In light of the liberalization of refined products included in the Mexican Energy Reforms and the Company’s ownership of land strategically located in Tuxpan, in August 2016 we announced a new venture with TransCanada and Sierra Oil & Gas to jointly develop a mid-stream infrastructure in Tuxpan as well as an inland distribution center to serve the growing demand for refined products such as gasoline, diesel and jet fuel in the central region of Mexico.  In February 2019, we agreed to purchase from Sierra Oil & Gas their 50% interest in the project’s joint venture company, Services and Solutions Optimus S. de R.L. de C.V. (“Optimus”), for US$2.6 million, resulting in Optimus becoming a wholly owned subsidiary of the Company. Once completed, the liquid terminal infrastructure being developed by Optimus should allow us to supply up to 80,000 barrels per day of refined products to Mexico City and the central Mexican states from our facilities in Tuxpan. See Notes 1 and 5 of the accompanying Audited Consolidated Financial Statements.

Refinancing of Parcel Tankers Debt

In May 2018, following the sale of the parcel tanker M/T “Maya” the Company prepaid the full US$25 million outstanding on a line of credit from DVB Bank America, N.V. which had been incurred to finance the purchase of that vessel.  In addition, in September 2018, the Company obtained a new line of credit from ACT Maritime LLC, a subsidiary of Alterna Capital Partners, LLC, in the amount of US$5.25 million, at a variable rate of LIBOR 90 days plus 750 points, with quarterly payments of principal and interest, and maturing in September 2023.  The proceeds of this new line of credit were used to pay off the remaining balance of the 10-year line of credit in the original amount of US$27.5 million that the Company had obtained from DVB Bank America, NV in May 2007 to purchase the parcel tanker M/T “Olmeca.” In December 2020, we used the funds obtained from Athene Shipping Limited as an advance on the sale of the “Olmeca” to prepay in full the US$3.5 million outstanding on the ACT Maritime LLC line of credit.    See Item 5. “Liquidity and Capital Resources – Purchase of Two Parcel Tankers” and Note 9 of the accompanying Audited Consolidated Financial Statements.

27
Grupo TMM, S.A.B. and Subsidiaries

The Mexican Market

Since TMM’s formation in 1958, the growth and diversification of the Mexican economy have largely driven our growth. Following the enactment of NAFTA, which became effective January 1, 1994, trade with and investment in the Mexican economy has significantly increased, resulting in greater traffic along the North-South cross-border trade routes that extend from Canada to the United States and Mexico. The USMCA, the successor to NAFTA, entered into force on July 1, 2020. Although the USMCA aims to support mutually beneficial trade and robust economic growth among parties, we cannot predict the impact the USMCA will have on the Mexican economy or our operating results.  The following table illustrates the growth of the foreign trade segment of the Mexican economy over the last three years:

   
Foreign Trade 2019-2021(a)
 
   
As of December 31,
(in millions of Dollars)
 
   
2021
    
2020
    
2019
  
Total Exports
  
$
494,225
    
$
416,999
    
$
460,604
  
Total Imports
  
$
505,716
    
$
382,986
    
$
455,242
  
Total Trade Flows
  
$
999,941
    
$
799,985
    
$
915,846
  
Growth Rate—Exports
    
18.5
%
    
(9.5
)%
    
2.2
%
Growth Rate—Imports
    
32.0
%
    
(15.9
)%
    
(2.0
)%
Growth Rate—Total
    
25.0
%
    
(12.7
)%
    
0.1
%
Growth Rate—GDP(b)
    
4.8
%
    
(8.2
)%
    
(0.1
)%


(a)
The figures include the in-bound (maquiladora) industry.
(b)
The methodology for calculating Growth Rate-GDP was modified by the Instituto Nacional de Estadistica, Geografia e Informatica (INEGI) and is based on 2013 prices.
Source: Instituto Nacional de Estadistica, Geografia e Informatica (INEGI).

Business Strategy

As part of our continued effort to achieve the Company’s goals, throughout the past three years we have accomplished the following:


 ■
We have continued to implement our strategic plan to offset recent financial instability resulting from the COVID-19 pandemic and the downturn in the oil industry by taking the following actions: (i) reducing our overhead costs and selling, general and administrative (“SG&A”) expenses, (ii) working with Nacional Financiera, S.N.C. to maintain our early payment program to reduce our liquidity risk and mitigate payment delays resulting from changes in the payment policies of PEMEX and other key customers, (iii) diversifying our customer base, and (iv) negotiating with our lenders to delay our payment obligations and extend the applicable maturity date under various loans and financing agreements.


■
We have taken various measures to help ensure our financial reporting and auditing processes remain robust and as timely as possible amidst the COVID-19 pandemic. These actions have included, among others, (i) the implementation of new controls for emergency procedures, (ii) close monitoring of IT access controls to enable our employees to work remotely where possible, (iii) controls to mitigate the potential increase in cybersecurity risks arising from a higher level of remote work, and (iv) where existing controls are unable to be performed safely or effectively, identifying and implementing appropriate alternative controls to compensate for the lack of information.

28
Grupo TMM, S.A.B. and Subsidiaries


 ■
We have expanded the customer base in all of our business segments, resulting in better operating margins while strengthening our market position.


■
In August 2021, PEMEX awarded us a 3-year charter contract to operate 3 specialized mud vessels for use in dredging operations.


■
On February 4, 2022, Aeropuerto Internacional Felipe Angeles-AIFA, the new airport in Mexico City, awarded our wholly owned subsidiary, TMM Almacenadora S.A.P.I. de C.V., a 10-year lease to operate a bonded warehouse of 5,184 square meters within the airport’s cargo terminal.


■
In December 2020, we prepaid the full US$3.5 million outstanding on our 5-year line of credit from ACT Maritime LLC, a subsidiary of Alterna Capital Partners, LLC, with proceeds from our sale of the parcel tanker M/T “Olmeca”.


■
In February 2019, we purchased from Sierra Oild & Gas 50% of the shares of Optimus, the joint venture company developing the liquid terminal project in Tuxpan. As a result, Optimus is now a wholly owned subsidiary of the Company.

Moving forward, our business strategy is focused on the following:

Expansion and Improvement of our Maritime Operations

The recent Mexican Energy Reforms have the potential to increase oil and gas activity in Mexico by PEMEX and other industry participants, both domestic and international. To better capitalize on any such increase in light of the preferences granted to Mexican ship-owners under the Mexican Navigation Law (Mexican flagged vessels have a preference to perform cabotage in Mexican waters), our Maritime Operations division is focused on consolidating and expanding operations by: (i) increasing cabotage services with medium and long-term contracts; (ii) satisfying demand for exploration and distribution services in Mexico and abroad by meeting market requirements for new generation vessels with higher-rated and deeper-water capabilities; and (iii) increasing the current capacity of our shipyard repair services to more than 30 vessels per year, including the vessels we operate and, in the long term, to have the capacity to build vessels, enabling us to compete to satisfy the expected demands of current and future customers.  In support of this effort, we recently entered into a construction agreement with Westport Orange Shipyard to build a new 6,600 metric tons floating drydock to increase the capacity of our shipyard operations. The project is supported by a 7-year financing agreement with Amegy Bank (Zions Bancorporation N.A.), guaranteed by EXIM Bank, for up to 85% of the purchase price of the floating drydock.

Expansion of our Ports and Terminals Operations

Tuxpan is the closest port to Mexico City and the central Mexican states, which account for more than 50% of Mexico’s GDP. It is also the main port of entry of gasoline and diesel imports, which account for more than 70% of domestic consumption.

In light of the liberalization of refined products included in the Mexican Energy Reforms and the Company’s ownership of land strategically located in Tuxpan, in August 2016 we announced a new venture with TransCanada and Sierra Oil & Gas to jointly develop a mid-stream infrastructure in Tuxpan as well as an inland distribution center to serve the growing demand for refined products such as gasoline, diesel and jet fuel in the central region of Mexico. The project includes a liquid terminal being developed by Optimus, a company which had been jointly owned 50% by the Company and 50% by Sierra Oil & Gas.  In February 2019, we purchased the Optimus shares held by Sierra Oil & Gas for a total amount of US$2.6 million, giving us full ownership of the company as well as the development of the project.

To capitalize on the growth potential of this market, we continue our efforts to develop port facilities and storage terminals in order to meet the future demand for gasoline and diesel imports.

We retain a significant portion of land in Tuxpan and continue to develop projects associated with that region.

29
Grupo TMM, S.A.B. and Subsidiaries

Expansion of our Logistics Operations

We are looking to leverage our experience and knowledge of Mexico and its laws, our customer relationships, and our skills in managing union and non-union labor resources to further expand our business with the automotive industry and in general in all activities related to yards and storage management, with an emphasis on “just-in-time” inventory planning, store, subassemblies and yards administration.

We expect to meet all of the above mentioned goals through a series of financial and commercial strategies that are described in greater detail under Item 5. “Operating and Financial Review and Prospects—Business Plan.”

Improvement of our Warehousing Operations

We are working to improve our strategic bonded warehousing services as well as import duties service. Additionally, we are focusing our growth through providing an integral logistic service to our customers, encompassing bonded warehousing services, inventories management, value-added services, and delivery to the end consumer.

We expect to meet all of the above mentioned goals through a series of financial and commercial strategies that are described in greater detail under Item 5. “Operating and Financial Review and Prospects—Business Plan.”

Certain Competitive Advantages

We believe that we benefit from the following competitive advantages:


 ■
We are one of the largest and leading Mexican owned and operated maritime and logistics companies in Mexico.


■
We have extensive and proven experience in ports, terminals and integrated services, such as yards operations, vessels and intermodal equipment maintenance, repair and warehousing in Mexico.


■
We have a demonstrated ability to contract vessels with limited disruptions.


■
The Mexican Navigation Law requires that Mexican flag carriers receive preferential treatment.


■
We are poised to capitalize on future growth in the Mexican energy sector.


■
We are certified by the Institute of International Container Lessors (“IICL”) for our maintenance and repair of containers.


■
Our operations in Tuxpan, Veracruz are in a prime location to capitalize on the growth of trade via the Gulf of Mexico.

Maritime Operations

Our Maritime Operations include: (a) supply and logistics services to the oil offshore industry at offshore facilities in the Gulf of Mexico and between ports, moving crews and/or cargo to and from oil platforms; (b) a product tanker for the transportation in cabotage of petroleum products, such as the distribution of gasoline to a variety of Mexican and international ports where the gasoline is further distributed inland; (c) parcel tankers, also known as chemical tankers, for the transportation of liquid chemical cargoes between ports in Mexico and the United States; (d) a bulk carrier vessel that transports unpackaged general commodities between South America, the Caribbean and Mexico; and (e) shipyard services, including ship repair and dry docking services. This segment accounted for 71.3%, 62.4% and 58.9% of consolidated revenues for the years 2021, 2020, and 2019, respectively.

30
Grupo TMM, S.A.B. and Subsidiaries

Fleet Management

As of March 31, 2022, we operated 30 vessels comprised of a product tanker, two parcel tankers, a bulk carrier and offshore vessels.  Following the spin-off of TMMDM in December 2017, we entered into a maritime services contract with TMMDM pursuant to which we manage, operate and market the 24 ships belonging to TMMDM (23 offshore vessels and 1 tanker) for a fee based on the shipping revenues and the cost of services required to operate the vessels.

The table below sets forth information as of March 31, 2022, about the fleet we operate by type, size and capacities:

Vessel Type
  
Number of
Vessels
    
Total Dead
Weight Tons
(in thousands)
    
Total Cubic
Meter Capacity
(in thousands)
    
BHP(*)
  
Offshore vessels
    
26
      
38.9
        
**
    
6,229
  
Product tankers
    
1
      
46.9
      
51.6
        
**
Parcel tankers
    
2
      
30.5
      
32.9
        
**
Bulk carriers
    
1
      
30.0
        
**
      
**
                                 
Total
    
30
      
146.3
      
84.5
          
*
Average Brake Horse Power.

**
Not applicable.

Offshore Vessels

We have been participating in this business for more than 25 years. Our offshore division provides supply and logistics services to the offshore industry between the ports and the offshore facilities in the Gulf of Mexico through a specialized fleet that includes mud vessels, fast and conventional crew vessels, supply vessels, anchor handling tug supply vessels, floating production, storage and offloading (“FPSO”) vessels and Dynamic Positioning (“DP”) vessels. Other services include supply and administration of onboard personnel, coordination and supervision of the maritime transport of staff, materials and equipment from the base on shore to operational points of the vessels within the oil-drilling zone of the Gulf of Mexico, and coordination and supervision of catering and accommodation matters onboard the vessels. In 2021, the vessels we operate represented 9.3% of Mexico’s offshore fleet. As of March 31, 2022, thirteen vessels were hired by PEMEX or its subsidiaries, four vessels were hired by private oil companies, companies engaged in the construction and maintenance sectors, or in the spot market, and nine vessels were available for hire.

During 2021, PEMEX conduced a public tender through which we were awarded three long-term charter contracts for the mud vessels Redfish 4, Beluga 2 and Go Canopus, each of which commenced operations in July 2021.

Set forth below is information regarding the offshore vessels fleet as of March 31, 2022:

Vessel
  
Year
  
Flag
  
DWT(1)
  
LOA(2)(m)(3)
  
Beam (m)
  
BHP
  
Charterer(s)
  
*Eco III
  
2008
  
Mexico
  
10,306
  
117.0
  
21.0
  
3,618
  
PEP
  
+ Doña Hilda
  
2009
  
Mexico
  
317
  
53.4
  
9.8
  
7,200
  
Fieldwood
  
*Isla Arboleda
  
2002
  
Mexico
  
417
  
46.0
  
8.0
  
5,400
  
PEP
  
*Isla Arcas
  
2001
  
Mexico
  
224
  
50.3
  
9.1
  
7,200
  
-
  
*Isla Azteca
  
1998
  
Mexico
  
1,000
  
61.9
  
14.0
  
3,900
  
PEP
  
*Isla Blanca
  
2008
  
Mexico
  
480
  
49.4
  
11.0
  
1,700
  
Sky-Mar
  
*Isla Ciari
  
2009
  
Mexico
  
480
  
49.4
  
11.0
  
1,700
  
PEP
  
*Isla Creciente
  
2002
  
Mexico
  
357
  
42.7
  
9.0
  
6,750
  
PEP
  
*Isla de Cedros
  
1999
  
Mexico
  
2,000
  
67.0
  
14.9
  
8,000
  
-
  
*Isla San Jose
  
2006
  
Mexico
  
1,660
  
68.0
  
16.0
  
12,240
  
PEP
  
*Isla Grande
  
2004
  
Mexico
  
2,800
  
75.0
  
16.0
  
12,000
  
-
  
*Isla Guadalupe
  
1998
  
Mexico
  
1,598
  
61.0
  
13.8
  
5,300
  
-
  

31
Grupo TMM, S.A.B. and Subsidiaries

 Vessel    Year    Flag   DWT(1)
  LOA(2)(m)(3)
 
Beam (m)
   BHP
   Charterer(s)  
*Isla Janitzio
  
2008
  
Mexico
  
480
  
49.3
  
11.0
  
1,700
  
PEP
  
*Isla León
  
2008
  
Mexico
  
1,350
  
63.4
  
15.6
  
6,500
  
-
  
*Isla Miramar
  
2000
  
Mexico
  
255
  
48.8
  
9.1
  
6,750
  
-
  
*Isla Monserrat
  
2007
  
Mexico
  
3,250
  
71.9
  
16.0
  
5,450
  
PEP
  
*Isla San Gabriel
  
2009
  
Mexico
  
369
  
55.6
  
10.4
  
7,200
  
Sky-Mar
  
*Isla San Ignacio
  
2009
  
Mexico
  
488
  
50.0
  
11.0
  
7,200
  
PEP
  
*Isla San Luis
  
2009
  
Mexico
  
381
  
55.5
  
10.4
  
7,200
  
ENI
  
*Isla Santa Cruz
  
2008
  
Mexico
  
1,900
  
63.4
  
15.8
  
6,800
  
PEP
  
*Isla Verde
  
2001
  
Mexico
  
540
  
44.0
  
11.0
  
1,700
  
-
  
*Isla San Diego
  
2009
  
Mexico
  
552
  
55.2
  
10.4
  
7,200
  
-
  
*Nevado de Colima
  
1983
  
Mexico
  
606
  
28.4
  
9.0
  
3,000
  
-
  
+ Redfish 4
  
2012
  
Mexico
  
2,435
  
67.40
  
16.00
  
8,000
  
PEP
  
+ Beluga 2
  
2012
  
Mexico
  
2,436
  
67.40
  
16.00
  
7,369
  
PEP
  
+ Go Canopus
  
2009
  
Mexico
  
2,278
  
67.00
  
16.00
  
10,876
  
PEP
  


(1)
Dead weight tons.
(2)
Overall length.
(3)
Meters.
*
TMMDM vessel.
+     Chartered vessel.

Product Tankers

Since 1992, we have provided product tanker chartering services to PEMEX and its subsidiaries for the transportation of clean and dirty petroleum products from refineries to various Mexican ports. As of December 31, 2021, the fleet we operated was comprised of one product tanker without a contract.

Set forth below is information regarding the product tanker fleet as of March 31, 2022:

Vessel
  
Year
  
Flag
  
Hull
  
DWT(1)
  
LOA(3)(m)(4)
  
Beam (m)
  
Charterer
  
*Tula
  
2005
  
Mexico
  
DH(2)
  
46,911
  
183
  
32
  
-
  


(1)
Dead weight tons.
(2)
Double hull.
(3)
Overall length.
(4)
Meters.
*
TMMDM vessel.

We have a competitive advantage in the Mexican market as Mexican Maritime law establishes that cabotage services should be provided by Mexican flag vessels and only Mexican companies are allowed to fly the Mexican flag.

OPA 90 established that vessels that do not have double-hulls will be prohibited from transporting crude oil and petroleum products in U.S. coastwise transportation after a certain date based on the age and size of the vessel unless they are modified with a double-hull. In addition, Annex II (Rules 13G and 13H) from MARPOL 73/78 establishes a phase out calendar for single hull tankers. We are aware of this regulation and do not charter or intend to acquire vessels that do not comply with these rules.

Parcel Tankers

Our Parcel Tanker business operates between Mexican and American ports in the Gulf of Mexico, transporting chemicals, vegetable and animal oils and molasses. The majority of the transported cargo is under contracts of affreightment (“COAs”) in which the customers commit the carriage of their cargo over a fixed period of time on multiple voyages, with a minimum and a maximum cargo tonnage at a fixed price. The vessel operator is responsible for the vessel, the fuel and the port expenses. Currently, our parcel tanker fleet is comprised of two chartered vessels. We transported 518 thousand tons of chemical products in our parcel tankers during 2021, 606 thousand tons during 2020, and 586 thousand tons during 2019. Our primary customers for our parcel tanker services include major oil and chemical companies.

32
Grupo TMM, S.A.B. and Subsidiaries

Set forth below is information regarding our parcel tankers as of March 31, 2022:

Vessel
  
Flag
  
Year
  
LOA
    
Beam
    
Draft
    
DWT(1)
    
Capacity M3
Total
  
           
(m)(2)
    
(m)
    
(m)
              
Chemical Atlantik
  
Turkey
  
2018
    
145.0
      
21.0
      
11.0
      
15,081
      
15,154
  
Oriental Marguerite
  
Panama
  
2008
    
134.2
      
20.5
      
11.6
      
14,367
      
16,232
  
                           
Total
      
29,448
      
31,386
  


(1)
Dead weight tons.
(2)
Meters.

Bulk Carrier

In August 2017, we commenced transporting unpackaged general commodities such as steel between South America, the Caribbean and Mexico in specialized ships called bulk carrier vessels. Our bulk carrier services typically involve the hiring of a bulk carrier vessel approximately once per month.

Shipyard

The Company holds a concession to operate a shipyard in the port of Tampico, Mexico. The shipyard is strategically positioned in the Gulf of Mexico, in close proximity to offshore oil and gas facilities and other key commercial routes between the Southeastern United States and Mexico. The shipyard provides ship repair services and enables us to provide drydocking services to more than 30 vessels per year. In addition, to better capitalize on the opportunities created by new participants in the Mexican market, we intend to expand and diversify our shipyard capabilities through the construction of a new 6,600 metric tons floating drydock, the completion of which is expected to occur in the first quarter of 2023.

Customers and Contractual Arrangements

The primary purchasers of our Maritime Operations services are multi-national oil, gas and chemical companies. These services are generally contracted for on the basis of short-term or long-term time charters, voyage charters, COAs or other transportation agreements tailored to the shipper’s requirements. In 2021, excluding customers contracted through TMMDM, our ten largest customers accounted for approximately 83% and 59% of Maritime Operations revenues and consolidated revenues, respectively. The loss of one or more of our customers could have a material adverse effect on the results of our Maritime Operations.

The services we provide are arranged through different contractual arrangements. Time charters are the principal contractual form for our Maritime Operations.

In the case of a time charter, the charterer is responsible for the hire, fuel and port expenses, and the shipowner is responsible for the nautical operation of the vessel, including the expenses related with the crew, maintenance and insurance. When we bareboat charter a vessel, the charterer is responsible for the hire, fuel and port expenses but also assumes all risk of the nautical operation, including the associated expenses. COAs are contracts with a customer for the carriage of cargoes that are committed on a multi-voyage basis over a period of weeks or months, with minimum and maximum cargo tonnages specified over the period at fixed rates per ton depending on the duration of the contract. Typically, under voyage charters and COAs, the shipowner pays for the fuel and any applicable port charges.

33
Grupo TMM, S.A.B. and Subsidiaries

Markets

The demand for offshore vessels is affected by the level of offshore exploration and drilling activities, which in turn is influenced by a number of factors including:


 ■
expectations as to future oil and gas commodity prices;


■
customer assessments of offshore drilling prospects compared to land-based opportunities;


■
customer assessments of cost, geological opportunity and political stability in host countries;


■
worldwide demand for oil and natural gas;


■
the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing;


■
the level of production of non-OPEC countries;


■
the relative exchange rates for the U.S. dollar; and


■
various government policies regarding exploration and development of their oil and gas reserves.

Ports and Terminals Operations

We conduct general cargo operations at the public berth in the port of Tuxpan pursuant to a permit awarded by the Mexican government. Additionally, we own land in Tuxpan on which we are developing a liquid oils terminal. Our permit in Tuxpan give us the right of first refusal to continue operations for a second term once the term of the original instrument expires. In 2019, our permit in Tuxpan was extended for an additional 10 years.

As further described below, from June 1996 to June 2021 we held a concession to operate the port of Acapulco through a joint venture with SSA. Our Acapulco ports and terminals operations terminated effective June 21, 2021 when the administration of President Manuel López Obrador elected not to renew our concession and transferred control of the port to SEMAR. Ports and Terminals operations accounted for 1.9%, 5.8% and 11.5% of consolidated revenues in 2021, 2020, and 2019, respectively.

The following table sets forth our existing port facilities and concessions:

Port
  
Concession/Permit
  
Date Awarded
  
Duration
                
Tuxpan
  
Stevedoring services
  
August 4, 1999
  
20 years (with the possibility of successive 10-year extensions, which were exercised in 2009 and 2019, respectively).

Tuxpan

Since 1999, we have held a permit to provide general cargo operations at the public berths in the port of Tuxpan, such as loading and unloading of grain and gravel for the construction of a gas pipeline. We also offer container-warehousing services at this port.  In addition, we own approximately 1,780 acres of land in the port of Tuxpan through our wholly owned subsidiaries, Bimonte S.A. de C.V., Prestadora de Servicios MTR, S.A. de C.V. and Services and Solutions Optimus, S. de R.L. de C.V., in which we plan to develop a liquid oils terminal and logistic facilities.

34
Grupo TMM, S.A.B. and Subsidiaries

In August 2016 we announced a new venture with TransCanada and Sierra Oil & Gas to jointly develop a mid-stream infrastructure in Tuxpan as well as an inland distribution center to serve the growing demand for refined products such as gasoline, diesel and jet fuel in the central region of Mexico. The site includes a liquid oils terminal being developed by Services and Solutions Optimus, S. de R.L. de C.V., which had been jointly owned 50% by the Company and 50% by Sierra Oil & Gas. In February 2019, we purchased the 50% interest held by Sierra Oil & Gas for US$2.6 million.  With this purchase, we acquired full ownership and control of the project and Services and Solutions Optimus, S. de R.L. de C.V. became a wholly owned subsidiary of the Company. Once completed, the liquid oils terminal should allow us to supply up to 80,000 barrels per day of refined products.

Acapulco

In June 1996, we received a 25-year concession to operate the tourist port of Acapulco. Our port interests in Acapulco were operated through a joint venture with SSA called Administración Portuaria Integral de Acapulco, S.A. de C.V. (“API Acapulco”), in which we hold a 51% interest. Through API Acapulco, we operated and managed an automobile terminal, a cruise ship terminal with a capacity to receive two cruise ships simultaneously and an automobile warehouse with a capacity to store up to 1,700 automobiles.

When our concession came up for renewal in June 2021, the López Obrador administration decided that the public interest would be best served by transitioning Mexican port operations to the oversight and control of SEMAR.  As a result, our concession to provide port and terminal operations in Acapulco expired effective as of June 21, 2021.

From January 1, 2021 through the expiration of our concession on June 21, 2021, we handled 5,263 export automobiles for Volkswagen, Chrysler and Nissan to South America and Asia. For the full year 2020, we handled 19,310 automobiles. With respect to the cruise ship terminal, in 2021 we didn’t receive any cruise ships, while during 2020 we received a total of four cruise ships.

Shipping Agencies

We operate shipping agencies at key ports throughout Mexico, including the ports of Veracruz, Coatzacoalcos, Ciudad del Carmen, Dos Bocas, Tuxpan, Cozumel, Costa Maya, Progreso and Zihuatanejo. Our shipping agencies provide services to vessel owners and operators in Mexican ports, including (i) port agent services, including the preparation of the required documentation with the relevant port authorities for the dispatch of vessels; (ii) protective agent services, which support the rotation of crew members and the supply of spare parts; (iii) cargo and multimodal supervision; (iv) ship chandler services, which include the procurement of food, water and supplies and (v) bunkering services, which include the coordination of fuel delivery services. Our shipping agencies also provide shipping agency services at other major ports through agreements with local agents.

Logistics Operations

Through TMM Logistics, S.A. de C.V. (“TMM Logistics”), a wholly owned subsidiary of Grupo TMM, we provide dedicated logistics services to major manufacturers, including automobile manufacturers, and retailers with facilities and operations throughout Mexico. The services that we provide include consulting, analytical and logistics outsourcing services, which encompass the management of inbound movement of parts to manufacturing plants consistent with just-in-time inventory planning practices; logistics network (order-cycle) analysis; logistics information process design; supply chain and logistics management; product handling and repackaging; local pre-assembly; and maintenance and repair of containers in principal Mexican ports and cities. Due to the scope of our operations, together with the extent of our experience and resources, we believe that we are uniquely positioned to coordinate the entire supply chain for our customers. This segment accounted for 15.4%, 20.2% and 18.0% of consolidated revenues in 2021, 2020, and 2019, respectively.

35
Grupo TMM, S.A.B. and Subsidiaries

Automotive Services

We provide specialized logistics support for the automotive industry within Mexico. Services include the arrangement and coordination of the movement of motor vehicle parts or sub-assemblies from supplier facilities to assembly plants, warehousing, inspection and yard management. Our logistics services can be provided as end-to-end integrated logistics programs (bundled) or discrete services (unbundled) depending on customer needs.

Container Repair and Maintenance

We offer maintenance and repair services for dry and refrigerated containers in Manzanillo, Veracruz, Altamira, Ensenada, Aguascalientes, and Mexico City (Pantaco). These services involve keeping refrigerated components and other parts of a container in useable condition, including mechanical repair, welding and repainting of such containers.

Warehousing Operations

We offer warehousing and bonded warehousing facility management services through our subsidiary, ADEMSA. ADEMSA currently operates over 217,000 square meters of warehousing space throughout Mexico, including 67,353 square meters of direct warehouse space (the largest of which is located in northern Mexico City). Due to its regulated nature, ADEMSA is one of a limited number of warehousing companies authorized by the Mexican government to provide bonded warehousing services and to issue negotiable certificates of deposit. This segment accounted for 11.4%, 11.6% and 11.6% of consolidated revenues in 2021, 2020, and 2019, respectively.

Grupo TMM’s Strategic Partners

We are currently a partner in the following strategic arrangements:

Business
  
Partner
Commercialization of Petroleum Products
  
Petrosoluciones en Firme, S.A.P.I de C.V.
Energy Infrastructure
  
EGI Oil & Gas, S.A. de C.V.

Sales and Marketing

Much of the success of our business depends on our marketing network. Our marketing network includes affiliated offices, agencies at Mexican ports and a sales force based throughout Mexico to sell our logistics, warehousing, ports and specialized maritime services. Our marketing and sales efforts are designed to grow and expand our current customer base by initiating long-term contracts. We have devised, implemented and will continue to implement several customer service initiatives in connection with our marketing efforts, which include the designation of customer sales territories and assignment of customer service teams to particular customers.

Since we commenced operations, we have been actively seeking to obtain new customer contracts with the expectation of entering into long-term contracts with such new clients or with existing customers. Although written customer contracts are not customary in Mexico, we have succeeded in negotiating written contracts with a number of our major customers.

Systems and Technology

We continually seek to update and improve our technology systems and processes to improve our operations. Our systems and applications are regularly updated following industry best practices and applying an agile methodology that ensures an efficient and cost-effective implementation process. In terms of on-premises IT security, we have implemented advanced devices and applications to increase the accuracy and security of our information, and at the cloud and data network level, we constantly monitor the environments hosting each platform as well as the performance, data traffic and stability of our communications networks to ensure the continuity of our business operations.

When implementing the technology platforms that support the operations across our business units, we work hand in hand with specialized teams of IT consultants and globally recognized companies such as Microsoft and SAP. In collaboration with these companies, we have implemented IT best practices and jointly developed a technology strategy to enable us to respond swiftly to the current needs of our businesses, while simultaneously laying the groundwork for future evolution in our IT systems.  Underlying our technology strategy is an understanding that our IT systems must remain flexible and able to adapt to changes in the financial conditions of the Company and emerging national and international trends, practices or circumstances.

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Grupo TMM, S.A.B. and Subsidiaries

Competition

Maritime Operations

The Company’s primary competitors in the offshore vessel business are Tidewater de Mexico, S. de R. L. de C.V., Naviera Bourbon Tamaulipas, S.A. de C.V., Mantenimiento Express Marítimo, S.R.L., Naviera Integral, S.A. de C.V., Blue Marine Technology Group, Harvey Gulf, and Hornbeck Offshore Services de Mexico S de RL de CV.

The Company’s primary competitor in the parcel tanker business is Stolt-Nielsen Transportation Group Ltd. Some other competitors in this business include Team Tankers, Ace Tankers, Eitzen and Caribbean Tankers, Inc. and Nordic Tankers.

The Company’s primary competitors in the product tanker business are Scorpio Tankers, Maersk Tankers, and PEMEX Refinación.

The primary competitors of our shipyard business are Talleres Navales del Golfo, Astilleros Mexicanos JP, Astilleros de Marina Tampico, Astilleros de Marina Coatzacoalcos, and Reparaciones Navales Zavala.

The Company believes the most important competitive factors concerning the Maritime Operations segment are pricing, the flying of the Mexican flag and the availability of equipment to fit customer requirements, including the ability to provide and maintain logistical support given the complexity of a project and the cost of transferring equipment from one market to another. The Company believes it can capitalize on opportunities as they develop for purchasing, mobilizing, or upgrading vessels to meet changing market conditions.

Ports and Terminals Operations

The Company’s key competitors in its ports business are CICE, Hutchinson Ports, SSA Mexico and Amports.

In its shipping agencies business, the Company’s primary competitors are Representaciones Marítimas, Meritus and Aconsur.

The Company believes the most important competitive factors concerning the Ports and Terminals Operations segment are customer service, experience and operating capabilities.

Logistics Operations

In the logistics business, the Company faces competition primarily from Car Logistics S.A. de C.V., Axis Logistics S.A. de C.V., Wallenius, SEGLO, Ceva Logistics, Syncreon, Keuhne-Nagel, SeSe, Amport, DHL, SSA, CPV and CSI.

In its maintenance and repair business, the Company faces competition primarily from Container Care International Inc., CIMA and Grupo SLTC.

The Company believes the most important competitive factors in the Logistics Operations segment are price, customer service, brand name, experience, operating capabilities and state-of-the-art information technology.

Warehousing Operations

Our warehousing business’ main competitors are Almacenadora Mercader, Afirme Almacenadora, Almacenadora Sur and, ACCEL.

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Grupo TMM, S.A.B. and Subsidiaries

The Company believes the most important competitive factors in the Warehousing Operations segment are value-added services, competitive rates, nationwide coverage, customer service, brand name, experience, operating capabilities and state-of-the-art information technology.

Regulatory Framework

Certain countries have laws which restrict the carriage of cargos depending upon the nationality of a vessel or its crew or the origin or destination of the vessel, as well as other considerations relating to particular national interests. In accordance with Mexico’s Navigation Law (Ley de Navegación y Comercio Marítimos), cabotage (intra-Mexican movement) is reserved for ships flying the Mexican flag. We believe we are currently in material compliance with all restrictions imposed by the jurisdictions in which we operate. However, we cannot predict the cost of compliance if our business is expanded into other jurisdictions which have enacted similar regulations.

We are also subject to the laws of various jurisdictions and international conferences with respect to the discharge of materials into the environment. See “— Environmental Regulation” and “— Insurance.”

Our port operations are subject to the Ley de Puertos. Port operations require a concession title granted by the Mexican government to special companies incorporated under the Ley de Puertos, which companies may partially assign their concession title to third parties for the use and exploitation of assets owned by the Mexican government in the different port facilities (subject to the Ley de Puertos and the terms and conditions of the concession title). Various port services require a special permit granted by the Ministry of Communications and Transportation of Mexico. Concession titles may be revoked under certain circumstances in accordance with applicable law and the terms of the concession title. Partial assignments of concession titles may be rescinded under certain circumstances established in the corresponding assignment agreements. Foreign investment in special companies incorporated under the Ley de Puertos may not exceed 49%, except through vehicles or securities deemed by applicable Mexican law as “neutral investments.”

Mexican Navigation Law

The Mexican Navigation Law (Ley de Navegación y Comercio Marítimos) was enacted in 2006, with its most recent amendments effective as of January 23, 2014.  This law: (i) strengthens the reservation of cabotage services for Mexican individuals dedicated to shipping or Mexican shipping companies; (ii) establishes mechanisms and procedures for the resolution of maritime controversies or disputes and (iii) in general terms, is protective of the Mexican shipping industry. Nevertheless, there can be no assurance that the percentage of Mexican-flagged vessels operating in Mexico will continue to increase in the future.

The law gives precedence to international treaties ratified by Mexico to foster uniformity in the type of regime applicable to specific circumstances such as the Hague Visby Rules, CLC/FUND Conventions, 1976 Limitation Convention, Salvage Convention, COLREGS, and MARPOL. (All vessels navigating Mexican waters must enter into protection and indemnity insurance agreements.)

Listed below are some of the salient points of the legislation:


 ■
customary provisions enabling authorities to carry out inspections of vessels and investigations of incidents;


■
regulations concerning registration of vessels and waivers allowing Mexican companies to operate foreign flag vessels in otherwise reserved domains;


■
foreign vessels are obliged to designate a shipping agent in order to call at Mexican ports;


■
Mexican flag vessels are required to operate with Mexican crews only and cabotage is in principle reserved for Mexican vessels;

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Grupo TMM, S.A.B. and Subsidiaries


 ■
when a foreign vessel is abandoned by the owners with cargo on board, provisions of the legislation coordinate repatriation and temporary maintenance of the crew which the law deems ultimately to be the joint and several liability of the owner and agent;


■
the carriage of passengers, cargo and towage in ports and pilotage are also regulated;


■
captains are responsible for damage and loss caused to vessels or ports due to negligence, lack of proper qualification, carelessness or bad faith, but are not responsible for damages caused by an act of God or force majeure;


■
companies providing towage services must carry insurance to cover their liabilities to the satisfaction of the authorities;


■
pollution is regulated by international treaties; however this only covers CLC-type liabilities. Pollution in respect of other substances is dealt with under local legislation which has no limitation. This is irrespective of any criminal proceedings or sanctions against the party responsible for the incident; and


■
maritime privileges are also considered within the law.

The law establishes time limits for commencement of proceedings with respect to 7 specific types of contracts as follows:


 ■
bareboat charter;


■
time charter;


■
voyage charter;


■
carriage of goods;


■
passengers;


■
salvage; and


■
towage.

Regulations of the Mexican Navigation Law

On March 4, 2015, the Regulations of the Mexican Navigation Law (“Reglamento de la Ley de Navegación y Comercio Marítimos”) were published in Mexico’s Official Gazette and became effective 30 days thereafter. Enactment of the regulations represented a significant event in the merchant maritime sector and were aimed at enhancing legal certainty and promoting trade. In particular, the regulations reduced administrative complexity by consolidating several existing laws or regulations into a single set of regulations.

The regulations develop various substantive aspects of the Mexican Navigation Law, including:


 ■
general provisions (definitions, guarantees, and maritime insurance);


■
extraordinary specialization of vessels, registration, national maritime registry, maritime agents and nautical education;


■
temporary navigation permits and permits for permanent stay, maneuver, nautical tourism and pollution prevention; and


■
revisions to conform hydrocarbons terminology to the new Hydrocarbons Law.

39
Grupo TMM, S.A.B. and Subsidiaries

Following the adoption of the regulations, several topics covered by the Mexican Navigation Law are addressed in a single document, including merchant marine education, maritime insurance, vessel inspection, maritime public registry, flag and registration of vessels and naval crafts, and marine prevention.

Mexican Energy Reforms

On December 12, 2013, the Mexican government passed legislation amending articles 25, 27 and 28 of the Mexican Constitution (Constitución Política de los Estados Unidos Mexicanos) and providing 21 transitional articles to establish the legal framework for reforming the Mexican energy sector. The reforms aim to modernize the Mexican energy sector and increase private investment by, inter alia:


 ■
providing for PEMEX and CFE to become state-owned, for-profit companies (empresas productivas del estado);


■
establishing a contractual regime to allow the Ministry of Energy (Secretaría de Energía or SENER), with the technical assistance of the new National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos or CNH), to award to PEMEX and private entities the right to participate in upstream oil and gas operations through the use of service contracts, profit-sharing agreements, production sharing agreements and license agreements, with the Ministry of Energy authorized to determine the best contractual form in each case so as to maximize revenue to the Mexican government;


■
allowing private entities that have entered into a contract with PEMEX or the Mexican government to report, for accounting and financial purposes, the awarding of the contract, the related oil and gas reserves and the contract’s forecasted benefits, provided the private entities affirm that all oil and gas within the subsoil remains the property of Mexico;


■
requiring PEMEX to participate in a “round zero” and submit to SENER for consideration a list of the areas where it intends to continue conducting exploration or production operations pursuant to the new contractual regime, establish that it has the technical, financial and execution capabilities needed to explore for and develop the oil and gas from those areas in an efficient and competitive manner, and provide a work program and budget for those areas;


■
allowing PEMEX to transfer its rights to explore for and develop oil and gas resources to private entities upon application to SENER;


■
allowing the Energy Regulatory Comission (Comisión Reguladora de Energia or CRE) to grant permits for the storage, transport and distribution of oil and gas through pipelines as well as for the generation and commercialization of electricity;


■
creating the Mexican Petroleum Fund for Stabilization and Development (Fondo Mexicano del Petróleo para la Estabilización y el Desarollo) to act as a government trust fund for the collection and administration of income received by the Mexican government from contracts with PEMEX and private entities;  and


■
creating the National Agency of Industrial Security and Environmental Protection of the Hydrocarbon Sector (Agencia Nacional de Seguridad Industrial y de Proteccion al Medio Ambiente del Sector de Hidrocarburos) to regulate and supervise matters concerning operational security and environmental protection in the oil and gas industry.

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Grupo TMM, S.A.B. and Subsidiaries

In August 2014, SENER and CNH announced the results of PEMEX’s “round zero” lease allocation, awarding PEMEX approximately 83% of Mexico’s proven and probable (2P) reserves and 21% of its prospective resources. In connection with the energy reforms, SENER released a five-year oil and gas tender plan (2015 – 2019), which was intended to showcase the Mexican government’s strategy for revitalizing the domestic oil and gas sector and maximize interest from industry participants in future tenders. “Round one”, which consisted of four phases that took place in July, September, and December 2015 and December 2016, respectively, awarded to various international oil and gas companies the right to conduct oil and gas operations in shallow water exploration and production areas, onshore production areas and deepwater exploration areas. “Round two”, which began in June 2017, was divided into four tenders, the first of which involved the award of production sharing contracts, while the following three rounds involved the award of license contracts. “Round three” began in September 2017 and consisted of three tenders, the first of which involved the award of production sharing contracts, with the following two rounds featuring license contracts. Additionally, there are the so-called “farmouts” in which PEMEX will conduct oil and gas operations jointly with a third party, either to increase production, share risks, obtain geological information or access new technology. Farmouts were scheduled to be divided into four tenders, the first of which resulted in the signing of a license contract in March 2017. The bidding process for the remaining farmout tenders began in 2017 and resulted in two license contracts signed in March 2018.

In October 2021, the government presented its five-year plan for 2020-2024, which prioritizes investments in shallow waters and conventional onshore areas, and excludes unconventional onshore and deep-water areas. Furthermore, the plan indicates that the current administration does not intend to initiate new bidding processes for the award of further exploration and production rights until the current contracts demonstrate that they can generate profits for the government.

On March 26, 2021, President Andrés Manuel López Obrador proposed legislation to amend certain provisions of the Hydrocarbons Law (the “Amendment”) to, among other things, prevent speculation in the oil market and curtail the illegal trafficking of gasoline. Following a spirited legislative debate, the Amendment was passed by the Mexican government and became effective on May 5, 2021 following its publication in the Federal Official Gazette.

This Amendment introduces key modifications to the regulatory structure for the granting of permits for midstream and downstream activities under the Hydrocarbons Law, establishing heightened requirements on companies applying for permits to refine oil, process natural gas, or engage in various other activities including transportation, storage, distribution, compression, liquefaction, decompression, regasification, commercialization, and retail of hydrocarbons, fuels and petrochemicals. In particular, the Amendment:


 ■
requires that companies applying for a permit to conduct midstream or downstream activities first demonstrate that they meet certain minimum storage requirements established by SENER;


■
modifies the procedure for the approval of applications to assign a permit, moving from the current “deemed approval” system under which an assignment application is deemed approved if the authorities fail to respond within the relevant time period, to one in which the failure of the authorities to respond within such period will result in denial of the application;


■
establishes new grounds for the revocation of permits, including where CRE or SENER determine that the permit holder (i) has committed the crime of hydrocarbons, fuels and petrochemicals smuggling or (ii) is otherwise in breach of the permit conditions or the provisions of the Hydrocarbons Law;


■
expands the discretionary authority of CRE and SENER, allowing them to suspend permits on a temporary basis or revoke them permanently, including for reasons of national security, energy security or to protect the national economy, and giving them the power to assume control of the permit holder’s administration and operations (or transfer such control to PEMEX) to ensure the continuous operation of the permit holder’s activities;


■
allows CRE or SENER to determine the length of any permit suspension, hire a new operator, use (or authorize PEMEX to use) the personnel of the permit holder to continue the permit holder’s operations,  or use a combination of the foregoing;


■ allows CRE or SENER to revoke permits for storage activities in cases where the holder has failed to meet and comply with the authorized storage capacity; and


■
provides that where a permit holder has failed to exercise their rights or perform their duties within the time period specified in the permit, or within 365 days if no period is specified, CRE or SENER may declare the permit to have expired and be of no further legal validity.

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Grupo TMM, S.A.B. and Subsidiaries

The Amendment may have a significant impact on the future development of Mexico’s hydrocarbons industry, particularly, the midstream, downstream, and retail sectors, as it grants authorities the discretionary power to revoke permits, considerably expands administrative power to issue temporary or permanent suspensions for reasons of national security, energy security, or to protect the national economy, and allows authorities to assume control of a permit holder’s operations or assign control of those operations to a third party. Although the permit holder may request the end of the permit suspension once the stated reasons for the suspension no longer eixst, the authority has no obligation to compensate the permit holders for their losses during the period of suspension.

The Mexican government might also consider changes to ports concessions already granted to third parties, as well as those that are in the process of being granted. We cannot provide any assurance that certain political decisions of the Mexican government will not put at risk the permanence of port concessions, or that such decisions will not have a negative effect on our business.

We continue to analyze the scope and implications of the Mexican Energy Reforms and the recent Amendment on our business. We cannot predict the full impact that these changes will have on our business, financial condition and results of operations once they are fully implemented. Despite the uncertainties introduced by the recent Amendment, we believe that the reforms have the potential to significantly increase Mexican oil and gas production in the coming years. Although there is no guarantee that such an effect will materialize, we believe that an increase in Mexican oil and gas production would likely have a positive impact on our business, financial condition and results of operations.

Mexican Tax Reforms

During the 2018 fiscal year, the Mexican government, through the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público), announced certain new federal tax provisions. These include provisions allowing taxpayers to offset accrued amounts only against contributions those taxpayers must pay on their own liabilities, provided both derive from the same federal tax, including ancillary charges.  This change eliminates the ability of taxpayers to offset accrued amounts against withholdings by third parties or against taxes other than the one to be offset. The changes which were included in the Federal Tax Code effective January 1, 2020.

On October 30, 2019, the Mexico’s Congress approved various amendments to different federal tax provisions. Key changes include:


 •
The tax authorities are empowered to presume, during the exercise of their powers of verification, that legal acts lack a business reason when they generate tax benefits, directly or indirectly, which are greater than the reasonably expected economic benefit.


•
The deferral in the deduction of net interests, up to 30% of the adjusted tax profit determined per year, to be deducted up to a period of 10 fiscal years following the one in which they have not been deducted, provided that accrued interests exceed $20 million.


•
An increase in the income tax withholding rate, on interests earned through the financial system, from 1.04% to 1.45%.

We cannot predict the full impact that the changes described above will have on our business, financial condition and results of operations upon implementation, including the effect on our business of higher costs due to additional compliance measures. Our initial assessments indicate that the changes will increase our income tax base in the coming years, primarily as a result of the new limitations on tax deductions. In addition, we cannot predict the indirect impact that this legislation could have on our customers and shareholders. It is possible that our shareholders may be required to pay more taxes than they would have paid prior to the implementation of the tax reforms.

Environmental Regulation

Our operations are subject to Mexican federal and state laws and regulations relating to the protection of the environment, as well as technical environmental requirements issued by the SEMARNAT. Under the General Law of Ecologic Equilibrium and Protection of the Environment (Ley General de Equilibrio Ecológico y Protección al Ambiente) and the General Law for Integral Prevention and Handling of Residues (Ley General de Prevención y Gestión Integral del Residuos), the SEMARNAT and other authorized ministries have promulgated standards, for, among other things, water discharge, water supply, emissions, noise pollution, hazardous substances, transportation and solid waste generation. The terms of the port concessions also impose on us certain environmental law compliance obligations. See “— Insurance.”

42
Grupo TMM, S.A.B. and Subsidiaries

Under OPA, responsible parties, including owners and operators of ships, are subject to various requirements and could be exposed to substantial liability, and in some cases, unlimited liability for removal costs and damages, including natural resource damages and a variety of other public and private damages, resulting from the discharge of oil, petroleum or related substances into United States waters by their vessels. In some jurisdictions, claims for removal costs and damages would enable claimants to immediately seize the ships of the owning and operating company and sell them in satisfaction of a final judgment. The existence of comparable statutes enacted by individual states of the United States, but requiring different measures of compliance and liability, creates the potential for similar claims being brought under state law. In addition, several international conventions that impose similar liability for the discharge of pollutants have been adopted by other countries. If a spill were to occur in the course of the operation of one of our vessels carrying petroleum products, and such spill affected the United States or another country that had enacted legislation similar to OPA, we could be exposed to substantial or unlimited liability.

The U.S. Clean Water Act imposes restrictions and strict controls regarding the discharge of wastes into the waters of the United States, including discharges incidental to the normal operation of commercial vessels, such as ballast water. The Clean Water Act and comparable state laws, provide for civil, criminal and administrative penalties for unauthorized discharges of wastes or pollutants, including harmful organisms that can travel in ballast water. In the event of an unauthorized discharge of wastes or pollutants into waters of the United States, we may be liable for penalties and could be subject to injunctive relief.

In addition, our seagoing transport of petroleum and petroleum products subjects us to additional regulations and exposes us to liability specific to this activity. Laws and international conventions adopted by several countries in the wake of the “Exxon Valdez” accident, most notably OPA (discussed above), could result in substantial or even unlimited liability for us in the event of a spill. Moreover, these laws subject tanker owners to additional regulatory and insurance requirements. We believe that we are in compliance with all material requirements of these regulations.

We could have liability with respect to contamination at our former U.S. facilities or third-party facilities in the United States where we have sent hazardous substances or wastes under the U.S. Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) and comparable state laws (known as state Superfund laws). CERCLA and the state Superfund laws impose joint and several liability for the cost of investigation and remediation, natural resources damages, certain health studies and related costs, without regard to fault or the legality of the original conduct, on certain classes of persons with respect to releases into the environment of certain substances. These persons, commonly called “potentially responsible parties” or “PRPs” include the current and certain prior owners or operators of a facility and persons that arranged for the disposal or treatment of certain substances at a facility where a release has or could occur. In addition, other potentially responsible parties, adjacent landowners or other third parties may initiate cost recovery actions or toxic tort litigation against PRPs under CERCLA, state Superfund laws or state common law.

Noncompliance with applicable environmental laws and regulations may result in the imposition of considerable administrative or civil fines, temporary or permanent shutdown of operations or other injunctive relief, or criminal prosecution. We currently believe that all of our facilities and operations are in substantial compliance with applicable environmental regulations. There are currently no material legal or administrative proceedings pending against us with respect to any environmental matters, and we do not believe that continued compliance with environmental laws will have a material adverse effect on our financial condition or results of operations.

We cannot predict the effect, if any, that the adoption of additional or more stringent environmental laws and regulations would have on the operations of companies that are engaged in the type of business in which we are engaged, or specifically, on our results of operations, cash flows, capital expenditure requirements or financial condition.

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Grupo TMM, S.A.B. and Subsidiaries

Insurance

Our business is affected by a number of risks, including mechanical failure of vessels and other transportation equipment, collisions, property loss of vessels and other transportation equipment, piracy, cargo loss or damage, as well as business interruption due to political circumstances in Mexico and in foreign countries, hostilities and labor strikes. In addition, the operation of any oceangoing vessel is subject to the inherent possibility of catastrophic marine disaster, including oil spills and other environmental accidents, and the liabilities arising from owning and operating vessels in international trade.

We maintain insurance to cover the risk of partial or total loss of or damage to all of our assets, including, but not limited to, harbor and seagoing vessels, port facilities, port equipment, land facilities and offices. In particular, we maintain marine hull and machinery and war risk insurance on our vessels, which covers the risk of actual or constructive total loss. Additionally, we have protection and indemnity insurance for damage caused by our operations to third persons. With certain exceptions, we do not carry insurance covering the loss of revenue resulting from a downturn in our operations or resulting from vessel off-hire time on certain vessels. In certain instances, and depending on the ratio of insurance claims to insurance premiums paid, we may choose to self-insure our over-the-road equipment following prudent guidelines. We believe that our current insurance coverage is adequate to protect against the accident-related risks involved in the conduct of our business and that we maintain a level of coverage that is consistent with industry practice. However, we cannot assure you that our insurance would be sufficient to cover the cost of damages suffered by us or damages to others, that any particular claim will be paid or that such insurance will continue to be available at commercially reasonable rates in the future. OPA 90, by imposing potentially unlimited liability upon owners, operators and bareboat charters for certain oil pollution accidents in the United States, made liability insurance more expensive for ship-owners and operators.

Organizational Structure

We hold a majority of the voting stock in each of our subsidiaries. The most significant subsidiaries, as of March 31, 2022, include:

 
Name
  
Country of
Incorporation
  
Ownership
Interest
  
Voting
Interest
Autotransportación y Distribución Logística, S.A. de C.V. (Logistics)
  
Mexico
  
100%
  
100%
TMM Logistics, S.A. de C.V. (Logistics)
  
Mexico
  
100%
  
100%
Transportación Marítima Mexicana, S.A. de C.V. (Product and parcel tankers, offshore vessels, and specialized vessels)
  
Mexico
  
100%
  
100%
Prestadora de Servicios MTR, S.A. de C.V. (Ports)
  
Mexico
  
100%
  
100%
Bimonte, S.A. de C.V. (Ports)
  
Mexico
  
100%
  
100%
Services and Solutions Optimus, S. de R.L. de C.V. (Ports)
  
Mexico
  
100%
  
100%
Administradora Marítima TMM, S.A.P.I. de C.V. (Shipping agencies)
  
Mexico
  
100%
  
100%
TMM Parcel Tankers, S. A. de C. V. (Tanker vessels)
  
Mexico
  
100%
  
100%
Almacenadora de Deposito Moderno, S. A. de C. V. (Warehousing)
  
Mexico
  
100%
  
100%
TMM Almacenadora S.A.P.I. de C.V.(Warehousing)
  
Mexico
  
100%
  
100%
Inmobiliaria Dos Naciones, S. R. L. de C. V. (Shipyard)
  
Mexico
  
100%
  
100%
Operadora Portuaria de Tuxpan, S.A. de C.V. (Ports)
  
Mexico
  
100%
  
100%

Property, Vessels and Equipment

Our principal executive offices are located in Mexico City, and are currently under lease from October 2020 through September 2029. Our business activities in the logistics and transportation fields are conducted with both owned and leased equipment, and, in certain instances, through concessions granted to us by the Mexican government. We were granted the right to operate certain facilities, including certain warehouses, cruise ship terminals and ports, as part of franchises awarded through the Mexican government’s privatization activity. We operate facilities, either through leases or with direct ownership interests in Aguascalientes, Altamira, Cancun, Ciudad del Carmen, Ciudad Juarez, Ciudad de Mexico, Coatzacoalcos, Dos Bocas, Ensenada, Guadalajara, Veracruz, Manzanillo, Monterrey, Nuevo Laredo, Puebla, Reynosa, Tapachula, Tampico, Toluca and Tuxpan. See Item 4. “Information on the Company — Business Overview,” and Notes 9, 10 and 11 to the accompanying Audited Consolidated Financial Statements contained elsewhere herein.

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Grupo TMM, S.A.B. and Subsidiaries

Concession Rights and Related Assets are summarized below:

   
Years Ended December 31,
        
   
2021
    
2020
    
Estimated
Amortization Life
(Years)
  
   
(in thousands of Pesos)
  
API Acapulco
  
$
94,607
    
$
94,607
      
-
  
Accumulated amortization
    
(94,607
)
    
(92,715
)
        
Concession rights and related assets – net
  
$
-
    
$
1,892
          


API Acapulco’s concession to provide port and terminal services at the port of Acapulco expired effective as of June 30, 2021 following the Mexican government’s decision not to renew it and to transfer control of port operations to SEMAR.

Property, Vessels and Equipment are summarized below:

   
Years Ended December 31,
        
   
2021
    
2020
    
Estimated Total
Useful Lives
(Years)
  
   
(in thousands of Pesos)
  
Vessels
  
$
-
    
$
182,055
    
25
  
Shipyard
    
149
      
190
    
40
  
Drydocks (major vessel repairs / mud vessels refurbished in 2021)
    
72,783
      
6,858
    
2.5
  
Buildings and installations
    
116,714
      
286,232
    
20 and 25
  
Warehousing equipment
    
387
      
450
    
10
  
Computer equipment
    
277
      
397
    
3 and 4
  
Terminal equipment
    
23,337
      
24,309
    
10
  
Ground transportation equipment
    
2,564
      
3,730
    
4, 5 and 10
  
Other equipment
    
8,434
      
9,500
        
   
$
224,645
    
$
513,721
        
Land
    
1,199,550
      
1,934,345
        
Construction in progress
    
116,743
      
83,930
        
Total Property, Vessels and Equipment—net
  
$
1,540,938
    
$
2,531,996
        

On March 31, 2014, the Company, through its subsidiary IDN, entered into a “sale and leaseback” arrangement with UNIFIN Financiera, S.A.P.I. de C. V., SOFOM E.N.R. (“UNIFIN”) whereby IDN sold to UNIFIN the floating drydock “ARD-10”, the floating drydock “ABDF 2”, and the towing vessel “Catherine M” for an amount of approximately $55.6 million. At the same time, IDN and UNIFIN entered into a four-year operating leasing arrangement for the three assets in order to maintain their ability to operate and generate income.  In 2018, the Company repurchased the floating drydock “ARD-10” and the towing vessel “Catherine M” from UNIFIN, and IDN extended the operating lease of the floating drydock “ABDF 2” by two years. In April 2020, IDN and UNIFIN entered into an additional four-year extension of the “ABDF 2” operating lease.

Since January 1, 2014, the Company has applied the revaluation model for its assets in accordance with IAS 16 “Property, Plant and Equipment”. The revalued amounts for the majority of its assets are determined at market values calculated by professional appraisers, with the values of certain vessels determined using other valuation techniques. As a result, in December 2021, the Company recognized a cancellation of the revaluation surplus to some of its assets in the amount of $254.0 million, while in December 2020, the Company recognized a gain on revaluation of assets of $314.4 million. See Notes 4.8 and 25 of the Audited Consolidated Financial Statements contained elsewhere herein.

In June 2019, we entered into a financing agreement with PNC Bank, N.A., guaranteed by EXIM Bank, to acquire an RTG crane to replace the the crane used in our automotive sector operations at Aguascalientes. Pursuant to the agreement, the Company received loan proceeds in the amount of US$860,000 (approximately 85% of the purchase price of the crane), at a fixed rate of 4.40% per annum, with semiannual payments of principal and interest, and maturing in July 2024.

45
Grupo TMM, S.A.B. and Subsidiaries

In December 2019, our subsidiary TMM sold its concession to provide tugboat services in the port of Manzanillo to an unrelated third party together with 100% of the shares in its tugboat business subsidiary, Snekke S.A. de C.V., and the harbor tugboat “TMM Colima”.

During the third quarter of 2021, we refurbished three mud vessels (“Redfish 4”, “Beluga 2” and “Go Canopus”) prior to commencement of their operations under a long-term charter contract with PEMEX.

As of December 31, 2021, one RTG crane has been pledged to secure our obligations under the financing agreement with PNC Bank, N.A. In addition, three properties have been pledged to secure our obligations under our lines of credit with Banco Autofin and Banco del Bajio.

On January 8, 2021, the vessel “Olmeca" was sold to the company Athene Shipping Limited, and was delivered in Singapore. The proceeds were used to prepay credit line with Act Maritime LLC for $3.5 million dollars in December 2020.
 
In December 2021, our subsidiary Inmobiliaria TMM, S.A. de C.V. wrote off three properties for a value of $191.0 million.

ITEM 4A.
UNRESOLVED STAFF COMMENTS

None.

ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Executive Overview

We generate our revenues and cash flows by providing our customers with value-added multimodal transportation and logistics services, such as warehousing, storage management, ports and terminals operations, cargo handling and logistics support. Our commercial and strategic alliances allow us to market a full range of services in the context of a total supply chain distribution process. Through such alliances, we have been able to benefit not only from synergies, but also from the operational expertise of our alliance partners, enhancing our own competitiveness.

Our operating results are generally affected by a variety of factors, including macroeconomic conditions, fluctuations in exchange rates, operating performance of our business units, changes in applicable regulations and fluctuations in oil prices. The effect of changes in these factors impacts our revenues and operating results.

Over the last few years, we have made and continue to make significant changes to our business, including:


 ■
COVID-19 crisis actions. In response to the recent financial instability resulting from the COVID-19 pandemic, we have taken a number of actions to strengthen our business, ensure the integrity of our financial reporting and audit processes, and protect the health and safety of our employees and the communities in which we operate.  See Item 4. “Information on the Company — Recent Developments – COVID-19 Pandemic” and “Information on the Company – Business Strategy.”


■
Changes in management. We have recently made various changes to our senior management team.  Effective September 1, 2020, Mrs. Vanessa Serrano Cuevas assumed the role of Chief Executive Officer and Mrs. Flor de María Cañaveral Pedrero assumed the role of Deputy Chief Executive Officer.  Most recently, effective January 4, 2021, Mr. Luis Rodolfo Capitanachi Dagdug assumed the role of Chief Financial Officer and effective March 1, 2021, Mr. Axel Xavier Vera de Castillo assumed the role of Chief Information Officer. Also Mrs. Christian Venus Vázquez Coria, Mr. Gerardo Meza Vázquez, Mr. Luis Manuel Ocejo Rodríguez and Mr. Alejandro Romero Rodríguez effective March 2022, assumed the roles of Legal Manager, Audit Manager, Strategic Projects Director and Maritime Operations Director, respectively.


■
Updating our digital technology platforms: We continue to improve our technology and information systems capabilities through our Digitalization strategy. Supported by integrated cloud-based platforms, we have developed specific software applications for each business unit, and have improved our telecommunications connectivity and internet speed across all locations to ensure business continuity on and off site. The efforts of our internal information technology employees have been fundamental to this transformation, working in close collaboration with our business partners to keep our operations running. As a result of these efforts, today our companies are aligned in a digital information platform that will enable them to operate efficiently, effectively, flexibly and with an eye toward future changes impacting our businesses and our customers. Furthermore, we are continuously improving our financial systems according to SAP updates and business operational changes, in order to obtain consolidated reports in a faster and more reliable way. See Item 4. “Information on the Company — Systems and Technology.”

46
Grupo TMM, S.A.B. and Subsidiaries


 ■
Termination of Tugboats Business. In December 2019, we exited the harbor towing business following the sale by our subsidiary TMM of its concession to provide tugboat services in the port of Manzanillo to an unrelated third party.  As part of the transaction, TMM also sold 100% of the shares in its tugboat business subsidiary, Snekke S.A. de C.V., and the harbor tugboat “TMM Colima”.  See Item 4. “Information on the Company — Recent Developments – Termination of Tugboats Business in the Port of Manzanillo.”


■
Acquisiton of an RTG Crane. In June 2019, we entered into a financial agreement with PNC Bank, N.A. , guaranteed by EXIM Bank, to acquire an RTG crane to replace the the crane used in our operation for the automotive industry at Aguascalientes. See Item 4. “Information on the Company — Recent Developments – RTG Crane Acquisition.”


■
Enhancing our Maritime Operations: We have strengthened and streamlined our Maritime Operations in recent years, developing the business into our most profitable segment. We remain focused on expanding our Maritime Operations to add specialized vessels to our fleet in order to meet market requirements for new generation vessels with higher-rated and deeper-water capabilities. As part of this strategy, as of August 2021, we entered into a long-term contract with PEMEX to operate three specialized vessels known as “mud vessels”. In addition, we have continued our efforts to diversify our customer base, as well as implemented a strategic cost reduction plan to offset some of the instability in the oil industry. See Item 4. “Information on the Company — Business Strategy – Expansion and Improvement of our Maritime Operations.”


■
Developing our shipyard operations in the port of Tampico: We continue to develop our shipyard operations in the port of Tampico, where we provide ship repair and drydock services to more than 30 vessels per year, of which approximately 25% have been vessels we operate, which has reduced the vessel maintenance and repair costs for this fleet. In addition, we recently entered into a construction agreement with Westport Orange Shipyard to build a new 6,600 metric tons floating drydock to increase the capacity of shipyard operations.  The project is supported by a 7-year financing agreement with Amegy Bank (Zions Bancorporation N.A.), guaranteed by EXIM Bank, for up to 85% of the purchase price of the floating drydock. In the medium term, we plan to build a fixed drydock with the capacity to receive larger vessels as well as to be able to build vessels and marine structures at the shipyard, enabling us to compete to satisfy the expected demands of PEMEX and future customers for new offshore vessels. See Item 4. “Information on the Company — Business Strategy – Expansion and Improvement of our Maritime Operations.”


■
Developing a liquid oils terminal at the port of Tuxpan: We continue developing storage and transportation infrastructure to serve the growing demand for refined products, including through our acquisition of 100% of the shares of Services and Solutions Optimus S. de R.L. de C.V., which is developing a liquid oils terminal at the port of Tuxpan,. The Mexican Energy Reforms include refined products liberalization, which should result in new mid-stream infrastructure to meet the demand for gasoline and diesel imports. The liquid oils terminal should help us capitalize on current and future demand for gasoline and diesel imports, which currently account for more than 70% of domestic consumption. See Item 4. “Information on the Company — Business Strategy – Expansion of our Ports and Terminals Operations.”


■
Partnership diversification: Through our wholly owned subsidiary, Caoba Energía S de R.L. de C.V. we entered into an association with Petrosoluciones en Firme S.A.P.I. de C.V. to develop a project for the commercialization of oil/petroleum derivatives. We also entered into a partnership with EGI Oil & Gas, S.A. de C.V. through our wholly owned subsidiary, Trinidad Energy, S.A. de C.V., to provide state-of-the-art pipelines for the construction and maintenance of the hydrocarbons sector.

47
Grupo TMM, S.A.B. and Subsidiaries


 ■
Reducing our corporate overhead: Over the last few years, we have significantly reduced our operating costs by reducing our corporate executive headcount through the elimination of redundant functions and the transfer of certain employees to other business areas within the Company. We also relocated our corporate headquarters to a new location in Mexico City, reducing our lease expenses and other corporate overhead costs.  For 2022, we aim to optimize the size of our corporate staff as necessary to implement our business strategy.


■
Sale of certain subsidiaries: In recent years we have sold certain non-strategic subsidiaries in an effort to streamline our operations and reduce operating costs. During 2019, we sold 100% of the shares of the subsidiaries Bamorau Servicios S.A.P.I. de C.V. and Snekke S.A. de C.V. related to the tugboats business to unrelated parties for a total gain on sale of $279.7 million. In 2020, we sold 100% of the shares of our subsidiaries Siremirta Corporate, S.A. de C.V., Ricalme Services, S.A. de C.V., Dogoubert, S.A.P.I. de C.V. and Judsony, S.A.P.I. de C.V. to an unrelated third party for a total gain on sale of $451,000. We did not sell any subsidiaries in 2021.


■
Warehousing expansion: On February 4, 2022, the new airport in Mexico City (Aeropuerto Internacional Felipe Angeles-AIFA) awarded TMM Almacenadora S.A.P.I. de C.V., our wholly owned subsidiary, a 10-year lease to operate a bonded warehouse of 5,184 square meters within the airport’s cargo terminal. This expansion of our warehousing operations is in keeping with our strategy to diversify and expand our business lines beyond our traditional core segments.


■
Termination of port and terminal operations at the Port of Acapulco: Since 1996, we have operated the port of Acapulco in association with SSA Mexico through a concession granted by the Mexican government. The concession was subject to renewal in June 2021, at which time the López Obrador administration decided that the public interest would be best served by transitioning Mexican port operations to the oversight and control of SEMAR. As a result, we terminated our port and terminal operations in Acapulco concurrently with the expiration of our concession on June 21, 2021.

Operating Results

The following discussion should be read in conjunction with, and is qualified in its entirety by reference to our Financial Statements and the notes thereto appearing elsewhere in this Annual Report. Our Financial Statements have been prepared in accordance with IFRS, which differ in certain respects from U.S. GAAP.

General

Set forth below is a summary of the results of operations:

   
Year Ended December 31,
  
   
2021
    
2020
    
2019
  
   
(in millions of Pesos)
  
Consolidated Transportation Revenues
                  
Maritime Operations
  
$
964.1
    
$
751.2
    
$
868.5
  
Ports and Terminals Operations
    
25.3
      
69.3
      
169.8
  
Logistics Operations
    
208.8
      
243.8
      
265.5
  
Warehousing Operations
    
153.5
      
139.0
      
171.9
  
Total
  
$
1,351.7
    
$
1,203.3
    
$
1,475.7
  
(Loss) Income on Transportation
                        
Maritime Operations
  
$
73.4
    
$
74.5
    
$
150.0
  
Ports and Terminals Operations
    
(35.7
)
    
(20.8
)
    
31.8
  
Logistics Operations
    
15.9
      
3.6
      
13.6
  
Warehousing Operations
    
(16.0
)
    
(16.5
)
    
(2.4
)
Shared corporate costs
    
(78.3
)
    
(112.4
)
    
(214.1
)
Total
  
$
(40.7
)
  
$
(71.6
)
  
$
(21.1
)

48
Grupo TMM, S.A.B. and Subsidiaries

Fiscal Year ended December 31, 2021 Compared to Fiscal Year ended December 31, 2020

Revenues from operations for the year ended December 31, 2021 were $1,351.7 million compared to $1,203.3 million for the year ended December 31, 2020.

   
Consolidated Transportation Revenues
(in millions of Pesos)
Years Ended December 31,
  
   
2021
    
% of Net
Revenues
    
2020
    
% of Net
Revenues
    
Y2021 vs.
Y2020
% Change
  
Maritime Operations          
  
$
964.1
      
71.3
%
  
$
751.2
      
62.4
%
    
28.3
%
Ports and Terminals Operations          
    
25.3
      
1.9
%
    
69.3
      
5.8
%
    
(63.5
)%
Logistics Operations          
    
208.8
      
15.4
%
    
243.8
      
20.2
%
    
(14.4
)%
Warehousing Operations          
    
153.5
      
11.4
%
    
139.0
      
11.6
%
    
10.4
%
Total          
  
$
1,351.7
      
100.0
%
  
$
1,203.3
      
100.0
%
    
12.3
%


Maritime Operations

Maritime Operations’ revenues increased 28.3% to $964.1 million in 2021 compared to $751.2 million in 2020 and represented 71.3% of our total revenues. The increase in revenue is mainly attributable to the August 2021 commencement of operations of three specialized mud vessels under long-term charters to PEMEX, an increase in the number of calls in the bulk carrier segment, as well as in the number of jobs in the shipyard derived from the gradual recovery of the industry from the downturn precipitated by the outbreak of the COVID-19 pandemic.

Ports and Terminals Operations

Ports and Terminals Operations’ revenues decreased 63.5% to $25.3 million for the year ended December 31, 2021 compared to $69.3 million for the year ended December 31, 2020, and accounted for 1.9% of total revenues. Results in fiscal year 2021 were still affected by the prolonged impact of the COVID-19 pandemic, which continued to generate negative impacts worldwide, such as the cancellation of cruise ship arrivals. Results in 2021 were also negatively affected by the Mexican government’s decision not to renew our concession to operate the port of Acapulco.

Logistics Operations

Logistics Operations’ revenues decreased 14.4% to $208.8 million in 2021 compared to $243.8 million in 2020 and accounted for 15.4% of total revenues. This decrease was attributable to a series of negative events affecting logistics operations globally, such as the shortage of shipping containers, which mainly affected the operations in our maintenance and repair of containers segment.

Warehousing Operations

Warehousing Operations’ revenues increased 10.4% to $153.5 million in 2021 compared to $139.0 million in 2020 and accounted for 11.4% of total revenues. The increase in 2021 stemmed primarily from a new short-term contract with a major retailer in the country.

 (Loss) Income on Transportation

 (Loss) income on transportation reflects revenues on transportation less operating costs and expenses. References to operating income (loss) in this Annual Report refer to income (loss) on transportation, plus/minus the effect of other income (expenses) as presented in the Audited Consolidated Financial Statements included elsewhere in this Annual Report. Total costs and expenses for the year ended December 31, 2021 increased 9.2% to $1,392.4 million from $1,274.8 million for the year ended December 31, 2020. This increase was mainly due to an increase of 80.9%, or $252.9 million, in property leasing and equipment. The increase in leasing costs was due to the rental of specialized vessels for use in our maritime operations following the disposal of our owned vessels. Operating loss decreased to $210.1 million for the year ended December 31, 2021 compared to an operating loss of $ 328.8 million for the year ended December 31, 2020, primarily due to a reduction in non-recurring expenses, including a decrease in expenses related to the termination of the building lease for our former corporate headquarters and a decrease in corporate expenses related to an organizational restructuring.

49
Grupo TMM, S.A.B. and Subsidiaries

The following table sets forth information concerning the Company’s operating (loss) income on transportation by business segment for the years ended December 31, 2021 and 2020, respectively.

   
Grupo TMM Operations
(Loss) income on Transportation (1)
(in millions of Pesos)
Year Ended December 31,
  
   
2021
    
2020
    
Y2021 vs.
Y2020
% Change
  
Maritime Operations
  
$
73.4
    
$
74.5
      
(1.5
)%
Ports and Terminals Operations
    
(35.7
)
    
(20.8
)
    
(71.6
)%
Logistics Operations
    
15.9
      
3.6
      
341.7
%
Warehousing Operations
    
(16.0
)
    
(16.5
)
    
3.0
%
Shared Corporate Costs
    
(78.3
)
    
(112.4
)
    
30.3
%
Total
  
$
(40.7
)
  
$
(71.6
)
    
43.2
%


(1)
To better reflect Grupo TMM’s corporate costs, human resources and information technology costs are allocated separately to each business unit in accordance with their use. Income on transportation includes the following allocated total administrative costs: In 2021: $13.6 million in Ports and Terminals Operations, $13.6 million in Maritime Operations and $78.3 million in shared corporate costs. In 2020: $0.5 million in Ports and Terminals Operations, $9.5 million in Maritime Operations and $112.4 million in shared corporate costs.

Maritime Operations

Maritime Operations’ operating income for the year ended December 31, 2021 decreased to $73.4 million compared to $74.5 million for the year ended December 31, 2020, after deducting $13.6 million of administrative costs in 2021 compared with $9.5 million of such costs in 2020. The decrease is mainly due to less volume transported in parcel tankers, partially offset by the August 2021 commencement of operations of the three specialized mud vessels on long-term charter to PEMEX, an increase in the number of calls in the bulk carrier segment, as well as in the number of jobs in the shipyard derived from the gradual recovery of the industry from the downturn precipitated by the outbreak of the COVID-19 pandemic.

Ports and Terminals Operations

Ports and Terminals Operations’ registered an operating loss for the year ended December 31, 2021 of $35.7 million compared to a loss of $20.8 million for the year ended December 31, 2020, after deducting $13.6 million of administrative costs in 2021 compared to $0.5 million of such costs in 2020. The increase in losses was primarily attributable to the lingering impact of the COVID-19 pandemic, which caused the cancellation of cruise ship arrivals and contributed to supply disruptions and shortages of key materials such as shipping containers. Results in 2021 were also negatively affected by the Mexican government’s decision not to renew our concession to operate the port of Acapulco.

Logistics Operations

Logistics Operations operating income for the year ended December 31, 2021 increased to $15.9 million, compared to $3.6 million for the year ended December 31, 2020. This increase was mainly due to increased activity in our intermodal terminal and automotive business due to the gradual recovery in this sector.

50
Grupo TMM, S.A.B. and Subsidiaries

Warehousing Operations

Warehousing Operations’ operating loss in the year ended December 31, 2021 decreased to $16.0 million, compared to $16.5 million for the year ended December 31, 2020.

Net Financing Cost

   
(in millions of Pesos)
Year Ended December 31,
  
   
2021
    
2020
    
Y2021
vs.
Y2020
% Change
  
Interest income
  
$
0.3
    
$
7.1
      
(95.8
)%
Interest expense
                        
Interest in leases
  
$
34.2
    
$
33.6
      
1.8
%
Interest on other loans
    
25.0
      
38.6
      
(35.2
)%
Amortization of expenses associated with other loans
    
0.2
      
1.5
      
(86.7
)%
Other financial expenses
    
3.2
      
2.0
      
60.0
%
Subtotal
  
$
62.6
    
$
75.7
      
(17.3
)%
Gain (loss) on exchange, net
  
$
 3.2    
$
(25.1 )
    
(112.7
)%
Net financing cost
  
$
59.1
    
$
93.7
      
(36.9
)%

Net financing cost recognized during the year ended December 31, 2021 was $59.1 million compared to $93.7 million incurred during the year ended December 31, 2020. The net financing cost in 2021 included net exchange gain of $3.2 million and in 2020 included a net exchange loss of $25.1 million as a result of fluctuations in the relative value of the Peso against the Dollar. Interest expense decreased $6.2 million in 2021 mainly due to repayment of the balance of the debt associated with the vessel “Olmeca”.

Other (Expenses) income – Net

   
(in millions of Pesos)
Year Ended December 31,
  
   
2021
    
2020
    
Y2021
vs.
Y2020
% Change
  
Other (expenses) income – net
  
$
(169.3
)
  
$
(257.2
)
    
(34.2
)%

Other (expenses) income – net for the year ended December 31, 2021 was $(169.3) million, including $130.0 million of assets written off and $38.5 millon of expenses related to the cancellation of the building lease of our former corporate headquarters. Other income – net for the year ended December 31, 2020 was $(257.2) million, including $113.5 million of expenses related to the cancellation of the building lease of our former corporate headquarters, $98.9 million of expenses associated with the write-off of accounts receivable, $31.8 million of project cancellation expenses, and $11.1 million of net expenses associated with the recovery of taxes paid in prior years.

Income Tax Expense

   
(in millions of Pesos)
Year Ended December 31,
  
   
2021
    
2020
    
Y2021
vs.
Y2020
% Change
  
Income tax gain (expense)
  
$
21.1
    
$
19.3
      
9.3
%

In the year ended December 31, 2021, income tax expenses of $7.0 million were offset by deferred income tax benefit of $28.2 million, resulting in a gain from income tax of $21.1 million compared to a provision for income tax expense of $19.3 million in the year ended December 31, 2020. In the year ended December 31, 2020, income tax expenses of $10.9 million were offset by deferred income tax benefit of $30.2 million, resulting in a gain from income tax of $19.3 million compared to a provision for income tax expense of $64.6 million in the year ended December 31, 2019.

51
Grupo TMM, S.A.B. and Subsidiaries

Non-controlling Interest

   
(in millions of Pesos)
Year Ended December 31,
  
   
2021
    
2020
    
Y2021
vs.
Y2020
% Change
  
Non-controlling interest
  
$
(5.5
)
  
$
(5.0
)
    
10.0
%

Non-controlling interest registered a loss of $5.5 million for the year ended December 31, 2021, in comparison to a loss of $5.0 million for the year ended December 31, 2020. This result is attributable to the termination of our operations at API Acapulco in association with SSA México following the expiration of our concession at the port of Acapulco.

Net (Loss) Income for the year attributable to stockholders of Grupo TMM

   
(in millions of Pesos)
Year Ended December 31,
  
   
2021
    
2020
    
Y2021
vs.
Y2020
% Change
  
Net (Loss) Income for the year attributable to stockholders of Grupo TMM
  
$
(242.6
)
  
$
(398.2
)
    
(39.1
)%

In the year ended December 31, 2021, we recognized a net loss of $242.6 million, or $2.4 per Share. In the year ended December 31, 2020, we recognized a net loss of $398.2 million, or $3.9 per Share.

Fiscal Year ended December 31, 2020 Compared to Fiscal Year ended December 31, 2019

For a comparison of our operating results for the fiscal year ended December 31, 2020 to our operating results for the fiscal year ended December 31, 2019, see Item 5. “Operating and Financial Review and Prospects—Fiscal Year ended December 31, 2020 Compared to Fiscal Year ended December 31, 2019” in our Annual Report on Form 20-F for the fiscal year ended December 31, 2020.

Foreign Currency Risk

Historically, a majority of our revenues have been denominated in U.S. dollars, while the majority of our costs and expenses have been denominated in Pesos. As such, we are exposed to foreign currency risk and may occasionally use currency derivatives to manage alternating levels of exposure. These derivatives allow us to offset an increase in operating and/or administrative expenses arising from foreign currency appreciation or depreciation against the U.S. dollar.

Our income from operations may therefore be materially affected by variances in the exchange rate between the U.S. dollar and the Mexican Peso.  Mexican Pesos historically have been subject to greater risk of devaluation and have tended to depreciate against the U.S. dollar.  Given that a large proportion of our revenues are denominated in U.S. dollars, we have sought to reduce our exposure to foreign currency risk by holding a portion of our debt in U.S. dollars. Currently, approximately 41.2% of our indebtedness is denominated in U.S. dollars, including liabilities associated with long-term operating leases.

52
Grupo TMM, S.A.B. and Subsidiaries

We believe that our strategy of holding a portion of our debt as U.S. dollar-denominated debt will allow us to effectively manage our foreign currency risk without the use of currency derivatives or other hedging instruments. However, we have in the past, and may from time to time in the future, enter into currency derivatives denominated in Mexican Pesos or other relevant currencies to attempt to manage our foreign currency risk. These derivatives should allow us to offset an increase in operating and/or administrative expenses arising from foreign currency appreciation or depreciation against the U.S. dollar. See Item 11. “Quantitative and Qualitative Disclosures About Market Risk — Foreign Currency Risk.”

Liquidity and Capital Resources

Our business is capital intensive and requires ongoing expenditures for, among other things, improvements to ports and terminals, infrastructure and technology, capital expenditures for vessels and other equipment, leases and repair of equipment and maintenance of our vessels. Our principal sources of liquidity consist of cash flows from operations, existing cash balances, sales of assets and debt financing.

Grupo TMM is primarily a holding company and conducts the majority of its operations, and holds a substantial portion of its operating assets through numerous direct and indirect subsidiaries. As a result, it relies on income from dividends and fees related to administrative services provided from its operating subsidiaries for its operating income, including the funds necessary to service its indebtedness.

In addition, the Company notes that its financial statements present its debt obligations and liabilities associated with our long-term operating leases on a consolidated basis; however 68.5% of the Company’s debt as of December 2021 was held directly by its subsidiaries, each of which services its own debt out of its operating income. Management believes that these factors will enable the Company to remain current in its debt repayments notwithstanding the Mexican Law restriction on the distribution of profits by subsidiaries described below.

As of December 31, 2021, the debt obligations and liabilities associated with our long-term operating leases at each of the Company’s subsidiaries were as follows:


  
(in millions of Pesos)
  
Almacenadora de Deposito Moderno, S.A. de C.V.
  
$
269.0
  
Grupo TMM, S.A.B.
    
140.4
  
TMM Logistics, S.A. de C.V.
    
100.6
  
TMM Dirección Corporativa, S.A. de C.V.
    
8.5
  
Inmobiliaria Dos Naciones, S. de R. L. de C.V.
    
14.1
  
Total
  
$
532.6
  

Under Mexican law, dividends from our subsidiaries, including a pro rata share of the available proceeds of our joint ventures, may be distributed only when the shareholders of such companies have approved the corresponding financial information, and none of our subsidiaries or joint venture companies can distribute dividends to us until losses incurred by such subsidiary have been recouped. In addition, at least 5% of profits must be separated to create a reserve (fondo de reserva) until such reserve is equal to 20% of the aggregate value of such subsidiary’s capital stock (as calculated based on the actual nominal subscription price received by such subsidiary for all issued shares that are outstanding at the time).

As of March 31, 2022, our total debt amounted to $488.7 million, which includes $95.3 million of bank debt owed to several different banks and financial institutions, $35.8 million owed to non-institutional lenders and $357.6 million of liabilities associated with our long-term operating leases; of this debt, $184.1 million is short-term debt, and $304.6 million is long-term debt. Under IFRS, transaction costs in connection with financings are required to be presented as a part of debt. Further, following the January 1, 2019 adoption of IFRS 16, liabilities associated with operating leases are presented as a part of debt unless the lease term is for 12 months or less or the underlying asset is of low value.

As of December 31, 2021, our total debt amounted to $532.6 million, which includes $104.2 million of bank debt owed to several different banks and financial institutions, $18.5 million owed to non-institutional lenders and $409.9 million of liabilities associated with our long-term operating leases, primarily the lease of our corporate headquarters; of this debt, $317.6 million is short-term debt, and $354.1 million is long-term debt.

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Grupo TMM, S.A.B. and Subsidiaries

As of December 31, 2021 and March 31, 2022, we were in compliance with all of the restrictive covenants contained in our financing agreements.

Our total shareholders’ equity in 2021, including non-controlling interest in consolidated subsidiaries, was $1,819.1 million, resulting in a debt-to-equity ratio of 0.37.

On January 11, 2008, in order to refinance the acquisition of ADEMSA, we closed a financing agreement in the amount of US$8.5 million (approximately $160.4 million) with a term of seven years, at a fixed rate of 8.01% with semi-annual payments of principal starting on January 2010 and semi-annual interests payments. We refinanced the payment schedule to extend the maturity of this line of credit to December 2019, which was fully paid at maturity.

In November 2013, we obtained (through our subsidiary Transportación Marítima Mexicana, S.A. de C.V.) a line of credit in US dollars of up to US$10.8 million (approximately $203.8 million) to finance the acquisition of the vessel “Subsea 88” through a capital lease at a fixed rate with monthly principal and interest payments. In November 2018, the vessel “Subsea 88” suffered an onboard fire, rendering it inoperable.  We reported the incident to our insurance companies, Mexican authorities and the financial institution that provided the capital lease in respect of the vessel. In June 2019, we received the insurance proceeds for the loss of the vessel, wrote off the value of the asset and terminated the associated capital lease. See “—Capital Leases” below.

 As of March 31, 2022, we had net working capital (current assets less current liabilities) of $158.4 million. We had net working capital of $119.7 million, $(220.7) million and $476.6 million, as of December 31, 2021, December 31, 2020, and December 31, 2019, respectively. The increase in net working capital from December 31, 2021 to March 31, 2022 was primarily attributable to an increase in trade receivables associated with our shipyard business and the operation of three specialized mud vessels on long-term charters to PEMEX. The increase in net working capital from December 31, 2020 to December 31, 2021 was mainly attributable to the recognition of “non-current assets available for sale” and the commencement of operations in August 2021 of the three specialized mud vessels. The decrease in net working capital from December 31, 2019 to December 31, 2020 was mainly attributable to a significant downturn in our maritime and logistics transportation business, as well as the ongoing adverse effects of the COVID-19 pandemic. Although we continue to look for ways to improve our debt profile in order to reduce our financing costs and improve the flows available for investment, we believe our financial resources, including the cash expected to be generated by our subsidiaries, is sufficient to meet our present liquidity and working capital needs.  See “—Executive Overview – COVID 19 crisis actions” above.

Information on Cash Flows

Summary cash flow data for the years ended December 31, 2021, 2020, and 2019 is as follows:

   
Years Ended December 31,
 
   
2021
   
2020
   
2019
 
   
(in million of Pesos)
  
Operating activities
  
$
(78.1
)
  
$
(212.6
)
  
$
(33.7
)
Investing activities
    
21.5
      
13.3
      
573.9
  
Financing activities
    
0.8
      
(205.4
)
    
(336.2
)
Currency exchange effect on cash
    
(9.9
)
    
33.3
      
(6.1
)
Net (decrease) increase in cash and cash equivalents
    
(65.7
)
    
(371.4
)
    
197.9
  
Cash and cash equivalents at beginning of year
    
105.3
      
476.7
      
278.8
  
Cash and cash equivalents at end of year
  
$
39.6
    
$
105.3
    
$
476.7
  

For the year ended December 31, 2021, our consolidated cash position decreased by approximately $65.7 million from the year ended December 31, 2020. This decrease is mainly attributable to the payment made for the refurbishment of the three mud vessels and the increase in accounts receivable related to commencement of their operations.

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Grupo TMM, S.A.B. and Subsidiaries

For the year ended December 31, 2020, our consolidated cash position decreased by approximately $371.4 million from the year ended December 31, 2019. This decrease is mainly attributable to the significant downturn in the maritime and logistics transportation and energy industries due to the drop in oil prices since 2019, as well as the ongoing adverse effects of the COVID-19 pandemic.
 
Our Cash Flows from Operating Activities
 
Net cash flows used in operating activities amounted to $78.1 million in the year ended December 31, 2021 compared to $212.6 million used in the year ended December 31, 2020. The decrease is primarily due to the August 2021 commencement of operations of the three specialized vessels called mud vessels, an increase in the number of calls in the bulk carrier segment, as well as an increase in the number of works performed in the shipyard resulting from the gradual recovery of the industry.
 
Net cash flows used in operating activities amounted to $212.6 million in the year ended December 31, 2020 compared to $33.7 million used in the year ended December 31, 2019. The decrease is primarily due to the reduction in operating activity in API Acapulco, passenger’s mobility restrictions caused by the COVID-19 pandemic, and the drop in export activity, as well as the reduced operating results in our shipping agencies business due to the cancellation of cruise ship calls.
 
The following table summarizes cash flows from operating activities for the periods indicated:

   
Years Ended December 31,
  
   
2021
    
2020
    
2019
  
   
(in million of Pesos)
  
(Loss) income before provision for income taxes
  
$
(269.2
)
  
$
(422.5
)
  
$
95.9
  
Depreciation and amortization and other amortization
    
117.4
      
161.2
      
184.6
  
Loss (gain) on sale of fixed assets—net
    
44.7
      
(0.2
)
    
(23.4
)
Sale of subsidiaries
    
-
      
(0.5
)
    
(279.7
)
Provision for interests on debt
    
59.2
      
72.1
      
140.1
  
Investment interests
    
(0.3
)
    
(7.1
)
    
(5.1
)
Loss (gain) from exchange differences
    
4.5
      
43.9
      
(26.4
)
Total changes in operating assets and liabilities
  
(34.4)
    
(59.5)
    
(119.7)
  
Net cash provided by (used in) operating activities
  
$
(78.1
)
  
$
(212.6
)
  
$
(33.7
)
 
Our Cash Flows from Investing Activities
 
Net cash provided by investing activities for the year ended December 31, 2021 was $21.5 million, which included $83.5 million generated from the sale of the chemical tanker “Olmeca” and $13.2 from other assets, which was partially offset by the use of $75.5 million for investments in projects and operating equipment. Net cash provided by investing activities for the year ended December 31, 2020 was $13.3 million, which included $34.6 million generated from the sale of property, operating equipment and subsidiaries, which was partially offset by the use of $28.4 million for investments in projects and operating equipment. Net cash provided by investing activities for the year ended December 31, 2019 was $573.9 million, which included $617.1 million generated from the sale of property, operating equipment and subsidiaries, which was partially offset by the use of $48.3 million for investments in projects and operating equipment.
 
See “— Capital Expenditures and Divestitures” below for further details of capital expenditures and divestitures relating to the years ended December 31, 2021, 2020, and 2019, respectively.

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Grupo TMM, S.A.B. and Subsidiaries

Our Cash Flows from Financing Activities
 
For the year ended December 31, 2021, cash generated from financing activities amounted to $0.8 million, which resulted primarily from $62.6 million of proceeds from borrowings, partially offset by the payment of $52.3 million of debt under existing loan facilities and operating leases and $9.5 million of interest payments.
 
For the year ended December 31, 2020, cash used in financing activities amounted to $205.4 million, which resulted primarily from the payment of debt under existing loan facilities and operating leases.
 
For the year ended December 31, 2019, cash used in financing activities amounted to $336.2 million, which resulted primarily from the payment of debt under existing loan facilities and operating leases.
 
Business Plan
 
We are focused on improving all our business segments through through a series of financial and commercial strategies, as well as maintaining efficient and cost-effective operations and strengthening our balance sheet, allowing us to better develop and implement our projects. These projects seek to combine the elements that can enable us to capture the opportunities presented by the Mexican Energy Reforms and other recent industry developments, with the ultimate goal of creating value for our shareholders.
 
Maritime Operations. We seek to capitalize on our steady and proven vessels management and operation expertise to increase our customer base and expand our services in the offshore operations and other maritime transportation segments such as tankers and bulk cargo vessels, taking advantage of the opportunities presented by new participants in the Mexican market.  We are also seeking to capitalize on these opportunities by expanding and diversifying our shipyard services. To this end, we recently entered into a construction agreement with Westport Orange Shipyard to build a new 6,600 metric tons floating drydock to increase the capacity of our shipyard operations. The project is supported by a 7-year financing agreement entered into with Amegy Bank (Zions Bancorporation N.A.), guaranteed by EXIM Bank, to finance up to 85% of the purchase price of the floating drydock, and is expected to be completed during the first quarter of 2023.  In the medium term, we plan to build a fixed drydock with the capacity to receive larger vessels (150-220 meters in length) as well as to be able to build marine structures, enabling us to compete to satisfy the expected demands of PEMEX and future customers.
 
Ports and Terminals Operations. We intend to continue to take advantage of our unique experience, our strategically located assets and the existing investment opportunities in the midstream oil and gas sector, to develop liquids oil terminals that will help reduce the current gap in infrastructure and anticipate growing demand for gasoline and diesel imports, which currently account for more than 70% of Mexico’s domestic consumption. In this regard, we intend to keep moving forward with the development of storage and transportation infrastructure to serve the growing demand for refined products from Tuxpan to the central region of Mexico as well as to develop logistic facilities fitted with modern equipment and suitable warehouses for high quality, fast and safe handling and storage of goods such as lubes, fertilizers and grains. The port of Tuxpan is the main port of entry for hydrocarbon imports and the closest port to Mexico City and the central area of Mexico.
 
Logistics Operations. As part of our commitment to ensure first-class maintenance and repair and increase our volume of operations, we plan to revamp our facilities, diversify and widen our services through strategic alliances or partnerships through which we can also develop the automotive, steel and food logistics market in all areas with emphasis on “just-in-time” inventory planning, subassembly and management of cars and container yards whilst improving our processes.
 
Warehousing Operations. We are working to improve our bonded warehousing services, import duties service and the development of our strategic warehousing services to provide integrated logistics services to our customers, encompassing bonded warehousing services, inventory management, value-added services, and delivery to the end consumer.

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Grupo TMM, S.A.B. and Subsidiaries

Diversification of current operations: We are working through strategic alliances to develop new lines of business that will focus in the first stage on the commercialization of petroleum products and commodities in general, allowing us to provide our customers with services across the full logistics chain in the energy sector.
 
Corporate Expenses. As part of our continuous improvement plan, we aim to optimize the size of our corporate staff consistent with the implementation of the plans described above.
 
Capital Expenditures and Divestitures
 
The following tables set forth our principal capital expenditures and divestitures during the last three years:

Our Principal Capital Expenditures for the Last Three Years
(in millions of Pesos)
   
Years Ended December 31,
  
   
2021 (a)
    
2020 (b)
    
2019 (c)
  
Capital Expenditures by Segment:
Ports and Terminals Operations
  
$
11.7
    
$
5.1
    
$
24.1
  
Maritime Operations
    
63.7
      
7.6
      
12.0
  
Logistics Operations
    
0.1
      
0.1
      
0.6
  
Warehousing Operations
    
-
      
4.1
      
0.5
  
Corporate
  
-
    
11.5
    
11.1
  
Total
  
$
75.5
    
$
28.4
    
$
48.3
  
(a)
In 2021, capital expenditures included: (i) Ports and Terminals Operations: $11.7 million in acquisition and equipment improvements and construction in process for the expansion and maintenance of port and terminal facilities; and (ii) Maritime Operations: $63.7 million in acquisition and equipment improvements.
(b)
In 2020, capital expenditures included: (i) Ports and Terminals Operations: $5.1 million in acquisition and equipment improvements and construction in process for the expansion and maintenance of port and terminal facilities; (ii) Maritime Operations: $7.6 million in acquisition and equipment improvements; and (iii) Corporate: $11.5 million in fixed assets and other strategic corporate projects.
(c)
In 2019, capital expenditures included: (i) Ports and Terminals Operations: $24.1 million in acquisition and equipment improvements and construction in process for the expansion and maintenance of port and terminal facilities; (ii) Maritime Operations: $12.0 million in acquisition and equipment improvements; and (iii) Corporate: $11.1 million in fixed assets and other strategic corporate projects.
 
Principal Capital Divestitures for the Last Three Years
 (in millions of Pesos)

   
Years Ended December 31,
  
   
2021 (a)
    
2020 (b)
    
2019 (c)
  
Capital Divestitures:
                  
Sale of shares of subsidiaries
  
$
-
    
$
34.0
    
$
600.9
  
Other assets
  
96.7
    
0.6
    
16.2
  
Total
  
$
96.7
    
$
34.6
    
$
617.1
  
(a)
In 2021, capital divestitures included $96.7 million from the sale of a vessel (“Buque Olmeca”).
(b)
In 2020, capital divestitures included $0.6 million from the sale of other assets.
(c)
In 2019, capital divestitures included $16.2 million from the sale of a vessel (“Buque SMR Manzanillo”).
 
Capital Leases
 
As of December 31, 2021, the Company had no capital lease obligation.

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Grupo TMM, S.A.B. and Subsidiaries

From December 31, 2021 to the date of this Annual Report, the Company has not incurred any capital lease obligations.
 
In November 2013, we entered into an agreement (through our subsidiary Transportación Marítima Mexicana, S.A. de C.V.) with “FTAI Subsea 88 Ltd”, a subsidiary of Fortress, to obtain a line of credit for 10 years in US dollars of up to US$10.8 million to finance the acquisition of the vessel “Subsea 88” through a capital lease, at a fixed rate of 15.9% per annum, with monthly principal and interest payments. In November 2018, the vessel “Subsea 88” suffered an onboard fire, rendering it inoperable. We reported the incident to our insurance companies, Mexican authorities and the financial institution that provided the capital lease in respect of the vessel. In June 2019, we received the insurance proceeds for the loss of the vessel, wrote off the value of the asset and terminated the associated capital lease.
 
       Going forward, in order to meet our short-term obligations as well as carry out our projects, we are considering the sale of certain assets which are already reclassified to current assets, coupled with our strategy to build alliances and strategic partnerships, and obtaining sources of financing to enable us to realize our projects.
 
Transportation Equipment and Other Operating Leases
 
We lease transportation and container-handling equipment, our corporate office building and other assets under agreements which are classified as operating leases. The terms of these lease agreements vary from 1 to 9 years and contain standard provisions for these types of operating agreements. Under IFRS, transaction costs in connection with financings are required to be presented as a part of debt. Further, following the January 1, 2019 adoption of IFRS 16, liabilities associated with operating leases are presented as a part of debt unless the lease term is for 12 months or less or the underlying asset is of low value.
 
Purchase of Two Parcel Tankers
 
On May 25, 2007 the Company purchased the M/T “Maya” and purchased the M/T “Olmeca” on June 19, 2007. We entered into a 10-year line of credit with DVB Bank SE (formerly DVB Bank AG) in an aggregate amount of US$52.5 million to finance the acquisition of these parcel tankers. Principal and interest under this loan was payable on a monthly basis. Interest was payable at a weighted average rate of 7.61% per annum. On April 4, 2011, the Company entered into an agreement with the bank to restructure this loan through: (i) full prepayment of the junior loan tranche in an amount totaling US$6.5 million, including US$0.7 million in breakage costs; (ii) drawing of a new tranche in the amount of US$4.0 million with monthly interest payments and a balloon principal payment due upon maturity in June 2017; and (iii) opening of a bridge tranche with monthly drawings of up to US$3.5 million over the next 24 months to reduce the principal payments due on the existing senior loan tranche.  Both of the tranches were at a variable rate of the AIR (Actual Interbank Rate) plus 400 basis points, and the Company will pay principal on the bridge tranche beginning in April 2013 on a quarterly basis until maturity in June 2017. As of May 31, 2011, the weighted average rate of interest on the restructured loan was 6.7% per annum. This agreement allows the Company to improve the amortization schedule of this loan facility and reduce the related financial expenses. In 2017, the Company and the bank agreed to restructure the payment schedule, extending the maturity for one more year to June 2018.
 
On May 17, 2018, the Company prepaid the outstanding line of credit with DVB Bank America, N.V. which had been incurred to finance the purchase of the M/T “Maya.”  In addition, in September 2018, the Company obtained a new line of credit from ACT Maritime LLC, a subsidiary of Alterna Capital Partners, LLC, in the amount of US$5.25 million, at a variable rate of LIBOR 90 days plus 750 points, with quarterly payments of principal and interest, and maturing in September 2023.  The proceeds of this new line of credit were used to pay off the remaining balance of the 10-year line of credit that the Company had obtained to purchase the M/T “Olmeca.” In December 2020, we repaid the outstanding balance of the ACT Maritime LLC line of credit in an amount of US$3.5 million (approximately $69.8 million) with proceeds from our sale of the “Olmeca” to Athene Shipping Limited.
 
Purchase of One Tugboat
 
On November 11, 2016 the Company entered into a 6-year line of credit with B.V. Scheepswerf Damen Gorinchem (DAMEN) for an amount of EUR6.8 million to finance the acquisition of the Tugboat “TMM Colima”. Principal and interest under this loan is payable on a semiannual basis. Interest is payable at a fixed rate of 7.00% per annum. In December 2019, following the sale of TMM’s Manzanillo’s harbor tug service concession and related tugboat business assets, the financing with DAMEN for the tugboat “TMM Colima” was prepaid in full.

58
Grupo TMM, S.A.B. and Subsidiaries

Acquisition of Transportation Units
 
On June 4, 2008, the Company, through its subsidiary Lacto Comercial Organizada, S.A. de C.V. (“Lacorsa”), entered into a loan facility in Mexican pesos with Daimler Financial Services Mexico, S. de R.L. de C.V. (formerly known as DC Automotriz Servicios, S. de R.L. de C.V.) (“Daimler”) for the acquisition of 31 transportation units for $19.8 million at a fixed rate of 12.85%. Principal was payable in 60 consecutive monthly payments plus accrued interest on the outstanding balance, maturing in June 2013.
 
On September 26, 2008, the Company, through Lacorsa, entered into a loan facility in Mexican pesos with Daimler for the acquisition of 8 transportation units for $5.2 million at a fixed rate of 13.56%. Principal was payable in 60 consecutive monthly payments plus accrued interest on the outstanding balance, maturing in September 2013. In June 2010, both loans were restructured into a single loan for $21.7 million at a fixed rate of 14.8%. Principal was payable in 60 consecutive monthly payments plus accrued interest on the outstanding balance, maturing in May 2015.
 
On December 1, 2010, through Lacorsa we entered into a debt recognition and restructuring agreement relating to the two loans with Daimler for $96.7 million at a variable rate of the 28-day TIIE plus 3.5 percentage points. Principal was payable in 72 consecutive monthly payments plus accrued interest on the outstanding balance starting January 1, 2011 and maturing in December 2016.
 
On December 3, 2013, following previous negotiations, we entered into another debt recognition and restructuring agreement with Daimler for $62.9 million at a variable rate of the 28-day TIIE plus 6.0 percentage points. Principal is payable in 72 consecutive monthly payments plus accrued interest on the outstanding balance starting January 1, 2014 and maturing in December 2019.
 
On August 2, 2016, we restructured the amortization schedule with Daimler for $40.9 million at a fixed annual rate of 12.0%. Principal is payable in 36 consecutive monthly payments plus accrued interest on the outstanding balance, and maturing in November 2019.
 
On November 26, 2018, we restructured the amortization schedule with Daimler for $28.0 million at a fixed annual rate of 12.9%. Principal is payable in monthly payments plus accrued interest on the outstanding balance, and maturing in October 2021.
 
To strengthen our financial position in the face of the economic downturn precipitated by the COVID-19 pandemic, we negotiated and obtained two grace periods of 3 months each in the payment of principal from April to September 2020, extending the term of the credit facility to January 2022. In October 2021, we extended the repayment terms to July 2024 retaining the same credit conditions. As of December 31, 2021, the outstanding balance of this facility was $18.1 million with interest payable at a fixed annual rate of 12.9%.
 
Purchase of an RTG Crane
 
In June 2019, TMM Logistics entered into a financing agreement with PNC Bank, N.A., guaranteed by EXIM Bank, to acquire an RTG crane to replace the the crane used in our operation for the automotive industry at Aguascalientes. This financing agreement was for US$860 thousand (approximately 85% of the purchase price of the equipment) at a 4.40% fixed rate, with semiannual payments of principal and interest, and maturing in July 2024.
 
Other Debt
 
In January 2011, to improve the amortization schedule of the Receivables Securitization Facility and its cancelation, we decided to secure two lines of credit through our subsidiary Transportación Marítima Mexicana, S.A. de C.V. with two private investors, each of the credits for US$3.0 million. The loan accrues interest at a fixed rate of 11.25%, with semi-annual interest and principal payments, a two-year grace period for principal payments, and maturing January 2016. As of December 31, 2016 the outstanding balance of both credits was US$6.0 million. In 2017 and 2018, we paid US$1.5 million and in 2019 we paid a further US$1.5 million, fully repaying one of the two lines of credit.  During 2019, we extended the maturity date for the remaining US$3.0 million line of credit to July 2020 with monthly interest payments at a fixed rate of 11.25%, with semi-annual interest and principal payments. In July 2020, we extended the maturity date for the US$3.0 million line of credit to July 2021 with monthly interest payments at a fixed rate of 11.25%, and a ballon payment at maturity. We are currently in negotiations to change payment conditions and/or improve the amortization schedule. During 2021, we extended the maturity date for the remaining US$3.0 million line of credit to December 2022 with the same terms.

59
Grupo TMM, S.A.B. and Subsidiaries

In November 2011, acting through a subsidiary, we decided to enter into two loan facilities with INPIASA, S.A. de C.V. to strengthen the agricultural activities of ADEMSA. The first for $15.7 million at a variable rate of the 28-day TIIE plus 450 basis points, with monthly payments of principal and interest, and maturing in August 2021, and the second for $4.2 million at a variable rate of the 28-day TIIE plus 450 basis points, with monthly payments of principal and interest, which matured in October 2016. We are currently negotiating to extend the repayment term, as well as the payment conditions of the first credit line.
 
In September 2014, we decided to enter into three loan facilities to strengthen the agricultural activities of ADEMSA, through its subsidiary TMM Logistics, S.A. de C.V. with Banco Autofin México. The first for $45.8 million at a variable rate of the 28-day TIIE plus 450 basis points, with monthly payments of principal and interest, and maturing September 2021, the second for $34.6 million at a variable rate of the 28-day TIIE plus 450 basis points, with monthly payments of principal and interest, and maturing September 2021, and the third for $25.5 million at a variable rate of the 28-day TIIE plus 450 basis points, with monthly payments of principal and interest, and maturing September 2021. To strengthen our financial position in the face of the downturn caused by the COVID-19 pandemic, we negotiated and obtained a grace period of 4 months in the payment of principal from the months of May to August 2020, extending the term of each credit line 4 months. The effective rate for these three loans as of December 31, 2021 was 9.72%, with a total outstanding balance of approximately $7.02 million.
 
In December 2014, we decided to enter into two lines of credit in Mexican Peso for working capital, through its subsidiary TMM Logistics, S.A. de C.V. with Banco Autofin México. The first for $21.6 million at a variable rate of the 28-day TIIE plus 450 basis points, with monthly payments of interest and principal payment at maturity in March 2022, and the second for $8.4 million at a variable rate of the 28-day TIIE plus 350 basis points, with monthly payments of interest and principal payment at maturity in March 2022. To strengthen our financial position in the face of the downturn caused by the COVID-19 pandemic, we negotiated and obtained a grace period of 4 months in the payment of principal from the months of May to August 2020, extending the term of each credit line 4 months. As of December 31, 2021, the effective rate for these two loans was 9.72% and 8.72% respectively with an outstanding balance of $3.3 million and $0.7 million.
 
In November 2018, we decided to enter into another lines of credit in Mexican Peso for working capital, through its subsidiary TMM Logistics, S.A. de C.V. with Banco Autofin México, in the amount of $20.0 million at a variable rate of the 28-day TIIE plus 550 basis points, with monthly payments of interest and principal payment at maturity in November 2023. To strengthen our financial position in the face of the downturn caused by the COVID-19 pandemic, we negotiated and obtained a grace period of 4 months in the payment of principal from the months of May to August 2020, extending the term of the credit line 4 months. As of December 31, 2021, the effective rate was 10.73% with an outstanding balance of $11.0 million.
 
In light of the continuing negative effects of the COVID-19 pandemic, we negotiated with Banco Autofin México a new grace period of 6 months in the payment of principal for 4 of the 6 lines of credit for the months of January to June 2021, and extended the maturity of those lines correspondingly.
 
In April 2016, we entered into a $9.8 million line of credit with Banco HSBC, S.A. in order to strengthen the agricultural activities of ADEMSA, at a variable rate of the 28-day TIIE plus 300 basis points, with monthly payments of principal and interest and maturing in April 2021. To better withstand the negative effects of the COVID-19 pandemic, we negotiated and obtained a grace period of 3 months in the payment of principal from the months of May to July 2021, extending the term of each credit line 3 months, which matured and was repaid in full in July 2021.
 
In March and October 2019, we entered into a loan facility with Hewlett-Packard Operations Mexico, S. de R.L. de C.V. with two lines of credit to improve our technological systems. The first for US$607.8 thousand at a fixed rate of 6.84%, with monthly payments of principal and interest, and maturing in March 2025, and the second for US$201.6 thousand at a fixed rate of 6.13%, with monthly payments of principal and interest, and maturing in October 2024. To better withstand the negative effects of the COVID-19 pandemic, we negotiated and obtained a grace period of 3 months in the payment of principal for the months of May to July 2020, extending the term of each credit line by 3 months. In March and December 2020, we arranged another three lines of credit with Hewlett-Packard Operations Mexico, S. de R.L. de C.V. to continue the improvement of our technological systems, the first for US$86.6 thousand at a fixed rate of 5.96%, with monthly payments of principal and interest, and maturing in March 2025, the second for US$96.9 thousand at a fixed rate of 7.16%, with monthly payments of principal and interest, and maturing in April 2025, and the third for US$252.1 thousand at a fixed rate of 4.58%, with monthly payments of principal and interest, and maturing in August 2025. As of December 31, 2021, the total outstanding balance was US$1.35 million.

60
Grupo TMM, S.A.B. and Subsidiaries

In September 2019, we entered into another $29.0 million line of credit with Banco del Bajio, S.A. in order to strengthen the agricultural activities of ADEMSA, at a variable rate of the 28-day TIIE plus 250 basis points, with monthly payments of interest, quarterly principal payments, which matured and was repaid in full in April 2020.
 
In July 2020, we entered into two unsecured lines of credit with private investors, each for $6.0 million at a fixed rate of 15.0% per annum, with principal and interest payments at maturity, originally scheduled to occur in October 2020. We are currently in negotiations to extend the repayment term, as well as the payment conditions of both lines of credit. The effective rate as of December 31, 2020 was 15.0%, with a total outstanding of $12.0 million. In January 2021, as part of the negotiations, we paid $1.0 million on each line of credit and established a new maturity date in December 2022.
 
In July 2020, acting through our subsidiary Inmobiliaria Dos Naciones, we entered into a working capital line of credit with Portafolio de Negocios for $10.0 million at fixed rate of 25.0%, with monthly principal and interest payments and maturity in July 2023, which we can prepay in part or in full without penalty. The line of credit was fully paid in advance in December 2021.
 
In July 2020, acting through our subsidiary TMM Logistics, we entered into a working capital line of credit with Banco del Bajio for up to $30 million with a mortgage guarantee. The first drawdown was made in the same month of July for $12.0 million, variable rate of TIIE 28 days plus 600 points, monthly payments of principal and interest and maturity in July 2027. In February 2021, we drew the remaining $18.0 million with the same terms and conditions. The effective rate as of December 31, 2021 was 11.23%, with an outstanding balance of $25.2 million.
 
Contractual Obligations
 
The following table outlines our obligations for payments under our capital leases, debt obligations, operating leases and other financing arrangements for the periods indicated as of December 31, 2021:

 
Indebtedness (1)
  
Less than
1 year
    
1-3 years
    
3-5 years
    
More than
5 years
    
Total
  
   
(in thousands of Pesos, unless noted otherwise)
  
Investors (2)
    
157,584
      
-
      
-
      
-
      
157,584
  
Land and Logistics Equipment Financing (3)
    
10,588
      
18,161
      
-
      
-
      
28,749
  
Working Capital (4)
    
5,563
      
9,038
      
9,038
      
2,639
      
26,278
  
Other Debt (5)
    
22,508
      
22,389
      
4,336
      
-
      
49,233
  
Total
  
$
196,243
    
$
49,588
    
$
13,374
    
$
2,639
    
$
261,844
  

Operating Lease Obligations (6)
  
Less than
1 year
    
1-3 years
    
3-5 years
    
More than
5 years
    
Total
 
Vessel, Transportation Equipment and Other Operating Leases
  
$
184,703
    
$
213,311
    
$
102,716
    
$
39,833
    
$
540,563
  
Financial charges
    
(63,325
)
    
(48,820
)
    
(13,581
)
    
(4,962
)
    
(130,688
)
Net present value
  
$
121,378
    
$
164,491
    
$
89,135
    
$
34,871
    
$
409,875
  

(1)
These amounts include principal payments and accrued and unpaid interest as of December 31, 2021.
(2)
Three unsecured lines of credit. In July 2021, we extended the maturity date for the first US$3.0 million line of credit to December 2022 with monthly interest payments at a fixed rate of 11.25%, and a ballon payment at maturity. We are currently in negotiations to change payment conditions and/or improve the amortization schedule for this line of credit. The second and third lines of credit, each for $5.0 million at a fixed rate of 15.0% per annum, with principal and interest payments at maturity, originally provided for a maturity date of October 2022.

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Grupo TMM, S.A.B. and Subsidiaries

(3)
Debt in connection with the land & logistics equipment financing. These include one line of credit denominated in Mexican Pesos. In October 2021, we extended the repayment terms to July 2024 on the same credit conditions, with monthly interest and principal payments at a fixed rate of 12.90% per annum. The second loan relates to the acquisition of an RTG crane, and carries a 4.40% fixed rate, with semiannual payments of principal and interest, maturing in July 2024.
(4)
Debt for working capital and to strength agricultural activities of ADEMSA. Five lines of credit denominated in Mexican Pesos, in three of them, we are currently negotiating to extend the repayment term, as well as the payment conditions of these lines of credit. And the last two with maturity July 2027, the first one signed in July 2020 and the second one signed in February 2021, all with monthly interest and principal payments with a weighted average rate of 11.23% per annum as of December 31, 2021.
(5)
Debt allocated in different companies for working capital. Various lines of credit denominated in Mexican Pesos, with maturities between January 2022 and September 2024, with monthly principal and interest payments, variable rate; the weighted average rate was 10.23% per annum as of December 31, 2021. To better withstand the effects of the COVID-19 pandemic, we negotiated and obtained a grace period of 6 months in the payment of principal from the months of January to June 2021, extending the term of each credit line by 6 months. To improve our technological systems, we entered into a loan facility, denominated in US Dollars at a fixed rate, with monthly payments of principal and interest, and maturing March 2026. As of December 31, 2021 the weighted average rate was 6.84% per annum.
(6)
The adoption of the new IFRS 16 accounting standard has resulted in the Company recognizing an asset for right of use and the corresponding liability for leasing in relation to all previous operating leases, except those identified as low value or with a term of remaining lease of less than 12 months from the date of initial application. The corresponding liability is decreased by lease payments net of financial expenses. The interest component of the lease payment represents a portion of the outstanding principal balance and is recognized in income as finance costs over the lease period.
 
Research and Development, Patents and Licenses, Etc.
 
Not applicable.
 
Trend Information
 
In recent years, a significant portion of the revenue generated by our maritime operations business has been achieved through contracts with Helmsley Management, Celanese Operations Mexico and PEMEX Exploración y Producción. In 2021, these customers represented 13%, 12% and 10%, respectively, of the revenue generated by our maritime operations business, while in 2020 TMMDM, Celanese Operations Mexico and Helmsley Management they represented 14%, 13% and 7%, respectively. The primary purchasers of our maritime operations services are multinational oil, gas and chemical companies. The future success of our maritime operations business depends upon our ability to capitalize on growth in the Mexican oil and gas sector by increasing our level of services to these companies.
 
The future success of our logistics, ports and terminals businesses depends upon our ability to enter into contracts with large automotive manufacturers, retail and consumer goods companies and to become a supplier for Mexican government entities, providing integrated logistics and shipping services, as well as to develop our liquids terminal project. Our primary skills that make us competitive are: (i) our logistics expertise, (ii) our ability to continue developing logistics and other land transportation infrastructure, and (iii) our ability to provide state-of-the-art systems to provide logistics solutions.
 
The ability to satisfy our obligations under our debt in the future will depend upon our future performance, including our ability to increase revenues significantly and control expenses. Future operating performance depends upon prevailing economic, financial, business and competitive conditions and other factors, many of which are beyond our control. As noted elsewhere in this Annual Report, the recent COVID-19 pandemic resulted in a significant global economic downturn, which had an adverse effect on our business, financial condition and results of operations. Although global economic activity has recovered as vaccination programs have expanded, new variants of COVID-19 continue to emerge, and governmental efforts to control or mitigate the spread of these variants or other infectious diseases may trigger renewed restrictions with negative effects on global trade and the demand for our services. See Item 3. “Risk Factors – Risks Relating to our Business – Our business has been and may continue to be adversely affected by the COVID-19 pandemic, and may be adversely affected by future pandemics, epidemics or other outbreaks of infectious diseases and governmental responses thereto” and Item 4. “Information on the Company — Recent Developments – COVID-19 Pandemic.” Our ability to refinance our debt and take other actions will depend on, among other things, our financial condition at the time, the restrictions in the instruments governing our debt and other factors, including market conditions, the macroeconomic environment and such variables as the Peso/dollar exchange rate, benchmark money market rates in Pesos and Dollars and the success of reforms and amendments to the Hydrocarbons Law, which are beyond our control.

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Grupo TMM, S.A.B. and Subsidiaries

We have funded capital expenditures with funds from operating cash flows and expect to seek additional financing primarly through secured credit arrangements and asset-backed financings for additional capital expenditures.
 
Critical Accounting Estimates
 
Our Financial Statements have been prepared in accordance with the IFRS as issued by the IASB.
 
We have identified certain key accounting policies on which our financial condition and results of operations are dependent. These key accounting policies most often involve complex matters, may be based on estimates and involve a significant amount of judgment. In the opinion of our management, our critical accounting policies under IFRS are those related to revenue recognition, valuation of property, vessels and equipment, deferred income taxes, labor obligations and impairment of long-lived assets. For a description of these policies and other significant accounting policies applicable to us, see Note 4 to the accompanying Audited Consolidated Financial Statements contained elsewhere herein.
 
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
Directors and Senior Management
 
Board of Directors
 
Our Estatutos Sociales, or Bylaws, provide that our Board of Directors shall consist of not less than seven and not more than 21 directors, without taking into account the appointment of their respective alternates. We currently have nine directors on our board. Our Board of Directors is elected annually by a majority vote of our shareholders and is responsible for the management of the Company. The Company does not have any agreements to pay benefits to any directors upon termination of their employment.
 
Our current Board of Directors was elected and ratified at the Company’s Annual General Ordinary Shareholders’ Meeting held on April 29, 2022. Our directors and alternate directors, their principal occupations and years of service (rounded to the nearest year) as a director or alternate director are as follows:

Name
Principal Occupation
Years as a
Director or
Alternate
Director
  
Age
Directors
        
Vanessa Serrano Cuevas
Chairman of the Board of Grupo TMM
3
  
47
Flor de Maria Cañaveral Pedrero
First Vice-Chairman of Grupo TMM
2
  
45
Maria Josefa Cuevas Santos
Member of the Board
6
  
75
Miguel Oscar Adad Rosas
Member of the Board
1
  
59
Alberto Guillermo Saavedra Olavarrieta
Member of the Board
1
  
58
Francisco Javier García-Sabaté Palazuelos
Member of the Board
7
  
70
Boris Otto
Member of the Board
1
  
51
Alejandro Pablo Salas de la Borbolla
Secretary (non-member of the Board)
1
  
46

The directors (whenever elected) shall remain in office for the period of time stated below, calculated from the date of their appointment. The directors may be reelected and, in case of the failure to appoint their substitute or, if the designated substitute does not take office, the directors in office being substituted shall continue to perform their duties for up to thirty calendar days following the date of expiry of the term for which they were appointed, as described below. For further information see Item 10. “Additional Information – Board of Directors.”

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Grupo TMM, S.A.B. and Subsidiaries

Position in the Board of Directors
Term
Chairman
7 years
First Vice-Chairman
7 years
Second Vice-Chairman
Between 3 and 7 years (As determined by the General Shareholders’ Meeting that elects him/her.)
Other Board Directors
1 year
 
Vanessa Serrano Cuevas
 
       Mrs. Serrano was born on April 30, 1975. Mrs. Serrano holds a degree in Business Administration and a Business Administration master’s degree in Corporate Governance from Instituto Panamericano de Alta Dirección de Empresas (“IPADE”).  Highly skilled in leadership abilities, alliances and business partnerships, her professional achievements include founding the food company Dasami, S.A. de C.V. as well as the digital platform Zertú. Her parents are Mr. Jose F. Serrano Segovia and Mrs. Maria Josefa Cuevas de Serrano.
 
Flor de Maria Cañaveral Pedrero
 
       Mrs. Cañaveral was born on January 29, 1977. Mrs. Cañaveral holds a master’s degree in Shipping and Port Business Administration from FIDENA.  She has served in important positions in the port sector, such as director of the Port Authority of Manzanillo and Puerto Chiapas, being the first woman to hold this position. Mrs. Cañaveral has actively participated in the development and consultant of multimodal infraestrucutre and energy projects.
 
Maria Josefa Cuevas de Serrano
 
Mrs. Serrano was born on June 16, 1946. Mrs. Serrano is the founder of the Sociedad Internacional de Valores de Arte Mexicano, A.C. (SIVAM), which promotes classical music and outreach for talented artists in Mexico. Additionally, she is an active promoter of Mexican art in Mexico and abroad. Mrs. Serrano is the wife of Mr. José F. Serrano Segovia.
 
Miguel Oscar Adad Rosas
 
       Mr. Adad holds a degree in Business Administration and a diploma in Senior Business Management from the Instituto Tecnológico de Estudios Superiores de Monterrey. Mr. Adad has extensive experience in business planning, management and foreign trade, having held important positions in the main automotive companies in Mexico. He is an active participant as a representative of various business organizations, and a speaker and panelist in various forums.
 
Alberto Guillermo Saavedra Olavarrieta
 
Mr. Saavedra hold a Law degree from Universidad Iberoamericana and a Specialization in Commercial Law, from Universidad Panamericana, Mexico. Mr. Saavedra is partner of Santamarina y Steta, S.C., with more than 35 years of experience in financial markets, foreign investment, mergers and acquisitions and project financing, among others.
 
Francisco Javier García-Sabaté Palazuelos
 
Mr. García-Sabaté Palazuelos holds a degree in Public Accounting with High Honors from the Universidad La Salle and a postgraduate degree in Administration from Insituto Tecnologico y de Estudios Superiores de Monterrey Since 1972, Mr. García-Sabaté Palazuelos has been the Partner/Director of García-Sabaté, Castañeda, Navarrtere, S.C. and has worked in the Tax and Auditing department of several companies within the financial, commercial and industrial sector. He is certified by the Instituo Mexicano de Contadores Públicos as an accountant and a Financial Expert.

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Grupo TMM, S.A.B. and Subsidiaries

Boris Otto
 
       Mr. Boris Otto holds a Law degree with honors from Escuela Libre de Derecho and a Master’s degree in Business Administration with specialty in Finance from Rice University. Mr. Otto is a recognized expert in financial matters with more than 25 years of experience advising Mexican and foreign companies and financial institutions in all types of financing and mergers and acquisitions. Likewise, Mr. Otto has extensive experience in the administration and advice of various investment funds in the United States. He is currently a founding partner and Chairman of three North American investment funds.
 
Executive Officers
 
Our officers serve at the discretion of our Board of Directors. Our executive officers, their position and years of service with us and as an executive officer are as follows:

Name
Position
Years of
Service
  
Executive
Officer
         
Corporate Directors
        
Vanessa Serrano Cuevas
Chair of the Board and Chief Executive Officer
3
  
1
Flor de María Cañaveral Pedrero….
Vice President and Deputy Executive Officer
2
  
1
Luis Rodolfo Capitanachi Dagdug
Chief Financial Officer
2
  
2
Gerardo Meza Vázquez
Audit Manager
21
  
1
Christian Venus Vázquez Coria
Legal Manager
11
  
1
Axel Xavier Vera de Castillo
Chief Information Officer
1
  
1
         
Business Unit Directors
        
Luis Manuel Ocejo Rodríguez
Director, Strategic Projects
39
  
15
Alejandro Romero Rodríguez
Director, Maritime Transportation
27
  
2
Victor Velazquez Romo
Director,  Shipyard
10
  
2
Luis David Limón Guajardo
Director, Ports, Terminals and Warehousing
2
  
1
 
Vanessa Serrano Cuevas, the CEO and Chairman of the Board of Directors, is the daughter of Mr. Jose F. Serrano Segovia and Mrs. Maria Josefa Cuevas de Serrano.
 
Compensation
 
For the year ended December 31, 2021, the aggregate total compensation paid to our directors, alternate directors and executive officers for services in all capacities was approximately $30.5 million. See Item 7. “Major Shareholders and Related Party Transactions.”
 
Pension, Retirement or Similar Benefits
 
Seniority premiums, retirement plan obligations (“Pension Benefits”) and other employee compensation payable at the end of employment are based on actuarial calculations using the projected unit credit method. Pension Benefits are based mainly on years of service, age and salary level upon retirement.
 
Seniority premiums, Pension Benefits and other employee compensation payable upon termination include the amortization of past service costs over the average remaining working lifetime of employees.
 
Reserves for obligations at the end of the 2021, 2020 and 2019 fiscal years were $102,375, $150,197 and $151,481, respectively.
 
Board Practices
 
Our Bylaws provide that our Board of Directors shall consist of at least seven but not more than 21 directors elected at our annual ordinary shareholders’ meeting to serve until their successors accept their election at the next annual ordinary shareholders’ meeting. The Board of Directors is responsible for the management of the Company. Mexican Securities Law requires that at least 25% of the members of the Board be independent directors.

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Grupo TMM, S.A.B. and Subsidiaries

Audit and Corporate Practices Committee
 
The Board of Directors maintains an Audit and Corporate Practices Committee composed of independent directors, each with extensive experience in the analysis and evaluation of financial reporting and knowledge of internal controls and procedures for financial reporting. In accordance with Mexican Securities Law and Mexican Corporate Practices, the committee’s responsibilities include, among others:
 
Audit responsibilities:
 

 ■
overseeing the accounting and financial reporting processes of the Company;
 

 ■
discussing the financial statements of the Company with all parties responsible for preparing and reviewing such statements, and advising the Board of Directors on their approval thereof;
 

 ■
overseeing compliance with legal and regulatory requirements and overseeing audits of the financial statements of the Company;
 

 ■
evaluating the performance of the Company’s external auditor and its independent status in accordance with the CNBV rules;
 

 ■
advising the Board of Directors on the compliance of the Company’s or any of its subsidiaries’ internal controls, policies and in-house auditing, and identifying any deficiencies in accordance with the Bylaws of the Company and applicable regulations;
 

 ■
providing sufficient opportunity for a private meeting between members of our internal and external auditors and the Audit Committee, who may also request additional information from employees and legal counsel;
 

 ■
providing support to the Board of Directors in supervising and reviewing the Company’s corporate accounting and disclosure policies and discussing guidelines and policies to govern the process of risk assessment with management;
 

 ■
advising the Board of Directors on any audit-related issues in accordance with the Bylaws of the Company and applicable regulations;
 

 ■
assisting the Board of Directors in the selection of the external auditor in accordance with the CNBV rules;
 

 ■
reviewing the financial statements and the external auditor’s report. The Committee may request that the external auditor be present when reviewing such reports, in addition to the Committee’s mandatory meeting with the external auditor at least once a year;
 

 ■
preparing the Board of Directors’ opinion on the Chairman’s annual report and submitting it at the Shareholders’ Meeting for its approval; and
 

 ■
overseeing compliance by the Company’s chief executive officer with decisions made at a Shareholders’ Meeting or a Board of Directors meeting.
 
Corporate Practices responsibilities:
 

 ■
requesting an opinion from independent experts as the Committee might see fit, in accordance with applicable regulations;
 

 ■
calling Shareholders’ Meetings and adding any issue they consider important to the agenda;
 

 ■
supporting the Board of Directors in preparing its reports in accordance with the Bylaws of the Company and applicable regulations;

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Grupo TMM, S.A.B. and Subsidiaries


 ■
suggesting procedures for hiring the Company’s chief executive officer, chief financial officer and senior executive officers;
 

 ■
reviewing human resources policies, including senior executive officers’ performance evaluation policies, promotions and structural changes to the Company;
 

 ■
assisting the Board of Directors in evaluating senior executive officers’ performance;
 

 ■
evaluating executive officer’s compensation. The Company is not required under Mexican law to obtain shareholder approval for equity compensation plans; the Board of Directors is required to approve the Company’s policies on such compensation plans;
 

 ■
reviewing related-party transactions; and
 

 ■
performing any activity set forth in the Mexican Securities Law.
 
Code of Ethics
 
The Company has adopted a Code of Ethics, which applies to its principal executive officer, principal financial officer, and other members of our senior management. We last updated the Code of Ethics in April 2017. The Code of Ethics may be viewed on the Company website at www.tmm.com.mx under the caption “Investors — Corporate Practices.” An English version of this document is available upon written request sent to Grupo TMM, S.A.B., Paseo de la Reforma No. 296, P.19. Col. Juárez, C.P. 06600, Alcaldía Cuauhtémoc, México City, México, Attn: Human Resources.
 
Statutory Auditor
 
Pursuant to the Mexican Securities Market Law (Ley del Mercado de Valores), the surveillance of the Company is entrusted to different committees (i.e., Audit and Corporate Practices Committees), as previously described, which replace the role of the Statutory Auditor. At the Extraordinary Shareholders’ Meeting held on December 20, 2006, the Statutory Auditor, Salles Sainz–Grant Thornton, S.C (SSGT), and the alternate Statutory Auditor, were duly replaced by the Audit and Corporate Practices Committee of the Company. However, SSGT continues to serve as the Statutory Auditor for all of our subsidiaries.
 
Employees
 
As of March 31, 2022, we had 808 employees, approximately 5% of whom were unionized. As of December 31, 2021, we had 837 employees, approximately 5% of whom were unionized. The decrease in the number of our employees in the first quarter of 2022 is largely due to the reduction of personnel required for the storage business.
 
As of December 31, 2020, we had 934 employees, approximately 12% of whom were unionized. The decrease in the number of our employees in 2021 is mainly due to the closure of operations at API Acapulco.
 
As of December 31, 2019, we had 1,099 employees, approximately 17% of whom were unionized. The decrease in the number of our employees in 2020 was largely due to decreases in our maritime operations personnel on board vessels and decreases in our staff in the storage business.
 
In accordance with customary practice in Mexico, we negotiate union contracts annually with regard to wages and every two years with regard to other matters, including benefits. We have not experienced a strike since 1987 and believe that relations with our employees are good.
 
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Grupo TMM, S.A.B. and Subsidiaries

Share Ownership

As of March 31, 2022, the Serrano Segovia family held 57,349,084 Shares directly, and the CPO Trustee maintained 16,225,750 Shares of our capital stock in the form of ADSs, including 6,836,510 Shares that are beneficially owned by the Serrano Segovia family. Accordingly, as of such date, the Serrano Segovia family controlled the voting power of our capital stock. The voting power controlled by the Serrano Segovia family varies from time to time, depending upon the number of Shares held by the Serrano Segovia family and by the CPO Trust and others. As of March 31, 2022, other than as set forth below in the section entitled “Major Shareholders” each of our other directors, alternate directors or executive officers owns less than one percent of our Shares on an individual basis.
 
Shares were contributed to the CPO Trust established with a 30-year term by Nacional Financiera, S.N.C. (the “CPO Trustee”) on November 24, 1989. The CPO Trustee authorized the issuance of non-redeemable ordinary participation certificates (certificados de participación ordinarios no amortizables) (“CPOs”) that correspond to our Shares. One CPO may be issued for each Share contributed to the CPO Trust. CPOs constitutes separate negotiable instruments different and apart from the Shares, and afford to their holders only economic rights with respect to the Shares held in the CPO Trust. Such voting rights are exercisable only by the CPO Trustee, which is required by the terms of the CPO Trust to vote such Shares in the same manner as holders of a majority of the outstanding Shares not held in the CPO Trust and voted at the relevant meeting. Mexican and non-Mexican investors may hold CPOs without restrictions of any kind. The acquisition of Shares representing 5% or more of the capital stock of Grupo TMM by any person or group of persons (other than the Serrano Segovia family and the CPO Trustee), in one or a series of simultaneous or successive transactions requires the prior approval of the Board of Directors. As of March 31, 2022, the CPO Trustee held CPOs representing an aggregate of 16,225,750 Shares in the form of ADSs.
 
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
Major Shareholders
 
The following table indicates, as of March 31, 2022, unless otherwise indicated, the shareholders that beneficially own 5% or more of our outstanding Shares (the “Major Shareholders”). The percentage of our outstanding Shares owned by each Major Shareholder shown below is based on the 102,182,841 Shares outstanding as of March 31, 2022. For purposes hereof, each Major Shareholder with shared voting or investment authority with respect to certain securities is deemed to beneficially own all such securities.

Shareholder
  
Number
of Shares
  
Percentage of
Shares
Outstanding
Vanessa Serrano Cuevas
  
37,874,355
  
37.1%
José F. Serrano Segovia (a)
  
19,474,729
  
19.1%

a)
Based upon information made known to the Company and reports of beneficial ownership filed with the SEC, the Serrano Segovia Family beneficially owns 57,349,084 Shares, including 19,461,229 Shares held by VEX, a Mexican corporation in which José F. Serrano Segovia holds 100% of the voting stock, and 500 Shares beneficially owned by Promotora Servia, S.A. de C.V. (“Promotora”), a Mexican corporation controlled by José F. Serrano Segovia, and which are owned directly by its subsidiary, Servicios Directivos Servia, S.A. de C.V. (“Servicios”), a Mexican corporation.
 
Change in Percentage Ownership
 
Vanessa Serrano Cuevas reported an increase in her percentage ownership from 12.2% of the Shares outstanding as of December 31, 2020 to 37.1% of the Shares outstanding as of December 31, 2021. Mr. José F. Serrano Segovia reported a decrease in his percentage ownership from 38.6% of the Shares outstanding as of December 31, 2020 to 19.1% of the Shares outstanding as of December 31, 2021. No other Major Shareholder has disclosed a significant change in its percentage ownership of Shares during the three years ended December 31, 2021, 2020, and 2019.
 
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Grupo TMM, S.A.B. and Subsidiaries

Voting Rights and Control

As of March 31, 2022, 16,225,750 Shares were held in the form of ADSs, which have limited voting rights. The Shares held in the form of ADSs are held directly by the CPO Trust. The voting rights for those Shares are exercisable only by the trustee of the CPO Trust, which is required by the terms of the trust agreement to vote such Shares at any shareholders’ meeting in the same manner as the majority of the Shares that are not held in the CPO Trust are voted. Of the 85,957,091 Shares held outside of the CPO Trust as of March 31, 2021, the Serrano Segovia family beneficially owns 50,512,574, or 58.8% of such Shares. As a result, the Serrano Segovia family could direct and control the policies of the Company and its subsidiaries, including mergers, sales of assets and similar transactions. See Item 9. “The Offer and Listing.” Except for the limited voting rights applicable to their ADSs, none of the Major Shareholders have voting rights that differ from those applicable to other holders of Shares.
 
Other than the Serrano Segovia family, which may be deemed to control the Company, to our knowledge we are not directly or indirectly owned or controlled by any other corporation, by any foreign government or by any other natural or legal person, severally or jointly. We are not aware of any arrangement which may at a later date result in a change of control of the Company.
 
Related Party Transactions
 
On February 24, 2016, the Company entered into a venture with TransCanada and Sierra Oil & Gas to jointly develop a liquid terminal project for refined products storage, transportation, and distribution infrastructure to serve the growing demand for refined products such as gasoline, diesel and jet fuel from Tuxpan, Veracruz to the central region of Mexico.
 
In accordance with such venture, Sierra Oil & Gas initially contributed $4.6 million to the capital stock of Optimus, equivalent to the value of the first portion of land contributed by Grupo TMM, with the parties agreeing to joint control of Optimus. In addition, Grupo TMM contributed to Optimus another portion of land at a value of US$6.16 million, with Sierra Oil & Gas to contribute an additional US$6.16 million, for a total additional contribution of US$12.333 million, all of which was to be contributed by Sierra Oil & Gas within the three-year period following May 26, 2016. See Notes 1 and 5 to our Audited Consolidated Financial Statements contained elsewhere herein.
 
In February 2019, the Company agreed to purchase the 50% of Optimus shares owned by Sierra Oil & Gas for the amount of US$2.6 million, giving the Company full ownership of the liquid terminal project in Tuxpan and resulting in Optimus becoming a wholly owned subsidiary of the Company.
 
ITEM 8.
FINANCIAL INFORMATION
 
See Item 18 — “Financial Statements.”
 
Legal Proceedings

Refined Product Services (“RPS”) Claim

On August 7, 2007, Transportación Marítima Mexicana, S.A. de C.V. (“TMM”) filed a claim for arbitration against RPS for the amount of US$50,000 (approximately $996,760) for various expenses incurred by TMM due to the delay of the delivery of the tanker vessel Palenque.

On October 19, 2007, RPS filed a countersuit for US$3.0 million (approximately $59.81 million), alleging that TMM failed to maintain the tanker vessel Palenque, and also filed a claim for consequential damages for losing a contract while the vessel was being repaired. Although it is impossible to predict the outcome of any legal proceeding, we believe this claim to be without merit and intend to defend this proceeding vigorously.

Mutual Claims Between Worldwide Services, Ltd. (“WWS”) and TMM

In December 2007, TMM and WWS filed claims against each other relating to the charter by us of the vessel Veracruz. TMM’s US$393,731 (approximately $7.8 million) claim related to the fuel costs and low performance of the vessel Veracruz, and WWS’ US$938,000 (approximately $18.7 million) counter claim alleged that the same vessel overperformed and that consequently, TMM owes WWS under the terms of the charter contract.

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As part of the defense, TMM filed an application to dismiss the case, arguing that the Tribunal has no jurisdiction since arbitration proceedings were initiated under the name of the wrong claimant. In January 2017, the Tribunal issued a partial award denying our application to dismiss the case. WWS submitted a “claim submission” arguing certain discounts to the claim and TMM replied requesting a “security of costs” from WWS.  WWS never filled the requested “security of costs”. Therefore, on March 2, 2021 the Tribunal issued an award in favor of TMM and dismissed the case.
 
Tax Liabilities Claim
 
TMM has initiated an appeal to secure the annulment of various tax liabilities asserted by the Mexican tax authorities concerning the 2005 tax year.
 
On November 5, 2012, the former Federal Court of Tax and Administrative Justice ruled that TMM’s appeal for annulment could proceed. That appeal for annulment was referred to the Metropolitan Regional First Division of the Federal Court of Tax and Administrative Justice.
 
On January 30, 2018, TMM was notified that the matter was forwarded to the full Federal Tax Court of Mexico City of Mexico City. In February 2020, TMM received a favorable judgment from the Federal Tax Court.
 
On February 5, 2020, TMM filed a lawsuit challenging the judgment that determined diverse tax debts for supposed omissions on income tax withholdings and VAT Withholdings to foreign tax residents, regarding fiscal year 2014.
 
Motions for Annulment of Various Tax Provisions
 
During 2017 and 2016, Grupo TMM filed Motions for Annulment with the Federal Court of Administrative Justice against various decisions of the Tax Administration Service (SAT) challenging (i) the rejection of deductions (tax year 2007), (ii) modifications to the Fiscal Consolidation Regime for controlled companies (tax year 2005), (iii) deferred income tax on consolidation (tax year 2010), and (iv) the termination of the consolidation regime (tax year 2013). These motions remain pending before the courts.
 
Other Legal Proceedings
 
We are a party to various other legal proceedings and administrative actions, all of which are of an ordinary or routine nature and incidental to our operations. Although it is impossible to predict the outcome of any legal proceeding, in the opinion of our management, such proceedings and actions should not, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations or liquidity.
 
In considering whether accrual of a loss contingency is necessary in connection with legal claims outstanding that could, both individually or in the aggregate, have a material effect on the financial condition or operating results of the Company, the Company evaluates the requirements of paragraph 14 of IAS 37 to determine whether the Company has a present obligation (legal or constructive), whether it is probable that an outflow of resources will be required in order to settle the obligation, and whether the amount of the obligation can be reliably estimated.  Based on management’s review and analysis of the legal claims outstanding for the fiscal year ended December 31, 2021, the Company concluded that it did not have a present obligation in respect of any legal claims outstanding other than the mutual claims described above.
 
Operations with Related Parties
 
Under the Income Tax Law, companies that conduct operations with related parties, nationals or nonresidents, are subject to fiscal limitations and obligations regarding the determination of the prices negotiated, as these must be comparable to those that would be used with or between independent parties in similar operations.
 
In the event the tax authorities were to review the prices and reject the amounts determined, they could demand, in addition to the collection of the corresponding taxes and accessory charges (adjustments and surcharges), fines on the omitted tax contributions, which could be for up to 100% of the adjusted tax amount.

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The Company has significant transactions and relationships with related parties. The Company maintains documentation which confirms that the terms of these transactions were conducted in 2020 similarly to transactions between unrelated parties. The Company and its subsidiaries are in the process of compiling similar documentation  for 2021.
 
Other Legislation
 
Grupo TMM and subsidiary companies are subject to laws and regulations of other countries, as well as to international norms that govern maritime transport and safety regulations to conserve the environment.
 
Dividends
 
At shareholders’ meetings, shareholders have the ability, at their discretion, to approve dividends from time to time. No dividend has been declared since 1997.
 
Significant Changes
 
See Item 4. “Information on the Company — Business Overview — Recent Developments.”
 
ITEM 9.
THE OFFER AND LISTING
 
Trading Markets
 
Our Series A Shares started trading on the Bolsa Mexicana de Valores, S.A. de C.V. (the “Mexican Stock Exchange” or the “Bolsa”) on September 24, 1980 and our Series L Shares began trading on August 9, 1991. In June 1992, L Share ADSs, each representing one Series L Share, were issued by Citibank, N.A. as depositary in exchange for Rule 144A ADSs as part of an initial public offering, and commenced trading on the NYSE. On September 13, 2002, we completed a reclassification of our Series L Shares of stock as Series A Shares. The reclassification combined our two classes of stock into a single class by converting each share of our Series L Shares into one share of our Series A Shares. The reclassification also eliminated the variable portion of our capital stock and we became a fixed capital corporation (sociedad anónima). Following the reclassification, we had 56,963,137 Series A Shares outstanding. As a result of the elimination of the variable portion of our capital stock, our registered name changed from Grupo TMM, S.A. de C.V. to Grupo TMM, S.A.
 
As a result of the promulgation of the new securities law in Mexico in June of 2006, public companies were transformed by operation of law into Sociedades Anónimas Bursátiles (Public Issuing Corporation) and were required to amend their bylaws to conform them to the provisions of the new law. On December 20, 2006, the Company added the term “Bursátil” to its registered name to comply with the requirements under Mexico’s new securities law or Ley del Mercado de Valores, resulting in Grupo TMM, Sociedad Anónima Bursátil, or Grupo TMM, S.A.B.  In addition, the Series A Shares of the Company were renamed and are now referred to as nominative common shares, without par value (“Shares”). The rights afforded by these new Shares are identical to the rights afforded by the former Series A Shares.
 
Our Shares continue to trade in Mexico on the Mexican Stock Exchange under the ticker symbol TMMA. In the United States, our ADSs, each representing five CPOs, trade on the OTC market under the ticker symbol GTMAY following their delisting from the NYSE on June 12, 2012. Our ADSs continue to be registered under the U.S. Securities Exchange Act of 1934 and are issued and exchanged in New York by The Bank of New York Mellon, which replaced Citibank, N.A. as depositary on December 18, 2009. As of March 31, 2022, of the 102,182,841 outstanding Shares, 16,225,750 were held in the form of ADSs.
 
The CPOs do not trade independently of the Shares on the Bolsa. In the event that CPOs are sold to a Mexican national, the Shares underlying such CPOs will be delivered directly to the purchaser through S.D. Indeval, S.A. de C.V. (“Indeval”). Indeval is a privately owned central securities depositary that acts as a clearing house, depositary, custodian, settlement, and transfer agent and registration institution for Mexican Stock Exchange transactions, eliminating the need for physical transfer of securities. Because non-Mexican nationals cannot acquire direct interests in the Shares, in the event that the purchaser of such Shares is not a Mexican national, such Shares must be delivered in the form of CPOs through Indeval.

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Limitations Affecting ADS Holders and CPO Holders
 
Each Share entitles the holder thereof to one vote at any of our shareholders’ meetings. Holders of CPOs are not entitled to vote the Shares underlying such CPOs. Such voting rights are exercisable only by the CPO Trustee, which is required to vote all such Shares in the same manner as the holders of a majority of the Shares that are not held in the CPO Trust and that are voted at the relevant meeting.
 
Whenever a shareholders’ meeting approves a change of corporate purpose, change of domicile or restructuring from one type of corporate form to another, any shareholder who has voted against such change or restructuring has the right to withdraw as a shareholder and receive an amount equal to the book value of its shares (in accordance with our latest balance sheet approved by the annual ordinary general shareholders’ meeting), provided such shareholder exercises its right to withdraw during the 15-day period following the meeting at which such change or restructuring was approved. Because the CPO Trustee is required to vote the Shares held in the CPO Trust in the same manner as the holders of a majority of the Shares that are not held in the CPO Trust and that are voted at the relevant meeting, appraisal rights will not be available to holders of CPOs.
 
Share Repurchase Program
 
On December 14, 2007, the Company announced that its Board of Directors had given its approval to constitute a reserve fund to repurchase Shares during their meeting held in November of that year. The Share repurchase program was also approved by the Company’s shareholders at a shareholders’ meeting. The program was approved for an amount of up to US$10 million (approximately $199.3 million). The Company has repurchased 1,577,700 Shares under the program since its approval in 2007.
 
ITEM 10.
ADDITIONAL INFORMATION
 
Share Capital
 
Not applicable.
 
Memorandum and Articles of Association
 
The following is a summary of the provisions of the Bylaws (Estatutos Sociales) of Grupo TMM and is qualified in its entirety by the actual provisions within the Bylaws themselves and applicable provisions of the General Law of Mercantile Companies (Ley General de Sociedades Mercantiles) and the Mexican Securities Law (Ley del Mercado de Valores). For a description of the provisions of our Bylaws relating to our Board of Directors, General Director, Special Committees and Statutory Auditors, as well as Audit and Corporate Practices Committee, see Item 6. “Directors, Senior Management and Employees.”
 
Organization and Register
 
We were incorporated in the United Mexican States as a sociedad anónima, as evidenced by public deed number 26,225 dated August 14, 1987. We amended our Bylaws on August 29, 2002 in connection with the reclassification of our Series A Shares and Series L Shares.
 
On June 4th, 2008, certain articles of the Company’s Bylaws were modified at the General Shareholders’ Meeting. The modification to Article 14 added further restrictions to the acquisition or the transfer of the Company’s shares providing more specific detail with respect to the requirements and authorizations required in order to acquire five percent or more of the Company’s shares. Article 25 was modified in order to comply with the Mexican Exchange Law (Ley del Mercado de Valores). Finally, Article 27 was modified to clarify which shareholders are required to sign the Shareholders’ Meeting Attendance Sheet. This General Shareholders’ Meeting was properly formalized in public deed number 18,196 (filing before the Public Commerce Registry pending) by and before Mr. Juan Martín Álvarez Moreno, Public Brokerage number 46 of Mexico City, Federal District.

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On December 15, 2009, certain articles of the Company’s Bylaws were modified at the General Shareholders’ Meeting. The modification to Article 6 approved a capital increase. This General Shareholders’ Meeting was properly formalized in public deed number 21,851 (filed before the Public Commerce Registry pending) by and before Mr. Juan Martín Álvarez Moreno, Public Brokerage number 46 of Mexico City, Federal District.
 
Our statement of corporate purposes authorizes us to engage in, among other things, shipping and transportation services, the development, organization and management of all types of companies or entities, the acquisition of shares or units of the capital stock of other companies or entities, and generally, to carry out and execute all acts, transactions, agreements and operations of any nature as may be necessary or convenient in furtherance of our corporate purposes.
 
Board of Directors
 
Our business and affairs are managed by the Board of Directors and by a General Director. The Board of Directors consists of not more than 21 nor fewer than 7 persons, provided that at least 25% of the directors are independent. Our directors are elected annually at the Annual General Shareholders’ Meeting. The Board of Directors shall always have a Chairman, a First Vice-Chairman and a Second Vice-Chairman and other Directors.
 
The directors (whenever elected) shall remain in office for the period of time stated below, calculated from the date of their appointment. The directors may be re-elected and, in case of the failure to appoint their substitute or if the designated substitute does not take office, the directors in office being substituted shall continue to perform their duties for up to 30 calendar days following the date of expiry of the term for which they were appointed:

Position in the Board of Directors
Term
   
Chairman
7 years
First Vice-Chairman
7 years
Second Vice-Chairman
Between 3 and 7 years (As determined by the General Shareholders’ Meeting that elects him/her.)
Other Directors
1 year
 
Except that in no event whatsoever shall more than one third (1/3) of the member directors be replaced for any fiscal year of the Company.
 
In the event of the permanent absence of the Chairman or of any of the Vice-Chairmen, the Board of Directors, at the first meeting held after said permanent absence shall temporarily appoint from among its members or persons outside the same, the director or directors that shall fill relevant vacancies. Also, in the event of resignation or permanent absence of any of the other directors, the Board of Directors shall make the appointments of temporary directors as may be required for the continuance of the Board’s integration and duties. In both cases, a General Ordinary Shareholders’ Meeting shall be called as soon as possible to ratify or make definitive appointments of the relevant directors and, in any case, in the absence of said call, the first General Shareholders’ Meeting held after any of said events shall carry out the final appointment.
 
The Board of Directors shall appoint a Secretary and a Deputy Secretary, who shall not be a part of the Board of Directors. Said Secretary and Deputy Secretary may at any time be removed by the Board of Directors and their temporary and final absences shall be covered by the persons appointed by the Board of Directors. Despite the fact that the Secretary and the Deputy Secretary are not members of the Board of Directors of the Company, they may sign jointly or severally and instruct the publication of any call to the Shareholders’ Meeting of the Company ordered or resolved by the Board of Directors or the Audit and Corporate Practices Committee.
 
The meetings of the Board of Directors may be ordinary or extraordinary. The ordinary meetings shall be held periodically on the dates and times designated by such Board of Directors, provided that such Board of Directors meets at least 4 times during each fiscal year. The extraordinary meetings shall be held when the Chairman of the Board of Directors determines or at the request of 25% of the directors. The Board of Directors shall meet at the Company’s registered office or at any other place in Mexico or abroad as determined beforehand in the respective call. The meetings of the Board of Directors shall be presided over by the Chairman and in his absence, by the alternate Chairman and, in the absence of the alternate Chairman, by any director designated by the directors present at the meeting in question, by a majority of votes.

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In order for a Board of Directors meeting to be valid, at least half of the directors that make up the Board of Directors from time to time must be in attendance and the Chairman and a Vice-Chairman shall always and in any event be in attendance. If a meeting of the Board of Directors may not be held due to the lack of quorum or the absence of the Chairman and a Vice-Chairman, the call shall be repeated as many times as needed. In order for the resolutions of the Board of Directors to be valid, the favorable vote of the majority of the directors present at the meeting in question is required. In the event of a tie, the Chairman of the Board of Directors, or his alternate, as applicable, shall have the tie-breaking vote.
 
For resolutions of the Board of Directors to be valid in connection with the matters listed below, the favorable vote of (i) the Chairman of the Board of Directors and (ii) the First Vice-Chairman or the Second Vice-Chairman is required. The following matters shall be decided upon exclusively by the Board of Directors of the Company:
 

 1.
The approval and/or modification of the annual budget, which must be approved for each fiscal year of the Company;
 

 2.
The imposition or creation of any lien on any of the assets of the Company and/or of the corporations controlled by the Company, or the resolution of the Company and/or of the corporations controlled by the Company, to guarantee obligations of the Company and/or of its subsidiaries, or to guarantee obligations of third parties, in all of said cases, when the value of any of said transactions involves in a single act or in a series of related acts, an amount equal to or higher than five percent of the total consolidated assets of the Company during a calendar year;
 

 3.
The decision to begin a new business line or the suspension of any business line developed by the Company or by any corporation in which the Company participates, either directly or indirectly;
 

 4.
Any decision related to the acquisition or sale of assets (including shares or equity interests or their equivalent, in any corporation controlled or not controlled by the Company or in which the Company has a significant share, or to any financing and/or the creation of any liens, when the value of any of said transactions involves in a single act or in a series of related acts, an amount equal to or higher than five percent of the total consolidated assets of the Company during a calendar year;
 

 5.
The determination of the manner in which the Company shall exercise its voting rights regarding shares or equity interests (or their equivalent) issued by its subsidiaries or entities in which the Company owns at least 20% of the capital stock thereof; and
 

 6.
The establishment of any committee of the Company other than the Audit and Corporate Practices Committee.
 
The Board of Directors shall primarily have the duty of establishing general strategies for the direction of the business of the Company and its subsidiaries and that of overseeing the management and direction of the same and the performance of the relevant managers or officers. Such Board may establish one or more committees. In any event, the Company shall establish one or more committees in charge of the duties of audit and corporate practices.
 
General Director
 
The General Director, or Chief Executive Officer, shall be in charge of the day-to-day management of the Company, the direction and execution of the businesses of the Company and of its subsidiaries, subject to the strategies, policies and guidelines approved by the Board of Directors or, as the case may be, by committees created pursuant to the corporate Bylaws.

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In order to fulfill his duties, the General Director shall have the powers granted to him by the Board of Directors at the time of his appointment or at any other time after his appointment. For the exercise of his duties and activities and the fulfillment of his obligations, the General Director shall be assisted by all the relevant managers and other employees of the Company and of the corporations controlled by the Company.
 
Audit and Corporate Practices Committee
 
The Board of Directors of the Company must establish a committee to carry out the audit and corporate practices functions that shall be integrated by at least three independent directors appointed by the Board of Directors, which members are proposed by the Chairman. The foregoing notwithstanding, the Chairman of the Audit and Corporate Practices Committee must be appointed and/or removed from his position exclusively by the General Shareholders’ Meeting and he must always be an independent director. The Chairman of the Audit and Corporate Practices Committee in no event whatsoever may preside over the Board of Directors.
 
The oversight of the management, direction and execution of the business of the Company and of its subsidiaries shall be entrusted to the Board of Directors through the aforementioned Audit and Corporate Practices Committee, as well as through the individuals or corporations that carry out the external audit of the Company for each fiscal year.
 
Capital Stock
 
To conform to the provisions of the new Mexican Securities Law, our Series A Shares of capital stock were converted into nominative common shares without par value (“Shares”), thereby deleting any series. The rights of the Series A Shares and the Shares are identical.
 
Consequently, our total capital stock is made up of 103,760,541 Shares, of which 1,577,700 are held in treasury. As a result of a translation adjustment effective January 1, 2012, our stated total capital stock increased by $994,720,659 from $1,222,011,712. Accordingly, our total stated capital stock is $2,216,732,371.
 
Registration and Transfer
 
All Shares are evidenced by share certificates in registered form. Mexican law requires that all shares be represented by a certificate, although a single certificate may represent multiple shares of stock. Certificates may be issued in the name of the registered holder. All of our share certificates are issued in the name of the registered holder. Mexican law also requires that all transfers, encumbrances and liens on nominative shares must be recorded in the share registry book and are only enforceable against us and third parties after such registration occurs. S.D. Indeval, S.A. de C.V. (“Indeval”) is the registrar and transfer agent for the Shares held in book-entry form. A global certificate representing all Shares in book entry form is deposited at Indeval. Shareholders holding their share certificates directly are required to be recorded as such by the secretary of the Company in our share registry book.
 
Shareholders’ Meetings
 
Shareholders are entitled to vote on all matters at ordinary or special shareholders’ meetings. The Board of Directors will convene an Annual Shareholders’ Meeting at least once a year on the date determined by the Board of Directors within the first four months following the end of the fiscal year. In addition to dealing with the matters included on the agenda, the shareholders’ meeting should discuss, approve or modify the report of the Board of Directors, of the General Director and of the committee(s) that carry out the duties of corporate and audit practices, related to (i) the day-to-day conduct of business, (ii) the general balance sheet, (iii) the statement of income and losses, (iv) the statement of changes in financial position, and (v) the statement of the change in shareholders’ equity for such fiscal year. At such meeting directors shall also be appointed as per our Bylaws for the next fiscal year and their compensation shall be determined.
 
All notices of shareholders’ meetings shall be published once in the official newspaper of the domicile of the Company and in one of the newspapers of major circulation in such domicile, at least 15 days prior to the date scheduled for the meeting to be held. In order for the Ordinary Shareholders’ Meetings to be considered legally convened as a result of the first call, at least half of the capital stock in circulation at that time must be represented thereat, and the resolutions of such meeting shall be valid when passed by a majority of the votes present.

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Ordinary Shareholders’ Meetings require the attendance of shareholders holding at least half the shares that have the right to attend such meetings, and the affirmative vote of a majority of the holders present at any such meeting, in a first call, and in a second call, the affirmative vote of majority holders of shares that have the right to attend any such meeting irrespective of the number of shares presents thereat, in order to take action.
 
Extraordinary Shareholders’ Meetings require the attendance of shareholders holding at least 75% of the shares that have the right to attend and vote at any such meetings, and the affirmative vote of at least half the issued and outstanding shares having such voting right, in a first call, and in a second or subsequent call, the attendance and affirmative vote of at least half the issued and outstanding shares having the right to attend and vote at any such meeting in order to take action.
 
Shareholders may be present or represented by a simple proxy at shareholders’ meetings. Directors and statutory auditors of the Company may not represent any shareholder at any shareholders’ meeting.
 
In order to attend any meeting, shareholders must obtain an admission card prior to the meeting from Indeval or another financial institution in the United Mexican States or abroad. Such financial institution must notify the Company (telegraphic or facsimile means are authorized) of the name of the depositor, the number of shares deposited and the date on which the deposit was made. Admission cards to shareholders’ meetings may be regularly obtained through authorized brokers in the United Mexican States which, together with the list issued by Indeval, will be sufficient for any shareholder to obtain the corresponding admission card.
 
Limitation on Share Ownership
 
Mexican law and our corporate charter prohibit ownership of Shares by foreign investors. Any acquisition of Shares in violation of this charter provision would be null and void.
 
Any foreigner who acquires any interest or participation in our capital stock through CPOs will be considered a Mexican citizen insofar as Mexican law and we are concerned (except with respect to the right to own Shares) and will be deemed to understand and agree that such foreigner may not invoke the protection of his government in connection with his interest or participation in the Company, under penalty of forfeiture of such interest or participation in favor of the United Mexican States.
 
We contributed Shares of our capital stock to the Master Neutral Investment Trust (Fideicomiso Maestro de Inversion Neutra) (the “CPO Trust”) established with a 30-year term by Nacional Financiera, S.N.C. (the “CPO Trustee”) on November 24, 1989. The CPO Trustee authorized the issuance of non-redeemable ordinary participation certificates (certificados de participación ordinarios no amortizables) (“CPOs”) that correspond to our Shares. One CPO may be issued for each of our Shares contributed to the CPO Trust. CPOs constitute separate negotiable instruments different and apart from our Shares, and afford to their holders only economic rights attaching to Shares. Consequently, holders of CPOs are not entitled to exercise any voting rights with respect to the Shares held in the CPO Trust. Such voting rights are exercisable only by the CPO Trustee, which is required by the terms of the CPO Trust to vote such Shares in the same manner as holders of a majority of the outstanding Shares not held in the CPO Trust and voted at the relevant meeting.
 
Prior to its termination date, the CPO Trustee will sell Shares held by the CPO Trust, and deliver the proceeds thereof to CPO holders in proportion to their respective CPO holdings. Alternatively, we may establish a new trust to enable continued foreign equity participation in the Company. Although, we will endeavor to establish a new trust to substitute the CPO Trust, no assurance can be made that we will in fact establish or be able to establish such new trust.
 
Mexican and non-Mexican investors may hold CPOs without restrictions of any kind.

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We note that because CPOs are negotiable instruments separate and apart from Shares of the Company, holders of CPOs do not qualify as shareholders, and may not exercise the minority rights afforded by the General Law of Mercantile Companies and Mexican Securities Law of the United Mexican States, except for the right to exercise a derivative action for civil liability against the Directors and relevant officers of the Company or its subsidiaries, as further detailed in section entitled “Minority Rights” below.
 
Acquisition of Share Capital
 
On December 20, 2006, the Company amended Article 14 of its Bylaws to provide that the consent of the Board of Directors would be required for acquisitions that would result in any person or group of persons acquiring five percent or more of our Shares whether in a single transaction or in several simultaneous or successive transactions, notwithstanding the number of shares that such person may own at such time. If the approved process is not complied with, the acquirer will not be entitled to vote the acquired Shares. The approved process will apply only to direct acquisitions of Shares and not to CPOs and ADSs. In addition, the acquisition of Shares by any Mexican national may also be subject to the applicable provisions of Mexican antitrust laws. The Board is required to resolve with respect to any request for authorization to acquire five percent or more of our Shares within a period of three months following the request and to take into account certain criteria as set forth in our Bylaws that relates to the consequences affecting the Company by such acquisition. Notwithstanding this restriction, in the event of a public offering for the acquisition of 100% of our Shares, no authorization by the Board of Directors in connection with such public offering is necessary and the Board of Directors is required by law to render an opinion related to the terms and conditions of such public offering which opinion is to be rendered pursuant to applicable regulations. Our Bylaws provide that any amendment to the aforementioned provision may only be approved at a General Extraordinary Shareholders’ Meeting, at which shares representing five percent or more of the capital stock of the Company have not voted against.
 
On June 4, 2008, Article 14 of the Company’s Bylaws was further modified at the General Shareholder’s Meeting.  These modifications added further restrictions to the acquisition or the transfer of the Company’s shares providing more specific detail with respect to the requirements and authorizations required in order to acquire five percent or more of the Company’s shares.
 
Rights
 
1. Applicable to Shareholders, CPOs holders and the CPO Trustee
 
The shareholder, or group of shareholders representing at least five percent or more of the capital stock, may exercise a derivative action for civil liability against the directors and relevant officers of the Company, provided the complaint includes the total amount of the liabilities in favor of the Company, its subsidiaries or entities in which the Company owns 20% or more of the capital stock thereof, and not only the personal interest of the petitioners. The assets obtained as a result of the claim shall be for the benefit of the Company, its subsidiaries, or such entities, as applicable.
 
Pursuant to the Mexican Securities Law, CPOs or ADSs holders, as well as the CPO Trustee, may also exercise the aforementioned civil liability action.
 
2. Applicable to Shareholders
 
The shareholder or group of shareholders representing at least 20% or more of the capital stock may oppose in court the resolutions of the General Shareholders’ Meetings, provided (i) the complaint is filed within the 15 days following the adjournment of the Shareholders’ Meeting, (ii) the plaintiffs have not attended the Shareholders’ Meeting or they have cast their vote against the resolution, and (iii) the complaint states the clause of the Company’s Bylaws or of the legal norm violated, as well as a description of the violation. Shareholders exercising such opposition right must deposit their Shares before a Notary Public or an authorized financial institution and their complaint shall be accompanied by evidence of such deposit. Deposited shares may not be withdrawn until a final judgment is rendered.
 
The shareholder or group of shareholders representing at least 10% of the capital stock shall be entitled to appoint, at the Annual General Ordinary Shareholders’ Meeting held in order to elect directors, a Regular Member and, as the case may be, his respective alternate. The appointment of any director carried out by a minority may only be reversed when all other directors are also removed, unless the removal is attributable to a justified reason according to the applicable law.

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Holders of 10% or more of the capital stock of the Company may require the Chairman of the Board of Directors or of the Audit and Corporate Practices Committee to call a General Shareholders’ Meeting.
 
The shareholder or group of shareholders representing, at least, 10% of the shares represented at a Shareholders’ Meeting may request that the voting on any matter of which they are not sufficiently informed be postponed and in said case the voting on said matter shall be postponed for three calendar days, without the need for a new call. This right may be exercised only once for the same matter.
 
In addition, shareholders are entitled to (i) review all information and documents pertaining to the matters for which a Shareholders’ Meeting has been called at the offices of the Company and within at least 15 calendar days of the scheduled date of the meeting; (ii) request that certain relevant issues be dealt with at the meeting that were not originally on the agenda for the meeting, if called for under sundry or general matters in the relevant call for the meeting; (iii) be represented at the meeting by persons designated by them pursuant to standard proxy forms that are to be made available by the Company with at least 15 calendar days prior to the date scheduled for the meeting which will contain the name of the Company, the matters to be discussed at the meeting and spaces for instructions as to the manner of the vote; and (iv) execute agreements between or among different shareholders provided that any such shareholders’ agreement(s) must be disclosed to the Company within five business days following the date of their execution for disclosure thereof to the public through the relevant stock exchanges and disclosure of their existence in the annual reports of the Company, and provided further that such agreements will not affect any voting at any Shareholders’ Meeting of the Company, may not be enforced against the Company and will only be effective among the executing shareholders upon disclosure to the public as aforesaid.
 
Limitation of Officers’ and Directors’ Liability
 
In addition to voting for directors at the Annual Shareholders’ Meeting, shareholders are asked to vote upon the financial statements of the Company and the annual reports of the Board of Directors, the Audit and Corporate Practices Committee, and the General Director. If the holders of a majority of the votes entitled to be cast approve management’s performance, all shareholders are deemed to have released the directors and officers from claims or liability to us or our shareholders arising out of actions taken or any failure to take actions by any of them on our behalf during the prior fiscal year, with certain exceptions. Officers and directors may not be released from any claims or liability for criminal acts, fraud, self-dealing or gross negligence.
 
Members of the Board of Directors and the officers of the Company shall not incur, individually or jointly, any responsibility for the damages and/or losses they may cause to the Company or its subsidiaries or of entities in which the Company owns 20% or more of the capital stock thereof, derived from acts executed by, or decisions made, by any of them, to the extent that acting in good faith, any of the following exclusions of responsibility applies:
 

 (i)
They fulfill the requirements that the Bylaws and the applicable laws may stipulate for the approval of matters to be dealt with by the Board of Directors or, as the case may be, by committees of which they are members.
 

 (ii)
They make decisions or vote at the meetings of the Board of Directors or, as the case may be, committees to which they belong, based on the information provided by the relevant managers, the corporation providing the external audit services or the independent experts, whose capacity and credibility do not offer a cause for reasonable doubt.
 
  (iii)
They have selected the most suitable alternative, to the best of their knowledge and belief, or negative property damages had not been foreseeable, in both cases, based on the information available at the time of the decision.
 

 (iv)
They fulfill the resolutions of the Shareholders’ Meeting, provided these do not violate the law.

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We shall indemnify and hold the directors, the General Director and all other relevant managers of the Company or of the mercantile corporations controlled by the Company harmless from all damages and/or losses that their performance may cause to the Company and the corporations controlled by the Company or in which it has a significant influence, except in the event of deceitful acts or acts in bad faith, unlawful acts in accordance with the applicable legislation or whose indemnity, pursuant to said legislation may not be agreed or granted by the Company. For said purposes, we may obtain liability insurance or any similar insurance and grant any bonds and bails that may be necessary or convenient. All legal costs related to the respective defense shall be payable by us against general expenses, which shall only be refunded to the Company by the director in question, the General Director or the relevant manager in question, when required pursuant to a firm court order releasing the Company from its indemnity obligations.
 
Liquidation Rights
 
Any liquidation of the Company shall be carried out in the manner provided under the valid General Law of Mercantile Companies. The shareholders’ meeting, in the act of agreeing to the dissolution, should establish the rules that, in addition to the legal provisions and the provisions provided herein, should dictate the actions of the liquidators. Holders of 75% of the votes entitled to be cast are required to approve a liquidation of the Company.
 
Dividends
 
Dividends are declared by the shareholders. All holders of common stock (represented by Shares, CPOs or ADSs) will share equally on a per share basis in any dividend declared by our shareholders.
 
Certain Voting Rights
 
Our only class of outstanding capital stock consists of Shares. Shares, when properly issued, are fully voting shares of capital stock without par value.
 
Preemptive and Other Rights
 
In case of a capital increase, except in the case of treasury shares (in which case no preemptive rights applies), the holders of Shares have the preemptive right to subscribe for the new shares issued as a result of a capital increase, in proportion to the number of Shares owned by each of them.
 
Material Contracts
 
See Item 4. “Information on the Company — History and Development of the Company” and Item 5. “Operating and Financial Review and Prospects — Liquidity and Capital Resources.”
 
Exchange Controls
 
There are currently no exchange controls in Mexico; however, Mexico has imposed foreign exchange controls in the past. Pursuant to the provisions of the USMCA, if Mexico experiences serious balance of payment difficulties or the threat thereof in the future, Mexico would have the right to impose foreign exchange controls on investments made in Mexico, including those made by U.S. and Canadian investors.
 
United States Federal Income and Mexican Federal Taxation
 
The following is a summary of certain United States federal income tax and certain Mexican federal tax consequences related to the acquisition, ownership, and disposition of our ADSs by certain holders.
 
The Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion and a Protocol thereto between the United States and Mexico became effective on January 1, 1994 and has been amended by additional protocols (collectively, the “Tax Treaty”).  The United States and Mexico have also entered into an agreement concerning the exchange of information with respect to tax matters.

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This summary is not intended as tax advice to any particular holder of ADSs, which can be rendered only in light of that holder’s particular circumstances. Accordingly, each holder of ADSs is urged to consult such holder’s tax advisor with respect to the specific tax consequences to such holder of the acquisition, ownership and disposition of our ADSs, including the availability and applicability of any tax treaty to such holder.
 
The summary with respect to certain United States federal income tax consequences is based on the Internal Revenue Code of 1986 (the “Code”), the Treasury Regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as of the date of this Annual Report and as applicable in the current taxable year, and all of which are subject to change, possibly with retroactive effect, or to different interpretations.  The summary with respect to certain Mexican federal taxes is based on the Mexican federal tax laws, the Tax Treaty, regulations issued thereunder, rulings and general rules issued by the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público), official pronouncements and judicial decisions, all as of the date of this Annual Report, and all of which are subject to change, possibly with retroactive effect, or to different interpretations.
 
General
 
For purposes of this summary, a “U.S. holder” means a beneficial owner of ADSs, who is, for U.S. federal income tax purposes, (i) a citizen or individual resident of the United States, (ii) a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States, any state therein or the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of source, or (iv) a trust, if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in place to be treated as a United States trust.  A “non-U.S. holder” is any holder other than a U.S. holder.  The tax treatment of persons who hold their ADSs through a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) generally will depend upon the status of the partner and the activities of the partnership.  Partners in a partnership holding ADSs should consult their tax advisors.
 
For purposes of this summary, a “non-resident U.S. holder” is a U.S holder that is a non-resident of Mexico for Mexican federal tax purposes and that does not have a permanent establishment in Mexico.  In general, for Mexican federal tax purposes, an individual is a resident of Mexico if he has established his home in Mexico, unless he has a home both in Mexico and abroad; in such case, an individual will be considered to be a resident of Mexico if the individual’s “center of vital interests” is in Mexico. For these purposes, the center of vital interests will be considered to be located in Mexico, among other cases, if either (i) more than 50% of the individual’s total income in a calendar year is derived from sources in Mexico, or (ii) the main center of the individual’s professional activities is located in Mexico. Mexican nationals who are state officials or state workers are deemed to be residents of Mexico, even though their individual center of vital interests is located abroad.  A Mexican national is presumed to be a resident of Mexico unless such person can demonstrate otherwise.  A legal entity is a resident of Mexico if it maintains the principal administration of its business or the effective location of its management in Mexico.  If a legal entity or an individual is deemed to have a permanent establishment in Mexico for Mexican federal income tax purposes, all income attributable to such permanent establishment will be subject to Mexican federal income tax, in accordance with applicable laws.
 
If an individual or legal entity ceases to be a resident of Mexico for Mexican federal tax purposes, such individual or legal entity must make certain filings with the Mexican tax authorities generally within a 15-day period before its change of residency.
 
A non-resident of Mexico is an individual or legal entity that does not satisfy the requirements to be considered a resident of Mexico for Mexican federal tax purposes.
 
Certain Mexican Federal Tax Consequences
 
This summary of certain Mexican federal tax consequences relates only to non-resident U.S. holders of our ADSs.  This summary does not address all of the Mexican tax consequences that may be applicable to specific holders of the Shares (including a holder that controls the Company, an investor that holds 10% or more of the Shares or holders that constitute a group of persons for purposes of Mexican law).

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Dividends — Dividends distributed from net taxable profits generated after or during 2014, either in cash or in any other form, paid with respect to the Shares underlying the CPOs represented by our ADSs generally will not be subject to a 10% Mexican withholding tax. Our ADSs are not subject to Mexican withholding tax if such dividends were distributed from the net taxable profits generated before 2014.
 
Capital Gains — Capital gains arising from the sale or other disposition of our ADSs carried out through a stock exchange recognized under applicable Mexican tax law, generally will be subject to a 10% Mexican income tax to be withheld by the financial intermediary, except in cases when the transferor asserts its residency in a country with which Mexico has entered into a tax treaty for the avoidance of double taxation, in which case the non-resident holder will not be subject to Mexican tax.
 
In compliance with certain requirements, gains on the sale or other disposition of ADSs made in circumstances different from those set forth in the prior paragraph generally would be subject to Mexican tax, at the general rate of 25% of the gross income, regardless of the nationality or residence of the transferor. However, under the Tax Treaty, a 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 our ADSs in a transaction that is not carried out through the Mexican Stock Exchange or other approved securities markets, so long as the holder did not own, directly or indirectly, 25% or more of our outstanding capital stock (including shares represented by our ADSs) within the 12-month period preceding such sale or other disposition.
 
Deposits and withdrawals of ADSs will not give rise to any Mexican tax or transfer duties.
 
In general, commissions paid in brokerage transactions for the sale of our ADSs on the Mexican Stock Exchange are subject to a value-added tax of 16%.
 
Other Mexican Taxes — There are no Mexican inheritance, succession taxes or value-added taxes applicable to the ownership, transfer or disposition of our ADSs.  Gratuitous transfers of our ADSs may, in some circumstances, subject the recipient to Mexican federal income tax.  There are no Mexican stamp, issue, registration or similar taxes or duties payable by non-resident U.S. holders with respect to our ADSs.
 
Certain United States Federal Income Tax Consequences
 
U.S. Holders
 
The following is a summary of certain United States federal income tax consequences to U.S. holders of the acquisition, ownership and disposition of ADSs.  This discussion does not purport to be tax or legal advice and may not be applicable depending upon a U.S. holder’s particular situation.
 
Each U.S. holder should consult such U.S. holder’s own tax advisor with respect to the current and, possibly future, U.S. federal, state, local and foreign tax consequences to such U.S. holder of the acquisition, ownership and disposition of ADSs.
 
This summary is directed solely at U.S. holders that hold their ADSs as capital assets and whose functional currency is the Dollar.  This summary does not discuss all of the U.S. federal income tax consequences that may be relevant to U.S. holders, particularly those that may be subject to special treatment under U.S. federal income tax laws, such as partnerships, banks, financial institutions, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, U.S. holders whose functional currency is not the U.S. dollar, tax-exempt investors, expatriates, former long-term U.S. residents, U.S. holders that reside outside the United States, persons who received shares in return for services rendered or in connection with their employment, securities traders who elect to account for their investments in ADSs on a mark-to-market basis, persons that own (or are deemed to own for U.S. tax purposes) 10% or more of the voting stock or value of the Company, or persons that hold their ADSs as part of a hedge, straddle, conversion or other integrated transaction.  This summary does not discuss any United States federal estate, gift or alternative minimum tax consequences or the tax laws of any state, local or foreign government that may be applicable.

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For United States federal income tax purposes, a holder of an ADS generally will be treated as the beneficial owner of the CPOs represented by such ADS and such CPOs should represent a beneficial interest in the underlying Shares represented by such CPOs.
 
Distributions — Distributions with respect to our ADSs that are paid out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) will be includible in the gross income of a U.S. holder as dividend income when the distributions are received by CPO trustee, and, in general, will not be eligible for the dividends received deduction otherwise allowable to U.S. holders that are corporations. To the extent that a distribution exceeds our current and accumulated earnings and profits, it will be treated first as a nontaxable return of the U.S. holder’s adjusted tax basis in its ADSs to the extent of such tax basis, and then as gain from the sale or exchange of a capital asset.
 
A U.S. holder may be entitled, subject to a number of complex limitations and conditions (including a minimum holding period requirement), to claim a U.S. foreign tax credit in respect of any Mexican income taxes withheld on dividends received in respect of the ADSs. Subject to certain limitations, a U.S. holder who does not elect to claim a credit for any foreign income taxes paid during the taxable year may instead claim a deduction in respect of such income taxes provided the U.S. Holder elects to deduct (rather than credit) all foreign income taxes for that year. Dividends received in respect of ADSs generally will be treated as foreign-source income, subject to various classifications and other limitations and generally will be treated as passive category income for most U.S. Holders. The rules relating to computing foreign tax credits or deducting foreign taxes are extremely complex, and U.S. holders should consult their own tax advisors regarding the availability of foreign tax credits under their particular circumstances.
 
The amount of any dividend paid in Pesos will be includible in a U.S. Holder’s gross income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day the pesos are actually or constructively received by the CPO trustee, regardless of whether the Pesos are converted into Dollars at that time. A U.S. holder will have a basis in the Pesos received equal to their Dollar value on the date of receipt. If the distribution is converted into Dollars on the date of receipt, U.S. holders should not be required to recognize foreign currency gain or loss in respect of the dividend income. Any gains or losses resulting from the conversion of Pesos into Dollars after the date on which the distribution is received generally will be treated as U.S. source ordinary income or loss.
 
Subject to certain exceptions for short-term and hedged positions, certain dividends received with respect to the ADSs by an individual U.S. holder may be subject to United States federal income tax at preferential rates applicable to long-term capital gain if the dividends are “qualified dividends.” Qualified dividends with respect to an individual U.S. holder generally include dividends that are received from a “qualified foreign corporation”, provided the U.S. holder meets certain holding period requirements with respect to its ownership of such qualified foreign corporation. A qualified foreign corporation generally includes a foreign corporation if (A) (i) its shares, including its ADSs, are readily tradable on an established securities market in the United States, or (ii) it is eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service (“IRS”) has approved for purposes of the qualified dividend rule, and (B) it was not a passive foreign investment company (“PFIC”) in the taxable year in which the dividend was paid or in the preceding taxable year. The U.S. Treasury has approved the Tax Treaty for the purposes of the qualified dividend rules, and we believe that we should be eligible for the benefits of the Tax Treaty. Further, as discussed below, we believe that we are not a PFIC. Therefore, we believe that dividends paid to an individual U.S. holder with respect to the ADSs may be subject to U.S. federal income tax at preferential rates applicable to long-term capital gain, provided such U.S. holder otherwise meets the requirements for the application of such rate. U.S. holders should consult their tax advisers regarding the availability of the preferential dividend tax rates in light of their particular circumstances.
 
Dispositions — In general, upon the sale or other disposition of ADSs, a U.S. holder will recognize gain or loss equal to the difference between the amount realized on the sale or disposition (in Dollars, generally determined at the spot rate on the date of disposition if the amount realized is denominated in a foreign currency) and the U.S. holder’s adjusted tax basis in the ADSs (in Dollars). The gain or loss generally will be long-term capital gain or loss if the ADSs have been held for more than one year on the date of the sale or other disposition. Certain non-corporate U.S. Holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. The deductibility of capital losses is subject to limitations.  Deposits and withdrawals of CPOs by a U.S. holder in exchange for ADSs generally will not result in the realization of gain or loss for U.S. federal income tax purposes.  Gain or loss recognized by a U.S. holder on a sale or other disposition of ADSs generally will be treated as gain or loss from sources within the United States for United States foreign tax credit purposes.

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In addition, under current law, certain U.S. Investors that are individuals, estates or trusts are required to pay an additional 3.8% tax on various types of investment income. Such U.S. Investors should consult their tax advisors regarding the effect, if any, of the applicability of this tax with respect to an investment in our ADSs.
 
PFIC — A non-U.S. corporation is a PFIC for any taxable year in which, after applying relevant look-through rules with respect to the income and assets of subsidiaries:
 

 •
75% or more of its gross income consists of passive income; or
 

 •
50% or more of the average quarterly value of its gross assets consists of assets that produce, or are held for the production of, passive income.
 
“Passive income” for this purpose includes, for example, dividends, interest, royalties, rents and gains from commodities and securities transactions. Passive income does not include rents and royalties derived from the active conduct of a trade or business. If the stock of a non-U.S. corporation is publicly traded for the taxable year, the asset test is applied using the fair market value of the assets for purposes of measuring such corporation’s assets. If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income for purposes of the PFIC income and asset tests.
 
We believe that we were not a PFIC for United States federal income tax purposes for the 2021 taxable year and we do not anticipate being a PFIC for the 2022 taxable year. However, because PFIC status depends upon the composition of our income and assets and the market value of our assets from time to time (including certain equity investments of less than 25%) and because the characterization of certain income and assets is uncertain under the PFIC rules, there can be no assurance that we will not be considered a PFIC for any taxable year. If we were treated as a PFIC for any taxable year during which a U.S. holder held ADSs, certain adverse consequences could apply to such U.S. holder.
 
In general, if we were treated as a PFIC for any taxable year, gain recognized by a U.S. holder on the sale or other disposition of ADSs would be allocated ratably over the U.S. holder’s holding period for such ADSs. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, and an interest charge would be imposed on the tax liability attributable to such amounts. Further, generally, to the extent any distribution during a taxable year to a U.S. holder in respect of ADSs exceeds 125% of the average of the annual distributions in respect of such ADSs received by such U.S. holder during the preceding three taxable years; such “excess distribution” would be subject to taxation as described in the preceding sentence. Certain elections may be available to mitigate the adverse consequences resulting from PFIC status.
 
If we were regarded as a PFIC, a U.S. Holder would be required to file an annual information return on IRS Form 8621 relating to the holder’s ownership of the shares or ADSs. A failure to file this return will suspend the statute of limitations with respect to any tax return, event, or period to which such report relates (potentially including with respect to items that do not relate to a U.S. Holder’s investment in the ADSs). This requirement would be in addition to other reporting requirements applicable to ownership in a PFIC.
 
Information Reporting and Backup Withholding — Dividends on, and proceeds from the sale or other disposition of, ADSs paid to a U.S. holder generally may be subject to the information reporting and backup withholding rules under the Code unless such U.S. holder (i) is a corporation or comes within certain exempt categories, and demonstrates this fact when so required, or (ii) provides a correct taxpayer identification number, certifies that it is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules – such as by providing an IRS Form W-9. Any amount withheld under these rules generally will be allowed as a credit against the U.S. holder’s United States federal income tax liability, provided certain information is timely provided to the IRS.

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Certain U.S. Holders (including individual U.S. Holders) that hold certain specified foreign financial assets, including stock in a foreign corporation, with values in excess of certain thresholds are required to file Form 8938 with their United States Federal Income Tax return. Form 8938 requires disclosure of information concerning such foreign assets, including the value of the assets. Failure to file the form when required results in penalties. An exemption from reporting applies to foreign assets held through a US financial institution, generally including a non-U.S. branch or subsidiary of a U.S. institution and a U.S. branch of a non-US institution.
 
Non-U.S. Holders
 
A non-U.S. holder generally will not be subject to United States federal income or withholding tax on dividends received with respect to ADSs, unless such income is effectively connected with the conduct by such non-U.S. holder of a United States trade or business (or, in the case of a non-U.S. holder that qualifies for the benefits of an income tax treaty with the United States, if such income is attributable to a permanent establishment or fixed place of business of such non-U.S. holder in the United States).
 
A non-U.S. holder of ADSs will not be subject to United States federal income or withholding tax on gain realized on the sale or other disposition of ADSs, unless (1) such gain is effectively connected with the conduct by such non-U.S. holder of a United States trade or business (or, in the case of a non-U.S. holder that qualifies for the benefits of an income tax treaty with the United States, such gain is attributable to a permanent establishment or fixed place of business of such non-U.S. holder in the United States), or (2) in the case of gain realized by an individual non-U.S. holder, such non-U.S. holder is present in the United States for 183 days or more in the taxable year of the sale or other disposition and certain other conditions are met.
 
Although non-U.S. holders generally are exempt from backup withholding, a non-U.S. holder may be required to comply with U.S. backup withholding and FATCA with certification and identification procedures in order to establish such exemption – such as by providing the applicable IRS Form W-8.
 
Documents On Display
 
All documents concerning the Company referred to herein may be inspected at our offices in Mexico City. We will provide a summary of such documents in English upon request. In addition, we file reports, including annual reports on Form 20-F, and other information electronically with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers.  Any filings we make electronically with the SEC will be available to the public over the Internet at the SEC’s website http://www.sec.gov.
 
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
The following information includes “forward-looking statements” that involve risk and uncertainties. Actual results could differ from those presented. All information below is presented under IFRS as of December 31, 2021, in pesos.
 
We are exposed to market risks arising from changes in interest rates, foreign exchange rates, equity prices and commodity prices. We use derivative instruments, on a selective basis, to manage these risks. We do not use derivative instruments for trading or speculative purposes. We maintain and control our treasury operations and overall financial risk through policies approved by senior management and our Board of Directors. See Note 26 to the accompanying Audited Consolidated Financial Statements contained elsewhere herein for additional disclosures about market risk.
 
Foreign Currency Risk
 
Historically, a majority of the Company’s revenues have been denominated in U.S. dollars, while the majority of our costs and expenses have been denominated in Pesos. As such, the Company is exposed to foreign currency risk and may occasionally use currency derivatives to manage alternating levels of exposure. These derivatives allow the Company to offset an increase in operating and/or administrative expenses arising from foreign currency appreciation or depreciation against the U.S. dollar.

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The Company’s income from operations may therefore be materially affected by variances in the exchange rate between the U.S. dollar and the Mexican Peso.  Mexican Pesos historically have been subject to greater risk of devaluation and have tended to depreciate against the U.S. dollar.  Given that a large proportion of the Company’s revenues are denominated in U.S. dollars, the Company has sought to reduce its exposure to foreign currency risk by holding a portion of its debt in U.S. dollars. Currently, approximately 41.2% of the Company’s indebtedness is denominated in U.S. dollars.
 
The Company currently believes that its strategy of holding a portion of its debt as U.S. dollar-denominated debt will allow it to effectively manage its foreign currency risk without the use of currency derivatives or other hedging instruments. However, the Company has in the past, and may from time to time in the future, enter into currency derivatives denominated in Mexican Pesos or other relevant currencies to attempt to manage its foreign currency risk. These derivatives should allow the Company to offset an increase in operating and/or administrative expenses arising from foreign currency appreciation or depreciation against the U.S. dollar.
 
At December 31, 2021 and 2020, the Company had monetary assets and liabilities denominated in currencies other than the Mexican Peso as follows:

   
December 31,
  
   
(in thousands of Pesos)
  
   
2021
    
2020
  
Assets
  
$
641,116
    
$
310,589
  
Liabilities
    
(725,559
)
    
(481,625
)
   
$
(84,443
)
  
$
(171,036
)
 
The objective of the Company when using derivatives is always to manage specific risks and exposures, and not to trade such instruments for profit or loss.
 
Interest Rate Risk
 
We depend upon debt-financing transactions, including debt securities, bank and vendor credit facilities and leases, to finance our operations. These transactions expose us to interest rate risk, with the primary interest rate risk exposure resulting from changes in the relevant base rates (CETES, TIIE, SOFR and/or Prime rate) which are used to determine the interest rates that are applicable to borrowings under our credit facilities. We are also exposed to interest rate risk in connection with the refinancing of maturing debt.
 
The table below provides information about the Company’s debt obligations. For debt obligations, the table represents principal cash flows and related weighted average interest rates by expected maturity dates. The information is presented in millions of pesos, which is the Company’s reporting currency.

   
Breakdown of Fixed and Variable Rates of Financial Obligations (1) (2)
  
   
Expected Maturity
  
Liabilities
  
2022
    
2023
    
2024
    
2025
    
Thereafter
    
Total
    
Fair Value
  
   
(in millions of pesos)
  
Long-Term Debt
                                          
Fixed Rate
  
$
297.2
    
$
100.5
    
$
97.2
    
$
78.2
    
$
50.3
    
$
623.4
    
$
623.4
  
Average Interest Rate
    
12.41
%
    
10.26
%
    
11.74
%
    
12.12
%
    
11.11
%
    
11.81
%
      
**
Variable Rate
  
$
20.3
    
$
8.7
    
$
7.5
    
$
4.5
    
$
7.3
    
$
48.3
    
$
48.3
  
Average Interest Rate
    
9.64
%
    
10.11
%
    
10.30
%
    
9.02
%
    
10.49
%
    
9.83
%
      
**

(1)
Information as of December 31, 2021.

(2)
Considers debt obligations and liabilities associated with our long-term operating leases.
**
Not applicable

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From time to time, we use derivative financial instruments such as interest rate cap transactions for hedging purposes in order to reduce our exposure to increases in interest rates. The Company is not currently hedging its interest rate exposure throught the use of any derivative financial instruments.
 
Commodity Price Risk
 
The Company is exposed to price changes in the commodities markets for certain inventory goods, and specifically fuel. The Company purchases its diesel fuel on a spot basis within Mexico, and it purchases ship bunker fuel in the United States for certain of its operations. These purchases are affected by price changes in the international energy commodity market. In the past, the Company has entered into diesel fuel and other energy commodity derivatives transactions to manage these risks and may continue to engage in similar transactions in the future.
 
Inflation Rate Risk
 
A substantial increase in the Mexican inflation rate would have the effect of increasing our Peso-denominated costs and expenses, which could affect our results of operations and financial condition. High levels of inflation may also affect the balance of trade between Mexico and the United States and other countries, which could adversely affect our results of operations.
 
Derivative Instruments
 
As of December 31, 2021, the Company was not holding any derivative instruments for hedging purposes.
 
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
American Depositary Shares
 
The Bank of New York Mellon, the depositary, collects its fees for delivery and surrender of ADSs directly from investors depositing CPOs 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.

Persons depositing or withdrawing CPOs must pay:
  
For:
US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
  
•          Issuance of ADSs, including issuances resulting from a distribution of CPOs or rights or other property
     
   
•          Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
     
US$.02 (or less) per ADS
  
•          Any cash distribution to ADS registered holders
     
US$.02 (or less) per ADSs per calendar year
  
•          Depositary services
     
A fee equivalent to the fee that would be payable if securities distributed to holders had been CPOs and the CPOs had been deposited for issuance of ADSs
  
•          Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders
     
Registration or transfer fees
  
•          Transfer and registration of CPOs on the register to or from the name of the depositary or its agent when a holder deposits or withdraws CPOs
     
Expenses of the depositary
  
•          Cable, telex and facsimile transmissions as expressly provided in the deposit agreement
     
   
•          Converting foreign currency to U.S. dollars
     
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or CPO underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes
  
•          As necessary
     
Any charges incurred by the depositary or its agents for servicing the deposited securities
  
•          As necessary

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Grupo TMM, S.A.B. and Subsidiaries

Fees payable by the depositary
 
The depositary has agreed to reimburse us for expenses we incur in connection with the establishment of the ADS facility, including legal fees, fees due to the previous depositary, investor relations expenses and other facility-related expenses. 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 has also agreed to pay its standard out-of-pocket administrative, maintenance and shareholder services expenses for the ADSs. Such expenses include 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, stationary, postage, facsimile and telephone calls, and certain investor relationship programs or special investor relations promotional services. We did not receive any reimbursements from the depositary during the years ended December 31, 2019, 2020 and 2021, respectively.
 
PART II
 
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
None.
 
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
See Item 4. “Information on the Company — History and Development of the Company.”
 
ITEM 15.
CONTROLS AND PROCEDURES
 
(a) Disclosure Controls and Procedures.
 
The Company has evaluated, under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2021. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer each concluded that, as of December 31, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported as and when required by the Securities and Exchange Commission’s applicable rules and forms, and is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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Grupo TMM, S.A.B. and Subsidiaries

(b) Management’s annual report on internal control over financial reporting.
 
The Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer that: (i) pertains to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provides reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements for external reporting in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorization of the Company’s management and directors; and (iii) provides 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 procedure may deteriorate. The Company, with the participation of its Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making its assessment of internal control over financial reporting, management used the criteria in the 2013 Internal Control — Integrated Framework set forth by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission.
 
As a result of this assessment, the Company’s management has determined that the Company’s internal control over financial reporting was effective as of December 31, 2021.
 
(c) Attestation report of the registered public accounting firm.
 
Not applicable.
 
(d) Changes in internal control over financial reporting.
 
As required by Rule 13a-15(d), under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the period covered since the last report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  Based on this evaluation, it has been determined that there has been no change during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 16B.
AUDIT COMMITTEE FINANCIAL EXPERT
 
The Board of Directors of Grupo TMM maintains an Audit and Corporate Practices Committee which is comprised of three independent directors, each of whom has significant experience in analyzing and evaluating financial reports and an understanding of internal controls and procedures for financial reporting. On April 29, 2022, the General Assembly of Shareholders appointed as independent director Mr. Francisco Javier García-Sabaté Palazuelos, who is considered a financial expert in accordance with the standards described in Section 407 of the Sarbanes Oxley Act of 2002.
 
ITEM 16C.
CODE OF ETHICS
 
Grupo TMM has adopted a code of ethical conduct entitled, “Code of Ethics,” covering all its officers, including its principal executive officer, principal financial officer and principal accounting officer, and all of its employees. We will provide a copy of the Company’s Code of Ethics free of charge upon written request sent to Grupo TMM, Paseo de la Reforma No. 296, P.19. Colonia Juárez, 06600, Alcaldía Cuauhtémoc, México City, México, Attn: Human Resources.

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Grupo TMM, S.A.B. and Subsidiaries

We last updated our Code of Ethics in March 2017. We have not granted any waivers to any provision of our Code of Ethics to any officer, employee or member of the Audit or Corporate Practices Committee during the Company’s fiscal year ended December 31, 2021.
 
ITEM 16D.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
The following table reflects our principal accounting fees and services for the years 2021 and 2020:

GRUPO TMM, S. A. B.
Summary of Auditors’ Payments
(In thousands of Pesos)

   
As of December 31,
  
   
2021
    
2020
  
Audit Fees(a)
  
$
6,447.0
    
$
6,786.0
  
Total(b)
  
$
6,447.0
    
$
6,786.0
  
(a)
Audit Fees—Fees relate to the audit of our Annual Financial Statements and review of SEC filings.
(b)
Total does not include Mexican tax (“Impuesto al Valor Agregado” or “IVA”).
 
The Company’s Audit Committee pre-approves all fees for the services provided by the independent auditors, including the fees for 2020 and 2021 in accordance with the Company’s policies and procedures.
 
ITEM 16E.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
 
Not applicable.
 
ITEM 16F.
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 
None.
 
ITEM 16G.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
 
None.
          
ITEM 16G. CORPORATE GOVERNANCE
 
Not applicable.
 
ITEM 16H. MINE SAFETY DISCLOSURES
            
Not applicable.
 
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.
PART III
 
ITEM 17.
FINANCIAL STATEMENTS
 
Not applicable.
 
ITEM 18.
FINANCIAL STATEMENTS
 
The following financial statements are filed as part of this Annual Report on Form 20-F.

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Grupo TMM, S.A.B. and Subsidiaries

Contents
Page
Report of Independent Registered Public Accounting Firm (PCAOB Number 1245)
F-1
Consolidated Statements of Financial Position
F-3
Consolidated Statements of Profit or Loss
F-4
Consolidated Statements of Comprehensive (Loss) Income
F-5
Consolidated Statements of Changes in Stockholders’ Equity
F-6
Consolidated Statements of Cash Flows
F-7
Notes to the Consolidated Financial Statements
F-8

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Grupo TMM, S.A.B. and Subsidiaries

ITEM 19.
EXHIBITS
 
Documents filed as exhibits to this Annual Report:

Exhibit
No.
Exhibit
Amended and Restated Bylaws of Grupo TMM, S.A.B., as registered with the Public Registry of Commerce on January 15, 2010, together with an English translation (incorporated herein by reference to Exhibit 1.1 of the Company’s Form 20-F filed on June 30, 2010).
   
    2.1**
Specimen Ordinary Participation Certificate, together with an English translation (incorporated herein by reference to Exhibit 4.1 of the Registration Statement on Form F-1 — Registration No. 33-47334).
   
Form of Amended and Restated Deposit Agreement (the “Deposit Agreement”) among the Company, The Bank of New York Mellon, as depositary and all owners and holders of American Depositary Shares (incorporated by reference to Exhibit 1 of the Company’s Registration Statement on Form F-6 — Registration No. 333-163562).
   
Trust Agreement, dated November 24, 1989 (the “CPO Trust Agreement”), between Nacional Financiera, S.N.C., as grantor, and as CPO Trustee, together with an English translation (incorporated herein by reference to Exhibit 2 of the Company’s Registration Statement on Form F-6 — Registration No. 333-163562).
   
   2.4**
Public Deed, dated January 28, 1992, together with an English translation (incorporated herein by reference to Exhibit 4.5 of the Registration Statement on Form F-1 — Registration No. 33-47334).
   
Description of securities registered under Section 12 of the Securities Exchange Act of 1934.
   
List of Main Subsidiaries.
   
Section 302 Certification of Chief Executive Officer.
   
Section 302 Certification of Chief Financial Officer.
   
Section 906 Certification of Chief Executive Officer.
   
Section 906 Certification of Chief Financial Officer.

 
 15.1*  Consent letter of Salles, Sainz - Grant Thornton, S.C.
*
Filed herewith.
** This was a paper filing and is not available on the SEC website.
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Grupo TMM, S.A.B. and Subsidiaries

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 TMM, S.A.B.
       
     
         

By:
/s/  Luis Rodolfo Capitanachi Dagdug
      
         
Luis Rodolfo Capitanachi Dagdug
    
         
Chief Financial Officer

Date: May 25, 2022

Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm
 
Grupo TMM, S.A.B. and Subsidiaries
 
December 31, 2021, and 2020

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graphic
Salles, Sainz – Grant Thornton, S.C.
Periférico Sur 4338
Col. Jardines del Pedregal
04500, Mexico City
www.grantthornton.mx

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

Grupo TMM, S.A.B.:

Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Grupo TMM, S.A.B. and subsidiaries (‘Grupo TMM’ or the ‘Company’) as of December 31, 2021 and 2020, the related consolidated statements of profit or loss, comprehensive income, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2021 and the related notes (collectively referred to as the ‘financial statements’). In our opinion, the financial statements present fairly, in all material respects, the financial position of Grupo TMM as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board.

Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (‘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 financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

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Our audits included performing procedures to assess the risks of material misstatement of the 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters
The critical audit matters communicated below 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 judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment of long-lived assets.
As described further in Note 13, the Company evaluates long-lived assets annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Long-lived assets amounted to $2,038,281 at December 31, 2021. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. We identified the long-lived impairment analysis as a critical audit matter because the analysis involves a high degree of auditor judgment due to the significant estimation required to determine the recoverable amount of long-lived assets. In particular, the estimate of the recoverable amount was sensitive to significant assumptions, such as forecasted revenues and gross margins and discount rate.

Our audit procedures applied included, among other things, i) in understanding and evaluating the assumptions, methodologies, and input data used by the Company, particularly, the information related to revenue forecasts and gross margins of the main cash generating units, as well as the appropriate disclosure of the assumptions used, which are highly sensitive for the determination of the recoverable amount of long-lived assets and ii) the participation of an independent evaluation expert to assist us to review the discount rate used by the Company in its valuation process.

Going concern evaluation
As described further in Notes 1 and 4, Mexico, as well as other countries of the world, have suffered the effects of the COVID- 19 pandemic, which was declared as such by the World Health Organization since March 2020. These effects have been reflected in a decrease in the revenues of the Company, starting as of the end of March 2020 and up to the date of this report.

Based on evaluations carried out as mentioned in Note 1, Management determined that its consolidated financial statements as at December 31, 2021 have been prepared under the assumption that it operates on a going concern basis. Pursuant to the effects described in the above paragraph, the transportation profit (loss) of the last fiscal years and the accumulated deficit as at December 31, 2021, this going concern evaluation is considered a critical audit matter.

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Our audit procedures, among other things, included the following, i) evaluate the historical and projected information on operating profit or loss financial structure, ii) analyze the business plan of the Company for the short, medium, and long-term, including the evaluation of the feasibility of its main projects, iii) analyze the main financial ratios, key indexes and indicators of the industry in which the Company operates and iv) reconcile the projected financial information with other elements of the consolidated financial statements, such as future cash flows used for the determination of the fair value of the ships and evaluation of impairment of long-lived assets.

We have served as the Company’s auditor since 2005.
/s/ Sallez, Sainz – Grant Thornton, S.C.
Mexico City, Mexico
May 25, 2022
 
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Grupo TMM, S.A.B. and Subsidiaries

Consolidated statements of financial position
As at December 31, 2021 and 2020
(Amounts in thousands of pesos, except number of shares)

   
2021
    
2020
  
Assets
            
Current
            
Cash and cash equivalents (Note 6)
  
$
39,567
    
$
105,310
  
Restricted cash (Note 6)
    
48,203
      
37,672
  
Trade receivables, net (Note 7)
    
401,087
      
186,363
  
Other accounts receivable (Note 8)
    
272,021
      
264,261
  
Related parties (Note 15)
    
65,057
      
42,228
  
Materials and supplies
    
62,534
      
53,853
  
Prepayments
    
6,649
      
32,465
  
Assets classified as held for sale (Note 9)
     455,157       -  
Total current assets
    
1,350,275
      
722,152
  
                 
Non-current
                
Other accounts receivable (Note 8)
    
280,000
      
238,000
  
Property, vessels and equipment, net (Note 9)
    
1,540,938
      
2,531,996
  
Right-of-use assets (Note 10)
    
337,232
      
354,232
  
Intangible assets (Note 12)
    
160,111
      
151,250
  
Concession rights, net (Note 11)
    
-
      
1,892
  
Other non-current assets
    
43,714
      
31,025
  
Total non-current assets
    
2,361,995
      
3,308,395
  
Total assets
  
$
3,712,270
    
$
4,030,547
  
                 
Liabilities
                
Short-term
                
Short-term portion of the financial debt (Note 14)
  
$
57,106
    
$
129,085
  
Short-term leases liabilities (Note 10)
    
121,378
      
58,245
  
Trade payables
    
437,005
      
228,959
  
Accounts payable and accrued expenses (Note 16)
    
470,068
      
525,108
  
Related parties (Note 15)
    
144,966
      
1,458
  
Total short-term liabilities
    
1,230,523
      
942,855
  
                 
Long-term
                
Long-term portion of the financial debt (Note 14)
    
65,601
      
53,644
  
Long-term lease liabilities (Note 10)
    
288,497
      
297,268
  
Acounts payable
    
-
      
23,551
  
Employee benefits (Note 23)
    
102,375
      
150,197
  
Deferred income tax (Note 21)
    
206,176
      
315,624
  
Total long-term liabilities
    
662,649
      
840,284
  
Total liabilities
    
1,893,172
      
1,783,139
  
                 
Stockholders’ equity (Note 17):
                
Share capital (103,760,541 shares authorized and issued)
    
2,216,733
      
2,216,733
  
Treasury shares (1,577,700 shares)
    
(46,805
)
    
(46,805
)
Accumulated losses
    
(1,165,223
)
    
(963,602
)
Other components of equity
    
778,468
      
999,675
  
Controlling interest
    
1,783,173
      
2,206,001
  
Non-controlling interest
    
35,925
      
41,407
  
Total stockholders’ equity
    
1,819,098
      
2,247,408
  
Total liabilities and stockholders’ equity
  
$
3,712,270
    
$
4,030,547
  

The attached notes are part of these consolidated statements.

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Grupo TMM, S.A.B. and Subsidiaries

Consolidated statements of profit or loss
For the years ended December 31, 2021, 2020 and 2019
(Amounts in thousands of pesos, except per share amounts and number of shares)

    2021
     2020
    
2019
  
                   
Revenue from transportation (Note 18)
  
$
1,351,713
    
$
1,203,281
    
$
1,475,683
  
                         
Costs and expenses:
                        
Salaries, wages and employee benefits (Note 23)
    
253,135
      
341,399
      
343,700
  
Leases (Note 10)
    
565,371
      
312,463
      
300,466
  
Contracted services
    
292,423
      
293,543
      
448,217
  
Fuel, materials and supplies
    
147,461
      
170,753
      
206,820
  
Depreciation, amortization and loss from revaluation
    
117,202
      
141,051
      
182,880
  
Other costs and expenses
    
16,842
      
15,635
      
14,740
  
     
1,392,434
      
1,274,844
      
1,496,823
  
Transportation loss
    
(40,721
)
    
(71,563
)
    
(21,140
)
                         
Other (expenses) income, net (Note 19)
    
(169,343
)
    
(257,225
)
    
233,907
  
Operating (loss) profit
    
(210,064
)
    
(328,788
)
    
212,767
  
                         
Comprehensive financing cost:
                        
Interest income
    
266
      
7,097
      
5,100
  
Interest expense and other financial costs (Note 20)
    
(62,576
)
    
(75,654
)
    
(146,875
)
Exchange gain (loss), net
    
3,177
      
(25,145
)
    
24,875
  
     
(59,133
)
    
(93,702
)
    
(116,900
)
(Loss) profit before taxes
    
(269,197
)
    
(422,490
)
    
95,867
  
                         
Income tax expense (benefit) (Note 21)
    
21,143
      
19,334
      
(64,575
)
Net (loss) profit for the year
  
$
(248,054
)
  
$
(403,156
)
  
$
31,292
  
                         
Attributable to:
                        
Non-controlling interest
    
(5,482
)
    
(5,025
)
    
(772
)
Controlling interest
    
(242,572
)
    
(398,131
)
    
32,064
  
   
$
(248,054
)
  
$
(403,156
)
  
$
31,292
  
                         
Profit per share for the year (Note 24)
                        
(Loss) profit per share for the year
  
$
(2.374
)
  
$
(3.896
)
  
$
0.314
  
                         
Weighted average number of shares for the year
    
102,182,841
      
102,182,841
      
102,182,841
  

The attached notes are part of these consolidated statements.

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Consolidated statements of comprehensive income
For the years ended December 31, 2021, 2020 and 2019
(Amounts in thousands of pesos)

    2021    
2020
    
2019
  
                   
Net (loss) profit for the year
  
$
(248,054
)
  
$
(403,156
)
  
$
31,292
  
                         
Other comprehensive income:
                        
Items that will not be subsequently reclassified to profit or loss
                        
Actuarial gains, net (Note 23)
    
33,691
      
10,953
      
2,354
  
Revaluation surplus (Note 25)
    
(291,200
)
    
314,436
      
379,420
  
Income tax on other comprehensive income
    
77,253
      
(97,617
)
    
(114,532
)
Total of other comprehensive (loss) income for the year
    
(180,256
)
    
227,772
      
267,242
  
Comprehensive (loss) income for the year
  
$
(428,310
)
  
$
(175,384
)
  
$
298,534
  
                         
Attributable to:
                        
Non-controlling interest
    
(5,482
)
    
(5,025
)
    
(772
)
Controlling interest
    
(422,828
)
    
(170,359
)
    
299,306
  
   
$
(428,310
)
  
$
(175,384
)
  
$
298,534
  

The attached notes are part of these consolidated statements.

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Consolidated statements of changes in stockholders’ equity
For the years ended December 31, 2021, 2020 and 2019
(Amounts in thousands of pesos, except number of shares)


  
Number of
outstanding
common shares
    
Share
capital
    
Treasury
shares
    
Mandatory
convertible
debentures
into shares
    
Accumulated
losses
    
Other
components
of equity
    
Subtotal
    
Non
controlling
interest
    
Total
stockholders’
equity
  
                                                       
Balances as at December 31, 2018
    
102,182,841
    
$
2,216,733
    
$
(46,805
)
  
$
-
    
$
(799,818
)
  
$
706,944
    
$
2,077,054
    
$
47,204
    
$
2,124,258
  
                                                                         
Net profit for the year
    
-
      
-
      
-
      
-
      
32,064
      
-
      
32,064
      
(772
)
    
31,292
  
Other comprehensive income
    
-
      
-
      
-
      
-
      
202,228
      
65,014
      
267,242
      
-
      
267,242
  
Comprehensive income for the year
                                                    
299,306
      
(772
)
    
298,534
  
Balances as at December 31, 2019
    
102,182,841
      
2,216,733
      
(46,805
)
    
-
      
(565,526
)
    
771,958
      
2,376,360
      
46,432
      
2,422,792
  
                                                                         
Net loss for the year
    
-
      
-
      
-
      
-
      
(398,131
)
    
-
      
(398,131
)
    
(5,025
)
    
(403,156
)
Other comprehensive income
    
-
      
-
      
-
      
-
      
55
      
227,717
      
227,772
      
-
      
227,772
  
Comprehensive loss for the year
                                                    
(170,359
)
    
(5,025
)
    
(175,384
)
Balances as at December 31, 2020
    
102,182,841
      
2,216,733
      
(46,805
)
    
-
      
(963,602
)
    
999,675
      
2,206,001
      
41,407
      
2,247,408
  
                                                                         
Net loss for the year
    
-
      
-
      
-
      
-
      
(242,572
)
    
-
      
(242,572
)
    
(5,482
)
    
(248,054
)
Other comprehensive loss
    
-
      
-
      
-
      
-
      
40,951
      
(221,207
)
    
(180,256
)
    
-
      
(180,256
)
Comprehensive loss for the year
                                                    
(422,828
)
    
(5,482
)
    
(428,310
)
Balances as at December 31, 2021
    
102,182,841
    
$
2,216,733
    
$
(46,805
)
  
$
-
    
$
(1,165,223
)
  
$
778,468
    
$
1,783,173
    
$
35,925
    
$
1,819,098
  

The attached notes are part of these consolidated statements.

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Grupo TMM, S.A.B. and Subsidiaries

Consolidated statements of cash flow
For the years ended December 31, 2021, 2020 and 2019
(Amounts in thousands of pesos)

   
2021
    
2020
     2019
  
                   
Cash flows from operating activities:
                  
                   
(Loss) profit before taxes
  
$
(269,197
)
  
$
(422,490
)
  
$
95,867
  
Adjustments to reconcile the profit with cash used in operating activities:
                        
Depreciation, amortization and loss from revaluation
    
117,202
      
141,051
      
182,880
  
Other amortizations
    
199
      
20,140
      
1,679
  
Loss (gain) from the disposal of property, vessels and equipment, net
    
132,956
      
(153
)
    
(23,415
)
Accrued interests
    
59,164
      
72,093
      
140,021
  
Interest income
    
(266
)
    
(7,097
)
    
(5,100
)
Exchange loss (gain), net
    
4,531
      
43,873
      
(26,411
)
Gain from the sale of subsidiaries
    
-
      
(451
)
    
(279,744
)
                         
Changes in assets and liabilities:
                        
Accounts receivable
    
(256,724
)
    
(80,333
)
    
(95,847
)
Other accounts receivable and related parties
    
60,081
      
162,437
      
45,287
  
Materials and supplies
    
(8,681
)
    
7,111
      
(4,343
)
Prepayments
    
25,816
      
(9,769
)
    
2,177
  
Other accounts payable and accrued expenses
    
129,454
      
(145,729
)
    
(46,638
)
Other non-current assets
    
(21,550
)
    
4,702
      
4,981
  
Employee benefits
    
(51,108
)
    
2,002
      
(25,125
)
Total adjustments
    
191,074
      
209,877
      
(129,598
)
Cash used in operating activities
    
(78,123
)
    
(212,613
)
    
(33,731
)
                         
Cash from investment activities
                        
Proceeds from sale of property, vessels and equipment
    
96,736
      
614
      
16,233
  
Acquisition of property, vessels and equipment
    
(75,468
)
    
(28,375
)
    
(48,281
)
Sale of subsidiaries, net
    
-
      
33,985
      
600,887
  
Interest charged
    
266
      
7,097
      
5,100
  
Cash from investment activities
    
21,534
      
13,321
      
573,939
  
                         
Cash flow from financing activities
                        
Proceeds from debt
    
92,348
      
31,419
      
29,590
  
Repayment of debt
    
(29,781
)
    
(123,703
)
    
(189,026
)
Repayment of leases
    
(52,250
)
    
(90,432
)
    
(134,245
)
Interest paid
    
(9,487
)
    
(22,712
)
    
(42,510
)
Cash from (used in) financing activities
    
830
      
(205,428
)
    
(336,191
)
                         
Exchange effect on cash
    
(9,984
)
    
33,316
      
(6,145
)
(Decrease) increase in cash and cash equivalents
    
(65,743
)
    
(371,404
)
    
197,872
  
Cash and cash equivalents, beginning of year
    
105,310
      
476,714
      
278,842
  
Cash and cash equivalents, end of year
  
$
39,567
    
$
105,310
    
$
476,714
  
                         
Supplementary information:
                        
Income tax
  
$
3,104
    
$
10,873
    
$
14,512
  

The attached notes are part of these consolidated statements.

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Grupo TMM, S.A.B. and Subsidiaries

Notes to the consolidated financial statements
December 31, 2021 and 2020
(Amounts in thousands of pesos, except number of shares and where otherwise indicated)
 
1
Nature of operations

Principal activity
 
Grupo TMM, S.A.B. (‘Grupo TMM’ or the ‘Company’) is a Mexican company whose principal activity is providing multimodal transport and logistics services to premium customers throughout Mexico.
 
The Company’s activities are grouped into the following service divisions:
 

 •
Maritime: includes specialized offshore shipping services, clean oil, and chemical products shipping, bulk carrier and other activities related to the maritime transportation business.
 

 •
Ports and terminals: include shipping agency services, inland and seaport terminal services.
 

 •
Logistics: includes the operations of logistics solutions services and container and railcar maintenance and repair services.
 

 •
Warehousing: includes bonded warehouse operations and management.
 
COVID-19 Impact and business strategy

On March 11, 2020, the WHO declared COVID-19 to be a pandemic. In response, the governments throughout all the world, including Mexico, have implemented various extraordinary measures to control its spread, including travel restrictions, quarantines, and the suspension of all non-essential activities. The effect of the COVID-19 pandemic on our business continues to be uncertain, and it will depend on its duration and is impact on the Mexican and global economies. However, as of the date of these financial statements, all countries entered into recession, however, various international banks and multi-lateral institutions such as the International Monetary Fund have forecasted that in the short term, this crisis will be overcome as the world’s population is fully vaccinated and the COVID-19 becomes an endemic disease.

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For fiscal year 2021, the Company’s revenues, particularly in the Ports and Terminals business, continue to be affected due to the COVID-19 pandemic, and the various emergency public health measures implemented by governments to combat it. Although the Company expects its revenues to improve as the extraordinary measures of the government are lifted and the public health emergency restrictions are removed, as of the date of these consolidated financial statements, the Company cannot quantify the adverse effect that COVID-19 will have on its operating profit for fiscal 2022.

In view of the foregoing and other conditions beyond the control of the Company, operating profit can be volatile and subject to change rapidly as the situation of COVID-19 develops. Consequently, the Company has taken various measures to maintain business continuity and strengthen its financial position, which are detailed below. In the future, the Company will continue to supervise the development of the COVID-19 pandemic closely, including its effect on the businesses, financial conditions, and operating profit of the Company.
 
As part of our effort to mitigate the effects of the Pandemic, we have carried out the following:
 

 •
In 2020, the Company decided to change its corporate offices, which will generate significant savings in corporate costs. The Company continues to comply with the health and safety protocols established by the Mexican government, and it has taken measures and implemented policies to safeguard the threats posed by the COVID-19 pandemic, its businesses, employees, and locations in which it operates.
 

 •
The Company has adopted the hybrid working model by maintaining limited access to facilities and implementing new controls for emergency procedures and mitigating potential cybersecurity risks.
 

 •
The Company continues a strategic plan to offset part of the instability in the oil industry and the COVID-19 pandemic, which includes the following actions: (i) reduction of costs and general and administrative expenses; (ii) maintenance of the early collection program (the “supply chain program”) through Nacional Financiera, SNC, by reducing liquidity risk and the effect of delays in the payments that can result from recent changes in the payment policies of PEMEX; and (iii) customer diversification; and (iv) negotiation of deferment and extension of the due date of certain financial commitments.
 

 •
The Company is implementing actions to help guarantee that financial and audit reporting processes continue to be sound, and as timely as possible in the middle of the global crisis of the COVID-19 pandemic. These actions include, among other things; (i) the implementation of new controls for emergency procedures; (ii) close monitoring of IT access controls to enable remote work to be performed; (iii) controls for mitigating the possible increase in cyber risks arising from a higher level of remote work; (iv) where it is not possible to conduct face-to-face controls, identify, and implement alternative controls appropriately designed to offset the lack of information. In addition, the Company is implementing an alternative audit plan to test the operating effectiveness of controls remotely, due to travel restrictions.

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The business strategy of the Company, which will help to mitigate the effects of the Pandemic, is focused mainly on the following:
 

 •
Maritime Operations. We seek to capitalize on our steady and proven vessels management and operation expertise to increase our customer base and expand our services in the offshore operations and other maritime transportation segments such as tankers and bulk cargo vessels, taking advantage of the opportunities presented by new participants in the Mexican market. We are also seeking to capitalize on these opportunities by expanding and diversifying our shipyard services. To this end, we recently entered into a construction agreement with Westport Orange Shipyard to build a new 6,600 short-tons floating dry-dock to increase the capacity of our shipyard operations. The project is supported by a 7-year financing agreement with Amegy Bank (Zions Bancorporation N.A.), guaranteed by EXIM Bank, for up to 85% of the purchase price of the floating dry-dock and it is expected to be received during the first quarter of 2023; in the medium term, we plan to build a fixed dry-dock with the capacity to receive larger vessels (150-220 meters length) as well as to be able to build marine structures, enabling us to compete to satisfy the expected demands of PEMEX and future customers.


•
Ports and Terminals Operations. We intend to continue to take advantage of our unique experience, our strategically located assets and the existing investment opportunities in the midstream oil and gas sector, to develop liquids oil terminals that will help reduce the current gap in infrastructure and anticipate growing demand for gasoline and diesel imports, which currently account for more than 70% of Mexico’s domestic consumption. In this regard, we intend to keep moving forward with the development of storage and transportation infrastructure to serve the growing demand for refined products from Tuxpan to the central region of Mexico as well as to develop a general cargo terminal fitted with modern equipment and suitable warehouses for high quality, fast and safe handling and storage of goods such as lubes, fertilizers and grains. The port of Tuxpan is the main port of entry for hydrocarbon imports and the closest port to Mexico City and the central area of Mexico.


•
Logistics Operations. As part of our commitment to ensure first-class maintenance and repair and increase our volume of operations, we plan to revamp our facilities, diversify, and widen our services through strategic alliances or partnerships with whom we can also develop the automotive, steel and food logistics market in all areas with emphasis on “just-in-time” inventory planning, subassembly and management of cars and container yards whilst improving our processes.


•
Warehousing Operations. We are working to improve our bonded warehousing services, import duties service and the development strategic warehousing services to provide better and new integrated logistics services to our customers, encompassing bonded warehousing services, inventory management, value-added services, and delivery to the end consumer.


•
Diversification of current operations: We are working through strategic alliances to develop new lines of business that will focus in the first stage on the commercialization of Oil/Petroleum Derivatives and commodities in general, allowing us to provide our customers with services across the full logistics chain in the energy sector.


•
Corporate Expenses. As part of our continuous improvement plan, we aim to optimize the size of our corporate staff consistent with the implementation of the plans described above.

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 12
Structure of Grupo TMM
 
At December 31, 2021 and 2020, Grupo TMM holds the percentage of equity interest in various subsidiaries, the most significant are as follows:
 
   
% of ownership
  
   
2021
    
2020
  
Specialized maritime
            
Transportación Marítima Mexicana, S.A. de C.V.
    
100
%
    
100
%
Inmobiliaria Dos Naciones, S. de R.L. de C.V.
    
100
%
    
100
%
TMM Parcel Tankers, S.A. de C.V.
    
100
%
    
100
%
                 
Logistics
                
Almacenadora de Depósito Moderno, S.A. de C.V. (Warehouse)
    
100
%
    
100
%
Autotransportación y Distribución Logística, S.A. de C.V.
    
100
%
    
100
%
TMM Almacenadora, S.A.P.I. de C.V.
    
100
%
    
100
%
                 
Ports and terminals
                
TMM Logistics, S.A. de C.V.
    
100
%
    
100
%
Prestadora de Servicios MTR, S.A. de C.V.
    
100
%
    
100
%
Bimonte, S.A. de C.V.
    
100
%
    
100
%
Administradora Marítima TMM, S.A.P.I. de C.V.
    
100
%
    
100
%
Caoba Energía, S. de R.L. de C.V.
    
100
%
    
100
%
Services & Solutions Optimus, S. de R.L de C.V.
    
100
%
    
100
%
Servicios Administrativos API Acapulco, S.A. de C.V.
    
51
%
    
51
%
Administración Portuaria Integral de Acapulco, S.A. de C.V.
    
51
%
    
51
%
                 
Payroll outsourcing
                
Mexschiff Operación de Personal, S.A.P.I. de C.V.
    
100
%
    
100
%
Omexmar Operadora Mexicana Marítima, S.A.P.I. de C.V.
    
100
%
    
100
%
Perhafen Services Marítimos, S.A.P.I. de C.V.
    
100
%
    
100
%
TMM Dirección Corporativa, S.A.P.I. de C.V.
    
100
%
    
100
%
Perjomar Operadora, S.A.P.I. de C.V.
    
100
%
    
100
%
                 
Property leasing
                
Inmobiliaria TMM, S.A. de C.V.
    
100
%
    
100
%
 
The Company’s subsidiaries are incorporated in Mexico, where most of their activities take place.

Non-controlling interest in subsidiaries
 
Grupo TMM holds an equity interest in the subsidiaries Administración Portuaria Integral de Acapulco, S.A. de C.V. and Servicios Administrativos API Acapulco, S.A. de C.V., for which there is non-controlling interest; the associated effect on the Company’s consolidated financial statements is considered immaterial. These companies are established and conduct their activities in Mexico. As of December 31, 2021, these companies ceased operations (see Notes 11a) y 28).
 
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 13
Investments in associates
 
The Company maintains investments in the following associates:
 

 (a)
In July 2014, Grupo TMM contributed $40,000 to the capital stock of Almacenes de Jugos Citricos de Mexico, S.A.P.I. de C.V., which represents 21% of the voting shares. Since this entity has not started up operations as of the issue date of the consolidated financial statements, Company Management decided to reserve the investment in its entirety.
 

 (b)
The Company lost control of its subsidiary TMM División Marítima, S.A. de C.V. (TMM DM) in 2017, retaining 15% equity in its capital without exerting significant influence. Accordingly, this investment has been classified as an investment in associate. As of December 31, 2021 and 2020, the value of this investment is nil, since the stockholders’ equity of TMM DM is negative. Moreover, in accordance with the statutes of TMM DM, the stockholders only assume obligation in connection with their equity up to the amount thereof.
 
2
General information and statement of compliance with IFRS
 
Grupo TMM’s head office is located at Paseo de la Reforma N° 296 piso 19, Colonia Juárez, Alcaldía Cuauhtémoc, C.P. 06600, Mexico City. In addition, a significant portion of its maritime division activities is conducted at Calle 55 N° 2 Col. Electricistas C.P. 24120 Cd. del Carmen, Campeche.
 
Grupo TMM’s shares are listed on the Mexican Stock Exchange, where they trade under the symbol TMM A.  In the United States, Grupo TMM’s shares trade on the “Over-the-Counter’ (‘OTC’) market in the form of American Depositary Shares (‘ADSs’) under the symbol GTMAY.
 
Grupo TMM and its subsidiaries prepare their consolidated financial statements in accordance with International Financial Reporting Standards (‘IFRS’), as issued by the International Accounting Standards Board (‘IASB’), and these are presented in thousands of Mexican pesos. They have been prepared under the assumption that Grupo TMM operates on a going concern basis.

The Company has decided to present in its consolidated statements of income a subtotal of ‘Operating income’ which reconciles with the ‘Net profit for the year’ considering the items of ‘Comprehensive financing cost’ and ‘Income tax expense’; with regard to the subtotal of ‘Transportation loss’, the latter reconciles with the ‘Operating income’ considering the item ‘Other (expenses) income’.
 
3
Changes in accounting policies
 
New Standards adopted as of January 1, 2021
 
Some accounting pronouncements which have become effective from 1 January 2021 and have therefore been adopted do not have a significant impact on the Company’s financial results or position.
 
Other Standards and amendments that are effective for the first time in 2021 and could be applicable to the Company are:
 

 •
COVID-19-related rent concessions beyond 30 June 2021 (Amendments to IFRS 16)
 

 •
Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
 
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 14
These amendments do not have a significant impact on these financial statements and therefore the disclosures have not been made.
 
Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Company
 
At the date of authorization of these consolidated financial statements, several new, but not yet effective Standards, amendments to existing Standards, and Interpretations have been published by the IASB, none of which have been adopted in advance by Grupo TMM.
 
Other new standards and amendments that are not yet effective and have not been adopted early by the Company include:


 •
IFRS 17 Insurance Contracts


•
Amendments to IFRS 17 Insurance Contracts (Amendments to IFRS 17 and IFRS 4)


•
References to the Conceptual Framework
 

 •
Proceeds before Intended Use (Amendments to IAS 16)


•
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)


•
Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments to IFRS 1, IFRS 9, IFRS 16, IAS 41)
 

 •
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
 

 •
Deferred Tax related to Assets and Liabilities from a Single Transaction

These amendments are not expected to have a significant impact on the financial statements in the period of initial application and therefore the disclosures have not been made.
 
Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and Interpretations not adopted in the current year have been disclosed as they are not expected to have a material impact on the Company’s consolidated financial statements.
 
4
Summary of significant accounting policies
 
The most significant accounting policies are summarized as follows:
 
4.1
Basis of preparation
 
The Company’s financial statements have been prepared on an accrual basis and under the historical cost convention except for the revaluation of vessels and properties. Monetary amounts are expressed in Mexican pesos and are rounded to the nearest thousands, except for earnings per share.

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 15
4.2
Basis of consolidation
 
The consolidated financial statements include the accounts of Grupo TMM and those of its subsidiaries. Grupo TMM controls a subsidiary when it is exposed, or has rights, to variable returns resulting from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have the reporting date of “December 31”, for all years reported.
 
The balances and transactions among subsidiaries have been eliminated for the purposes of consolidation, including balances and unrealized gains on transactions between Grupo TMM’s companies. Unrealized losses on the sale of assets among the Company are eliminated in the consolidation and the asset involved is also reviewed for impairment from a group perspective. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by Grupo TMM.
 
Profit or loss and other comprehensive income of subsidiaries acquired or disposed during the year are recognized from the effective date of acquisition, or up to the effective date of disposal, as applicable.
 
Non-controlling interest, presented as part of the stockholders’ equity, represents the portion of the subsidiary’s profit or loss and net assets that are not held by Grupo TMM. The Company attributes the total comprehensive income or loss of the subsidiaries between the owners of the parent and the non-controlling interest based on their respective ownership interests.
 
Associates and joint ventures
 
Associates are all entities over which Grupo TMM has significant influence but not control. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement having rights to the net assets of the arrangement.
 
Investments in associates and joint ventures are accounted by the equity method and are initially recognized at their acquisition cost.
 
The carrying amount of investments in associates and joint ventures is increased or decreased to recognize Grupo TMM’s share of the profit or loss and other comprehensive income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Company.
 
Unrealized gains on transactions between Grupo TMM and its associates and joint ventures are eliminated to the extent of the Company’s interest on those entities. When unrealized losses are eliminated, the asset involved is also tested for impairment.

4.3
Business combinations
 
Grupo TMM applies the acquisition method to accounting for business combinations. The consideration transferred by Grupo TMM to obtain control of a subsidiary is calculated as the sum of the fair values on the acquisition-date of the assets transferred, liabilities incurred, and the equity interests issued by Grupo TMM, which includes, accordingly, the fair value of any asset or liability that arises from the contingent consideration arrangement. Acquisition costs are expensed as incurred.
 
Grupo TMM recognizes identifiable assets acquired and liabilities assumed in the business combination independent of whether these were recognized in acquirer’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair value.
 
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Goodwill is stated after the individual recognition of identifiable intangible assets. It is calculated as the excess of the sum of: a) the fair value of the consideration transferred, b) the amount recognized for any non-controlling interest in the entity acquired, and c) the fair value on the acquisition date of any equity interest in the acquire, over the acquisition-date the fair values of the identifiable net assets. If the fair values of the identifiable net assets exceed the sum calculated above, this excess amount (e.g. gain on a bargain purchase) is immediately recognized in profit or loss.

4.4
Foreign currency translation
 
Functional and presentation currency
 
The consolidated financial statements are reported in Mexican pesos, which is also the functional currency of Grupo TMM.
 
Foreign currency balances and transactions
 
Foreign currency transactions are translated into the functional currency of the respective Company entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the measurement of monetary items denominated in foreign currency at year-end exchange rates are recognized in profit or loss.
 
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.
 
4.5
Cash and cash equivalents
 
Cash and cash equivalents comprise cash on hand and demand deposits, together with other highly liquid and short-term investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of change in their value.
 
4.6
Materials and supplies
 
Materials and supplies, consisting mainly of fuel and items for the maintenance of property, vessels and equipment, are valued at the lower of the average cost and the net realizable value.

4.7
Prepayments
 
Represent prepayments for services that will be received in the future and are amortized in the period when said services are received.
 
4.8
Property, vessels and equipment
 
Properties and vessels
 
The properties (land and buildings) are measured at fair value, which are determined by external professional valuers every three years or before if the market factors indicate a significant change in the fair value. The last valuation of these assets was in December 2019.

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Until December 31, 2021, the vessels are measured at fair value, the revalued amounts were determined using the revenue technique (expected future cash flows). The frequency of the revaluations for this class of assets will be based on the changes of the fair values, meaning when these values significantly differ from their carrying value. The Company has revalued this class of assets through December 31, 2020. At the end of 2021 the Company no longer owns these vessels (see Note 9).
 
The revaluation surplus that is derived from the valuation of properties and vessels is recognized as part of ‘Other comprehensive income items’ and forms part of ‘other capital components’ in stockholders’ investment. A revaluation surplus is credited to income up to an amount equivalent to any revaluation write-down or impairment loss previously recognized income. Any excess is recognized in ‘Other comprehensive income items’ and in stockholders’ equity in the item of ‘Revaluation surplus’. Revaluation write-downs or impairment losses are recognized in ‘Other comprehensive income items’ up to the amount previously recognized on that asset in stockholders’ equity in the item of ‘Revaluation surplus’.
 
Any remaining decrease is recognized in income for the year. Any remaining balance of the revaluation surplus in stockholders’ equity at the time of disposing of the asset that gave rise thereto is reclassified to retained earnings. Moreover, any remaining balance of the revaluation surplus in stockholders’ equity may not be distributed to stockholders.
 
The depreciation of properties and vessels is recognized using the straight-line method to write down its carrying value less its estimated residual value. As no finite useful life for land can be determined, the related carrying amounts are not depreciated.
 
Equipment
 
Equipment is stated at construction or acquisition cost, including any cost directly attributable to bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended by Grupo TMM’s Management. Acquisitions through capital leases or charter arrangements with an obligation to purchase are capitalized based on the present value of future minimum payments, recognizing the related liability. Depreciation of equipment is computed using the straight-line method based on the useful lives of the assets net of the estimated residual value.
 
Recurring maintenance and repair expenditures are charged to operating expenses as incurred. Major repairs to vessels (docks) are capitalized and amortized over the period in which benefits are expected to be received (two to five years for vessels). The material residual values and the estimated useful life are adjusted as necessary, at least once a year.

Gains or losses from the disposal of property, vessels and equipment are determined as differences between the disposal proceeds and the carrying amount of the assets and are recognized in profit or loss as part of ‘Other (expenses) income’, accordingly (see Note 19).
 
Construction in progress
 
Disbursements attributable to construction of assets that are identifiable and may be controlled by the Company are recognized as assets when they meet the following conditions:
 

 •
it is technically possible to complete the construction of the asset so that it can be available to be used;
 

 •
management has the intent of completing the asset to use it;
 

 •
it can be proven that the asset will generate economic benefits in the future;
 

 •
adequate technical, financial or another type of resources are available to complete the asset; and
 

 •
the disbursement attributable to the asset during its construction can be determined reliably.

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4.9
Leased assets
 
The Company as lessee
 
The Company makes the use of leasing arrangements principally of warehouse, courtyards, corporate building and cranes. The rental contracts for facilities are typically negotiated for terms of between 1 and 9 years and some of these have extension terms. Lease terms for cranes have lease terms of between 1 and 2 years without any extension terms. The Company does not enter into sale and leaseback arrangements. All the leases are negotiated on an individual basis and contain a wide variety of different terms and conditions.
 
The Company assesses whether a contract is or contains a lease at inception of the contract. A lease conveys the right to direct the use and obtain substantially all of the economic benefits of an identified asset for a period of time in exchange for consideration.
 
Some lease contracts contain both lease and non-lease components. These non-lease components are usually associated with facilities management services. The Company has elected to separate their lease and non-lease components based on their relative stand-alone prices.
 
Measurement and recognition of leases as a lessee
 
At lease commencement date, the Company recognizes a right-of-use asset and a lease liability in its consolidated statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability.
 
The Company depreciates the right-of-use asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for impairment when such indicators exist.
 
At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the Company’s incremental borrowing rate on the date of the revaluation when the implicit lease rate cannot be easily determined.

Lease payments included in the measurement of the lease liability are made up of fixed payments and variable payments based on an index or rate.
 
Subsequent to initial measurement, the liability will be reduced by lease payments that are allocated between repayments of principal and finance costs. The finance cost is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability.
 
The lease liability is reassessed when there is a change in the lease payments. Changes in lease payments arising from a change in the lease term. The revised lease payments are discounted using the Company’s incremental borrowing rate at the date of reassessment when the rate implicit in the lease cannot be readily determined. The amount of the remeasurement of the lease liability is reflected as an adjustment to the carrying amount of the right-of-use asset.

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Payments under leases can also change when change through an index or a rate used to determine those payments. The lease liability is remeasured only when the adjustment to lease payments takes effect and the revised contractual payments for the remainder of the lease term are discounted using an unchanged discount rate.
 
The remeasurement of the lease liability is dealt with by a reduction in the carrying amount of the right-of-use asset to reflect the full or partial termination of the lease for lease modifications that reduce the scope of the lease. Any gain or loss relating to the partial or full termination of the lease is recognized in profit or loss. The right-of-use asset is adjusted for all other lease modifications.
 
The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognizing a right-of-use asset and lease liability, the payments in relation to these are recognized as an expense in profit or loss on a straight-line basis over the lease term.
 
The Company as lessor
 
As a lessor the Company classifies its leases as either operating or finance leases.
 
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset and classified as an operating lease if it does not.
 
4.10
Intangible assets
 
Recognition of intangible assets
 
Concession rights
 
Concession rights correspond to payments made for the rights to operate assets under concession, which are stated at cost and are amortized over the terms specified in the corresponding agreements.
 
Software
 
Software licenses acquired are capitalized on the basis of costs incurred to acquire and install the specific software.

Trademark
 
The trademark acquired in a business combination that qualifies for separate recognition is considered an intangible asset and is recorded at its fair value.
 
Subsequent measuring
 
All finite-lived intangible assets are accounted for using the cost model by which the net capitalized costs of their residual value are amortized using the straight-line method throughout their estimated useful lives, in the case of the concession rights; these are amortized according to the term specified in the corresponding agreement. The residual values and useful lives are reviewed at each reporting date. The trademark is considered an intangible asset with an indefinite life; therefore, it is subject to impairment tests annually as described in Note 13.
 
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The amortization is included in the consolidated statement of operations as part of the depreciation, amortization, and loss on revaluation item. Subsequent expenditures to preserve software and trademarks are expensed as incurred.
 
4.11
Impairment testing of long-lived assets
 
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.
 
Trademark is allocated to those cash-generating units that are expected to benefit from synergies of a related business combination and represent the lowest level within the Company at which management monitors the trademark.
 
Cash-generating units to which trademark has been allocated (determined by the Grupo TMM’s Management as equivalent to its operating segments) are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
 
An impairment loss is recognized for the amount by which the asset’s (or cash-generating unit’s) carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows.
 
The data used for impairment testing procedures are directly linked to the Grupo TMM’s latest approved budget, adjusted as necessary to exclude the effects of future reorganizations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect current market assessments of the time value of money and asset-specific risk factors.
 
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.

With the exception of the trademark, all assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist. An impairment loss is reversed if the asset’s or cash-generating unit’s recoverable amount exceeds its carrying amount.
 
4.12
Non-current assets classified as held for sale

Non-current assets classified as held for sale are presented separately and measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. Once classified as held for sale, the assets are not subject to depreciation or amortisation.

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4.13
Financial instruments
 
Recognition and derecognition
 
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument.
 
Financial assets are derecognized when the contractual rights to the cash flow from a financial asset expire, or when the financial asset and all the substantial risks and benefits have been transferred. A financial liability is derecognized as extinguished, discharged, canceled, or expired.
 
Classification and initial measurement of financial assets
 
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value, adjusted by transaction costs (where applicable).
 
Financial assets are classified into the following categories:
 

 •
amortized cost
 

 •
fair value through profit or loss (FVTPL)
 

 •
fair value through other comprehensive income (FVOCI).
 
In the periods presented the Company does not have any financial assets categorized as FVTPL or FVOCI.
 
The classification is determined by both:
 

 •
the Company’s business model for managing the financial asset; and
 

 •
the contractual cash flow characteristics of the financial asset.
 
All income and expenses relating to financial assets that are recognized in profit or loss are presented within financial costs and income; except for impairment of trade receivables which is presented in the heading of ‘Other costs and expenses’.
 
Subsequent measurement of financial assets
 
Financial assets at amortized cost
 
Financial assets are measured at amortized cost if the assets meet the following conditions:
 

 •
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and
 

 •
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

After initial recognition, these are measured at amortized cost using the effective interest method. The financial assets of the Company are not discounted since it is not material. The Company’s cash and cash equivalents, trade receivables and part of the other accounts receivable fall into this category of financial instruments.

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Impairment of financial assets
 
IFRS 9’s impairment requirements use more forward-looking information to recognize expected credit losses – the ‘expected credit loss (ECL) model’. Instruments within the scope of the new requirements included mainly trade receivables, contract assets recognized and measured under IFRS 15, other accounts receivables and accounts receivable from related parties.
 
Recognition of credit losses considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
 
Grupo TMM makes use of a simplified approach in accounting for trade and other accounts receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Company uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses.
 
The Company assess impairment of trade receivables based on the characteristics of the business segment, when appropriate this assessment is made on a collective basis as they possess shared credit risk characteristics, they have been grouped based on the days past due. Refer to Note 26, for a detailed analysis of how the impairment requirements of IFRS 9 are applied.
 
Classification and measurement of financial liabilities
 
The Company’s financial liabilities include borrowings, trade and other payables. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs. Subsequently, financial liabilities are measured at amortized cost using the effective interest method.
 
All interest-related charges are included within finance costs or finance income.
 
4.14
Provisions, contingent liabilities and contingent assets
 
Provisions are recognized when the present obligations resulting from a past event will probably lead to an outflow of the Company economic resources and the amounts can be reliably estimated. Timing or amount of the outflow may still be uncertain. A present obligation arises from a presence of a legal or constructive commitment that has resulted from past events. Provisions are not recognized for future operating losses.
 
Provisions are the estimated amounts required to be expended to settle the present obligation based on the most reliable evidence available at the date of the consolidated financial statements, including the risks and uncertainties associated with the present obligation. Provisions are discounted at their present value, where the time value of money is material.

All provisions are reviewed on the issuance of the financial statements and adjusted to reflect the current best estimate. When an outflow of economic resources for present obligations is not probable, this is not recognized as a liability, unless it was assumed in the course of a business combination. Such cases are disclosed as contingent liabilities unless the outflow of resources is remote.
 
Possible inflows of the Company’s economic benefits, which do not yet meet the criteria for recognition of an asset, are considered as contingent assets.

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4.15
Taxes on earnings
 
Calculation of current income tax is based on tax rates and tax laws that have been enacted or substantially enacted to the reporting date of the consolidated financial statements.
 
Deferred income tax is determined using the liability method, based on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the financial statements. Determination of deferred income tax has considered tax rates that will be effective at the time of reversion of the temporary differences.
 
The income tax expense in the statement of profit or loss includes the sum of the deferred tax, which has not been recognized in other comprehensive income or directly in stockholders’ equity, and the current income tax for the year.
 
Deferred tax assets are recognized to the extent that it is probable that future taxable profit against which temporary differences can be utilized will be available (see Note 21).
 
This is assessed based on the Company’s forecast of future operating results, adjusted for significant items that are reconciled for the taxable income and the limits on the use of tax losses and other tax asset carryforwards.
 
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
 
4.16
Statutory employee profit sharing
 
The statutory employee profit sharing is determined applying the rate of 10% on taxable income, adjusted as provided for by the Income Tax Law. The statutory employee profit sharing accrued is considered an ordinary expense associated with employee benefits.
 
4.17
Post-employment benefits and benefits for short-term employees
 
Post-employment benefits
 
Defined benefit plans
 
The seniority pension to which employees are entitled after 15 years of service and after having retired at the age of 60, are expensed in the years in which the services are rendered (see Note 23).

In addition, the Company has pension plans for certain employees who retire after the age of 65 (or early retirement at 60 or 55), in addition to having completed a minimum 15 years of service, which are expensed in the years in which the services are rendered (see Note 23).
 
Under the defined benefits plan, the pension amount an employee will receive upon retirement is determined in reference to the time of service and salary determined for each case based on the plan. The legal obligation of the benefits lies with Grupo TMM, even if the plan’s assets to finance the defined benefits plan are separate. The plan’s assets may include assets specifically designated in a long-term benefit fund.

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The liability recognized in the consolidated statement of financial position for the defined benefits plans is the present value of the defined benefits obligation (DBO) as of the reporting date less the fair value of the plan assets.
 
Management estimates the DBO annually with the assistance of independent actuaries, based on the standard inflation rate, the salary growth rates, and the mortality rate. The discount factors are determined near the close of each year in reference to the high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and which have maturities similar to the terms of the corresponding pension liability.
 
The net cost for the defined benefits liability period is included in the item ‘Salaries, wages and employee benefits’ in the consolidated statements of profit or loss.
 
Indemnifications
 
Indemnifications that are not substitutive of retirement, paid to personnel who leave the company due to restructuring or any other reason, are charged to the operations for the period when incurred or provisions are created when there is a present obligation of these events, with a probability of an outflow of resources and this obligation can be reasonably estimated.
 
Short-term employee benefits
 
Short-term employee benefits, including vacation entitlement, are current liabilities included in ‘Accounts payable and accrued expenses’, measured at the amount Grupo TMM expects to pay as a result of time not taken; as these liabilities are short-term, they were not discounted as their effect is considered immaterial.
 
4.18
Stockholders’ equity
 
Common shares are classified as equity. Grupo TMM does not have other equity instruments in addition to its common shares.
 
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of taxes, from the proceeds. Incremental costs directly attributable to the issue of new shares or options are included in the cost of acquisition as part of the purchase consideration.
 
The accumulated losses include the profit (loss) for the year and previous periods.
 
Other components of equity capital include:
 

 •
revaluation surplus, including gains and losses from the revaluation of vessels and properties;
 

 •
statutory reserve corresponds to the separation of earnings withheld for this reserve;


•
additional paid-in capital is equivalent to the amount received in excess of the par value of the shares;
 

 •
translation result represents the cumulative effect of the change in functional currency in previous years; and
 

 •
actuarial gains and losses include experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and the effects of changes in actuarial assumptions.

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4.19
Recognition of revenue, costs and expenses, and financing costs
 
Revenues
 
Company’s revenue arises mainly from services of maritime transportation, logistics and warehousing. To determine whether to recognize revenue, the Company follows a 5-step process:
 

 1.
Identifying the contract with a customer
 

 2.
Identifying the performance obligations
 

 3.
Determining the transaction price
 

 4.
Allocating the transaction price to the performance obligations
 

 5.
Recognizing revenue when/as performance obligation(s) are satisfied.
 
The Company does not carry out transactions that involve different contracts and on which their characteristics must be combined in accordance with IFRS. Moreover, transactions are not usually carried out that involve different services as part of the same contract; therefore, the total price of the transaction for a contract in all cases is allocated to a single performance obligation, based on their relative independent sales prices. The transaction price for contracts does not consider variable payments, except for certain service payments that are not considered significant in connection with the total revenues of the Company, nor are payments in kind, nor amounts collected on behalf of third parties and nor contemplate a financing component.
 
All revenues are recognized over time, as the Company meets performance obligations by transferring the services promised to its customers.
 
When the Company meets a performance obligation before receiving the payment, the Company already recognizes either a contract asset or a receivable in its consolidated statement of financial position, depending upon if something else is required than only passage of time before the consideration becomes due. The Company generally does not receive payments in advance in connection with performance obligations; therefore, contractual liabilities are not required to be recognized.
 
In obtaining these contracts, the Company incurs immaterial incremental costs. Since the amortization period of these costs would be less than one year, if capitalized, and also that those costs are immaterial, the Company makes use of the practical expedient in IFRS 15.94 and expenses them as they incur.

Parcel vessels and bulk carriers
 
These revenues are derived from the transportation of merchandise through the Company’s own shipments or third parties, usually in periods ranging between 7 and 30 days. The rate is fixed and it is set at the beginning of the contract, based on the space or capacity required by the customer. The performance obligation is met as the merchandise is transported from the point of origin to the destination. Revenues are recognized over time on a straight-line basis during the term of each contract. Given that the costs required for rendering the service under these contracts do not vary significantly, that method provides a reasonable representation of the services transferred.

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The amounts that remain unbilled at the end of the reporting period are presented in the consolidated statement of financial position as contractual assets, since something additional is required in addition to time elapsed in order for those amounts to become due and payable. The Company generally does not receive advances that exceed the amount of obligations met; therefore, contract liability balances are not generated.
 
Maritime administration services
 
They correspond to revenues for services rendered for contracting, operating, and managing shipments, mainly offshore service providers. The rate for these services is determined by applying a 2.85% profit margin to the costs incurred by the Company for rendering services. This percentage is reviewed annually, and it can be increased under certain circumstances, but by applying it beginning the year subsequent to its modification, these services are considered a single performance obligation. Accordingly, the consideration is totally allocated; revenues are recognized over time as the related costs are incurred by applying the corresponding profit margin. The amounts are billed monthly, in accordance with these referred to above; therefore, neither asset balances nor contract liabilities are generally generated.
 
Ship repair services (shipyard) and containers
 
They correspond to revenues for minor and major repairs and maintenance to ships made at the facilities of the Company (shipyard), as well as containers of shipping companies and others such as wharfage. The consideration for the services is fixed, and it is determined in the contract based on the work ordered, including materials and replacement parts, which must be realized in an estimated period for the work, which ranges from 2 days up to 60 days for ships, and from 1 day up to 6 days for containers. Wharfage depends on the considerations of the ship from 1 to 365 days, due to the high degree of interdependence among the various elements of these services. They are recorded in the accounting as a single performance obligation. These revenues are recognized over time in conformity with the completion of the services agreed upon.
 
The Company measures its completion toward total compliance of the performance obligation by comparing real hours invested up to the date with the total estimated hours required to perform the repair or maintenance, including related costs. This base reasonably represents services transferred to each customer, by virtue of the ability of the Company to make reliable estimates based on its significant historical experience in rendering these services.
 
The amounts that remain unbilled at the end of the reporting period are presented in the consolidated statement of financial position as contractual assets, since something additional is required in addition to time passaged in order for those amounts to become due and payable. The Company generally does not receive advances that exceed the amount of obligations met; therefore, liabilities balances are not generated.

Other services
 
The Company obtains revenues for other services such as suppliers, agency, port formalities, among other things. Most of these services are considered single performance obligations in the terms of the respective contracts, and the consideration is entirely allocated to those performance obligations. Revenues are recognized over time, since customers receive and consume the benefits as the Company renders the services, that is, as the performance obligations are met. The Company does not generate asset balances or contract liabilities for most of these services. The Company acts as an agent for the specific case of agency services and, therefore, it recognizes the revenues corresponding to the profit margin generated net of the costs incurred.

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Costs and expenses
 
The costs and expenses for maritime, and also those related to other logistics operations, are recognized in operations when the services are rendered, materials are consumed or as incurred.
 
Financing income and costs
 
Interest income and expense are reported as accrued using the effective interest method and are reported as part of the comprehensive financing cost.
 
4.20
Information by segments
 
The Company has four operating segments: maritime division, logistics division, ports and terminals division and warehousing division. These operating segments are monitored by the Company’s Management, who are responsible for making strategic decisions, which are made based on adjusted operating segment results. In identifying its operating segments. Management follows Grupo TMM’s service lines, which represent the main services provided by the Company.
 
Each of these operating segments is managed separately as each of these service lines requires different technologies and other resources as well as marketing approaches. All inter-segment transfers are carried out at market prices.
 
The accounting policies Grupo TMM uses for segment reporting are the same as those used in its consolidated financial statements, with the exception that corporate assets which are not directly attributable to the business activities of any operating segment are not allocated. In the financial periods presented, this primarily applies to Grupo TMM’s corporate headquarters.
 
4.21
Significant management judgment in applying accounting policies and estimation uncertainty
 
When preparing the consolidated financial statements, Management considers a number of judgments, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses.
 
Significant management judgment
 
The reporting judgments made by Management as to the application of the accounting policies of the Company that would have a material effect on the consolidated financial statements are described following.

Evaluation of control, significant influence, and joint control
 
Management evaluates the terms of voting power with respect to its investees, the power to govern, decisions, contractual and legal agreements, upon determining if there is control, significant influence, and joint control. Significant judgment is required by evaluating some of these characteristics that can be modified over time (see Note 4.2).
 
Estimation uncertainty
 
Information about estimates and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses is provided below; actual results may be substantially different.

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Impairment of long-lived assets
 
On assessing impairment, Management determines the recoverable value of each asset or cash generating unit based on the expected future cash flows and determines an adequate interest rate to be able to calculate the present value of these cash flows.
 
The uncertainty in the estimate is related to the assumptions regarding results of future operations and the determination of suitable discount rate.
 
Useful lives of depreciable assets
 
Management reviews the useful lives of the depreciable assets on each reporting date, based on the expected use of each asset. The uncertainty in these estimates is derived from the technical obsolescence that could change the expected use of vessels and other equipment.
 
Defined benefits obligation
 
Management’s estimate of the DBO is based on a number of critical assumptions, such as inflation rates, mortality rates, discount rate, and a consideration for future salary increases. The variances in these assumptions can impact the amount of the DBO and the corresponding annual expense for defined benefits (the analysis is provided in Note 23).
 
Measures of fair value
 
Management uses valuation techniques to measure the fair value of its vessels and properties. This results in Management preparing estimates and assumptions based on market information and using observable data that could be used by market participants to assign a price to the asset, however these are not always available. Moreover, other valuation techniques based on expected future cash flows are used for certain assets, and an interest rate is determined to calculate their present value. These fair value estimates for these non-financial assets can vary from the actual prices obtained on operations at market value on the reporting date, as well as future results and the discount rate (see Note 25).

Leases – determination of the appropriate discount rate to measure lease liabilities
 
As noted above, the Company enters into leases with third-party landlords and as a consequence the rate implicit in the relevant lease is not readily determinable. Therefore, the Company uses its incremental borrowing rate as the discount rate for determining its lease liabilities at the lease commencement date. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow over similar terms which requires estimations when no observable rates are available.
 
These rates are, where necessary, then adjusted to reflect the credit worthiness of the entity entering into the lease and the specific condition of the underlying leased asset.

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Effect of estimation uncertainty:
 
The effect of a change in the incremental borrowing rate for leases entered into during the reporting period is shown in the table below:
 
Estimate
  
Change in estimate
  
Effect on right-of-use asset
  
Effect on lease liability
Incremental borrowing rate
  
1% increase in the rate
  
Reduces by $7,201
  
Reduces by $7,201

5
Acquisitions and disposals
 
Disposal of subsidiaries
 
Year 2021
 
During fiscal year 2021 no subsidiaries were disposed of.

Year 2020

Grupo TMM sold 100% of the shares of the subsidiaries Siremirta Corporate, S.A. de C.V., Ricalme Services, S.A. de C.V., Dogoubert, S.A.P.I. de C.V. (Split of TMM Logistics, S.A. de C.V.) and Judsony, S.A.P.I. de C.V. (Split of TMM Logistics, S.A. de C.V.) to an unrelated third party in 2020. The gain on the sale of these subsidiaries amounted to $451, which is shown in the item of ‘Other (expenses) income’ in the consolidated statements of profit or loss (see Note 19). The value of the net assets of those subsidiaries was immaterial as of the date of the sale.
 
Year 2019
 
Grupo TMM sold 100% of the shares of the subsidiaries Bamorau Servicios, S.A.P.I. de C.V. and Snekke, S.A. de C.V. (tugboats) to unrelated third parties in 2019.

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At the date of sale, the value of the assets of those subsidiaries and the consideration received was as follows:
 
   
Snekke, S.A. de
C.V. (a)
    
Bamorau
Servicios,
S.A.P.I. de C.V.
    
Total
  
Current assets
                  
Other accounts receivable
  
$
27,786
    
$
-
    
$
27,786
  
Other current assets
    
5,388
      
-
      
5,388
  
Total current assets
    
33,174
      
-
      
33,174
  
                         
Non-current assets
                        
Property
    
339,038
      
-
      
339,038
  
Total assets
  
$
372,212
     $
-
    
$
372,212
  
                         
Short-term liabilities
                        
Other accounts payable
  
$
25,243
     $
-
    
$
25,243
  
Total short-term liabilities
    
25,243
      
-
      
25,243
  
                         
Long-term liabilities
                        
Deferred income tax
    
58,920
      
-
      
58,920
  
Total liabilities
  
$
84,163
     $
-
    
$
84,163
  
                         
Total net assets
  
$
288,049
     $
-
    
$
288,049
  
                         
Consideration transferred
    
543,184
      
24,609
      
567,793
  
Gain on the disposition of subsidiaries
  
$
255,135
    
$
24,609
    
$
279,744
  
 
In December 2019, in connection with the sale of Snekke, S.A. de C.V., and with the prior authorization of the Administración Portuaria Integral de Manzanillo, the Company transferred the rights to its concession to provide tugboat services in the port of Manzanillo in favor of the buyer, following which the Company stopped operating its tugboat business (see Note 11).
 
The gain on the sale of these subsidiaries is shown in the item of ‘Other (expenses) income’ (see Note 19).
 
These divestitures form part of the business plan and financial restructuring of Grupo TMM, which contemplates focusing its resources and operation in the specialized maritime and ports and terminals, through a more efficient operating structure.

Acquisition of subsidiaries
 
Years 2021 and 2020
 
During 2021 and 2020 no company was acquired.
 
Year 2019
 
On February 14, 2019, the Company acquired the remaining 50% of the shares of Servicies & Solutions Optimus, S. de R.L. de C.V., giving Grupo TMM 100% of the shares of the entity and control as of that date. The purpose of this acquisition is to continue to the develop hydrocarbon and refined oil product storage and transportation infrastructure, such as gasoline, diesel and jet fuel in the port of Tuxpan.

Table of Contents
 31
The details of this business combination are as follows:
 
   
2019
  
Fair value of the consideration transferred
  
$
51,126
  
         
Recognized amounts of identifiable net assets
        
Cash and cash equivalents
    
671
  
Other current assets
    
8,703
  
Land
    
122,481
  
Construction in progress
    
23,595
  
Total identifiable assets
    
155,450
  
         
Accounts payable
    
113,777
  
Other liabilities
    
373
  
Total liabilities assumed
    
114,150
  
Identifiable net assets
  
$
41,300
  
Goodwill on acquisition
  
$
9,826
  
         
Consideration transferred settled in cash
  
$
51,126
  
Cash and cash equivalents acquired receive on acquisition
    
(671
)
Net cash outflow on acquisition
  
$
50,455
  
 
Goodwill of $ 9,826 is mainly related to growth expectations, expected future profitability that the management of Grupo TMM estimated at the acquisition date. As of December 31, 2019, Grupo TMM’s management decided to impair goodwill in view that the operations will not generate cash flows for the next two years as the project continues and construction remains in progress. The impairment is presented in the consolidated statement of profit or loss as part of the item “Other (expenses) income” (see Note 19).
 
6
Cash and cash equivalents
 
Cash and cash equivalents as of December 31, 2021 and 2020, are summarized as follows:
 
   
2021
    
2020
  
Cash on hand
  
$
738
    
$
756
  
Cash at banks
    
38,829
      
49,356
  
Short-term investments (a)
    
-
      
55,198
  
   
$
39,567
    
$
105,310
  


(a)
Includes fix-term deposits (promissory notes) and repurchase/resell agreements with terms up to 3 days.
 
Restricted cash
 
As of December 2021 and 2020, restricted cash represents the amounts $48,203 and $37,672, respectively, required to guarantee payments according to the obligations arising from the debt agreements for the acquisition of vessels and guarantee for the sale of Terminal Marítima de Tuxpan, S.A. de C.V.
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 32
7
Trade receivables
 
Trade receivables as of December 31, 2021 and 2020, are summarized as follows:
 
   
2021
    
2020
  
Maritime
            
Sludge ships
   $ 105,373     $ -  
Shipyard
    
59,942
      
40,979
  
Tugboats
    
13,883
      
13,981
  
Parcel tankers
    
10,071
      
14,485
  
Offshore vessels
    
68,486
      
29,864
  
Bulk carrier
    
-
      
98
  
                 
Ports and terminals
                
Shipping agencies
    
7,839
      
331
  
Port services
    
889
      
7,152
  
Commercial leases
    
66
      
106
  
                 
Logistics, warehousing and other businesses
                
Warehousing
    
35,560
      
27,145
  
Repair of containers
    
20,705
      
16,204
  
Automotive services
    
1,277
      
1,021
  
Other businesses
    
1,267
      
-
  
Total trade receivables
    
325,358
      
151,366
  
Contract assets
    
96,023
      
56,215
  
Allowance for doubtful accounts
    
(20,294
)
    
(21,218
)
   
$
401,087
    
$
186,363
  
 
All amounts are short-term. The net carrying value of trade accounts receivables is considered a reasonable approximation to fair value.
 
The activity in the allowance for doubtful accounts is presented below:
 
   
2021
    
2020
  
Balance as of January 1
  
$
21,218
    
$
14,385
  
Impairment loss for the period
    
199
      
20,140
  
Receivables written off during the year
    
(1,123
)
    
-
  
Allowance cancelation recognized during the year
    
-
      
(13,307
)
Balance as of December 31
  
$
20,294
    
$
21,218
  

Note 26 includes disclosures related to credit risk exposures and the analysis related to the allowance for expected credit losses. In 2021 and 2020 the impairment loss was calculated applying the expected credit loss model in accordance with IFRS 9.
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 33
8
Other accounts receivable
 
Other accounts receivable as of December 31, 2021 and 2020, are summarized as follows:
 
   
2021
    
2020
  
Current
            
Recoverable taxes
  
$
202,903
    
$
203,503
  
Services for port, maritime and other operations
    
57,620
      
54,288
  
Employees
    
3,287
      
4,495
  
Insurance claims
    
842
      
818
  
Others
    
7,369
      
1,157
  
     
272,021
      
264,261
  
                 
Non-current
                
Value added tax recoverable (a)
    
280,000
      
238,000
  
   
$
552,021
    
$
502,261
  
 

 (a)
During the 2021 and 2020, the VAT recovery processes have been affected by practices of the tax authorities to extend the recovery periods.
 
9
Property, vessels and equipment
 
Property, vessels and equipment as of December 31, 2021 and 2020 are summarized as follows:
 
   
2021
  
   
Net
balances at
beginning
of year
    
Additions
    
Disposals
      
Transfers
and others
      
Depreciation
/ loss from
revaluation
    
Net
balances at
year end
    
Estimated
useful
lives(years)
  
Vessels
  
$
182,055
    
$
-
    
$
119,832
  
(a)
  
$
(51,591
)
(b)
  
$
10,632
    
$
-
      
25
  
Maritime equipment
     -       33,836       -         37,002         -       70,838       3  
Shipyard
    
190
      
-
      
-
        
-
        
41
      
149
      
40
  
Major vessel maintenance
    
6,858
      
-
      
5,486
        
2,376
        
1,803
      
1,945
      
2.5
  
Buildings and facilities
    
286,232
      
-
      
48,869
  
(c)
    
(108,094
)
(b)
    
12,555
      
116,714
      
20 & 25
  
Warehousing equipment
    
450
      
-
      
-
        
-
        
63
      
387
      
10
  
Computer equipment
    
397
      
100
      
-
        
-
        
220
      
277
      
3 & 4
  
Terminal equipment
    
24,309
      
1,381
      
-
        
-
        
2,353
      
23,337
      
10
  
Ground transportation equipment
    
3,730
      
54
      
-
        
-
        
1,220
      
2,564
      
4.5 & 10
  
Other equipment
    
9,500
      
89
      
-
        
23
        
1,178
      
8,434
          
     
513,721
      
35,460
      
174,187
        
(120,284
)
      
30,065
      
224,645
          
Lands
    
1,934,345
      
-
      
158,287
 (c)
     
(576,508
)
(b)
    
-
      
1,199,550
          
Constructions in progress
    
83,930
      
40,008
 (d)
   
-
  

   
(7,195
)
      
-
      
116,743
          
   
$
2,531,996
    
$
75,468
    
$
332,474
      
$
(703,987
)
    
$
30,065
    
$
1,540,938
          

Table of Contents
 34
    2020
   
Net
balances at
beginning of year
    
Additions
    
Disposals
      
Transfers
and others
      
Depreciation
/ loss from
revaluation
    
Net
balances at
year end
    
Estimated
useful
lives(years)
  
Vessels
  
$
214,938
    
$
-
    
$
-
  

 
$
(16,241
)
(e)
  
$
16,642
    
$
182,055
      
25
  
Shipyard
    
232
      
-
      
-
  
   
-
        
42
      
190
      
40
  
Major vessel maintenance
    
15,180
      
-
      
-
        
5,871
     
14,193
      
6,858
      
2.5
  
Buildings and facilities
    
299,660
      
3,432
      
-
        
-
  

   
16,860
      
286,232
      
20 & 25
  
Warehousing equipment
    
205
      
616
      
-
        
-
        
371
      
450
      
10
  
Computer equipment
    
456
      
214
      
-
        
-
        
273
      
397
      
3 & 4
  
Terminal equipment
    
26,035
      
999
      
281
        
-
        
2,444
      
24,309
      
10
  
Ground transportation equipment
    
5,027
      
79
      
-
        
28
        
1,404
      
3,730
      
4.5 & 10
  
Other equipment
    
10,892
      
166
      
180
        
1
        
1,379
      
9,500
          
     
572,625
      
5,506
      
461
        
(10,341
)
      
53,608
      
513,721
          
Lands
    
1,597,923
      
-
      
-
        
336,422
  
(e)
    
-
      
1,934,345
          
Constructions in progress
    
114,872
      
22,869
      
31,804
  
(f)
    
(22,007
)
      
-
      
83,930
          
   
$
2,285,420
    
$
28,375
    
$
32,265
      
$
304,074
      
$
53,608
    
$
2,531,996
          
 
All the amounts for depreciation and for loss from revaluation are included as part of the depreciation, amortization, and loss from revaluation on the consolidated statements of profit or loss.
 
The accumulated depreciation on property, vessels and equipment at December 31, 2021 and 2020 is $197,950 and $290,056, respectively.
 

 (a)
On January 8, 2021, the ship 2Olmeca” was sold to company Athene Shipping Limited, which was delivered in Singapore. The cash received was used to prepay the line of credit with Act Maritime LLC for $3.5 million dollars in December 2020.
 

 (b)
It is mainly made up of the transfer to the assets classified as held for sale for $446,951 and the cancellation of the revaluation surplus for $284,584.
 

 (c)
It is mainly made up of the write-offs of 3 properties for $191,000, registering a loss of $130,000, recorded under other expenses (see Note 19).
 

 (d)
Corresponds mainly to investments in Inmobiliaria Dos Naciones, S. de R.L. of C.V. for the Dam project.
 

 (e)
It is mainly comprised of the surplus for revaluation of land for $330,571 and a deficit for revaluation of vessels for $16,135.
 

 (f)
Corresponds mainly to the cancellation of the project called “Terminal Quintana Roo”, derived from changes in the conditions of the project previously considered by Management.
 
If the cost model had been used, the revalued carrying amounts for vessels, land and properties as of December 31, 2021 and 2020, would be as follows:
 
   
2021
    
2020
  
Vessels
  
$
8,206
    
$
102,993
  
Lands
    
715,613
      
715,616
  
Properties
    
133,342
      
140,360
  
   
$
857,161
    
$
958,969
  
 
The revalued amounts include a revaluation surplus of $914,260 and $1,455,179 in 2021 and 2020, respectively, before taxes, which is not available for distribution to stockholders.
 
Fair value measurement
 
See Note 25 regarding the measuring of fair value for vessels and properties.
 
Guarantees
 
At the end of 2021 and 2020 no vessel was under guaranty.

At the end of 2021, there were three properties securing various bank loans, while at the end of 2020 there were four properties under guarantee. Likewise, as of December 31, 2021 and 2020, there was an RTG crane under guarantee with ‘PNC Bank, N.A.’.
 
10
Leases
 
Right-of-use assets
 
   
2021
  
   
Warehouse
    
Cranes
    
Courtyards
    
Major vessel
maintenance
    
Corporate
building
    
Total
  
Gross carrying amount
                                    
Balance 1 January 2021
  
$
287,641
    
$
11,722
    
$
60,035
    
$
22,135
    
$
92,170
    
$
473,703
  
Additions
    
58,454
      
-
      
11,362
      
-
      
-
      
69,816
  
Disposals
    
-
      
-
      
-
      
-
      
-
      
-
  
Balance at 31 December 2021
    
346,095
      
11,722
      
71,397
      
22,135
      
92,170
      
543,519
  
                                                 
Depreciation
                                                
Balance 1 January 2021
    
83,036
   
7,157
   
22,495
   
4,150
   
2,633
   
119,471
Disposals
    
-
      
-
      
-
      
-
      
-
      
-
  
Depreciation
    
55,673
      
4,111
      
10,964
      
5,534
      
10,534
      
86,816
  
Balance 31 December 2021
    
138,709
   
11,268
   
33,459
   
9,684
   
13,167
   
206,287
Carrying amount 31 December 2021
  
$
207,386
    
$
454
    
$
37,938
    
$
12,451
    
$
79,003
    
$
337,232
  

Table of Contents
 36
   
2020
  
   
Warehouse
    
Cranes
    
Courtyards
    
Major vessel
maintenance
    
Corporate
building
      
Total
  
Gross carrying amount
                                      
Balance 1 January 2020
  
$
83,968
    
$
3,112
    
$
60,035
    
$
10,834
    
$
513,735
      
$
671,684
  
Additions
    
216,548
      
8,610
      
-
      
22,135
      
92,170
        
339,463
  
Disposals
    
12,875
      
-
      
-
      
10,834
      
513,735
  
(a)
    
537,444
  
Balance at 31 December 2020
    
287,641
      
11,722
      
60,035
      
22,135
      
92,170
        
473,703
  
                                                   
Depreciation
                                                  
Balance 1 January 2020
    
40,212
      
2,197
      
10,794
      
8,667
      
49,715
        
111,585
  
Disposals
    
1,884
      
-
      
-
      
10,834
      
62,146
        
74,864
  
Depreciation
    
44,708
      
4,960
      
11,701
      
6,317
      
15,064
        
82,750
  
Balance 31 December 2020
    
83,036
   
7,157
   
22,495
   
4,150
   
2,633
     
119,471
Carrying amount 31 December 2020
  
$
204,605
    
$
4,565
    
$
37,540
    
$
17,985
    
$
89,537
      
$
354,232
  
 

 (a)
It corresponds to the cancellation of the rental agreement of the former corporate headquarters located on Av. De la Cuspide, which generates an effect on profit or loss in the amount of $113,469, which is presented in the caption of other (expenses) income (See note 19). In accordance with the agreement, the Company is bound to pay an amount of 158 thousand dollars monthly for 4 years, which will be conditioned to the rent or sale by the lessor of the real property. As of the date of issuance of the accompanying financial statements, these offices have not been rented or sold.

Lease liabilities
 
As of December 31, 2021 and December 31, 2020, the information on leases is summarized below:
 
   
2021
  
   
Short-term
    
Long-term
  
Payable in Mexican pesos
            
Warehouse
  
$
89,694
    
$
179,292
  
Cranes
    
1,248
      
-
  
Courtyards
    
11,482
      
30,033
  
Major vessel maintenance
    
6,404
      
7,683
  
                 
Payable in US dollars
                
Corporate building
    
12,550
      
71,489
  
   
$
121,378
    
$
288,497
  

   
2020
  
   
Short-term
    
Long-term
  
Payable in Mexican pesos
            
Warehouse
  
$
33,916
    
$
174,894
  
Cranes
    
4,272
      
488
  
Courtyards
    
8,260
      
33,030
  
Major vessel maintenance
    
6,490
      
13,214
  
                 
Payable in US dollars
                
Corporate building
    
5,307
      
75,642
  
   
$
58,245
    
$
297,268
  
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 37
Grupo TMM has leased its corporate headquarters building, warehouses for the storage service, cranes for the logistics services and a major vessel maintenance. With the exception of short-term leases and low-value underlying assets, each lease is reflected on the consolidated statement of financial position as a right-of-use asset and a lease liability.
 
Each lease generally imposes a restriction that, unless there is a contractual right for the Company to sublet the asset to another party, the right-of-use asset can only be used by the Company.
 
Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. Some leases contain an option to extend the lease for a further term.
 
Grupo TMM is prohibited from selling or pledging the underlying leased assets as security. For leases over office buildings and warehouses, Grupo TMM must keep those properties in a good state of repair and return the properties. Further, Grupo TMM must insure items of leases assets and incur maintenance fees on such items in accordance with the lease contracts.
 
The table below describes the nature of Grupo TMM’s leasing activities by type of right-of-use asset recognized in the consolidated statement of financial position:
 
Right-of-use asset
  
No. of
right-of-use
assets
leased
    
Range of
remaining
term
(years)
    
No. of
leases with
extension
options
    
No. of
leases with
purchase
option
    
No. of
leases with
variable
payments
linked to an
index
    
No. of
leases with
termination
options
  
Corporate headquarters
    
1
      
7
      
-
      
-
      
1
      
-
  
Warehouse
    
7
      
3 - 4
      
2
      
-
      
7
      
-
  
Courtyards
    
5
      
1 – 4
      
5
      
-
      
5
      
-
  
Cranes
    
1
      
1
      
-
      
-
      
-
      
-
  
Major vessel maintenance
    
1
      
2
      
-
      
-
      
-
      
-
  
 
Lease liabilities are secured with related underlying assets. Future minimum lease payments at 31 December 2021 and 2020 were as follows:
 
   
Within the
1st year
    
1 to 3 years
    
3 to 5 years
    
After 5
years
    
Total
  
Balance at December 31, 2021
                              
Lease payments
  
$
184,703
    
$
213,311
    
$
102,716
    
$
39,833
    
$
540,563
  
Financial charges
    
(63,325
)
    
(48,820
)
    
(13,581
)
    
(4,962
)
    
(130,688
)
Present values, net
  
$
121,378
    
$
164,491
    
$
89,135
    
$
34,871
    
$
409,875
  
                                         
Balance at December 31, 2020
                                        
Lease payments
  
$
95,914
    
$
178,415
    
$
152,179
    
$
54,620
    
$
481,128
  
Financial charges
    
(37,669
)
    
(55,149
)
    
(23,783
)
    
(9,014
)
    
(125,615
)
Present values, net
  
$
58,245
    
$
123,266
    
$
128,396
    
$
45,606
    
$
355,513
  
 
Table of Contents
 38
Lease payments not recognized as a liability
 
The Company has elected not to recognize a lease liability for short-term leases (leases with an expected term of 12 months or less) or for leases of low-value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognized as lease liabilities and are expensed as incurred.
 
The expense relating to payments not included in the measurement of the lease liability is as follows:
 
   
2021
    
2020
  
Short-term leases (a)
  
$
558,178
    
$
307,643
  
Leases of low-value assets
    
7,193
      
4,820
  
   
$
565,371
    
$
312,463
  
 

 (a)
Corresponds to the leasing of parcel and bulk carrier vessels.
 
At December 31, 2021, Grupo TMM was committed on short-term leases and total commitment at that date was $46,515.

At December 31, 2021 Grupo TMM had no lease commitments that had not yet started.
 
Total cash outflow for leases for the years ended December 31, 2021 and 2020 were $617,621 and $402,892, respectively.
 
11
Concession rights
 
As of December 31, 2021 and 2020, the concession rights are as follows:
 
   
2021
    
2020
    
Years to amortize
  
Administración Portuaria Integral de Acapulco (a)
  
$
94,607
    
$
94,607
    
10
  
Transportación Marítima Mexicana (b)
    
-
      
-
     -  
     
94,607
      
94,607
        
Accumulated amortization
    
(94,607
)
    
(92,715
)
      
Concession rights, net
  
$
-
    
$
1,892
        
 

 (a)
As of December 31, 2020, the Company holds concession to operate the cruise and vehicle terminal at the port of Acapulco, Guerrero. Under this concession agreements, the Company is obliged to keep the facilities included in the concession in good condition, as well as making monthly payments (fixed and variable), related to the operation (see Note 28). As of June 2021, this concession expired and renewal was not obtained.



The amortization of the concession rights was $1,892 and 3,784, for the years ended December 31, 2021 and 2020. Monthly payments to the Administración Portuaria Integral de Acapulco were $3,962 and $7,507 in 2021 and 2020, respectively. At the date of delivery of the facilities, the rights paid for this concession in the amount of $94,607, had been fully amortized.

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(b)
As of December 31, 2018, the Company maintained the concession rights to operate the tug services in the Port of Manzanillo, Colima. This concession was renewed in October 2014, expiring on January 16, 2023, with the possibility of being renewed for another eight years.



In connection with the December 2019 sale of Snekke, S.A. de C.V. and with the prior authorization of the Administración Portuaria Integral de Manzanillo, the Company transferred the rights of this concession in favor of the buyer (see Notes 1 and 5). As of the date of this sale, the total value of the concession rights, which amounted to $30,266, had been fully amortized.

12
Intangible assets
 
Intangible assets as of December 31, 2021 and 2020, are summarized as follows:
 
   
2021
  
   
Net
balances at
beginning
of year
    
Additions
    
Transfers
and others
    
Amortization
    
Net
balances at
year end
    
Estimated
useful life
(years)
  
Software
  
$
25,722
    
$
9,305
 (b)
  
$
132
    
$
576
    
$
34,583
    
3 y 5
  
Trademark (a)
    
125,528
      
-
       -      
-
      
125,528
    
Indefinite
  
   
$
151,250
    
$
9,305
    
$
132
    
$
576
    
$
160,111
          

   
2020
  
   
Net
balances at
beginning
of year
    
Additions
    
Transfers
and others
    
Amortization
    
Net
balances at
year end
    
Estimated
useful life
(years)
  
Software
  
$
15,956
    
$
10,508
    
$
-
    
$
742
    
$
25,722
    
3 y 5
  
Trademark (a)
    
125,528
      
-
      
-
      
-
      
125,528
    
Indefinite
  
   
$
141,484
    
$
10,508
    
$
-
    
$
742
    
$
151,250
          
 

 (a)
Corresponds to the rights on the Marmex trademark associated with the specialized maritime division segment, specifically the offshore vessels operation. This trademark is subject to annual impairment testing (see Note 13).
 

 (b)
Corresponds mainly to the SAP Hana system upgrade project.
 
The accumulated amortization of intangible assets as of December 31, 2021 and 2020, is $1,599 and $7,838, respectively.
 
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13
Impairment of long-lived assets
 
As of December 31, 2021, and 2020, Grupo TMM had performed annual impairment tests. The recoverable amounts of the cash generating units were determined based on calculations of the value in use and fair value less costs of sale as follows:
 
Vessels and trademark
 

Vessels are identifiable assets that individually generate cash flows which are largely independent from the flows from other assets or groups of assets. As mentioned in Note 9, the Company sold the last vessel it owned in January 2022, so the value of this asset as of December 31, 2021 was adjusted to its sale price and is presented in the consolidated statements of financial position as an asset available for sale.



The trademark is considered an asset that does not generate flows independently, therefore this was grouped as a cash-generating unit (specialized maritime division segment) together with other long-lived assets in this segment.
 
The recovery value for these assets was determined as the higher between their value in use and their market value, less selling costs. As of December 31, 2021, and 2020, no impairment losses were determined for these assets.

Properties
 
The recoverable value of properties was determined as their fair value less costs of sale, which are considered immaterial in terms of the fair value. The determination of fair value is described in Note 25. At December 31, 2021 and 2020, no impairment losses were determined for these assets.
 
Corporate assets and other long-lived assets
 
These assets are not identified with any cash-generating unit, therefore these were evaluated at the Grupo TMM level. The recoverable amount of these assets was determined as their value in use. At December 31, 2021 and 2020, no impairment losses were determined for these assets.
 
The recoverable amounts for cash-generating units were determined based on calculations of the value in use, covering a detailed three-year projection, followed by an extrapolation of the cash flows expected for the useful lives remaining for the assets using the growth rates determined by Management.
 

The present value of the cash flows expected for each segment was determined applying an appropriate discount rate.

Growth rates
 
The growth rates reflect the long-term average for these rates for the specialized maritime segment (all publicly available).
 
Discount rates
 
The discount rate reflects adequate adjustments associated with the market risk and the specific risk factors.
 
Cash flow assumptions
 
The key assumptions of Management for the specialized maritime segment include stable profit margins, which have been determined based on experience in this market. Grupo TMM Management considers this to be the best information available to forecast this market. The cash flow projections reflect stable profit margins achieved before the period covered by said projections.
 
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 41
No consideration has been given to efficiency improvements and prices and salaries reflect the inflation projected for the industry, which are publicly available.
 
In addition to the considerations described above for determining the value in use of assets and the cash-generating units described above, Management is currently not aware of any other probable change that could require changes in their estimate. However, the estimate for the recoverable amount for the specialized maritime segment is particularly sensitive to the discount rates.

14
Financial assets and liabilities
 
Categories of financial assets and liabilities
 
The financial assets and liabilities as of December 31, 2021 and 2020, are summarized as follows:
 
   
2021
    
2020
  
Financial assets
            
Valued at amortized cost
            
Cash and cash equivalents
  
$
39,567
    
$
105,310
  
Restricted cash
    
48,203
      
37,672
  
Trade receivables
    
305,064
      
130,148
  
Other accounts receivable
    
69,118
      
60,758
  
Related parties
    
65,057
      
42,228
  
Total current financial assets
  
$
527,009
    
$
376,116
  
                 
Financial liabilities
                
Valued at amortized cost
                
Short-term portion of the financial debt
  
$
57,106
    
$
129,085
  
Trade payables
    
437,005
      
228,959
  
Accounts payable and accrued expenses
    
438,712
      
486,827
  
Related parties
    
144,966
      
1,458
  
Total short-term portion of the financial debt
    
1,077,789
      
846,329
  
Long-term financial debt
    
65,601
      
53,644
  
Total financial liabilities
  
$
1,143,390
    
$
899,973
  
 
As of December 31, 2021, and 2020, the carrying value of the financial assets and liabilities at amortized cost is considered similar to their fair value.

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 42
Financial debt
 
The information for financing as of December 31, 2021 and 2020 is summarized as follows:
 
   
2021
    
2020
  
   
Short-term
    
Long-term
    
Short-term
    
Long-term
  
Payable in Mexican pesos
                        
Daimler Financial Services México, S. de R.L. de C.V.
  
$
7,076
    
$
11,103
    
$
16,333
    
$
-
  
Recognition of debt and substitution of debtor for $40.9 million at a fixed rate of 12%, with monthly payments of principal and interest and maturing in November 2019.                                
                                 
In order to improve the profile of the schedule of payments, a new debt recognition was formalized on October 11, 2018, in the amount of $28 million at a 12.9% fixed rate, with monthly payments on principal and interest, due October 2021.                                
                                 
In order to face the effects of the Covid-19 pandemic, the Company obtained two grace periods of 3 months each for the principal payment from April to September 2020, extending the term of the loan to January 2022.                                
                                 
On June 19, 2021, a new agreement was signed with the finance company in order to extend the amortization period for a total amount of $19.9 million at a fixed rate of 12.9%, with monthly payments of principal and interest and maturity in June 2024.                                
Banco Autofin México, S.A. Institución de Banca Múltiple
    
14,732
      
7,257
      
23,352
      
12,773
  
Five lines of credit with mortgage surety for $45.8, $34.6, $25.5, $21.6, and $8.4 million at a variable rate of the 28-day TIIE plus 450 basis points, with monthly payments of principal and interest, maturing September 2021.
                                
                                 
On November 26, 2018, a new line of credit was drawn down in the amount of $20 million at a variable rate at 28-day TIIE, plus 550 base points, due November 2023.                                
                                 
In order to face the effects of the Covid-19 pandemic, the Company obtained a grace period of 6 months in the payment of principal of 4 of the 6 lines, the period applies from the months of January to June of 2020, extending the maturity of those lines correspondingly.                                
INPIASA, S.A. de C.V. (a)
    
1,044
      
-
      
1,435
      
-
  
Contract for line of credit, the first for $15.7 million at a variable rate of the 28-day TIIE plus 450 basis points, with monthly payments of principal and interest, and maturing August 2021.
                                
                                 
The Company is currently in the process of negotiating with the finance company to restructure the debt repayment schedule.                                
                                 
HSBC, S.A. (a)
    
-
      
-
      
951
      
-
  

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 43
     2021
       2020
  
   
Short-term
   Long-term  
Short-term
   Long-term
$9.77 million line of credit at a variable rate of the 28-day TIIE plus 300 points, with monthly payments of principal and interest, and maturing April 2021.                                
                                 
In order to face the effects of the Covid-19 pandemic, the Company obtained a grace period of 3 months in the payment of principal from the months of May to July 2020, extending the term of each credit line 3 months.                                
                                 
The Company settled the entire line in July 2021.                                
                                 
Banco del Bajío, S.A. Intemza (a)
    
-
      
-
      
211
      
-
  
$9.36 million line of credit at a variable rate of the 28-day TIIE plus 250 points, with monthly payments of principal and interest, and maturing August 2020.                                
                                 
In order to face the effects of the Covid-19 pandemic, the Company obtained a 6-month grace period in the payment of principal from April to September 2020, extending the term of each credit line 6 months.                                
                                 
The Company settled the entire line in February 2021.                                

Banco del Bajío, S.A.
    
4,519
      
20,715
      
1,714
      
9,571
  
First drawdown for $12.0 million line of credit line with a mortgage guarantee for $30.0 million, variable rate of TIIE 28 days plus 600 points, with monthly payments of principal and interest, maturing in July 2027.
                                
                                 
The second drawdown for $18.0 million was made on February 23, 2021, variable rate of TIIE 28 days plus 600 points, with monthly payments of principal and interest, due in July 2027.                                
                                 
Portafolio de Negocios, S.A. de C.V. SOFOM
    
-
      
-
      
2,738
      
6,334
  
Line of credit for $10.0 million with a fixed rate of 15.0%, with monthly payments of principal and interest; maturity in July 2023, without prepayment penalty.
                                
                                 
The Company settled the entire line in December 2021, making the full payment in advance.                                
                                 
Others investors
    
18,446
      
-
      
12,000
      
-
  
Two unsecured loans were contracted, each for $6.0 million at a fixed rate of 15.0% per annum, with principal and interest payments due originally in October 2020.
                                

                               
In January 2021, a principal payment of $1.0 million was made to each line, as part of the negotiation that the Company continues to carry out, with the purpose of improving the amortization profile, extending the payment term of both credits.                                
                                 
In July 2021, a line of credit with multiple drawdowns was contracted, the first being made on July 28. The balance to date is $47.2 million with an initial rate of 15% and maturity in September 2022.                                
                                 
Hewlett Packard     137       485       -       -  

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 44
    2021
  2020
   
Short-term
   Long-term  
Short-term
   Long-term
In January 2021, an additional line was contracted for $622.5 thousand pesos, at a fixed rate of 9.87%, monthly payments of principal and interest on unpaid balances with maturity in December 2025.                                

                               
The Company is in negotiations to improve the conditions and amortization profile of the balance of the lines of credit.                                
                                 
Interest payable
    
194
      
-
      
563
      
-
  
Total financial debt in Mexican pesos    
46,148
      
39,560
      
59,297
      
28,678
  
                                 
Payable in US dollars
                                
Others
    
-
      
-
      
59,806
      
-
  
                                 
Unsecured credits were contracted, each one amounting to $3 million dollars at a fixed rate of 11.25%, with semiannual payments of principal and interest, originally due January 2016.
                                
                                 
Both credits were contracted again in January 2017, and $1 million dollars on one of them was paid and both were due in July 2017.                                
                                 
The payment rescheduling and outstanding balance amounting to $5 million dollars were formalized in July 2017, with a fixed rate of 11.25% with monthly payments on interest and principal, due July 2018.
                                
                                 
A new rescheduling of payments and unpaid balance amounting to $4.5 million dollars was formalized in July 2018, with an 11.25% fixed rate with monthly interest payments. The principal amounting to $500 thousand dollars was paid in July 2018, and the balance of $4 million dollars is due in July 2019.                                
                                 
In order to improve the amortization profile, the Company continued its negotiations with creditors to define a new amortization schedule. On December 20, 2019, the payment of $ 1.0 million dollars was made.                                
                                 
In July 2020, the rescheduling of payments for $3.0 million dollars was formalized, with a fixed rate of 11.25% with monthly payments of interest and principal due in July 2021.                                
                                 
The Company is in a process to capitalize this debt, which has been duly authorized by the Board of Directors and the Shareholders’ Meeting.                                

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     2021  
    2020   
 
    Short-term     Long-term     Short-term     Long-term  
                         
Hewlett Packard
    
7,429
      
18,983
      
4,180
      
14,679
  
Two lines of credit for $607.8 dollars and $201.6 dollars, at a fixed rate of 6.84% and 6.13%, monthly payments of principal and interest on unpaid balances and maturing in March and October 2024, respectively.                                
                                 
In order to face the effects of the Covid-19 pandemic, the Company obtained a grace period of 3 months in the payment of principal for the months of May to July, extending the term of each credit line 3 months.                                
                                 
In order to continue with the Company’s technological transformation strategy, 3 additional simple credit lines were contracted for $86.6 thousand dollars, $96.9 thousand dollars and $ 252.1 thousand dollars, at a fixed rate of 5.96%, 7.16% and 4.58% fixed annual, respectively, monthly payments of principal and interest on unpaid balances and maturing in March, April and August 2025.                                
                                 
In January 2021, two additional lines were contracted for $43.3 thousand dollars and $385.0 thousand dollars, at a fixed rate of 5.14% and 4.76%, monthly payments of principal and interest on unpaid balances and maturity in December 2025.                                
                                 
The Company is in negotiations to improve the conditions and amortization profile of the balance of the lines of credit.                                
                                 
PNC, Bank, N.A.
    
3,529
      
7,058
      
3,429
      
10,287
  
Line of credit with collateral for $860 thousand dollars, at a fixed rate of 4.40%, semiannual payments of principal and interest on unpaid balances and maturing in July 2024.
                                
                                 
Interest payable
    
-
      
-
      
2,373
      
-
  
Total financial debt in US dollars
    
10,958
      
26,041
      
69,788
      
24,966
  
Total financial debt
  
$
57,106
    
$
65,601
    
$
129,085
    
$
53,644
  
 

 (a)
They correspond to judicial and private agreements signed for the debt recognition with respect to Deposit Certificates secured and backed by Almacenadora de Depósito Moderno, S.A. de C.V. (ADEMSA), a related party.
 
Covenants
 
Some of the agreements related to the abovementioned loans contain certain covenants including restricting the payment of dividends, not reducing the capital stock and not splitting, as well as conditioning the sale of assets, the foregoing without prior authorization from the creditor; Likewise, in some cases, a copy of quarterly and audited financial statements must be delivered, as well as reasonable information requested by the creditor. As of December 31, 2021, and 2020, Grupo TMM and subsidiaries complied with the covenants set forth in those contracts.
 
The interest expense on the financial debt was $25,018 and $38,558 for the periods of twelve months ended December 31, 2021 and 2020, respectively.

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The maturity of the long-term financial debt as of December 31, 2021 and 2020 is as follows:
 
Maturity
  
2021
    
2020
  
2022
  
$
-
    
$
23,638
  
2023
    
22,121
      
16,315
  
2024
    
21,762
      
8,275
  
2025
    
10,400
      
2,703
  
2026
    
8,682
      
2,713
  
2027
    
2,636
      
-
  
   
$
65,601
    
$
53,644
  
 
15
Balances and transactions with related parties
 
The accounts payable and transactions with related parties as of December 31, 2021 and 2020 are summarized as follows:
 
   
2021
    
2020
  
   
Receivable
    
Payable
    
Receivable
    
Payable
  
TMM División Marítima, S.A. de C.V. (a)
  
$
65,057
    
$
-
    
$
42,228
    
$
-
  
SSA México, S.A. de C.V. (b)
    
-
      
5,829
      
-
      
1,458
  
Investor (c)
     -       139,137       -       -  
   
$
65,057
    
$
144,966
    
$
42,228
    
$
1,458
  
 

 (a)
The accounts receivable is related to the maritime services provided to TMM DM by Grupo TMM. In September, 2020, the Company agreed through an agreement with this related party to forgive $98,859.
 

 (b)
The accounts payables to SSA México, S.A. de C.V. are largely due to subagency services that this related party provides to Grupo TMM.
 

 (c)
Three lines of credit, each for $5.0 million at a fixed rate of 15.0% per annum, with principal and interest payments at maturity, originally provided for a maturity date of October 2022.

The most relevant transactions with related parties as of December 31, 2021, 2020 and 2019 are summarized as follows:
 
   
2021
    
2020
    
2019
  
Revenue:
                  
Maritime services (a)
  
$
71,823
    
$
131,137
    
$
159,772
  
Shipping agency services (b)
    
419
      
499
      
758
  
   
$
72,242
    
$
131,636
    
$
160,530
  
                         
Costs:
                        
Sub-agency commissions (c)
  
$
4,062
    
$
107,692
    
$
264,743
  
                         
Expenses:
                        
Other expenses (d)
  
$
180
    
$
440
    
$
391
  

 
(a)
Maritime services between TMM Dirección Corporativa, S.A. de C.V, subsidiary of Grupo TMM, and TMM DM.


(b)
Shipping agency services between Administradora Marítima TMM, S.A.P.I. de C.V., subsidiary of Grupo TMM, and TMM DM.
 

(c)
Shipping agency servicies provided by SSA México, S.A. de C.V. to Administradora Marítima TMM, S.A.P.I. de C.V.
 

 (d)
Management consulting provided by SSA México, S.A. de C.V. to Administración Portuaria Integral de Acapulco, S.A. de C.V.

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 47
Transactions involving executive personnel for the years ended December 31, 2021, 2020 and 2019, include the following expenses:
 
   
2021
    
2020
    
2019
  
Short-term benefits
                  
Salaries
  
$
28,697
    
$
36,003
    
$
40,851
  
Social security costs
    
1,843
      
1,633
      
497
  
   
$
30,540
    
$
37,636
    
$
41,348
  
 
16
Accounts payable and accrued expenses
 
Accounts payable and accrued expenses at December 31, 2021 and 2020, are shown as follows:
 
   
2021
    
2020
  
General expenses
  
$
135,287
    
$
57,929
  
Operating expenses
    
167,741
      
259,151
  
Purchased services
    
51,302
      
89,976
  
Taxes payable
    
31,356
      
38,281
  
Salaries and wages
    
3,116
      
924
  
Others
    
81,266
      
78,847
  
   
$
470,068
    
$
525,108
  

17
Stockholders’ equity

Capital stock

As of December 31, 2021, and 2020, the Company’s capital stock is comprised of 102,182,841 shares outstanding, registered, without par value, and with voting rights, which may be held by Mexican nationals, investors, or companies that include in their bylaws the exclusion of foreigners clause. Foreigners may acquire economic rights in the Company’s common shares through ordinary participation certificates (‘CPOs’), with each CPO corresponding to one common share.

In the United States, the Company’s ADSs, each representing five CPOs, trade on the OTC market under the symbol GTMAY. The underlying TMM common shares for the ADSs are traded on the Mexican Stock Exchange under the listing code TMM A.

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 48
Net tax profit account (CUFIN)

As of December 31, 2021, and 2020, the restated balance of the Net Taxable Income Account (CUFIN for its acronym in Spanish) of the Parent Company amounts to $4,001,128 and $3,727,180, respectively, which was generated up to December 31, 2013. No new balances have been generated in this account thereafter.

Dividends or earnings distributed to stockholders that are paid out of the CUFIN balance generated up to December 31, 2014 will not be subject to income tax until that balance is exhausted.

Dividends not drawn from the CUFIN, in addition to the above, will continue to be subject to income tax, paid by the entity, based on the general rate set by law, which is definitive and may be credited against the income tax for this and the next two years. The balance in these accounts is susceptible to adjustment to the distribution date using the Mexican Consumers’ Price Index (INPC).

Capital decreases
 
As of December 31, 2021, and 2020, the current balance in the Capital Contribution Account (CUCA for its acronym in Spanish) is $5,226,551 and $4,868,700, respectively. In the event of capital reimbursement or decreases in favor of stockholders, the surplus for said reimbursement on this amount will be treated as a distributed earning.
 
In the event the equity capital exceeds the balance in the CUCA, the difference will be considered a dividend or distributed earning subject to the payment of income tax. If the earnings in reference come from the CUFIN, there will be no corporate tax due for the capital decrease or reimbursement. Otherwise, these will be treated as dividends or distributed earnings.
 
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 49
Other components of equity
 
Details of other components of equity as of December 31, 2021, 2020 and 2019, as follows:
 
   
Statutory
reserve
    
Defined
benefit
plan
    
Premium
on
convertible
obligations
    
Translation
result
    
Revaluation
surplus
      
Total
  
Balance as of December 31, 2018
   $ 216,948     $ (125,417 )   $ 77,106     $ (247,668 )   $ 785,975       $ 706,944  
Revaluation of assets
     -       -       -       -       379,420         379,420  
Defined benefit plan
     -       2,354       -       -       -         2,354  
Reclassification from disposal of properties and depreciation
     -       -       -       -       (202,228 ) (a)
    (202,228 )
Total before taxes
     -       2,354       -       -       177,192         179,546  
                                                   
Tax expense
     -       (706 )     -       -       (113,826 )       (114,532 )
Total net of taxes
     -       1,648       -       -       63,366         65,014  
Balance as of December 31, 2019
  
$
216,948
    
$
(123,769
)
  
$
77,106
    
$
(247,668
)
  
$
849,341
      
$
771,958
  
Revaluation of assets
    
-
      
-
      
-
      
-
      
314,436
    (b) 
   
314,436
  
Defined benefit plan
    
-
      
10,953
      
-
      
-
      
-
        
10,953
  
Reclassification from disposal of properties and depreciation
    
-
      
-
      
-
      
-
      
(55
)
   (a) 
   
(55
)
Total before taxes
    
-
      
10,953
      
-
      
-
      
314,381
        
325,334
  
                                                   
Tax expense
    
-
      
(3,286
)
    
-
      
-
      
(94,331
)
      
(97,617
)
Total net of taxes
    
-
      
7,667
      
-
      
-
      
220,050
        
227,717
  
Balance as of December 31, 2020
  
$
216,948
    
$
(116,102
)
  
$
77,106
    
$
(247,668
)
  
$
1,069,391
      
$
999,675
  
                                                   
Defined benefit plan     -       33,691       -       -       -         33,691  
Reclassification from revaluation of assets     -       -       -       -       (332,151 )  (c) 
    (332,151 )
Total before taxes     -       33,691       -       -       (332,151 )       (298,460 )
                                                   
Tax expense     -       (10,107 )     -       -       87,360         77,253  
Total net of taxes     -       23,584       -       -       (244,791 )       (221,207 )
Balance as of December 31, 2021   $ 216,948     $ (92,518 )   $ 77,106     $ (247,668 )   $ 824,600       $ 778,468  


(a)
It corresponds to the reclassification of the revaluation surplus to accumulated losses from the sale of properties and disposals of vessels, as well as the depreciation for the period of revaluation of properties and vessels.
 

(b)
Corresponds to the revaluation of the land of the project called “Liquid Storage Terminal”, derived from changes in the conditions of the project generated by obtaining permits, the revaluation allows the Management to know the fair value of the property based on at its best use.


(c)
Includes the adjustment of assets available for sale at their fair value, for an amount of $291,200.

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 50
18
Revenues
 
The revenues as of December 31, 2021, 2020 and 2019, are summarized as follows:
 
   
2021
    
2020
    
2019
  
Maritime
                  
Parcel tankers
  
$
294,641
    
$
340,767
    
$
287,140
  
Maritime administration services
    
42,416
      
131,136
      
159,772
  
Shipyard
    
139,226
      
100,864
      
164,917
  
Bulk carrier
    
174,643
      
85,085
      
162,897
  
Tugboats
    
-
      
-
      
81,707
  
Offshore vessels
    
146,950
      
93,373
      
12,072
  
Mud boats     166,220       -       -  
                         
Ports and terminals
                        
Port services
    
14,967
      
41,659
      
90,144
  
Shipping agencies
    
10,360
      
27,530
      
79,695
  
                         
Logistics, warehousing and other businesses
                        
Repair of containers
    
158,511
      
196,584
      
211,171
  
Warehousing
    
153,497
      
139,042
      
171,867
  
Intermodal terminal
    
44,292
      
41,794
      
49,157
  
Automotive services
    
5,990
      
5,447
      
5,144
  
Total consolidated revenue
  
$
1,351,713
    
$
1,203,281
    
$
1,475,683
  
 
The Company’s revenues do not show any particular grouping characteristic, such as by type of customer (government and private), geographic zone, etc. The main grouping is shown based on the type of revenue for each segment. Moreover, as discussed in Note 4.18, all of the Company’s revenues are recognized over time.
 
19
Other (expenses) income
 
Other (expenses) income as of December 31, 2021, 2020 and 2019, is summarized as follows:
 
   
2021
    
2020
    
2019
  
Recoveries of taxes paid in prior years, net of expenses for recovery
  
$
-
    
$
(11,145
)
  
$
(16,595
)
Gain (loss) from the sale of subsidiaries (see Note 5)
    
-
      
451
      
279,744
  
Cancellation of projects
    
-
      
(31,804
)
    
(18,944
)
Forgiveness of accounts receivable
    
-
      
(98,859
)
    
-
  
Expenses related to the cancellation of the corporate building lease
    
(38,537
)
    
(113,469
)
    
-
  
Goodwill impairment (see Note 5)
    
-
      
-
      
(9,826
)
Loss from sale of property, vessels and equipment (see Note 9)     (132,956 )     -       -  
Other, net
    
2,150
   
(2,399
)
    
(472
)
 
$
(169,343
)
  
$
(257,225
)
  
$
233,907
  

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 51
20
Interest expense and other financial costs
 
This line at December 31, 2021, 2020 and 2019, is comprised as follows:
 
   
2021
    
2020
    
2019
  
Interest on financial debt
  
$
25,018
    
$
38,558
    
$
69,796
  
Interest expense on leasing arrangements
    
34,146
      
33,535
      
70,225
  
Other financial expenses
    
3,236
      
2,066
      
5,303
  
Amortization of transaction cost associated with financial debt
    
176
      
1,495
      
1,551
  
   
$
62,576
    
$
75,654
    
$
146,875
  
 
21
Income tax and tax loss carryforwards
 
Income Tax
 
Results for the year
 
Grupo TMM and Subsidiaries incurred combined tax losses for the years ended December 2021 and 2020, in the amounts of $(159,003) and $(383,647), respectively. Most of the companies that generated taxable income fully offset them against tax losses from prior years. Income tax recognized in profit or loss corresponds to subsidiaries that generated taxable income of $10,349, $36,243 and $48,373, for 2021, 2020 and 2019, respectively.
 
The difference between taxable and book income is due primarily to the net effect of the gain or loss on inflation recognized for tax purposes, the difference between tax and book amortization and depreciation, non-deductible expenses, as well as certain temporary differences reported in different periods for financial and tax purposes.

In accordance with the currently enacted Income Tax Law, the rate for 2019, 2020, 2021, and subsequent years is 30%.

The provision for income tax recognized in the statement of profit or loss for the years ended December 31, 2021, 2020 and 2019, is as follows:
 
   
2021
    
2020
    
2019
  
Income tax
  
$
(7,015
)
  
$
(10,873
)
  
$
(14,512
)
Income tax (agreement) (a)
    
-
      
-
      
(85,196
)
Deferred income tax
    
28,158
      
30,207
      
35,133
  
Total income tax benefit (expenses)
  
$
21,143
    
$
19,334
    
$
(64,575
)
 

 (a)
During 2019, Grupo TMM agreed with the Tax Administration Service to resolve the Company’s outstanding tax liabilities for the fiscal year 2010 through payment of 2.6 million pesos over a period of 36 months beginning in November 2019. As of December 31, 2021, the Company is in negotiations to restructure the agreement.
 
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 52
The reconciliation between the provision for income tax based on the statutory income tax rate and the provision recorded by the Company at December 31, 2021, 2020 and 2019, is as follows:
 
   
2021
    
2020
    
2019
  
(Loss) profit before taxes
  
$
(269,197
)
  
$
(422,490
)
  
$
95,867
  
Income tax
    
80,759
      
126,747
      
(28,760
)
Increase (decrease) from:
                        
Difference in depreciation and amortization
    
135,332
      
(86,033
)
    
(180,395
)
Revaluation surplus
    
(88,112
)
    
94,331
      
113,826
  
Materials and supplies
    
13
      
3,625
      
(31,073
)
Inflationary and currency exchange effects on monetary assets and liabilities, net
    
(11,643
)
    
(4,035
)
    
1,236
  
Tax losses amortization
    
60,032
      
82,145
      
19,277
  
Provisions and allowance for doubtful accounts
    
(97,628
)
    
(178,276
)
    
54,214
  
Difference between the tax and book value for the sale of assets
    
(35,950
)
    
(14,276
)
    
(13,133
)
Difference between the tax and book value for the sale of shares of subsidiaries
    
-
      
(104
)
    
97,284
  
Non-deductible expenses
    
(21,660
)
    
(4,790
)
    
(11,855
)
Income tax (agreement)
    
-
      
-
      
(85,196
)
Benefit (provision) for income tax
  
$
21,143
    
$
19,334
    
$
(64,575
)
 
The components of deferred tax liability at December 31, 2021 and 2020, are comprised as follows:
 
   
2021
    
2020
  
Portion of tax loss carryforwards for subsequent years
  
$
336,395
    
$
350,272
  
Inventories and provisions – net
    
17,378
      
41,080
  
Concession rights and property, vessels and equipment
    
(559,949
)
    
(706,976
)
Total deferred tax liability
  
$
(206,176
)
  
$
(315,624
)

As of December 31, 2021, the Company’s Management carried out the evaluation of the amount of tax losses that will be recoverable and determined based on projections that the effect of the deferred tax asset determined in the year will be realized at 41% based on the information available at the date of issuance of the consolidated financial statements.
 
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 53
Tax loss carryforwards

As of December 31, 2021, Grupo TMM and its subsidiaries, report the following cumulative tax losses, which are restated applying the National Consumer Price Index (NCPI) factors in accordance with Mexican law.
 
Year in which the
loss was incurrred
  
Amounts
    
Year of expiration
  
2012
  
$
167,067
      
2022
  
2013
    
189,383
      
2023
  
2014
    
182,922
      
2024
  
2015
    
44,315
      
2025
  
2016
    
427,900
      
2026
  
2017
    
123,127
      
2027
  
2018
    
227,835
      
2028
  
2019
    
526,994
      
2029
  
2020
    
480,135
      
2030
  
2021
    
240,502
      
2031
  
   
$
2,610,180
          
 

22
Segment reporting
 
The Company as of December 31, 2021, 2020 and 2019 operates in the following segments: i) specialized maritime transportation, ii) logistics, iii) ports and terminals and iv) warehousing. Specialized maritime transportation operations (‘Specialized Maritime Division’) include transportation of bulk liquid products, materials and provisions for drilling platforms, and until December 31, 2019 towing services for ships. Logistics operations (‘Logistics Division’) include the operations of logistics solutions services and container and railcar maintenance and repair services. Operations at ports and terminals (‘Ports and Terminals Division’) include loading and unloading, storage at maritime port terminals, and shipping agency operations. Warehousing operations (‘Warehousing Division’) include storage and management of the facilities and bonded warehouses. There are no changes in the measuring methods used to calculate the earnings reported for each segment. The information for each operating segment is as follow:
 
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 54
   
Specialized
maritime division
    
Logistics
division
    
Ports and
terminals
division
    
Warehousing
division
    
Other
businesses
and shared
accounts
    
Total
consolidated
  
                                     
December 31, 2021
                                    
Revenue
  
$
964,096
    
$
208,793
    
$
25,327
    
$
153,497
    
$
-
    
$
1,351,713
  
Costs and expenses
    
(867,698
)
    
(170,946
)
    
(49,761
)
    
(112,989
)
    
-
      
(1,201,394
)
Corporate expenses
    
-
      
-
      
-
      
-
      
(73,838
)
    
(73,838
)
Depreciation and amortization
    
(23,035
)
    
(21,936
)
    
(11,308
)
    
(56,478
)
    
(4,445
)
    
(117,202
)
Transportation profit (loss)
  
$
73,363
    
$
15,911
    
$
(35,742
)
  
$
(15,970
)
  
$
(78,283
)
  
$
(40,721
)
Costs, expenses and revenue not allocated
                                            
(207,333
)
Net profit for the year
                                          
$
(248,054
)
                                                 
Total assets by operating segment
  
$
1,302,260
    
$
286,886
    
$
1,472,444
    
$
614,336
    
$
-
    
$
3,675,926
  
Shared assets
    
-
      
-
      
-
      
-
      
36,344
      
36,344
  
Total assets
  
$
1,302,260
    
$
286,886
    
$
1,472,444
    
$
614,336
    
$
36,344
    
$
3,712,270
  
                                                 
Total liabilities by operating segment
  
$
710,278
     $ 193,186    
$
404,992
    
$
438,572
    
$
-
    
$
1,747,028
  
Shared liabilities
    
-
      
-
      
-
      
-
      
146,144
      
146,144
  
Total liabilities
  
$
710,278
    
$
193,186
    
$
404,992
    
$
438,572
    
$
146,144
    
$
1,893,172
  
                                                 
Total capital expenditures by segment
  
$
63,709
    
$
54
    
$
11,705
    
$
-
    
$
-
    
$
75,468
  
Shared capital expenditures
    
-
      
-
      
-
      
-
      
-
      
-
  
Total capital expenditures
  
$
63,709
    
$
54
    
$
11,705
    
$
-
    
$
-
    
$
75,468
  
December 31, 2020
                                    
Revenue
  
$
751,225
    
$
243,825
    
$
69,189
    
$
139,042
    
$
-
    
$
1,203,281
  
Costs and expenses
    
(634,919
)
    
(217,699
)
    
(74,521
)
    
(110,309
)
    
-
      
(1,037,448
)
Corporate expenses
    
-
      
-
      
-
      
-
      
(96,345
)
    
(96,345
)
Depreciation and amortization
    
(41,764
)
    
(22,571
)
    
(15,423
)
    
(45,261
)
    
(16,032
)
    
(141,051
)
Transportation profit (loss)
  
$
74,542
    
$
3,555
    
$
(20,755
)
  
$
(16,528
)
  
$
(112,377
)
  
$
(71,563
)
Costs, expenses and revenue not allocated
                                            
(331,593
)
Net profit for the year
                                          
$
(403,156
)
                                                 
Total assets by operating segment
  
$
1,060,473
    
$
250,188
    
$
1,664,819
    
$
539,521
    
$
-
    
$
3,515,001
  
Shared assets
    
-
      
-
      
-
      
-
      
515,546
      
515,546
  
Total assets
  
$
1,060,473
    
$
250,188
    
$
1,664,819
    
$
539,521
    
$
515,546
    
$
4,030,547
  
                                                 
Total liabilities by operating segment
  
$
363,098
    
$
141,723
    
$
498,233
    
$
345,091
    
$
-
    
$
1,348,145
  
Shared liabilities
    
-
      
-
      
-
      
-
      
434,994
      
434,994
  
Total liabilities
  
$
363,098
    
$
141,723
    
$
498,233
    
$
345,091
    
$
434,994
    
$
1,783,139
  
                                                 
Total capital expenditures by segment
  
$
7,608
    
$
33
    
$
5,137
    
$
4,086
    
$
-
    
$
16,864
  
Shared capital expenditures
    
-
      
-
      
-
      
-
      
11,511
      
11,511
  
Total capital expenditures
  
$
7,608
    
$
33
    
$
5,137
    
$
4,086
    
$
11,511
    
$
28,375
  

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 55
   
Specialized
maritime
division
    
Logistics
division
    
Ports and
terminals
division
    
Warehousing
division
    
Other
businesses
and shared
accounts
    
Total
consolidated
  
                                     
December 31, 2019
                                    
Revenue
  
$
868,505
    
$
265,472
    
$
169,839
    
$
171,867
    
$
-
    
$
1,475,683
  
Costs and expenses
    
(652,157
)
    
(232,386
)
    
(122,882
)
    
(132,792
)
    
-
   
(1,140,217
)
Corporate expenses
    
-
      
-
      
-
      
-
      
(173,726
)
    
(173,726
)
Depreciation and amortization
    
(66,306
)
    
(19,474
)
    
(15,186
)
    
(41,516
)
    
(40,398
)
    
(182,880
)
Transportation profit (loss)
  
$
150,042
    
$
13,612
    
$
31,771
    
$
(2,441
)
  
$
(214,124
)
  
$
(21,140
)
Costs, expenses and revenue not allocated
                                            
52,432
  
Net profit for the year
                                          
$
31,292
  
                                                 
Total assets by operating segment
  
$
1,285,751
    
$
266,079
    
$
1,763,135
    
$
386,418
    
$
-
    
$
3,701,383
  
Shared assets
    
-
      
-
      
-
      
-
      
862,392
      
862,392
  
Total assets
  
$
1,285,751
    
$
266,079
    
$
1,763,135
    
$
386,418
    
$
862,392
    
$
4,563,775
  
                                                 
Total liabilities by operating segment
  
$
431,893
    
$
158,203
    
$
567,030
    
$
173,616
    
$
-
    
$
1,330,742
  
Shared liabilities
    
-
      
-
      
-
      
-
      
810,241
      
810,241
  
Total liabilities
  
$
431,893
    
$
158,203
    
$
567,030
    
$
173,616
    
$
810,241
    
$
2,140,983
  
                                                 
Total capital expenditures by segment
  
$
12,048
    
$
598
    
$
24,086
    
$
494
    
$
-
    
$
37,226
  
Shared capital expenditures
    
-
      
-
      
-
      
-
      
11,055
      
11,055
  
Total capital expenditures
  
$
12,048
    
$
598
    
$
24,086
    
$
494
    
$
11,055
    
$
48,281
  
 
23
Employee benefits
 
Expense for employee benefits

The expenses recognized for employee benefits are:
 
   
2021
    
2020
    
2019
  
Salaries, benefits and inherent
  
$
235,345
    
$
317,776
    
$
320,827
  
Pensions – defined benefit plans
    
17,790
      
23,623
      
22,873
  
   
$
253,135
    
$
341,399
    
$
343,700
  
 
The long-term liabilities recognized for pensions and other employee remunerations in the consolidated statement of financial position are comprised as follows:
 
   
2021
    
2020
  
Long-term:
            
Pensions and seniority premium
  
$
86,695
    
$
136,832
  
Termination of employment
    
15,680
      
13,365
  
   
$
102,375
    
$
150,197
  

The short-term liabilities for employee benefits, are included in the line ‘Accounts payable and accrued liabilities’ in the consolidated statements of financial position, which at December 31, 2021 and 2020, amount to $3,116 and $924, respectively (see Note 16).

The reduction in labor liabilities is derived from the business optimization strategy of Grupo TMM, as of September 2021, a reorganization of the operating structure was carried out, resulting in a personnel restructuring (identification of duplicity and optimization of functions). Additionally, the personnel assigned to the operation of the Maritime Division is now part of the administration of the company itself.

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 56
Remunerations on the termination of employment
 
The seniority premiums and the retirement plan (‘pensions’) obligations are based on actuarial calculations using the projected unit credit method. Pension benefits are based mainly on years of service, age, and salary level upon retirement.
 
The amounts charged to operations include the amortization of the cost of past services over the average time of service remaining. The Company continues with its policy of recognizing actuarial losses and gains for seniority premiums and pensions in the consolidated statement of operations, the actuarial (loss) gain net of taxes for 2021 and 2020 was $23,584 and $7,667, respectively (see Note 17).
 
The plan exposes Grupo TMM to such risks as interest rate, investment, mortality, and inflation.
 
Interest rate risk
 
The present value of the defined benefits obligation is calculated using a discount rate making reference to the market performance of high-quality corporate bonds.
 
The estimated term for the bonds is consistent with the estimated term for the defined benefits obligation and is denominated in pesos. A decrease in the market performance of high-quality corporate bonds will increase the defined benefits obligation of the Company, although this is expected to be partially compensated by an increase in the fair value of certain of the plan’s assets.
 
Investment risk
 
The plan assets are predominantly capital and debt instruments traded on the Mexican Stock Exchange which are considered low risk.
 
Mortality risk
 
The Company provides benefits for life to those who are covered by the defined benefits liability. An increase in the life expectancy of such persons will increase the defined benefits liability.
 
Inflation risk
 
A significant proportion of the defined benefits obligation is linked to inflation. An increase in the inflation rate will increase the Company’s obligation.

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The details of the net cost for the period for seniority premiums and termination of employment, and also the basic actuarial estimates for the calculation of these labor obligations is shown as follows:
 
   
2021
    
2020
  
   
Pensions and
seniority
premiums
    
Termination of
employment
    
Pensions and
seniority
premiums
    
Termination of
employment
  
Current service cost
  
$
(21,158
)
  
$
3,907
    
$
4,541
    
$
1,727
  
Interest cost
    
12,371
      
770
      
11,892
      
867
  
Net cost for the period
  
$
(8,787
)
  
$
4,677
    
$
16,433
    
$
2,594
  

At December 31, 2021 and 2020, the reserve for pensions and seniority premiums, and also for the termination of employment, is comprised as follows:

 
2021
  
2020
  
 
Pensions and
seniority
premiums
  
Termination of
employment
  
Pensions and
seniority
premiums
  
Termination of
employment
  
Defined benefit obligations
  
$
87,820
    
$
15,680
    
$
139,763
    
$
13,365
  
Plan assets
    
(1,125
)
    
-
      
(2,931
)
    
-
  
Total reserve
  
$
86,695
    
$
15,680
    
$
136,832
    
$
13,365
  
 
As of December 31, 2021, and 2020, the defined benefit obligations (DBO) for pensions and seniority premiums, and also for the reserve for termination of employment, are comprised as follows:
 
   
2021
    
2020
  
   
Pensions and
seniority
premiums
    
Termination of
employment
    
Pensions and
seniority
premiums
    
Termination of
employment
  
DBO at beginning of period
  
$
139,763
    
$
13,365
    
$
144,044
    
$
10,467
  
Current service cost
    
(21,158
)
    
3,907
      
4,541
      
1,727
  
Interest cost
    
12,371
      
770
      
11,892
      
867
  
Benefits paid
    
(3,878
)
    
(1,905
)
    
(2,072
)
    
(70
)
Benefits paid from plan assets
    
(6,044
)
    
-
      
(7,315
)
    
-
  
Miscellaneous
    
(33,234
)
    
(457
)
    
(11,327
)
    
374
  
Past service cost
  
$
87,820
    
$
15,680
    
$
139,763
    
$
13,365
  
 
The plan assets as of December 31, 2021 and 2020 are comprised as follows:
 
   
2021
    
2020
  
Value of the fund at beginning of year
  
$
2,931
    
$
3,030
  
Expected return on assets
    
(2,026
)
    
(356
)
Plan contributions
    
5,783
      
7,315
  
Benefits paid
    
(5,783
)
    
(7,315
)
Interests on plan assets
    
220
      
257
  
Miscellaneous
  
$
1,125
    
$
2,931
  

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The changes in the pension plan, seniority premium, and termination of employment plan as of December 31, 2021 and 2020 are as follows:
 
   
2021
    
2020
  
Reserve for obligations at the beginning of the period
  
$
150,197
    
$
151,481
  
Cost for the period
    
(4,110
)
    
19,027
  
Interest income
    
(220
)
    
(257
)
Contributions to the plan
    
(6,044
)
    
(7,315
)
Benefits paid on pension plan
    
(5,783
)
    
(2,142
)
Miscellaneous
    
2,026
      
356
  
Actuarial gain or losses
    
(33,691
)
    
(10,953
)
Reserve for obligations at the end of the period
  
$
102,375
    
$
150,197
  
 
The significant actuarial assumptions used for the valuation are:
 
   
2021
    
2020
  
Discount rate
    
7.50
%
    
7.50
%
Salary increase rate
    
4.00
%
    
4.00
%
Inflation rate
    
3.50
%
    
3.50
%
Average working life expectancy
    
14.50
   
16.10
 
These assumptions were prepared by Management with the assistance of independent actuaries. The discount factors are determined near the end of each year making reference to the market performance of high-quality corporate bonds denominated in the currency in which the benefits will be paid and which have similar maturities to the terms for the pension obligation corresponding. Other assumptions are based on actual reference parameters and Management’s historical experience.
 
On December 31, 2021 and 2020, approximately 5% and 12% of the Company’s employees work under collective work contracts that are subject to annual salary reviews and biannually for other compensations. As of December 31, 2021, and 2020, Grupo TMM has 837 and 934 employees, respectively.
 
The significant actuarial assumptions to determine the defined benefits obligation are the discount rate, the salary increase rate, and the average life expectancy. The calculation of the defined benefits obligation is sensitive to these assumptions.

The following table summarizes the effects of changes to these actuarial assumptions on the defined benefits obligations at December 31, 2021:
 
   
1.0% increase
    
1.0% decrease
  
Discount rate
            
(Decrease) increase in the defined benefits obligation
  
$
(1,909
)
  
$
2,268
  
                 
Salary increase rate
                
Increase (decrease) in the defined benefits obligation
  
$
976
    
$
(1,389
)

 
One year
Increase
  
One year
Decrease
  
Average life expectancies
        
Increase (decrease) in the defined benefits obligation
  
$
1,993
    
$
(2,169
)
 
The present value of the defined benefits obligation and also the defined benefits obligation recognized in the consolidated statement of financial position are calculated using the same method (projected unit credit). The sensitivity analyses are based on a change in one assumption without changing the others. This sensitivity analysis may not be representative of the real variance in the defined benefits obligation, as it is unlikely that the change to the assumptions would occur on its own, as some of the assumptions may be correlated.
 
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 59
24
Earnings per share
 
As of December 31, 2021, 2020 and 2019, earnings per share was determined based on the weighted average number of shares outstanding during the year. There are no potentially dilutive instruments outstanding, therefore basic and diluted earnings per share are the same.
 
25
Fair value measurement
 
Fair value measures for non-financial assets
 
The non-financial assets and liabilities measured at fair value in the statement of financial position are grouped into three levels of fair value hierarchy. The three levels are defined based on the observability of relevant data for the measuring, as follows:
 

 •
Level 1: quoted prices (without adjustment) in active markets for identical assets and liabilities.
 

 •
Level 2: data other than the quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly;
 

 •
Level 3: non-observable data for the asset or liability.
 
As of December 31, 2021 and 2020 non-financial assets measured at fair value are classified in Level 3 of this hierarchy, as described below:
 
   
2021
    
2020
  
Level 3
            
Vessels
  
$
-
    
$
182,055
  
Buildings
    
116,714
      
286,232
  
Land
    
1,199,550
      
1,934,345
  
   
$
1,316,264
    
$
2,402,632
  
 
As of December 31, 2021, the values of the Company’s land, buildings and facilities were estimated based on appraisals performed by independent, professionally qualified property valuers.
 
As of December 31, 2020, the revalued amounts for all the vessels were determined using the revenue technique. As indicated in Note 9, the Company presents as an asset available for sale the last vessel owned by it in the consolidated statements of financial position.
 
The important information and assumptions are prepared in close collaboration with Management. The valuation processes and changes in the fair value are reviewed by the Administration and Finance Department on the financial reporting date. Additional information on fair value measurement is as follows.

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 60
Vessels (Level 3)
 
Until December 31, 2020, the fair values for the offshore vessels, and parcel tankers are estimated based on revenue that capitalizes the estimated revenue cash flows from the leasing of vessels net of operating costs projected, using an appropriate discount rate that reflects the required performance for similar assets. Cash flows are calculated based on the average of international charter rates and operating costs (including maintenance), and also the historical utilization level. The value of vessels is sensitive to changes in these variables.
 
The most significant information, which is not observable, is the value of the estimated daily rates, the assumptions for the percentage of utilization and the discount rate. The fair value increases if the estimated daily rates and the percentage of utilization increase or if the discount rate (market yields) decreases. The appraisals in general are sensitive to these three assumptions.
 
Management believes that the range of reasonably possible alternatives is greater for the value of the rates and the percentage of use, and also that there is a correlation between these factors.
 
The information used for the measurement of fair value as of December 31, 2020 was:
 
 
Offshore vessels
  
Parcel tankers
  
Daily rate or fee
4,504 usd
  
15,805 usd
  
Average percentage of utilization
    
78
%
    
89
%
Discount rate
    
7.44
%
    
7.65
%
 
As of December 31, 2021, the Company does not own any vessels.

Buildings and land (Level 3)
 
The valuation was prepared based on a market focus that reflects the prices observed on recent market transactions involving similar properties and incorporates adjustments for factors specific to the property in question, including land size, location, liens, and current use.
 
The most significant information used, which is not observable, is the adjustment for factors specific to the properties in question. The magnitude and direction of this adjustment depends on the characteristics of observable market transactions for similar properties used as the end point for the valuation. Although this information is subjective, Management considers that the global valuation will not be materially affected by reasonably possible alternatives.

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As of December 31, 2021, and 2020, the reconciliation between the carrying amounts of non-financial assets classified within Level 3 is as follows:
 
   
Vessels
    
Buildings
and Facilities
  
Balance as of January 1, 2021
  
$
182,055
    
$
2,220,577
  
Amount recognized in other comprehensive income:
                
Revaluation surplus of vessels
    
(43,385
)
    
(327,362
)
Amount recognized in statements profit or loss:
                
Loss on revaluation of vessels
    
-
      
(130,000
)
     
(43,385
)
    
(457,362
)
Additions and disposals, net
    
(130,464
)
    
-
  
Transfer to assets available for sale
     (8,206 )     (446,951 )
Balance as of December 31, 2021
  
$
-
    
$
1,316,264
  

Balance as of January 1, 2020
  
$
214,938
    
$
1,897,583
  
Amount recognized in other comprehensive income:
                
Revaluation surplus of vessels
    
-
      
330,571
  
Amount recognized in statements profit or loss:
                
Loss on revaluation of vessels
    
(16,136
)
    
-
  
     
(16,136
)
    
330,571
  
Additions and disposals, net
    
(16,747
)
    
(7,577
)
Balance as of December 31, 2020
  
$
182,055
    
$
2,220,577
  
 
As of December 31, 2021, and 2020, there were no effects from unrealized gains from fair value measurements.
 
26
Financial instruments risk
 
Risk management objectives and policies
 
Grupo TMM is exposed to various risks in relation to financial instruments. The Company’s financial assets and liabilities by category are summarized in Note 14. The main types of risks are market risk, credit risk and liquidity risk.
 
The Company’s risk management is coordinated at its headquarters, in close cooperation with the board of directors, and focuses on actively securing short to medium-term cash flows by minimizing the exposure to volatile financial markets.
 
The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risk to which the Company is exposed are described below:

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 62
Market risk
 
Currency risk
 
The monetary position for Grupo TMM may be materially affected by variances in the exchange rate between the US dollar and the Mexican peso due to the Company’s significant operations in Mexico. The Company does not cover this exposure. Grupo TMM minimizes its exposure effects in foreign currency by contracting financial debt in Mexican pesos.
 
Grupo TMM also faces transactional currency exposure. This exposure derives from sales and acquisitions made in currencies other than Mexican pesos, Grupo TMM’s functional currency. As of December 31, 2021 and 2020, approximately 68% and 55% of Grupo TMM’s sales are denominated in US dollars, respectively while approximately 30% and 20% of the costs and expenses for both years are denominated in US dollars.
 
As of December 31, 2021 and 2020, the Company held monetary assets and liabilities denominated in foreign currencies other than the Mexican peso, translated at the corresponding interbank exchange rate as related to the Mexican peso, as follows:
 
   
2021
    
2020
  
   
US dollar
    
Other
currencies
    
US dollar
    
Other
currencies
  
Assets
  
$
641,116
    
$
-
    
$
309,657
    
$
932
  
Liabilities
    
(725,206
)
    
(353
)
    
(480,253
)
    
(1,372
)
   
$
(84,090
)
  
$
(353
)
  
$
(170,596
)
  
$
(440
)
 
As of December 31, 2021 and 2020, the exchange rate was Ps20.5157 and Ps19.9352 per US dollar, respectively.
 
Sensitivity analysis
 
The following table shows for the years ended December 31, 2021 and 2020, the sensitivity in profit or loss related to the financial assets and liabilities of Grupo TMM and the exchange rate; United States dollar (USD) / peso ‘considering that the rest of the conditions remain the same’, assumes a change of +/- 5.25% for 2021 and +/- 11.64% for 2020 in the peso / USD exchange rate.
 
This percentage was determined based on the volatility of the average exchange rate market over the past 12 months. The sensitivity analysis is based on financial instruments in foreign currency held by Grupo TMM on the reporting date.

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 63
If the peso had strengthened or weakened against the USD by 5.25% for 2021 and 11.64% for 2020, this would have had the following impact on the monetary position:
 
   
2021
    
2020
  
   
Aumento
5.25% en el
tipo de
cambio
    
Disminución
5.25% en el
tipo de
cambio
    
Aumento
11.64% en el
tipo de cambio
    
Disminución
11.64% en el
tipo de cambio
  
Assets in US dollars
  
$
33,686
    
$
(33,686
)
  
$
36,030
    
$
(36,030
)
Assets in other currencies
    
-
      
-
   
108
      
(108
)
Liabilities in US dollars
    
(38,105
)
    
38,105
      
(55,880
)
    
55,880
  
Liabilities in other currencies
    
(19
)
    
19
      
(160
)
    
160
  
   
$
(4,438
)
  
$
4,438
    
$
(19,902
)
  
$
19,902
  

The exposure to exchange rates varies during each year, depending on the volume of overseas operations or in foreign currency; however, the above analysis is considered representative of Grupo TMM’s exposure to currency risk.
 
Interest rate risks
 
Grupo TMM’s exposure to the risk of changes in market interest rates is related principally to the long-term debt obligations of Grupo TMM at a variable interest rate.
 
Grupo TMM’s policy is to obtain fixed rated instruments on its loans and, when a loan has a variable interest rate, the Company’s policy is to obtain all needed derivative financial instruments in order to fix this rate. At December 31, 2021 the Company has $200.6 and $48.3 million pesos of debt contracted on fixed and variable rates, respectively. At December 31, 2020, the debt contracted on fixed and variable rates was $129.8 and $50.2million pesos, respectively.
 
Sensitivity analysis
 
The following table illustrates the sensitivity in profit or loss at December 31, 2021 and 2020 to a reasonably possible change in the interest rates of +/- 1% and +/- 1%, respectively. These changes are considered to be reasonably possible based on the current market conditions.
 
The calculations are based on a variance in the average market interest rate for each period and the financial instruments on the reporting date that are sensitive to variances in the interest rates. The rest of the variables remain constant.
 
   
2021
    
2020
  
   
+1%
Variance
    
-1%
Variance
    
+1%
Variance
    
-1%
Variance
  
Profit or loss for the year
  
$
(7,465
)
  
$
7,465
    
$
(1,140
)
  
$
1,140
  

The impact shown in the above sensitivity is considered the same both in the results of profit or loss and in stockholders’ equity.

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 64
Concentration of risk
 
For the year ended December 31, 2021, the Company obtained revenues from Helmsley Management, Celanse Operations Mexico and PEMEX Exploración y Producción, representing 13%, 12% and 10%, respectively. None of the remaining customers represent more than 5% of its total revenues. For the year ended December 31, 2020, the Company obtained revenues from TMM DM (related party), and Celanese Operations Mexico and Helmsley Management, representing 14%, 13%, and 7%, respectively. None of the remaining customers represents more than 4% of the total revenues.
 
Credit risk
 
Credit risk is managed on a group basis, based on the credit risk management policies and procedures of Company.
 
Credit risk with respect to cash balances maintained in banks and sight deposits is managed through diversification of bank deposits that are only made with high credited financial institutions. For other receivables, other than trade accounts receivable and contractual assets, the balances are considered immaterial and whose risk of default is null.
 
The Company continuously monitors the creditworthiness of customers, based on its experience and customer profiles defined by Management. The Company’s policy is to deal only with creditworthy counterparties. Credit terms range between 30 and 90 days except Pemex that handles credit terms of 180 days. Credit terms negotiated with customers are subject to an internal approval process that considers the experience and profile of the customer. Current credit risk is managed by a periodic review of the accounts receivable aging analysis, together with credit limits per customer.
 
Trade accounts receivable consist of a large number of customers in various industries and geographical areas.
 
Guarantees (collateral)
 
The Company does not maintain any guarantee on its trade accounts receivable. In addition, the Company does not have guarantees related to other financial assets (i.e., other receivables, cash and cash equivalents held in banks).
 
Trade accounts receivable
 
Grupo TMM applies the IFRS 9 simplified model of recognizing lifetime expected credit losses for all trade receivables as these items do not have a significant financing component.
 
In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due and also according to the geographical location of customers.
 
Expected credit loss rates are based on the sales payment profile over the last 48 months prior to December 2021 and 2020, respectively, as well as the corresponding historical credit losses during that period. Historical rates are adjusted to reflect current and future macroeconomic factors that affect the customer’s ability to liquidate the unpaid balance.

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Trade receivables are written off when there is no reasonable expectation of recovery. Failure to make payments within 180 days from the invoice date and failure to engage with the Company on alternative payment arrangement amongst other is considered indicators of no reasonable expectation of recovery. However, industry and client’s practices could generate balances with more than 180 days of aging, for which conclusion is that those balances will be collected.
 
Pursuant to the foregoing, the expected credit loss for trade accounts receivable as of December 31, 2021 and 2020 was determined as follows:
 
   
Trade accounts receivable days in arrears
  
   
Current
    
More than
30 days
    
More than
60 days
    
More than
90 days
    
Total
  
As of December 31, 2021
                              
Expected credit loss rate
    
0.0
%
    
0.0
%
    
0.0
%
    
27.3
%
    
-
  
Gross carrying value
  
$
207,923
    
$
41,324
    
$
1,816
    
$
74,295
    
$
325,358
  
Expected credit losses during the lifetime
                            
20,293
      
20,293
  
                                         
As of December 31, 2020
                                        
Expected credit loss rate
    
0.0
%
    
0.0
%
    
0.0
%
    
32.7
%
    
-
  
Gross carrying value
  
$
76,360
    
$
5,875
    
$
4,290
    
$
64,841
    
$
151,366
  
Expected credit losses during the lifetime
                    

     
21,218
      
21,218
  
 
Liquidity risk
 
The goal of Grupo TMM is to maintain a balance between the continuity of loans and flexibility through the use of bank loans and securitizations. As of December 31, 2021, and 2020, 47% and 35%, respectively, of Grupo TMM’s financial liabilities are due within the next 12 months.
 
As of December 31, 2021, and 2020, the financial liabilities and other liabilities of Grupo TMM have contractual maturities (including interest payments as applicable) are summarized as follows:
 
   
Current
    
Non-Current
  
   
In 6 months
    
6 to 12
Months
    
1 to 4 years
    
More than 4
Years
  
At December 31, 2021
                        
Trade payables
  
$
437,005
    
$
-
    
$
-
    
$
-
  
Accounts payable and accrued expenses
    
-
      
470,068
      
-
      
-
  
Related parties
     -       144,966       -       -  
Leasing liabilities
    
86,597
      
34,781
      
238,404
      
50,093
  
Financial debt
    
19,041
      
38,065
      
54,283
      
11,318
  
   
$
542,643
    
$
687,880
    
$
292,687
    
$
61,411
  

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Current
    
Non-Current
  
   
In 6 months
    
6 to 12
Months
    
1 to 4 years
    
More than 4
Years
  
At December 31, 2020
                        
Trade payables
  
$
228,959
    
$
-
    
$
-
    
$
-
  
Accounts payable and accrued expenses
    
-
      
525,108
      
23,521
      
-
  
Leasing liabilities
    
29,465
      
28,780
      
193,811
      
103,457
  
Financial debt
    
52,125
      
76,960
      
48,227
      
5,417
  
   
$
310,549
    
$
630,848
    
$
265,559
    
$
108,874
  
 
The above amounts reflect the contractual cash flows without discount, which may differ from the values registered in the liabilities on the reporting date.
 
27
Capital management policies and procedures
 
Grupo TMM’s capital management goal is to ensure the capacity of Grupo TMM to continue as a going concern and to provide its stockholders with an appropriate return on their investment. The Company monitors capital based on the carrying value plus its financial debt.
 
The Company sets its capital amount proportionate to its overall financing structure, meaning, the capital and financial liabilities that are not loans. Grupo TMM manages the capital structure and makes adjustments in light of changes in the economic conditions and the associated risks of the underlying assets. In order to maintain or adjust the capital structure, Grupo TMM may adjust the amount of capital reimbursements to stockholders, or issue new shares or sell assets to reduce its financial debt.
 
As of December 31, 2021, and 2020, the capital management is summarized as follows:
 
   
2021
    
2020
  
Stockholders’ equity
  
$
1,819,098
    
$
2,247,408
  
Cash and cash equivalents
    
(87,770
)
    
(142,982
)
Stockholders’ equity, net
  
$
1,731,328
    
$
2,104,426
  
                 
Total financial debt
  
$
122,707
    
$
182,729
  
Leasing liabilities
    
409,875
      
355,513
  
Overall financing
  
$
532,582
    
$
538,242
  
                 
Capital-to-overall financing ratio
    
3.25
      
3.91
  
 
28
Commitments and contingencies
 
Commitments
 
a)
Concession fees
 
Pursuant to the concession to operate the cruise and automobile terminal in the Port of Acapulco, Guerrero, the Company must make fixed and variable monthly payments. These payments totaled $3,962 and $7,507, in the years of 2021 and 2020, respectively. During 2021, this concession was no longer renewed (see Note 11).

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Contingencies
 
a)
RPS Claim
 
On August 7, 2007, Transportación Marítima Mexicana, S.A. de C.V. (‘TMM’) filed a claim for arbitration against Refined Product Services (“RPS”) for US$50 thousand, for various expenses incurred by TMM due to the delay of the re-delivery of the tanker vessel Palenque.
 
On October 19, 2007, RPS filed a countersuit for US$3.0 million, for alleged faults and lack of maintenance involving the tanker vessel Palenque, and also consequential damages for having lost a contract while the vessel was being repaired. The consolidated financial statements did not present any significant claims for payments of loss (RPS) during 2020, 2021 and up to the authorization date hereof.
 
The Company’s Management and its legal advisors consider the position against this countersuit is strong, as there are sufficient elements and arguments for defense, also the amount claimed by RPS would appear to be excessive and for non-supported issues.
 
b)
Mutual loans between WWS y TMM
 
In December 2007, TMM and Worldwide Services, Ltd. (“WWS”) filed mutual claims; TMM for $394 thousand dollars, claiming fuel and low return on the performance of the tanker ship Veracruz A, and WWS in the amount of $938 thousand dollars, primarily claiming a presumed over-performance of the same ship.
 
As of the date of the authorization of the consolidated financial statements, total claims against TMM amount to $2.4 million dollars. However, those claims are considered weak.
 
TMM filed an appeal to have the case dismissed, claiming that the Court has no jurisdiction since the arbitration proceedings were initiated with the wrong plaintiff’s name. In January 2017, a ‘partial award’ was issued in which the dismissal of the case was not granted. WWS presented a ‘claim submission’ discounting certain claims, to which TMM responded, requesting a “security of costs” from WWS; same that WWS never presented. Therefore, on March 2, 2021 TMM was notified of the award by which the court dismissed the case. This matter is closed.
 
c)
Tax liabilities determined on TMM
 
Suit filed by TMM against the rulings handed down on which various tax liabilities were determined for presumed omitted income tax, corresponding to tax year 2005.
 
On November 5, 2012, the appeal for annulment was allowed to proceed before the former Federal Court of Tax and Administrative Justice. That appeal for annulment was forwarded for study and resolution to the Metropolitan Regional First Division of the Federal Court of Tax and Administrative Justice.
 
On January 30, 2018, TMM was notified of the decision whereby the matter was forwarded to the Full Federal Tax Court of Administrative Justice sitting in Mexico City, and in February 2020, a favorable judgment was issued for the interests of the Company.

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d)
Motions for Annulment against various tax provisions
 
During 2017 and 2016, Grupo TMM filed Motions for Annulment with the Federal Court of Administrative Justice against various decisions of the Tax Administration Service (SAT), on the rejection of deductions (tax year 2007), modifications to the Consolidation Regime for controlled companies (tax year 2005), deferred income tax on consolidation (tax year 2010), and the termination of the consolidation regime (tax year 2013), on which rulings have not been handed down by the courts with competent jurisdiction. Grupo TMM believes its legal position is strong and a ruling favorable to the interests of the Company is expected.
 
e)
Other legal proceedings
 
The Company is party to various other legal proceedings and administrative actions, all of which are of an ordinary or routine nature and incidental to its operations. Although it is impossible to predict the outcome of any legal proceeding, in the opinion of the Company’s management, such proceedings and actions should not, individually or in the aggregate, have a material adverse effect on the Company’s financial condition, results of operations or liquidity.
 
f)
Operations with related parties
 
Under the Income Tax Law, companies that conduct operations with related parties, nationals or nonresidents, are subject to fiscal limitations and obligations regarding the determination of the prices negotiated, as these must be comparable to those that would be used with or between independent parties on similar operations.
 
In the event the tax authorities were to review the prices and reject the amounts determined, they may demand, an addition to the taxes and accessory charges corresponding (adjustments and surcharges), fines on omitted taxes, which could be for up to 100% of the adjusted tax amount.
 
The Company has significant transactions and relations with related parties, for which the Company holds documentation that confirms the terms of these transactions were conducted in 2021 similarly to transactions between unrelated parties. The Company and its subsidiaries are in the process of completing this study for 2021.
 
g)
Other legislation
 
Grupo TMM and Subsidiaries are subject to the laws and ordinances of other countries, as well as international regulations governing maritime transportation and the observance of safety and environmental regulations.
 
29
Subsequent events to the reporting date
 

 (a)
On January 8, 2022, the sale of the ship “Isla Colorada” was formalized by Transportación Marítima Mexicana, S.A. de C.V., subsidiary of Grupo TMM.


(b)
On February 4, 2022 the new airport in Mexico City (Aeropuerto Internacional Felipe Angeles-AIFA) awarded to TMM Almacenadora S.A.P.I. de C.V., a 10-year lease to operate a bonded warehouse of 5,184 square meters within the airport’s cargo terminal. The Management expects to begin operations during the first quarter of 2023, once all airport cargo is moved from Mexico City International Airport (AICM) to AIFA as ordered by the Ministry of Communication and Transport.


(c)
Management continues to monitor the development of the COVID-19 pandemic and its impact on the Company, and has not identified any significant event related to the pandemic or any other matter between the reporting date and the authorization date of the accompanying financial statements, which in its view requires any adjustment or disclosure.
 
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30
Authorization of the consolidated financial statements

The consolidated financial statements of the Company were authorized by Luis Rodolfo Capitanachi Dagdug on April 29, 2022, in his capacity as Director of Administration and Finance, as well as by the Board of Directors on the same date, to be issued and subsequently approved by the General Stockholders’ Meeting, which has the authority to modify the accompanying consolidated financial statements.
 

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