Grupo TMM, S.A.B. (GTMAY) 20-F2021 FY Annual report (foreign)

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.”

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.

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.”

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:

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.

Not applicable.

Not applicable.

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.

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.

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.

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 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.

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

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.

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.

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.

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

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.

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:

The factors that influence our services capacity include:

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 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:

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.

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.

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.

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 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.

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.

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.

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 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.

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 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.

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:

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 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.

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:

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.

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.

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.

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:

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.

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.

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.

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.

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 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:

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.

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.

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 46^th 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.

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:

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.

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 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.

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.

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 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.”

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 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.

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.

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.

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.

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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:

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

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.

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:

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

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:

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.

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.

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

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.

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.

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.

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:

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:

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.

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.

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.

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.

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.

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.

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.

We are currently a partner in the following strategic arrangements:

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.

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.

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.

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.

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.

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

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.

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.”

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:

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

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:

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.

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:

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:

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.

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:

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.

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.”

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.

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.

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

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.

Concession Rights and Related Assets are summarized below:

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.

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.

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:

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.

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

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.

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’ 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’ 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’ 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 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.

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.