Nemak stated that it is confident of winning the case against it regarding alleged fictitious purchases of aluminum in Brazil.
In the first quarter of 2025, the company’s revenues increased at a year-on-year rate of 0.2%, to US$1.213 billion, due to lower volume, offset by trade adjustments in pricing and higher aluminum prices.
Nemak produces complex, high-tech aluminum components for the automotive industry.
EBITDA (comparable EBITDA) grew 2.9% to US$149 million, supported by operating efficiencies, cost control, and favorable foreign exchange effects.
Fictitious aluminum purchases
The Brazilian Federal Tax Authority issued an official notice. In it, it pointed out that Nemak Alumínio do Brasil Ltda. incorrectly deducted costs. These deductions came from alleged fictitious purchases of aluminum. As a result, income tax was miscalculated. In addition, value added tax credits of US$60,000 were improperly claimed.
At the Tax Authority’s request, Nemak submitted all supporting documentation. With this documentation, Nemak proved that the transactions are legitimate and in accordance with the law. Currently, the proceeding remains in the administrative phase. Nemak has already submitted its response.
The Company, together with its legal advisors, believes that the case will be resolved favorably. For that reason, no provision has been recognized in its statement of financial position.
Aluminum
Nemak uses aluminum scrap and ingots as its main raw materials. To mitigate the volatility of aluminum prices, the company signed agreements with its customers. These agreements transfer price variations to the sales value of the products through a pre-established formula.
However, there is a residual risk. Each original equipment manufacturer (OEM) uses its own formula to estimate aluminum prices. Typically, these formulas reflect market prices from one to three months ago.
As a result, the basis for calculating aluminum alloy prices used by each OEM may differ from that used by Nemak when purchasing aluminum. Consequently, this difference could have a positive or negative impact on the company’s business, financial condition and results of operations.