20-F 1 brhc20052943_20f.htm 20-F
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 20-F
 
(Mark One)
 
  ☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR


 ☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR


 ☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
OR
 

 ☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of event requiring this shell company report ________________
 
For the transition period from _________to_____________
 
Commission file number 333-14194
 
GRUPO TMM, S.A.B.
(Exact name of Registrant as specified in its charter)
 
TMM GROUP
(Translation of Registrant’s name into English)
 
United Mexican States
(Jurisdiction of incorporation or organization)
 
Paseo de la Reforma No. 296, P.19.
Colonia Juárez,
06600 México City, Mexico
(Address of principal executive offices)
 
Luis Rodolfo Capitanachi Dagdug
(5255) 5629 8866
luis.capitanachi@tmm.com.mx
Paseo de la Reforma No. 296, P.19.
Colonia Juárez,
06600 México City, Mexico
 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 
Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
None
N/A
N/A

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

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

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
 
102,182,841 Shares
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
☐ Yes           No ☑
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
☐ Yes           No ☑
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
☑ Yes           No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 
☑ Yes           No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☑
   
Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP ☐           International Financial Reporting Standards as issued by the International Accounting Standards Board   ☑    Other ☐
 
If  “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
 
Item 17 ☐    Item 18 ☐
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes ☐    No ☑
 
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
 
Yes ☐  No ☐
 
TABLE OF CONSENTS

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ITEM 16K. INSIDER TRADING POLICIES
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Grupo TMM, S.A.B. and Subsidiaries
 
Introduction
 
In this Annual Report, references to “$,” “Ps,” “Mx. pesos,” “Pesos” or “pesos” are to Mexican Pesos and references to “US$,” “U.S. dollars,” “Dollars” or “dollar” are to United States Dollars. This Annual Report contains translations of certain Dollar amounts into Pesos at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the Dollar amounts actually represent such Peso amounts or could be converted into Pesos at the rates indicated or at any other rate. In this Annual Report on Form 20-F except as otherwise provided, references to “we,” “us,” “our” and “Company” mean Grupo TMM, S.A.B. and its consolidated subsidiaries, and “Grupo TMM” means “Grupo TMM, S.A.B.”
 
Presentation of Financial Information
 
Our financial statements are reported in Mexican pesos and prepared in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
 
The financial information included in this Annual Report was approved by the Company’s shareholders at the Annual General Shareholders’ Meeting, which took place on April 27, 2023.
 
Market and Industry Data
 
This Annual Report includes certain market and industry data and projections obtained from official government bodies, industry publications and surveys, public filings, and internal company sources. The third-party materials from which these data and projections were obtained generally state that the information included therein was collected from sources believed to be reliable, but we cannot provide any assurance as to the accuracy or completeness of such information, which we have not independently verified. While we are not aware of any misstatements regarding any market or industry data and projections presented in this Annual Report, such data and projections involve risks and uncertainties and are subject to change based on various factors, including those discussed in the section entitled “Risk Factors.”
 
Forward-Looking Information
 
This Annual Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such forward-looking statements are based on the beliefs of the Company’s management as well as on assumptions made. Actual results could differ materially from those included in such forward-looking statements. Readers are cautioned that all forward-looking statements involve risks and uncertainty.
 
The following factors, among others described in this Annual Report, could cause actual results to differ materially from such forward-looking statements:
 

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

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

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

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

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

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

 •
our ability to reduce corporate overhead costs;
 

 •
the availability of capital to fund our expansion plans;
 

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

 •
changes in fuel prices;
 

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

 •
market and interest rate fluctuations;
 

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

 •
the adverse resolution of litigation and other contingencies;
 

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

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

 •
the ability of the Company to repay, restructure or refinance its indebtedness.
 
Readers are urged to read this entire Annual Report including, but not limited to, the section entitled “Risk Factors,” and carefully consider the risks, uncertainties and other factors that affect our business. The information contained in this Annual Report is subject to change without notice. Readers should review future reports filed by us with the SEC and the Bolsa Mexicana de Valores (the “Mexican Stock Exchange”). We undertake no obligation to publicly update or revise any forward-looking statements included in this Annual Report, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.
 
PART I
 
ITEM 1
DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
Not applicable.
 
ITEM 2
OFFER STATISTICS AND EXPECTED TIMETABLE
 
Not applicable.
 
ITEM 3
KEY INFORMATION
 
Risk Factors
 
Our business is subject to various risks and uncertainties that have the potential to materially and adversely affect our business, results of operation, financial condition and future prospects. This Annual Report includes information on risks relating to our business, operations and financial condition, indebtedness, and ownership of our Shares and ADSs, as well as risks related to Mexico and investments in Mexican companies like Grupo TMM. These are not the only risks we face, but if any of them were to occur, either alone or together with additional risks and uncertainties not currently known to us, or that we do not currently consider material, the value of our Shares or ADSs may decline and you may lose all or part of your investment. Accordingly, before deciding whether to invest in our Shares or ADSs, you should review the other information regarding our business contained in this Annual Report, including the Audited Consolidated Financial Statements and the related notes thereto, as well as other reports filed by us with the SEC and Mexican Stock Exchange.
 
2
Risk Factor Summary
 
Risks Relating to our Business
 

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

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

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

 •
Our results from operations are dependent on fuel expenses.
 

 •
We may be unable to successfully expand our businesses.
 

 •
Significant competition could adversely affect our future financial performance.
 

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

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

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

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

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

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

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

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

 •
The conflict between Russia and Ukraine may have a material adverse effect on our business, financial condition, liquidity and results of operation.
 
3

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

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

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

 •
Our financial statements may not give you the same information as financial statements prepared under United States accounting rules.
 
Risks Relating to our Indebtedness


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

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

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

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

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


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

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

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

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

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

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

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

 •
Political events in the United States could have a material adverse effect on our business, financial condition and results of operations.
 
4

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

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

 •
Investors may not be able to enforce judgments against the Company.
 
Risks Relating to Ownership of our Equity
 

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

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

 •
The Company is controlled by the Serrano Segovia family.
 

 •
A change in control may adversely affect us.
 

 •
Our ADSs trade on the over-the-counter (“OTC”) market, which may limit the liquidity and price of our ADSs more than if the ADSs were quoted or listed on a national securities exchange. Detailed Risk Factors
 
Risks Relating to our Business
 
Our business has been and may continue to be adversely affected by the COVID-19 pandemic, and may be adversely affected by future pandemics, epidemics or other outbreaks of infectious diseases and governmental responses thereto.
 
Our operations are subject to risks related to pandemics, epidemics or other infectious disease outbreaks, including the continuing COVID-19 pandemic, which was initially declared a pandemic by the World Health Organization (“WHO”) on March 11, 2020. Government efforts to combat the COVID-19 pandemic, including the enactment or imposition of travel bans, quarantines and other emergency public health measures, have negatively affected economic conditions and the demand for shipping and transportation services globally and within the Gulf of Mexico, which in turn negatively affected our operations and the operations of our customers. Although demand for shipping and transportation services continued to rebound during 2022 as restrictive public health measures were substantially curtailed or eliminated as vaccination programs expanded, future developments regarding the COVID-19 pandemic remain highly uncertain. In particular, the emergence and spread of new virus variants, some of which may prove resistant to currently approved vaccines, may result in the reintroduction of or increase in restrictive measures aimed at combating the spread of COVID-19 and its variants. As a result, our vessels may be unable to call on ports, or may be restricted from disembarking from ports, located in areas affected by COVID-19. Further, such measures may restrict our ability to conduct operations at our ports, terminals and warehousing businesses.
 
The extent to which our business, results of operations and financial condition may be negatively affected by the COVID-19 pandemic or future pandemics, epidemics or other outbreaks of infectious diseases is highly uncertain and will depend on numerous evolving factors that we cannot predict, including, but not limited to (i) the duration and severity of the infectious disease outbreak; (ii) the imposition of restrictive measures to combat the outbreak and slow disease transmission; (iii) the introduction of financial support measures to reduce the impact of the outbreak on the economy; (iv) volatility in the demand for and price of oil and gas; (v) shortages or reductions in the supply of essential goods, services or labor; and (vi) fluctuations in general economic or financial conditions tied to the outbreak, such as a sharp increase in interest rates or reduction in the availability of credit. We cannot predict the effect that an outbreak of a new COVID-19 variant or strain, or any future infectious disease outbreak, pandemic or epidemic may have on our business, results of operations and financial condition, which could be material and adverse.
 
5
Uncertainties relating to our financial condition in our recent past and other factors raised substantial doubt about our ability to continue as a going concern and could have resulted in our dissolution under Mexican corporate law.
 
In accordance with the Mexican Companies Act (The Ley General de Sociedades Mercantiles), when a company has accumulated losses in excess of two-thirds of its capital stock, the dissolution of the company may be adopted by the shareholders of the company at an Extraordinary Shareholders Meeting called by the company’s board of directors upon the request of shareholders representing at least 33% of the company’s capital stock. At the Extraordinary Shareholders Meeting, the shareholders may vote to either dissolve the company or approve any corporate strategy for addressing the accumulated losses.
 
Additionally, the Mexican Bankruptcy Act (Ley de Concursos Mercantiles) provides that any third party with legal interest may request the judicial authorities to declare the dissolution of the company. A third person is considered to have a legal interest to request dissolution if the person is a creditor of the company and (i) the company has failed continuously with its payment obligations to the third person and the amount of the failure represents at least 35% of all the obligations of the company, and (ii) the company does not have sufficient assets to satisfy at least 80% of the payment obligations in respect of which it has failed to make the required payments at the time of the request.
 
Although we generated a profit for the years ended December 31, 2022, 2019 and 2018, 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 12, 2023, the Company had not received any request for an Extraordinary Shareholders Meeting concerning the prior accumulated losses of the Company, nor had the Company received notice of any request to judicial authorities to declare a dissolution of the Company.
 
If the time charter arrangements for the vessels we operate are terminated or expire, our business could be adversely affected.
 
As of the date of this Annual Report, we operate four 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 the event that these time charter agreements are terminated or expire without being renewed, we will be required to seek new bareboat or time charter agreements for these vessels. We cannot be sure that bareboat or time charters will be available for the vessels following termination or expiration, or that bareboat or time charter rates in effect at the time of such termination or expiration will be comparable to those in effect under the existing time charters or in the present market. In the event that bareboat or time charters are not available on terms acceptable to us, we may operate those vessels in the spot market. Because charter rates in the spot market are subject to greater fluctuation than longer term bareboat or time charter rates, any failure to maintain existing, or enter into comparable, charter agreements could adversely affect our operating results.
 
Our results from operations are dependent on fuel expenses.
 
Part of 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, during 2022 international crude oil prices have increased substantially following Russia’s invasion of Ukraine. Our fuel expense represents a significant portion of our operating expenses in our parcel tanker operations, and there may be increases in the price of fuel that cannot be hedged or transferred to the final user of our transportation services. We cannot assure you that our operations would not be materially adversely affected in the future if energy and fuel costs increase from current levels.
 
6
We may be unable to successfully expand our businesses.
 
Future growth of our businesses will depend on a number of factors, including:
 

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

 •
the identification of joint venture opportunities or acquisition candidates;
 

 •
our ability to enter into acquisitions on favorable terms;
 

 •
our ability to finance any expansion of our business;
 

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

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

 •
our ability to manage expansion effectively and to obtain required financing.
 
In order to maintain and improve operating results from new businesses, as well as our existing businesses, we will be required to manage our growth and expansion effectively. However, the management of new businesses involves numerous risks, including difficulties in assimilating the operations and services of the new businesses, the diversion of management’s attention from other business concerns and the disadvantage of entering markets in which we may have no or limited direct or prior experience. Our failure to effectively manage our businesses could preclude our ability to expand our businesses and could have a material adverse effect on our results of operations.
 
Significant competition could adversely affect our future financial performance.
 
Certain of our business segments face significant competition, which could have a material adverse effect on our results of operations.
 
Our international and domestic maritime operations have faced significant competition, mainly from U.S., Mexican and other international shipping companies acting directly or through a Mexican intermediary. In our ports, terminals, and logistics operations division, our services have faced intense competition, including price competition, from a large number of U.S., Mexican, and other international companies. We cannot assure you that we will not lose business in the future due to our inability to respond to competitive pressures by decreasing our prices without adversely affecting our gross margins and operational results.
 
Downturns in certain cyclical industries in which our customers operate could have adverse effects on our results of operations.
 
The shipping, ports and terminals, and logistics industries are highly cyclical, generally tracking the cycles of the world economy. Although transportation markets are affected by general economic conditions, there are numerous specific factors within each particular market segment that may influence operating results. Some of our customers do business in industries that are highly cyclical, including the oil and gas and automotive sectors. The COVID-19 pandemic precipitated a large drop in demand in these sectors as countries imposed restrictions on domestic and cross-border travel and commercial activity in an effort to prevent or slow the spread of the virus. Although domestic and cross-border travel and commercial activity continued to rebound during 2022 as restrictive public health measures were substantially curtailed or eliminated as vaccination programs expanded, a reintroduction of pandemic-related restrictions or any sustained downturn in these sectors could have a material adverse effect on our operating results. Also, some of the products we transport have had a historical pattern of price cyclicality, which has typically been influenced by the general economic environment and by industry capacity and demand. We cannot assure you that prices and demand for these products will not decline in the future, adversely affecting those industries and, in turn, our financial results.
 
7
Grupo TMM is party to contracts with other parties as joint investors in subsidiaries with a joint venture.
 
Grupo TMM and certain third parties have invested in subsidiaries with joint ventures. Grupo TMM may enter into more contracts of this kind in the future. The business partners of Grupo TMM in this subsidiaries may, at any moment, from an economic stand point, have economic, commercial, and legal interests, or objectives that adjust to our interests or to those of the entity in which they have invested with us. Additionally, the dividends that are distributed from the subsidiaries that Grupo TMM does not fully own, will be distributed according to the subsidiaries’ ownership interests. For these and other reasons, the controversies or conflicts with the business partners with whom Grupo TMM has a strategic alliance or a relationship, may negatively affect its capacity to conduct its businesses and to receive distributions from the subsidiaries and obtain a profit from its investments.
 
Over time, asset values may fluctuate substantially and, if these values are lower at a time when we are attempting to dispose of an asset, we may incur a loss.
 
The value of our assets may fluctuate substantially over time due to a number of different factors, including:
 

 •
prevailing economic conditions in the market;
 

 •
a substantial or extended decline in world trade;
 

 •
increases in the supply of vessel capacity;
 

 •
increased port and terminal capacity;
 

 •
prevailing charter rates;
 

 •
restrictions arising from emergency public health measures; and
 

 •
the cost of retrofitting or modifying existing ships and other assets, as a result of technological advances, changes in applicable environmental or other regulations or standards, or otherwise.
 
In the future, if the market values of our assets deteriorate significantly, we may be required to record an impairment charge in our financial statements, which could adversely affect our results of operations. If a vessel charter terminates, we may be unable to re-charter the vessel at an acceptable rate and, rather than continue to incur costs to maintain and finance the asset, may seek to dispose of it. Our inability to dispose of a vessel or other asset at a reasonable price could result in a loss on its sale and adversely affect our results of operations and financial condition.
 
Our future success depends upon the continued growth of and demand for the maritime, ports and terminals, and logistics industries which may have already achieved the peak of their upward growth trend and for which rates may have already been at or near historical highs. These factors may lead to reductions and volatility in rates and profitability.
 
The maritime, ports and terminals, and logistics industries are cyclical and volatile in terms of rates and profitability. In the future, rates and demand for vessels and other equipment and services may fluctuate as a result of changes in the size of and geographic location of supply and demand for oil and related products, as well as changes in the corresponding industry regulations. These and other factors affecting the supply and demand for maritime, ports and terminals, and logistics services in general are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.
 
The factors that influence demand for our services include:
 

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

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

 •
the distance cargo products are to be moved by sea or land;
 
8

 •
the globalization of manufacturing;
 

 •
global and regional economic and political conditions;
 

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

 •
environmental and other regulatory developments;
 

 •
technological advancements;
 

 •
currency exchange rates;
 

 •
weather and natural disasters; and
 

 •
global and regional public health developments.
 
The factors that influence our services capacity include:


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

 •
the Mexican foreign trade balance;
 

 •
the price of steel and other raw materials;
 

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

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

 •
port congestion; and
 

 •
the existence of emergency public health measures that may require us to suspend or curtail some of our businesses.
 
Our ability to re-charter the vessels we operate upon the expiration or termination of their current charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, the prevailing state of the charter market for vessels. If the charter market is depressed when vessels’ charters expire, we may be forced to re-charter the vessels at reduced rates or even possibly a rate whereby we incur a loss, which may reduce our earnings or make our earnings volatile. The same issues will exist if we acquire additional vessels and attempt to obtain multi-year time charter arrangements as part of our acquisition and financing plan. Similarly, in our ports and terminals and logistics divisions, our ability to renew or extend our services agreements will be subject to current market conditions and other competitors.
 
Our growth depends on our ability to expand relationships with existing shipowners and other customers and to obtain new shipowners and customers, for which we will face substantial competition.
 
Our principal objectives include acquiring and operating additional vessels in conjunction with entering into 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:
 

 •
industry relationships and reputation for customer service and safety;
 
9

 •
experience and quality operations (including cost effectiveness);
 

 •
quality and experience of operating personnel;
 

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

 •
relationships with shipyards and the ability to get suitable facilities;
 

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

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

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

 •
competitiveness of the bid in terms of overall price.
 
We expect substantial competition from a number of experienced companies, including state-sponsored entities and major shipping, ports and terminals, and logistics companies. Some of these competitors have significantly greater financial resources than we do, and can therefore operate larger fleets, provide additional services, and potentially offer better rates. This competition may cause greater price competition for time charters and the other services we offer. As a result of these factors, we may be unable to expand our relationships with existing customers or to obtain new customers on a profitable basis, if at all, which would have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends to our stockholders.
 
The aging of the vessels we operate may result in increased operating costs in the future, which could adversely affect our earnings.
 
In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. As the vessels we operate age, we will incur increased costs. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of a vessel may also require expenditures for alterations or the addition of new equipment to vessels and may restrict the type of activities in which vessels may engage. We cannot assure you that, as the vessels we operate age, market conditions will justify such expenditures or will enable us to profitably operate the vessels during the remainder of their expected useful lives.
 
Our results of operations may be adversely affected by operational risks inherent in the transportation and logistics industry.
 
The operation of vessels and other machinery relating to the shipping and cargo business involves an inherent risk of catastrophic marine disaster, mechanical failure, collisions, property losses to vessels, piracy, cargo loss or damage and business interruption due to outbreaks of infectious diseases or political actions in Mexico and in foreign countries. In addition, the operation of any harbor and seagoing vessel is subject to the inherent possibility of catastrophic marine disasters, including oil spills and other environmental accidents, and the liabilities arising from owning and operating vessels in international trade. Any such event may result in a reduction of revenues or increased costs. The Company’s vessels are insured for their estimated value against damage or loss, including war, terrorism acts, and pollution risks and we also carry other insurance customary in the industry.
 
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We maintain insurance to cover the risk of partial or total loss of or damage to all of our assets including, but not limited to, harbor and seagoing vessels, port facilities, port equipment, land facilities and offices. In particular, we maintain marine hull and machinery and war risk insurance on our vessels, which covers the risk of actual or constructive total loss. Additionally, we have protection and indemnity insurance for damage caused by our operations to third persons. With certain exceptions, we do not carry insurance covering the loss of revenue resulting from a downturn in our operations or resulting from vessel off-hire time on certain vessels. In certain instances, and depending on the ratio of insurance claims to insurance premiums paid, we may choose to self-insure our over-the-road equipment following prudent guidelines. We cannot assure you that our insurance would be sufficient to cover the cost of damages suffered by us or damages to others, that any particular claim will be paid or that such insurance will continue to be available at commercially reasonable rates in the future.
 
Additionally, some shipping, ports and terminals, and logistics activities decrease substantially during periods of bad weather. Such adverse weather conditions can adversely affect our results of operations and profitability if they occur with unusual intensity, during abnormal periods, or last longer than usual in our major markets, especially during peak shipping periods.
 
Our operations are subject to extensive environmental and safety laws and regulations and we may incur costs that have a material adverse effect on our financial condition as a result of our liabilities under or potential violations of environmental and safety laws and regulations.
 
Our operations are subject to general Mexican federal and state laws and regulations relating to the protection of the environment. The Mexican Attorney General for Environmental Protection (Procuraduría Federal de Protección al Ambiente) is empowered to bring administrative and criminal proceedings and impose corrective actions and economic sanctions against companies that violate environmental laws, and temporarily or permanently close non-complying facilities. The Mexican Ministry of Environmental Protection and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales or “SEMARNAT”) and other ministries have promulgated compliance standards for, among other things, water discharge, water supply, air emissions, noise pollution, hazardous substances transportation and handling, and hazardous and solid waste generation. Under the environmental laws, the Mexican government has implemented a program to protect the environment by promulgating rules concerning water, land, air and noise discharges or pollution, and the transportation and handling of wastes and hazardous substances.
 
We are also subject to the laws of various jurisdictions and international conferences with respect to the discharge of hazardous materials, wastes and pollutants into the environment.
 
While we maintain insurance against certain of these environmental risks in an amount which we believe is consistent with amounts customarily obtained in accordance with industry norms, we cannot assure you that our insurance will be sufficient to cover damages suffered by us or that insurance coverage will always be available for these possible damages. Furthermore, such insurance typically excludes coverage for fines and penalties that may be levied for non-compliance with environmental laws and regulations.
 
We anticipate that the regulation of our business operations under federal, state and local environmental laws and regulations will increase and become more stringent over time. We cannot predict the effect, if any, that the adoption of additional or more stringent environmental laws and regulations would have on our results of operations, cash flows, capital expenditure requirements or financial condition.
 
Our maritime operations provide services to transport petrochemical products and refined clean and dirty petroleum products, respectively. See Item 4. “Information on the Company - Business Overview - Maritime Operations.” Under the United States Oil Pollution Act of 1990 (“OPA” or “OPA 90”), responsible parties, including ship owners and operators, are subject to various requirements and could be exposed to substantial liability, and in some cases unlimited liability, for removal costs and damages, including natural resource damages and a variety of other public and private damages resulting from the discharge of oil, petroleum or related substances into the waters of the United States. In some jurisdictions, including the United States, claims for spill clean-up or removal costs and damages would enable claimants to immediately seize the ships of the owning and operating company and sell them in satisfaction of a final judgment. The existence of comparable statutes enacted by individual states of the United States, but requiring different measures of compliance and liability, creates the potential for similar claims being brought in the United States under state law. In addition, several other countries have adopted international conventions that impose liability for the discharge of pollutants similar to OPA. If a spill were to occur in the course of operation of one of our vessels carrying petroleum products, and such spill affected the waters of the United States or another country that had enacted legislation similar to OPA, we could be exposed to substantial or unlimited liability. Additionally, our vessels carry fuels 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.
 
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The vessels we operate must also meet stringent operational, maintenance and structural requirements, and they are subject to rigorous inspections by governmental authorities such as the U.S. Coast Guard for those vessels that operate within U.S. territorial waters. Non-compliance with these regulations could give rise to substantial fines and penalties.
 
We could have liability with respect to contamination at third-party facilities in the United States where we have transported hazardous substances or wastes under the U.S. Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) and comparable state laws (known as state Superfund laws). CERCLA and the state Superfund laws impose joint and several liability for the cost of investigation and remediation, natural resources damages, certain health studies and related costs, without regard to fault or the legality of the original conduct, on certain classes of persons with respect to the release into the environment of certain substances. These persons, commonly called “potentially responsible parties” or “PRPs,” include the current and certain prior owners or operators of and persons that arranged for the disposal or treatment of hazardous substances at sites where a release has occurred or could occur. In addition, other potentially responsible parties, adjacent landowners or other third parties may initiate cost recovery actions or toxic tort litigation against PRPs under CERCLA or state Superfund law or state common law.
 
The U.S. Clean Water Act imposes restrictions and strict controls regarding the discharge of wastes into the waters of the United States. The Clean Water Act and comparable state laws provide for civil, criminal and administrative penalties for unauthorized discharges of pollutants. In the event of an unauthorized discharge of wastes or pollutants into waters of the United States, we may be liable for penalties and could be subject to injunctive relief.
 
Potential labor disruptions could adversely affect our financial condition and our ability to meet our obligations under our financing arrangements.
 
As of March 31, 2023, we had 769 employees, approximately 5% of whom were unionized. The compensation terms of the labor agreement with these employees are subject to renegotiation on an annual basis and all other terms are renegotiated every two years. If we are not able to negotiate these provisions favorably, strikes, boycotts or other disruptions could occur, and these potential disruptions could have a material adverse effect on our financial condition and results of operations and on our ability to meet our payment obligations under our financing arrangements. As of the date of this Annual Report, the COVID-19 outbreak has not negatively affected our relations with our employees. We cannot, however, assure you that the effects of COVID-19 will not lead to any labor disruptions in the future.
 
In addition, in connection with the labor commitments included in the United States-Mexico-Canada Agreement (“USMCA”), the successor to the North American Free Trade Agreement (“NAFTA”), the Mexican government has enacted significant reforms aimed at protecting the rights of workers. These include ratification of the International Labor Organization’s Convention C098, the “Right to Organize and Collective Bargaining Convention”, and revisions to the Mexican Federal Labor Law (Ley Federal del Trabajo) aimed at prohibiting discrimination and workplace harassment, establishing new labor courts and judicial protections for workers, enhancing the transparency of procedures for the negotiation of collective bargaining agreements, and ensuring the voting rights of workers on matters such as union contracts and representation. These developments, together with substantial increases in Mexico’s general minimum wage, have spurred increased demands from workers and labor unions for salary and benefit increases. We cannot predict how these developments may affect our business, results of operations or its financial condition. Any increased demands by our unionized workers may lead to higher labor costs, which could have a negative impact on our business, results of operations or financial condition.
 
12
The conflict between Russia and Ukraine may have a material adverse effect on our business, financial condition, liquidity and results of operation.
 
International financial and commodities markets are experiencing heightened volatility and disruption following Russia’s military invasion of Ukraine in February 2022. Although the ultimate duration and effect of the ongoing conflict remains uncertain, it has created significant disruptions in international markets, including heightened volatility in the credit and financial markets and significant increases in the prices of raw materials and other commodities, particularly oil and gas. Russia’s invasion has triggered the imposition of sanctions and other penalties by the United States, European Union and other countries against Russia and certain associated persons and entities, including the removal of certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system. Additional potential sanctions and penalties have also been threatened or remain under consideration, the ultimate effects of which remain uncertain. We are continuing to monitor the conflict in Ukraine and its effect on international markets, including any related supply chain disruptions or increases in the cost of fuel or other input costs, which may have a material adverse effect on our business, financial condition, liquidity and results of operations.
 
Continuing world tensions, including as the result of wars, other armed conflicts, terrorist attacks, the COVID-19 pandemic and trade disputes could have a material adverse effect on our business.
 
Continuing world tensions, including those relating to Russia, Ukraine, the Middle East, North Korea, Venezuela, Libya and various other African countries, the COVID-19 pandemic, trade disputes between the United States, China, and various other countries, as well as terrorist attacks in various locations and related unrest, have increased worldwide political and economic instability and depressed economic activity in the United States and globally, including the Mexican economy.
 
The continuation or escalation of existing armed hostilities or the outbreak of additional hostilities as a consequence of further acts of terrorism or otherwise could cause a further downturn and/or significant disruption to the economies of the United States, Mexico and other countries. The continued threat of terrorism within the United States and abroad and the potential for military action and heightened security measures in response to such threat may cause significant disruption to commerce throughout the world, including restrictions on cross-border transport and trade. Furthermore, the Mexican government’s efforts to combat illegal drug cartels have caused public safety issues that may hinder Mexico’s economic growth and could prompt additional restrictions on cross-border transport and trade.
 
The continuing COVID-19 pandemic, and the various restrictions on global trade and commerce instituted by countries to combat the spread of the virus, have had a negative impact on the global economy and may trigger significant future cross-border trade disputes. Further increases in global tensions and trade disputes may reduce the demand for our services and have a material adverse effect on our results of operations and financial condition.
 
Our information technology systems may be subject to security incidents or interruptions in network connectivity which could have an material adverse effect on our business.
 
Our business is supported by a robust platform of information and communications technology systems, including hardware and software which are susceptible to security incidents or disconnections from the local and/or global computer networks. We have employed various cybersecurity defenses and measures to protect our systems from the risks of cyberattacks and implemented sophisticated means of monitoring communications. Threats are constantly evolving, however, and our protection measures could be compromised, which could result in unauthorized access to our systems. File abduction, data corruption alteration, spread of computer viruses, installation of malware or ransomware or other malicious acts intended to disrupt our operations are a constant threat, and if our systems are affected by a security incident or service outage, we may experience a decrease in operational performance, an increase in operating costs and damage to our reputation. Any significant security breaches or disruptions to the connectivity or performance of our information technology systems could have a material adverse effect on our operating results and financial condition.
 
Our customers may take actions that may reduce our revenues.
 
If our customers believe that our financial condition will result in a lower quality of service, they may discontinue use of our services. Additionally, some customers may demand lower prices. While we have contracts with some of our customers that prevent them from terminating our services or which impose penalties on customers who terminate our services, it may be impractical or uneconomical to enforce these agreements in Mexican courts. If any of these events occurs, our revenues will be reduced.
 
13
Our financial statements may not provide you the same information as financial statements prepared under United States accounting rules.
 
Our financial statements are prepared in accordance with IFRS. IFRS differs from U.S. GAAP in certain significant respects, including, among others, the recognition of revaluation property, plant and equipment, the classification of minority interest in accordance with net identifiable assets, the nonrecognition of employees’ profit sharing, capitalized interest recognition, consolidation of subsidiaries, the acquisition of shares of subsidiaries from minority stockholders and the determination of deferred income taxes. For this and other reasons, the presentation of financial statements and reported earnings prepared in accordance with IFRS may differ in significant respects from the presentation of financial statements and reported earnings prepared in accordance with U.S. GAAP.
 
Risks Relating to our Indebtedness
 
Our substantial indebtedness could adversely affect our financial condition and impair our ability to operate our business, and we may not be able to pay the interest on and principal amount of our indebtedness.
 
As of March 31, 2023, Grupo TMM’s total debt amounted to $487.3 million, which includes $53.3 million of bank debt owed to several different banks, $14.4 million owed to non-institutional lenders, $145.8 million of related parties, and $273.8 million of liabilities associated with our long-term leases; of this debt, $261.9 million is short-term debt, and $225.4 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, 2022, our total debt amounted to $511.7 million, which includes $53.1 million of bank debt owed to several different banks, $14.4 million owed to non-institutional lenders, $157.1 million of related parties, and $287.1 million of liabilities associated with our long-term leases, primarily the lease of warehouses for use in our warehousing operations; of this debt, $261.1 million is short-term debt, and $250.6 million is long-term debt.
 
Although we have taken various measures to reduce our level of indebtedness, our level of indebtedness remains substantial and could have important consequences, including the following:
 

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

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

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

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

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

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

 •
limiting our ability to borrow additional money to fund our working capital and capital expenditures or to refinance our existing indebtedness, or to enable us to fund the acquisitions contemplated in our business plan.
 
Our ability to service our indebtedness will depend upon future operating performance, including the ability to increase revenues significantly, renew our existing services contracts and control expenses. Future operating performance depends upon various factors, including prevailing economic, financial, competitive, legislative, regulatory, business, public health and other factors that are beyond our control.
 
14
If we cannot generate sufficient cash flow from operations to service our indebtedness we may default under our various financing facilities. If we default under any such facility, the relevant lender or lenders could then take action to foreclose against any collateral securing the payment of such facility. Certain of our assets have been pledged to secure our financing facilities. See Item 4. “Information on the Company - Property, Vessels and Equipment.”
 
Grupo TMM is primarily a holding company and depends upon funds received from its operating subsidiaries to make payments on its indebtedness.
 
Grupo TMM is primarily a holding company and conducts the majority of its operations, and holds a substantial portion of its operating assets, through numerous direct and indirect subsidiaries. As a result, Grupo TMM relies on income from dividends and fees related to administrative services provided to its operating subsidiaries for its operating income, including the funds necessary to service its indebtedness.
 
Under Mexican law, profits of Grupo TMM’s subsidiaries may only be distributed upon approval by such subsidiaries’ shareholders, and no profits may be distributed by its subsidiaries to Grupo TMM until all losses incurred in prior fiscal years have been offset against any sub-account of Grupo TMM’s capital or net worth account. In addition, at least 5% of profits must be separated to create a reserve (reserva legal) until such reserve is equal to 20% of the aggregate value of such subsidiary’s capital stock (as calculated based on the actual nominal subscription price received by such subsidiary for all issued shares that are outstanding at the time).
 
There is no restriction under Mexican law upon Grupo TMM’s subsidiaries remitting funds to it in the form of loans or advances in the ordinary course of business, except to the extent that such loans or advances would result in the insolvency of its subsidiaries, or for its subsidiaries to pay Grupo TMM fees or other amounts for services.
 
To the extent that Grupo TMM relies on dividends or other distributions from subsidiaries that it does not wholly own, Grupo TMM will only be entitled to a pro rata share of the dividends or other distributions provided by such subsidiaries.
 
Restrictive covenants in our financing agreements may restrict our ability to pursue our business strategies.
 
Some of our financing agreements contain a number of restrictive covenants and any additional financing arrangements we enter into may contain additional restrictive covenants. These covenants restrict or prohibit many actions, including our ability, or that of our subsidiaries, to, among others:
 

 •
incur additional indebtedness;
 

 •
create or suffer to exist liens;
 

 •
prepay certain debt;
 

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

 •
carry out certain investments;
 

 •
engage in certain transactions with shareholders and affiliates;
 

 •
Table of Contents
 

 •
use assets as security in other transactions;
 

 •
issue guarantees to third parties;
 

 •
sell assets; and
 
15

 •
engage in certain mergers and consolidations or in sale-leaseback transactions.
 
If we fail to comply with these and other restrictive covenants, our obligation to repay our indebtedness may be accelerated. If we cannot pay the amounts due under our financing facilities, the relevant lender or lenders could then take action to foreclose against any collateral securing the payment of such facility or facilities.
 
We have to service our debt with revenues mostly generated in US dollars. This could adversely affect our ability to service our debt in the event of a devaluation or depreciation in the value of the Mexican peso against the dollar.
 
As of March 31, 2023, approximately 21.1% of our debt was denominated in U.S. Dollars. As of the date of this Annual Report, we do not generate sufficient revenue in Mexican Pesos from our operations to service all of our Mexican Pesos-denominated debt. Consequently, we have to use revenues generated in U.S. Dollars to service our Mexican Pesos-denominated debt. A revaluation or appreciation in the value of the Mexican peso, compared to the dollar, could adversely affect our ability to service our debt. During 2022, the Mexican peso appreciated 5.6% against the U.S. Dollar. From January 1st, 2023 through March 31, 2023, the Mexican Peso has appreciated 7.6% against the U.S. Dollar.
 
Fluctuations in the Mexican peso/dollar exchange rate could lead to shifts in the types and volumes of Mexican imports and exports, negatively impacting results on some of our businesses. Although a decrease in the level of exports may be offset by a subsequent increase in imports, any offsetting increase might not occur on a timely basis, if at all. Future developments in U.S.-Mexican trade beyond our control may result in a reduction of freight volumes or in an unfavorable shift in the mix of products and commodities we carry.
 
Our variable rate debt subjects us to risks associated with an increase in interest rates, which could increase the amount of our debt service obligations.
 
We are exposed to the impact of interest rate changes, primarily through our variable rate debt facilities that require us to make interest payments based on the Mexican Interbank Equilibrium Interest Rate (“TIIE”) or the Secured Overnight Financing Rate (“SOFR”). If interest rates increase significantly, our debt service obligations on this variable rate debt would increase, which could have an adverse effect on our earnings and cash flow. Further, as the use of SOFR as a reference rate was adopted only recently in January 2022 following a transition away from the London Interbank Offered Rate (“LIBOR”), we cannot predict the consequences that this transition will have on our debt service obligations and financing costs. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. The transition to SOFR may result in an increase in our debt service obligations and financing costs, and could otherwise adversely affect our business, financial condition, liquidity and results of operations.
 
Risks Relating to Mexico
 
Economic, political, social and public health conditions may adversely affect our business.
 
Our financial performance may be significantly affected by general economic, political, social and public health conditions in the markets where we operate. Most of our operations and assets are located in Mexico. As a result, our financial condition, results of operations and business may be affected by the general condition of the Mexican economy, the valuation of the Peso as compared to the U.S. dollar, Mexican inflation, interest rates, regulations, taxation, social or political instability, and economic, political, social and public health developments in Mexico. Many countries in Latin America, including Mexico, have suffered significant economic, political, social and public health crises in the past, and these events may occur again in the future. Instability in the region has been caused by many different factors, including:
 

 •
significant governmental influence over local economies;
 

 •
substantial fluctuations in economic growth;
 
16

 •
high levels of inflation;
 

 •
changes in currency values;
 

 •
exchange controls or restrictions on expatriation of earnings;
 

 •
high domestic interest rates;
 

 •
wage and price controls;
 

 •
changes in governmental economic or tax policies;
 

 •
imposition of trade barriers;
 

 •
unexpected changes in regulation; and
 

 •
overall economic, political, social and public health instability.
 
Mexico is an emerging market economy, with attendant risks to our results of operations and financial condition.
 
Mexico has historically experienced uneven periods of economic growth. Mexico’s gross domestic product (“GDP”) increased 2.2%, 4.7% and 3.1% in 2018, 2021 and 2022, respectively, but decreased 0.2% in 2019 and 8.0% in 2020. For the year 2023, the Bank of Mexico, through its Mexico Consensus Board1 survey, estimates that Mexico’s GDP will grow by approximately 1.4%, while inflation is expected to be 5.15%. We cannot assure you that these estimates will prove to be accurate. The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican governmental actions concerning the economy and state-owned enterprises could have a significant impact on Mexican private sector entities in general and on us in particular, as well as on market conditions, prices and returns on Mexican securities, including our securities.
 
Currency fluctuations or the devaluation and depreciation of the Peso could limit the ability of the Company and others to convert Pesos into U.S. dollars or other currencies which could adversely affect our business, financial condition and results of operations.
 
Severe devaluation or depreciation of the Peso may also result in governmental intervention or disruption of international foreign exchange markets. This may limit our ability to transfer or convert Pesos into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our dollar-denominated indebtedness and adversely affect our ability to obtain foreign currency and other imported goods. The Mexican economy has suffered current account balance of payment deficits and shortages of foreign exchange reserves in the past. While the Mexican government does not currently restrict, and for more than twenty years has not restricted, the right or ability of Mexican or foreign persons or entities to convert Pesos into U.S. dollars or to transfer other currencies outside of Mexico, the Mexican government could institute restrictive exchange control policies in the future. To the extent that the Mexican government institutes restrictive exchange control policies in the future, our ability to transfer or convert Pesos into U.S. dollars for the purpose of making timely payments of interest and principal on indebtedness would be adversely affected.
 
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.
 
1 The Banco de México Survey is comprised of 36 economic analysis and consulting groups from the domestic and foreign private sector.

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High interest rates in Mexico could increase our financing costs.
 
Interest rates in Mexico are currently above 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 8.00%, 8.32%, 5.71%, 4.63% and 7.91%  in 2018, 2019, 2020, 2021 and 2022, respectively, and for the three-month period ended March 31, 2023, it averaged 11.07%. To the extent our debt is incurred in Mexican Pesos at interest rates linked to the TIIE or any other Mexican interest rate index, any increase in such rates will increase our financing costs.
 
Developments in other emerging market countries or in the United States may affect us and the prices of our securities.
 
The market value of securities of Mexican companies, the economic and political situation in Mexico and our financial condition and results of operations are, to varying degrees, affected by economic and market conditions in other emerging market countries and in the United States. Although economic conditions in other emerging market countries and in the United States may differ significantly from economic conditions in Mexico, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value or trading price of securities of Mexican issuers, including our securities, or on our business.
 
Our operations, including demand for our products or services and the price of our floating rate debt, have also historically been adversely affected by increases in interest rates in the United States and elsewhere. Although in recent years interest rates have remained low, if interest rates rise, the interest payments on our floating rate debt and the cost of refinancing our financing arrangements at maturity will rise as well.
 
Mexico may experience high levels of inflation in the future, which could adversely affect our results of operations.
 
Mexico has a history of high levels of inflation, and may experience high inflation in the future. The annual inflation rates for the last five years, as measured by changes in the National Consumer Price Index, as provided by Banco de México, were:
 
2018
    
4.83
%
2019
    
2.83
%
2020
    
3.15
%
2021
    
7.36
%
2022
    
7.82
%
2023 (annualized as of March )
    
6.85
%

Mexico’s level of inflation has in recent years been reported at higher levels than the annual inflation rate of the United States and Canada. The United States and Canada are Mexico’s main trading partners. We cannot give any assurance that the Mexican inflation rate will decrease, increase or maintain its current level for any significant period of time. A substantial increase in the Mexican inflation rate as currently in effect would have the effect of increasing some of our costs, which could adversely affect our financial condition and results of operations, as well as our ability to service our debt obligations. High levels of inflation may also affect the balance of trade between Mexico and the United States, and other countries, which could adversely affect our results of operations.
 
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Political events and declines in the level of oil production in Mexico could affect the Mexican economy and our business, financial condition and results of operations.
 
Mexican political events may significantly affect our operations. On December 1, 2018, Andres Manuel Lopez Obrador, a member of the National Regeneration Movement Party (“MORENA”), began a six-year term as president of Mexico following his victory in the July 1, 2018 presidential election. Under the 2012-2018 government of President Enrique Peña Nieto, significant changes in laws, policies and regulations aimed at fostering growth in certain key sectors of the Mexican economy were enacted, including the energy and transportation sectors. Currently, MORENA has a majority in both chambers of the Mexican Congress, giving it considerable power to pass new legislation or modify or terminate existing legislation, including potential modifications to the Mexican Constitution. President Andrés Manuel López Obrador and members of his administration have expressed a desire to modify and/or terminate certain structural reforms to the Mexican economy, including the 2013 Energy Reforms. The new administration has already succeeded in enacting various changes to Mexican laws and public policy and is seeking further changes, which may increase political uncertainty or have negative effects on the Mexican economy. 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 (2015-2022) at a compounded average rate of 3.6%, 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 4.5%, and currently represent more than 80% of Mexico’s domestic consumption.
 
Experts have concluded that if the Mexican government does not follow through with its implementation of reforms designed to promote private investment in the energy sector, or fails to make further investments to increase PEMEX’s technological capabilities, Mexico’s oil production may drop considerably, weakening the financial position of the Mexican government. For its part, the administration of President Andrés Manuel López Obrador has taken steps to limit new private investment in Mexico’s oil and gas industry, including the cancellation of bidding rounds for the award of new upstream production sharing contracts and farm-out agreements. Such actions may have a detrimental effect on Mexico’s oil production levels, which may in turn reduce the demand for our transportation services from Pemex and other oil and gas industry customers.
 
Finally, the Mexican economy in the past has suffered balance of payment deficits and shortages in foreign exchange reserves, and we cannot assure you that these deficits and shortages will not occur in the future.
 
Political events in the United States could have a material adverse effect on our business, financial condition and results of operations.
 
The United States is Mexico’s primary trading partner, and receives over 80% of Mexico’s total exports. A deterioration in trade relations between Mexico and the United States could have a negative effect on Mexico’s economic growth and its transportation and shipping industry in particular.
 
In January 2021, Joseph R. Biden became the 46th President of the United States of America. As of the date of this Annual Report, President Biden’s administration and has not proposed substantial revisions to U.S. trade policies, including the renegotiation or termination of trade agreements, or proposed the imposition of border taxes, higher tariffs or other measures which would increase the price of goods imported into the United States, particularly from Mexico. Future decisions by the current U.S. administration, including with respect to U.S. laws and policies governing foreign trade and foreign trade relations, could have a negative impact on the Mexican economy by reducing the level of commercial activity between Mexico and the United States or effecting a slowdown in direct U.S. foreign investment in Mexico, which could adversely affect our business and our results of operations.
 
In November 2018, the United States, Mexico and Canada signed the USMCA, which replaced NAFTA. The United States, Mexico and Canada ratified the USMCA on January 29, 2020, June 19, 2020 and March 13, 2020, respectively. As a result, the USMCA took effect on July 1, 2020. We cannot predict the impact the USMCA will have on our industry or the changes to international trade that may result, and consequently, we cannot predict what effect it will have on our business and our results of operations. If the United States withdraws from or makes material changes to the USMCA or other international trade agreements to which it is a party, trade barriers and other costs associated with trade between the United States and Mexico may increase, which could have a material adverse effect on our business, financial condition and results of operations.
 
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As a result of the drop in oil prices, that began at the end of 2014, our clients may reduce spending on exploration and production projects, resulting in a decrease in demand for our services.
 
Oil and natural gas prices, as well as market expectations of potential changes in these prices, significantly impact the level of worldwide drilling and production services activities. Reduced demand for oil and natural gas or periods of surplus oil and natural gas generally result in lower prices for these commodities and often impact the economics of planned drilling projects and ongoing projects, resulting in the curtailment, reduction, delay or postponement of such projects for an indeterminate period of time. When drilling and production activity and spending declines, vessel daily rates and utilization for our offshore vessels historically decline as well.
 
Worldwide oil prices increased moderately in 2022, with respect to 2021, with demand increasing as countries eased restrictions on travel and economic activity in response to increased vaccination against, and prior exposure to, COVID-19 and its variants. As of the date of this Annual Report, prices have increased from their 2020 lows, reaching levels last experienced in 2014. If oil and natural gas prices decline from current levels for a sustained period, oil and gas exploration and production companies are likely to cancel or curtail their drilling programs and lower production spending on existing wells, thereby reducing demand for our services.
 
Any prolonged reduction in the overall level of oil and gas exploration and development activities, whether resulting from an accelerated transition to renewable energy sources, changes in the price of oil, natural gas or otherwise, could materially and adversely affect us by negatively impacting:
 

 •
our revenues, cash flows and profitability;
 

 •
the fair market value and profitability of our vessels;
 

 •
our ability to maintain or increase our borrowing capacity;
 

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

 •
the collectability of our receivables; and
 

 •
our ability to retain skilled personnel whom we would need in the event of an upturn in the demand for our services.
 
If any of the foregoing were to occur, it could have a material adverse effect on our business and financial results.
 
The following table shows the high, low, average and period-end spot prices of Mexican crude oil as reported by the Bank of Mexico in U.S. dollars for the periods indicated below.
 
   
Spot price of Mexican crude oil
  
Year Ended December 31,
  
High(1)
    
Low(1)
    
Average(1)
    
End of
Year(2)
  
2018
    
77.73
      
44.69
      
62.12
      
44.69
  
2019
    
65.83
      
43.65
              
56.14
  
2020
    
59.35
      
(2.37
)
    
35.70
      
47.16
  
2021
    
79.22
      
47.12
      
64.66
      
71.29
  
2022
    
119.62
      
60.42
      
89.49
      
69.71
  

20
Grupo TMM, S.A.B. and Subsidiaries
   
Spot price of Mexican crude oil
  
Year 2023
  
High(3)
    
Low(3)
    
Average(3)
    
End of Month(4)
  
January
    
71.10
      
61.66
      
67.26
      
68.66
  
February
    
70.33
      
63.63
      
67.27
      
67.27
  
March
    
70.37
      
57.12
      
63.58
      
64.19
  
April (5)
    
74.01
      
65.18
      
70.47
      
65.39
  

(1)
The highest, lowest and average spot price of Mexican crude oil in U.S. dollars reported by Banco de México during the relevant year.
(2)
The spot price on the last day of each relevant year.
(3)
The highest, lowest and average spot price in the relevant month.
(4)
The spot price on the last day of each relevant month.
(5)
As of April 28, 2023.

Mexican antitrust laws may limit our ability to expand through acquisitions or joint ventures.
 
Mexico’s federal antitrust laws and regulations may affect some of our activities, including our ability to introduce new products and services, enter into new or complementary businesses or joint ventures and complete acquisitions. In addition, the federal antitrust laws and regulations may adversely affect our ability to determine the rates we charge for our services and products. Approval of the Comisión Federal de Competencia, or Mexican Antitrust Commission, is required for us to acquire and sell significant businesses or enter into significant joint ventures and we cannot assure you that we would be able to obtain such approval.
 
Investors may not be able to enforce judgments against the Company.
 
Investors may be unable to enforce judgments against us. We are a stock corporation, organized under the laws of Mexico. Substantially all our directors and officers reside in Mexico, and all or a significant portion of the assets of those persons may be located outside the United States. It may not be possible for investors to effect service of process within the United States upon those persons or to enforce judgments against them or against us in U.S. courts, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. Additionally, it may not be possible to enforce, in original actions in Mexican courts, liabilities predicated solely on the U.S. federal securities laws and it may not be possible to enforce, in Mexican courts, judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of the U.S. securities laws.
 
Risks Relating to Ownership of our Equity
 
The protection afforded to minority shareholders in Mexico is different from that afforded to minority shareholders in the United States.
 
Under Mexican law, the protections afforded to minority shareholders are different from, and may be less than, those afforded to minority shareholders in the United States. Under Mexican law, there is no procedure for class actions as such actions are conducted in the United States and there are different procedural requirements for bringing shareholder lawsuits against companies. Therefore, it may be more difficult for minority shareholders to enforce their rights against us, our directors or our controlling shareholders than it would be for minority shareholders of a U.S. company.
 
In accordance with the Mexican Companies Act (Ley General de Sociedades Mercantiles), shareholders representing at least 33% of our capital stock can request that the Board of Directors call an Extraordinary Shareholders Meeting to vote on proposals included by the shareholders in their request to the Board.
 
Holders of ADSs may not be entitled to participate in any future preemptive rights offering, which may result in a dilution of such holders equity interest in our company.
 
Under Mexican law, if we issue new shares for cash as a part of a capital increase, we generally must grant our stockholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage in our company. Rights to purchase shares in these circumstances are commonly referred to as preemptive rights. We may not be legally permitted to allow holders of ADSs in the United States to exercise preemptive rights in any future capital increase unless (1) we file a registration statement with the SEC with respect to that future issuance of shares or (2) the offering qualifies for an exemption from the registration requirements of the U.S. Securities Act of 1933, as amended. At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC, as well as the benefits of preemptive rights to holders of ADSs in the United States and any other factors that we consider important in determining whether to file a registration statement.
 
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If we do not file a registration statement with the SEC to allow holders of ADSs in the United States to participate in a preemptive rights offering or if there is not an exemption from the registration requirements of the U.S. Securities Act of 1933 available, the equity interests of holders of ADSs would be diluted to the extent that ADS holders cannot participate in a preemptive rights offering.
 
The Company is controlled by the Serrano Segovia family.
 
The Serrano Segovia family controls the Company through Vanessa Serrano Cuevas’s direct and indirect ownership of our Shares as from December 31, 2022, and members of the Serrano Segovia family serve as members of our Board of Directors. Holders of our ADSs may not vote at our shareholders’ meetings. Each of our ADSs represents five CPOs. Holders of CPOs are not entitled to exercise any voting rights with respect to the Shares held in the Master Neutral Investment Trust (Fideicomiso Maestro de Inversion Neutra) (the “CPO Trust”). Such voting rights are exercisable only by the trustee, which is required by the terms of the trust agreement to vote such Shares in the same manner as the majority of the Shares that are not held in the CPO Trust that are voted at any shareholders’ meeting. Currently the Serrano Segovia family owns a majority of the Shares that are not held in the CPO Trust. As a result, the Serrano Segovia family will be able to direct and control the policies of the Company and its subsidiaries, including mergers, sales of assets and similar transactions. See Item 7. “Major Shareholders and Related Party Transactions - Major Shareholders.”
 
A change in control may adversely affect us.
 
In the past, a portion of the Shares and ADSs of the Company held by the Serrano Segovia family was pledged to secure indebtedness of the Serrano Segovia family and entities controlled by them and may from time to time in the future be pledged to secure obligations of other of their affiliates. A foreclosure upon any such Shares held by the Serrano Segovia family could result in a change of control under the various debt instruments of the Company and its subsidiaries. Such debt instruments provide that certain change of control events with respect to us will constitute a default and that the relevant lenders may require us to prepay our debt obligations including accrued and unpaid interest, if any, to the date of such repayment. If such a default occurs, we cannot assure you that we will have enough funds to repay our debt.
 
Our ADSs trade on the over-the-counter (“OTC”) market, which may limit the liquidity and price of our ADSs more than if the ADSs were quoted or listed on a national securities exchange.
 
Our ADSs currently trade on the OTC market under the ticker symbol GTMAY. The OTC market is a significantly more limited market than a national securities exchange such as the New York Stock Exchange (“NYSE”) or NASDAQ, with generally lower trading volumes and higher price volatility. Quotation of the ADSs on the OTC market may limit the liquidity and price of the ADSs and could adversely impact our ability to raise capital
 
ITEM 4
INFORMATION ON THE COMPANY
 
History and Development of the Company
 
We were formed on August 14, 1987, under the laws of Mexico as a variable capital corporation (sociedad anónima de capital variable) to serve as a holding company for investments by certain members of the Serrano Segovia family.
 
TMM merged with and into Grupo TMM (formerly Grupo Servia, S.A. de C.V. (“Grupo Servia”)), which was effected on December 26, 2001, leaving Grupo TMM as the surviving entity. Under the terms of the merger, all of the assets, privileges and rights and all of the liabilities of TMM were transferred to Grupo TMM upon the effectiveness of the merger. TMM was founded on September 18, 1958 by a group of private investors, including the Serrano Segovia family.
 
22
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. A Maritime Service Contact was entered into to operate TMMDM’s supply vessels and tankers, which was terminated by both parties in August of 2022.
 
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., Colonia Juárez, 06600, 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.
 
Business Overview
 
General
 
We are one of the largest logistics and transportation companies in Mexico, providing a variety of integrated and dynamic logistics and transportation services to premium clients throughout Mexico, including maritime transportation services, ports and terminals management, logistics services and warehousing services.
 
As part of the strengthening plan, (i) we have reassigned the ship agency business to the Maritime Operations Division, which was previously reported as part of the Ports and Terminals Division, (ii) the shipyard business has become a Business Division, now called Maritime Infrastructure (this division was previously a part of the Maritime Operations Division), and (iv) the Logistics Division is now reported within the Ports, Terminals and Logistics Division.
 
23
Maritime Operations. Our Maritime Operations division provides maritime transportation services, including the operation of offshore vessels that provide transportation and other services to the Mexican offshore oil industry, tankers that transport petroleum products within Mexican and international waters, parcel tankers that transport liquid chemical and vegetable oil cargos from and to the United States and Mexico, and dry bulk carriers that transport unpackaged commodities such as steel between South America, the Caribbean and Mexico. As of March 31, 2023, we operate a fleet of 6 vessels, which includes parcel tankers and a variety of offshore supply vessels.  This business unit also provides maritime agency services to ship owners and operators of Mexico’s main ports.
 
Maritime infrastructure operations. 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,  which is expected to be incorporated in the second quarter of 2023. IDN services more than 30 vessels per year and provides us with the necessary capabilities to build additional naval vessels.
 
Ports, Terminals and Logistics Operations. We presently provide general cargo operations at the port of Tuxpan, under a permit granted by the Mexican government, which provides for certain renewal rights. As of June 2021 and as a result of the Mexican government’s decision that all ports should be operated by such government, our concession in the port of Acapulco was not renewed.
 
In addition, we provide dedicated logistics services to major manufacturers, including automobile manufacturers and retailers with facilities and operations throughout Mexico. The services that we provide include consulting, analytical and logistics outsourcing services, which encompass the management of inbound movement of parts to manufacturing plants consistent with just-in-time inventory planning practices; logistics network (order-cycle) analysis; logistics information process design; intermodal transport; supply chain and logistics management; product handling and repackaging; local pre-assembly; maintenance and repair of containers in principal Mexican ports and cities and inbound and outbound distribution using multiple transportation modes. Due to the scope of our operations, together with the extent of our experience and resources, we believe that we are uniquely positioned to coordinate the entire supply chain for our customers.
 
Warehousing Operations. Through our subsidiary, Almacenadora de Depósito Moderno, S.A. de C.V. Auxiliary Credit Organization (“ADEMSA”), we provide warehousing and bonded warehousing facility management services. ADEMSA currently operates over 217,000 square meters of warehousing space throughout Mexico, including 67,353 square meters of direct warehouse space (the largest of which is located in northern Mexico City). Due to its regulated nature, ADEMSA is one of a limited number of warehousing companies authorized by the Mexican government to provide bonded warehousing services and to issue negotiable certificates of deposit.
 
Set forth below are our total revenues over the last three fiscal years for each of our business segments:
 
   
Consolidated Transportation Revenues
(in millions of Pesos)
Years Ended December 31,
  
   
2022
    
2021
    
2020
  
Maritime Operations
  
$
1,231.1
    
$
835.2
    
$
650.4
  
Maritime infrastructure operations
    
118.5
      
139.2
      
100.9
  
Ports, terminals and logistics Operations
    
161.0
      
223.8
      
313.0
  
Warehousing Operations
    
172.5
      
153.5
      
139.0
  
Total
  
$
1,683.1
    
$
1,351.7
    
$
1,203.3
  

24
Recent Developments
 
COVID-19
 
On March 11, 2020, WHO declared COVID-19 a pandemic. In response, governments around the world, including Mexico, have implemented a variety of extraordinary measures to control its spread, including travel restrictions, quarantines, and suspension of non-essential activities.
 
On May 5, 2023, the WHO officially declared the end of the COVID-19 pandemic in the world. By the same token, the government of Mexico announced that the country is closing the epidemic cycle and is moving toward an endemic. The effect of the COVID-19 pandemic in our business remains uncertain, and will depend on its duration and its impact on the Mexican and global economies.
 
In light of these and other conditions beyond our control, our operating results may be volatile and subject to change rapidly. In this sense, the Company adapted an operating scheme to face the crisis, which to this date remains in effect. Currently, all operating activities are face-to-face and only administrative activities operate under a hybrid home office - face-to-face scheme.
 
For fiscal year 2022, the Group’s revenues, particularly in the Ports and Terminals service line, as well as in the maritime agency business, continue to be partially depressed due to the COVID-19 pandemic and the various emergency public health measures enacted by governments to combat it. Although the Group expects its revenue to improve as the end of the COVID-19 emergency is declared, as of the date of these consolidated financial statements the Group is unable to quantify the adverse effect that COVID-19 will have on operating income for fiscal year 2023. In addition, we have taken several measures to maintain business continuity and strengthen our financial condition, including deferring payments to suppliers and creditors, maintaining our anticipated collection program to help offset the effect of late payments from customers, as well as different actions to reduce overhead expenses. As part of these efforts, it was decided to change corporate offices. The Group remains in compliance with the health and safety protocols established by the Mexican government and has taken measures and implemented policies to safeguard its businesses, employees and the locations in which it operates from the threats posed by the COVID-19 pandemic. We have adopted the hybrid model of working while maintaining limited access to facilities and implementing new controls for emergency procedures and mitigating potential cybersecurity risks. Going forward, we will continue to closely monitor the development of the COVID-19 pandemic, including its effect on our business, financial condition and results of operations.
 
Digitalization Strategy
 
As part of our Digitalization strategy to enhance our business performance, we have focused on developing software applications in-house instead of buying commercial software products, allowing us to reduce our spending on third-party technology applications. We have developed and implemented a Warehouse Management System (“WMS”) and Customer Relationship Management (“CRM”) platform for use in our warehousing and logistics businesses and a Container Depot Management (“CDM”) platform for maintenance, repair, and port terminal management of shipping containers in our ports and terminals business. We have also developed several proprietary data exchange interfaces which have allowed us to exchange data in real time between our systems and those of our customers, providing them an additional value-added service.
 
We have 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 operates on the SAP S4/HANA system, is currently operating consistently and is stable for the administrative and financial processes, however, due to a reduction in the users of 60%, the operative cost per user is very high and therefore, during 2023, it was decided to migrate to ERP Microsoft Dynamics 365. This will generate estimated savings of 80% of the annual cost of the system operation for the administrative and financial processes of the Company, adjusting to the current reality of such company.
 
25
By operating the Company’s technological ecosystem on the Microsoft 365 platform, our main office applications, e-mail, and virtual communications systems will be naturally integrated into the administrative and financial management system (ERP).
 
We updated our help desk platform to a more robust system called “Apolo”, to handle technical support cases and, consequently, manage and meet the IT support needs of users. We are also implementing (i) a system to administer the operation of containers’ yards named “Adiran”, (ii) a commercial management system (CNM) named “Arcadia”, and (iii) a national warehouse management system named “Gala”.
 
We continue to grow the online training platform named “Talentum” by including new digital content. This platform consists of video tutorials that recreate the most common operations conducted in the Company’s systems, helping to reduce the learning curve of new employees and to improve the knowledge of current employees.
 
New Mexico City Airport Bonded Warehouse
 
On February 4, 2022 the new airport in Mexico City (Aeropuerto Internacional Felipe Angeles-AIFA) awarded our wholly owned subsidiary, TMM Almacenadora S.A.P.I. de C.V., a 10-year lease to operate a bonded warehouse of 5,184 square meters within the airport’s cargo terminal. Also, in August of the same year, we were awarded a 10-year lease to operate a 12,200 m2 warehouse for domestic cargo. In December 2022, we partnered with an important company specialized in port terminals for the development and operation of the warehouses; we expect to start operations during the second quarter of 2023.
 
Termination of our Concession at the Port of Acapulco
 
Since June 1996, we had operated the port of Acapulco in association with SSA Mexico through a 25-year concession granted by the Mexican government. Although the concession provided for the possibility of renewal, the administration of president Manuel López Obrador elected to not to renew the concession and to transfer control of the port to SEMAR. As a result, our operations at the port of Acapulco terminated concurrently with the expiration of our concession effective as of June 21, 2021.
 
Refinancing of Certain Credit Lines
 
During 2020, 2021 and 2022, 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.
 
Charter of Specialized “Mud Vessels”
 
In August 2021, PEMEX awarded us a 3-year contract to operate three specialized “mud vessels” for use in the generation, transportation, conditioning and recovery of fluids during the drilling, completion and repair of offshore oil wells. At the end of August 2022, the company obtained the incorporation of a fourth mud vessel; with the same expiration of the aforementioned contracts.
 
Relocation of Corporate Headquarters
 
As part of our cost reduction efforts, in 2021 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.
 
Vessel Sales
 
In accordance with our fleet modernization plan, in recent years we have sold or otherwise ceased to operate a number of vessels. We 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 chemical 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 9 of the accompanying Audited Consolidated Financial Statements.
 
26
RTG Crane Acquisition
 
In June 2019, we entered into a financing agreement with PNC Bank, N.A., guaranteed by EXIM Bank, to acquire a rubber tyred gantry (“RTG”) crane to replace the 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.
 
Refinancing of Parcel Tankers Debt
 
In May 2018, following the sale of the chemical tanker M/T “Maya” the Company prepaid the full US$25 million outstanding on a line of credit from DVB Bank America, N.V. which had been incurred to finance the purchase of that vessel. In addition, in September 2018, the Company obtained a new line of credit from ACT Maritime LLC, a subsidiary of Alterna Capital Partners, LLC, in the amount of US$5.25 million, at a variable rate of LIBOR 90 days plus 750 points, with quarterly payments of principal and interest, and maturing in September 2023. The proceeds of this new line of credit were used to pay off the remaining balance of the 10-year line of credit in the original amount of US$27.5 million that the Company had obtained from DVB Bank America, NV in May 2007 to purchase the chemical tanker M/T “Olmeca.” In December 2020, we used the funds obtained from Athene Shipping Limited as an advance on the sale of the “Olmeca” to prepay in full the US$3.5 million outstanding on the ACT Maritime LLC line of credit. See Item 5. “Liquidity and Capital Resources - Purchase of Two Parcel Tankers”.
 
Termination of the operation and management contract of TMMDM’s fleet.
 
In August of 2022, the Maritime Services Agreement with TMMDM, which was entered into on December 15, 2017, was terminated as a result of the transfer by the Company of 85% of the shares in TMMDM to the holders of Senior Trust Bonds issued by TMMDM under the Senior Trust Bond program. As a result of this termination, in no time, the Maritime Division will eliminate the name TMM from its corporate name. This operation solely represented 1% of the consolidated revenue.
 
Termination of the business of transporting steel to South America in bulk carriers.
 
In August 2017, we began the service of transporting steel in bulk to South America in specialized vessels called bulk carriers. As part of our strategy to have profitable operations, we terminated this service in December of 2022.
 
The Mexican Market
 
Since TMM’s formation in 1958, the growth and diversification of the Mexican economy have largely driven our growth. Following the enactment of NAFTA, which became effective January 1, 1994, trade with and investment in the Mexican economy has significantly increased, resulting in greater traffic along the North-South cross-border trade routes that extend from Canada to the United States and Mexico. The USMCA, the successor to NAFTA, entered into force on July 1, 2020. Although the USMCA aims to support mutually beneficial trade and robust economic growth among parties, we cannot predict the impact the USMCA will have on the Mexican economy or our operating results. The following table illustrates the growth of the foreign trade segment of the Mexican economy over the last three years:
 
27
   
Foreign Trade 2020-2022(a)
  
   
As of December 31,
(in millions of Dollars)
  
   
2022
    
2021
    
2020
  
Total Exports
  
$
578,193
    
$
494,765
    
$
417,171
  
Total Imports
  
$
604,615
    
$
505,703
    
$
382,986
  
Total Trade Flows
  
$
1,182,808
    
$
1,000,468
    
$
800,157
  
Growth Rate-Exports
    
16.9
%
    
18.6
%
    
(9.4
)%
Growth Rate-Imports
    
19.6
%
    
32.0
%
    
(15.9
)%
Growth Rate-Total
    
18.3
%
    
25.0
%
    
(12.6
)%
Growth Rate-GDP(b)
    
3.1
%
    
4.7
%
    
(8.0
)%


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

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

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

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

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

 •
We began strengthening our Maritime Sector related businesses through the addition of 4 specialized vessels to our offshore operations services under a time charter contract with Pemex. These vessels, known as “mud vessels”, are used in the generation, transportation, conditioning and recovery of fluids during the drilling, completion and repair of offshore oil wells.
 

 •
In February and August 2022, Aeropuerto Internacional Felipe Angeles-AIFA, the new airport in Mexico City, awarded our wholly owned subsidiary, TMM Almacenadora S.A.P.I. de C.V., a 10-year lease to operate a bonded warehouse of 5,184 square meters within the airport’s cargo terminal and a 12,200 m2 warehouse for domestic cargo, respectively. In December 2022, we entered into a partnership with an important company specialized in port terminals for the development and operation of these businesses.
 
28

 •
In December 2020, we prepaid the full US$3.5 million outstanding on our 5-year line of credit from ACT Maritime LLC, a subsidiary of Alterna Capital Partners, LLC, with proceeds from our sale of the parcel tanker M/T “Olmeca ”.
 
Our business strategy is focused on the following:
 
- Strengthen our business related to the Maritime Sector by adding more specialized vessels to our Offshore operations services, as well as increasing our client base in parcel tankers and maritime agency services.
 
- Increasing the installed capacity in our Maritime Infrastructure operations (shipyard in Tampico), which will allow the company to integrate, in the short term, up to 94% of the potential market of offshore vessels operating in the Gulf of Mexico; in the medium term, we plan to have an additional dock of greater capacity that will also allow the construction of naval artifacts.
 
- Maintaining efficient and profitable operations in Ports and Terminals, Logistics and Storage.
 
- Diversification and expansion of services through strategic alliances or associations with which we also develop the markets in which we participate.
 
- Business development with the assets strategically located in Tuxpan, Veracruz and the existing investment opportunities in the oil and gas storage sector, as well as general cargo, to develop liquid and multipurpose terminals, such as lubricants, fertilizers and grains, equipped with modern equipment for the handling and storage of high quality, fast and safe goods.
 
- Disciplined and continuous control of expenses, as well as the optimization of staff size in accordance with the implementation of the plans described above, which will allow, as a whole, the financial strengthening and implementation of its short and medium term projects.
 
We expect to fulfill all of the above mentioned objectives through a series of financial and commercial strategies that are described in full detail in Item 5. “Operating and Financial Review and Prospects”.
 
Certain Competitive Advantages
 
We believe that we benefit from the following competitive advantages:
 

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

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

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

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

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

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

 •
Our operations in Tuxpan, Veracruz are in a prime location to capitalize on the growth of trade via the Gulf of Mexico.
 
29
Maritime Operations
 
Our Maritime Operations include: (a) supply and logistics services for the offshore oil industry at facilities in the Gulf of Mexico and between ports and/or to and from oil platforms; (b) parcel tankers, for the transportation and loading of liquid chemical products between ports in Mexico and the United States; (c) port agency services in the country’s main ports for both cargo vessels and cruise ships. This segment represented 73.1% of consolidated revenues for the year 2022, 61.8% for the year 2021 and 54.0% for the year 2020.

Fleet Management
 
As of March 31, 2023, we operated a fleet of 6 vessels comprised of two parcel tankers, as well as 4 offshore vessels. It is worth mentioning that until August 2022, we operated, commercialized and managed 24 vessels owned by TMMDM (23 supply vessels, 1 tanker), through a Maritime Services Agreement, which was terminated by both parties last August 2022. Under such agreement, TMMDM was required to pay a fee based on the income based on the shipping revenues.

The table below sets forth information as of March 31, 2023, about the fleet we operate by type, size and capacities:
 
Vessel Type
  
Number of
Vessels
    
Total Dead
Weight Tons
(in thousands)
    
Total Cubic
Meter Capacity
(in thousands)
    
BHP(*)
  
Offshore vessels
    
4
       **

    **

   
8,061
  
Parcel tankers
    
2
      
29.5
      
31.3
       **

                                 
Total
    
6
      
29.5
      
831.3
      
-
  


*
Average Brake Horse Power.
**
Not applicable.

Offshore Vessels
 
We have been participating in this business for more than 25 years. Our offshore division provides supply and logistics services to the offshore industry between the ports and the offshore facilities in the Gulf of Mexico through a specialized fleet that includes mud vessels, , supply vessels, anchor handling tug supply vessels,  production, storage and offloading (“FPSO”) vessels and Dynamic Positioning (“DP”) vessels. Other services include supply and administration of onboard personnel, coordination and supervision of the maritime transport of staff, materials and equipment from the base on shore to operational points of the vessels within the oil-drilling zone of the Gulf of Mexico.
 
During 2021, PEMEX conduced a public tender through which we were awarded three long-term charter contracts for the mud vessels Redfish 4, Beluga 2 and Go Canopus, each of which commenced operations in July 2021. At the end of August 2022, the company secured the addition of a fourth mud vessel, (Gannet).
 
Set forth below is information regarding the offshore vessels fleet as of March 31, 2023:
 
Vessel
Year
Flag
  
DWT(1)
    
LOA(2)(m)(3)
    
Beam (m)
    
BHP
  
Charterer(s)
+ Redfish 4
2012
Mexico
    
2,435
      
67.40
      
16.00
      
8,000
  
PEP
+ Beluga 2
2012
Mexico
    
2,436
      
67.40
      
16.00
      
7,369
  
PEP
+ Go Canopus
2009
Mexico
    
2,278
      
67.00
      
16.00
      
10,876
  
PEP
+ Gannet
2013
México
    
4,100
      
78.00
      
18.60
      
6,000
  
PEP


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

30
Product Tankers
 
Since 1992, we have provided product tanker chartering services to PEMEX and its subsidiaries for the transportation of clean and dirty petroleum products from refineries to various Mexican ports. As of December 31, 2022, the fleet we operated was comprised of one product tanker without a contract. Currently, we do not operate product tankers, as a result of the termination of the labor relationship of the maritime services provider with División Marítima.
 
Parcel Tankers

Our Parcel Tanker business operates between Mexican and American ports in the Gulf of Mexico, transporting chemicals, vegetable and animal oils and molasses. The majority of the transported cargo is under contracts of affreightment (“COAs”) in which the customers commit the carriage of their cargo over a fixed period of time on multiple voyages, with a minimum and a maximum cargo tonnage at a fixed price. The vessel operator is responsible for the vessel, the fuel and the port expenses. Currently, our parcel tanker fleet is comprised of two chartered vessels. We transported 531 thousand tons of chemical products in our parcel tankers during 2022, 518 thousand tons during 2021, and 606 thousand tons during 2020. 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, 2023:
 
Vessel
  
Flag
  
Year
  
Length
  
Beam
  
Draft
  
DWT(1)
  
Capacity M3
Total
  
           
(m)(2)
  
(m)
  
(m)
          
Chemical Atlantik
  
Turkey
  
2018
    
145
    
21.0
    
8.53
    
15,081
    
15,154
  
Oriental Marguerite
  
Panama
  
2008
    
134.2
    
20.5
    
8.81
    
14,367
    
16,232
  
                       
Total
    
29,448
    
31,386
  


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

Bulk Carrier
 
In August 2017, we commenced transporting unpackaged general commodities such as steel between South America, the Caribbean and Mexico in specialized ships called bulk carrier vessels. Our bulk carrier services typically involve the hiring of a bulk carrier vessel approximately once per month. On December 31, 2022, we concluded this service.
 
Maritime Agency Services
 
We work as representatives of shipowners through our agencies in the principal ports of Mexico, including the ports of Acapulco, Veracruz, Coatzacoalcos, Ciudad del Carmen, Dos Bocas, Tuxpan, Cozumel, Costa Maya, Progreso and Zihuatanejo. Our agencies that provide services to vessel owners and operators in Mexican ports include: (i) port agent services, including the preparation of the necessary documentation with the port authorities for the clearance of vessels; (ii) security agent services, which supports the rotation of crew members and the provision of spare parts; (iii) multimodal cargo and supervision; (iv) vessel provisioning services, which include the procurement of food, water and supplies and (v) fueling services, which include the coordination of fuel delivery services. Our shipping agencies also provide shipping agency services to other major ports through agreements with local agents.
 
31
Customers and Contractual Arrangements
 
The primary purchasers of our Maritime Operations services are multi-national oil, gas and chemical companies. These services are generally contracted for on the basis of short-term or long-term time charters, voyage charters, COAs or other transportation agreements tailored to the shipper’s requirements. In 2022, excluding customers contracted through TMMDM, our ten largest customers accounted for approximately 84% and 62% 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.
 
Markets
 
The demand for offshore vessels is affected by the level of offshore exploration and drilling activities, which in turn is influenced by a number of factors including:
 

 •
expectations as to future oil and gas commodity prices;
 

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

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

 •
worldwide demand for oil and natural gas;
 

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

 •
the level of production of non-OPEC countries;
 

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

 •
various government policies regarding exploration and development of their oil and gas reserves.
 
Maritime Infrastructure Operations
 
The Company has a concession to operate a shipyard in the port of Tampico, Mexico. The shipyard is strategically located on the Gulf of Mexico, in close proximity to offshore oil and gas facilities and other key trade routes between the southeastern United States and Mexico. The shipyard provides repair services to more than 30 vessels per year. In addition, to better capitalize on the opportunities created by new entrants in the Mexican market, we intend to expand and diversify our shipyard capabilities through the addition of a new 6,600-metric-ton floating dock, expected to be delivered in the second quarter of 2023.
 
32
Ports, Terminals and Logistics Operations
 
We conduct general cargo operations at the public berth in the port of Tuxpan pursuant to a permit awarded by the Mexican government. Additionally, we own land in Tuxpan on which we are developing a liquid oils terminal and a multipurpose one. 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 0.3%, 1.1% and 5.7% of consolidated revenues in 2022, 2021 and 2020, respectively.
 
The following table sets forth our existing port facilities and concessions:
 
Port
  
Concession/Permit
  
Date Awarded
  
Duration
             
Tuxpan
  
Stevedoring services
  
August 4, 1999
  
20 years (with the possibility of successive 10-year extensions, which were exercised in 2009 and 2019, respectively).

Tuxpan
 
Since 1999, we have held a permit to provide general cargo operations at the public berths in the port of Tuxpan, such as loading and unloading of grain and gravel for the construction of a gas pipeline. We also offer container-warehousing services at this port. In addition, we own approximately 1,780 acres of land in the port of Tuxpan through our wholly owned subsidiaries, Bimonte S.A. de C.V., Prestadora de Servicios MTR, S.A. de C.V. and Services and Solutions Optimus, S. de R.L. de C.V., in which we plan to develop a liquid oils terminal, a multipurpose terminal, and logistic facilities.
 
In August 2016 we announced a new venture with TransCanada and Sierra Oil & Gas to jointly develop a mid-stream infrastructure in Tuxpan as well as an inland distribution center to serve the growing demand for refined products such as gasoline, diesel and jet fuel in the central region of Mexico. The site includes a liquid oils terminal being developed by Services and Solutions Optimus, S. de R.L. de C.V., which had been jointly owned 50% by the Company and 50% by Sierra Oil & Gas. In February 2019, we purchased the 50% interest held by Sierra Oil & Gas for US$2.6 million. With this purchase, we acquired full ownership and control of the project and Services and Solutions Optimus, S. de R.L. de C.V. became a wholly owned subsidiary of the Company. Once completed, the liquid oils terminal should allow us to supply up to 80,000 barrels per day of refined products.
 
Acapulco
 
In June 1996, we received a 25-year concession to operate the tourist port of Acapulco. Our port interests in Acapulco were operated through a joint venture with SSA called Administración Portuaria Integral de Acapulco, S.A. de C.V. (“API Acapulco”), in which we hold a 51% interest. Through API Acapulco, we operated and managed an automobile terminal, a cruise ship terminal with a capacity to receive two cruise ships simultaneously and an automobile warehouse with a capacity to store up to 1,700 automobiles.
 
When our concession came up for renewal in June 2021, the López Obrador administration decided that the public interest would be best served by transitioning Mexican port operations to the oversight and control of SEMAR. As a result, our concession to provide port and terminal operations in Acapulco expired effective as of June 21, 2021.
 
From January 1, 2021 through the expiration of our concession on June 21, 2021, we handled 5,263 export automobiles for Volkswagen, Chrysler and Nissan to South America and Asia. With respect to the cruise ship terminal, in 2021 we didn’t receive any cruise ships.
 
33
Logistics Operations
 
Through TMM Logistics, S.A. de C.V. (“TMM Logistics”), a wholly owned subsidiary of Grupo TMM, we provide dedicated logistics services to major manufacturers, including automobile manufacturers, and retailers with facilities and operations throughout Mexico. The services that we provide include consulting, analytical and logistics outsourcing services, which encompass the management of inbound movement of parts to manufacturing plants consistent with just-in-time inventory planning practices; logistics network (order-cycle) analysis; logistics information process design; supply chain and logistics management; 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 9.2%, 15.4% and 20.2% of consolidated revenues in 2022, 2021 and 2020, respectively.
 
Automotive Services
 
We provide specialized logistics support for the automotive industry within Mexico. Services include the arrangement and coordination of the movement of motor vehicle parts or sub-assemblies from supplier facilities to assembly plants, warehousing, inspection and yard management. Our logistics services can be provided as end-to-end integrated logistics programs (bundled) or discrete services (unbundled) depending on customer needs.
 
Container Maintenance and Repair
 
We offer maintenance and repair services for dry and refrigerated containers in Manzanillo, Veracruz, Altamira, Ensenada, Aguascalientes, and Mexico City (Pantaco). These services involve keeping refrigerated components and other parts of a container in useable condition, including mechanical repair, welding and repainting of such containers.
 
Warehousing Operations
 
We offer warehousing and bonded warehousing facility management services through our subsidiary, ADEMSA. ADEMSA currently operates over 217,000 square meters of warehousing space throughout Mexico, including 67,353 square meters of direct warehouse space (the largest of which is located in northern Mexico City). Due to its regulated nature, ADEMSA is one of a limited number of warehousing companies authorized by the Mexican government to provide bonded warehousing services and to issue negotiable certificates of deposit. This segment accounted for 10.3%, 11.4% and 11.6% of consolidated revenues in 2022, 2021, and 2020, respectively.
 
Grupo TMM’s Strategic Partners
 
We are currently a partner in the following strategic arrangements:
 
Business
  
Partner
Commercialization of Petroleum Products
  
Petrosoluciones en Firme, S.A.P.I de C.V.
Energy Infrastructure
  
EGI Oil & Gas, S.A. de C.V.
Warehouses at new airport (AIFA)
TAP La Junta

Sales and Marketing
 
Much of the success of our business depends on our marketing network. Our marketing network includes affiliated offices, agencies at Mexican ports and a sales force based throughout Mexico to sell our logistics, warehousing, ports and specialized maritime services. Our marketing and sales efforts are designed to grow and expand our current customer base by initiating long-term contracts. We have devised, implemented and will continue to implement several customer service initiatives in connection with our marketing efforts, which include the designation of customer sales territories and assignment of customer service teams to particular customers.
 
Since we commenced operations, we have been actively seeking to obtain new customer contracts with the expectation of entering into long-term contracts with such new clients or with existing customers. Although written customer contracts are not customary in Mexico, we have succeeded in negotiating written contracts with a number of our major customers.
 
34
Systems and Technology
 
We continually seek to update and improve our technology systems and processes to improve our operations. Our systems and applications are regularly updated following industry best practices and applying an agile methodology that ensures an efficient and cost-effective implementation process. In terms of on-premises IT security, we have implemented advanced devices and applications to increase the accuracy and security of our information, and at the cloud and data network level, we constantly monitor the environments hosting each platform as well as the performance, data traffic and stability of our communications networks to ensure the continuity of our business operations.
 
When implementing the technology platforms that support the operations across our business units, we work hand in hand with specialized teams of IT consultants and globally recognized companies such as Microsoft and SAP. In collaboration with these companies, we have implemented IT best practices and jointly developed a technology strategy to enable us to respond swiftly to the current needs of our businesses, while simultaneously laying the groundwork for future evolution in our IT systems. Underlying our technology strategy is an understanding that our IT systems must remain flexible and able to adapt to changes in the financial conditions of the Company and emerging national and international trends, practices or circumstances.
 
Competition
 
Maritime Operations
 
The Company’s primary competitors in the offshore vessel business are Tidewater de Mexico, S. de R. L. de C.V., Naviera Bourbon Tamaulipas, S.A. de C.V., Mantenimiento Express Marítimo, S.R.L., Naviera Integral, S.A. de C.V., Blue Marine Technology Group, Harvey Gulf, and Hornbeck Offshore Services de Mexico S de RL de CV.
 
The Company’s primary competitor in the parcel tanker business is Stolt-Nielsen Transportation Group Ltd. Some other competitors in this business include Team Tankers, Ace Tankers, Eitzen and Caribbean Tankers, Inc. and Nordic Tankers.
 
The Company’s primary competitors in the product tanker business are Scorpio Tankers, Maersk Tankers, and PEMEX Refinación.
 
In the shipping agency business, the Company’s main competitors are Representaciones Marítimas, Meritus and Aconsur.
 
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.
 
Maritime Infrastructure Operations
 
The principal 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 that the most important competitive factors in the Marine Infrastructure segment are quality, repair times, geographic location, as well as customer service.
 
35
Ports, Terminals and Logistics Operations
 
The Company’s key competitors in its ports business are CICE, Hutchinson Ports, SSA Mexico and Amports.
 
The Company believes the most important competitive factors concerning the Ports and Terminals Operations segment are location, 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, CPV and CSI.
 
In its maintenance and repair business, the Company faces competition primarily from Container Care International Inc., CIMA and Grupo SLTC.
 
The Company believes the most important competitive factors in the Logistics Operations segment are price, customer service, brand name, experience, operating capabilities and state-of-the-art information technology.
 
Warehousing Operations
 
Our warehousing business’ main competitors are Almacenadora Mercader, Afirme Almacenadora, Almacenadora Sur and, ACCEL.
 
The Company believes the most important competitive factors in the Warehousing Operations segment are value-added services, competitive rates, nationwide coverage, customer service, brand name, experience, operating capabilities and state-of-the-art information technology.
 
Regulatory Framework
 
Certain countries have laws which restrict the carriage of cargos depending upon the nationality of a vessel or its crew or the origin or destination of the vessel, as well as other considerations relating to particular national interests. In accordance with Mexico’s Navigation Law (Ley de Navegación y Comercio Marítimos), cabotage (intra-Mexican movement) is reserved for ships flying the Mexican flag. We believe we are currently in material compliance with all restrictions imposed by the jurisdictions in which we operate. However, we cannot predict the cost of compliance if our business is expanded into other jurisdictions which have enacted similar regulations.
 
We are also subject to the laws of various jurisdictions and international conferences with respect to the discharge of materials into the environment. See “- Environmental Regulation” and “- Insurance.”
 
Our port operations are subject to the Ley de Puertos. Port operations require a concession title granted by the Mexican government to special companies incorporated under the Ley de Puertos, which companies may partially assign their concession title to third parties for the use and exploitation of assets owned by the Mexican government in the different port facilities (subject to the Ley de Puertos and the terms and conditions of the concession title). Various port services require a special permit granted by the Ministry of Communications and Transportation of Mexico. Concession titles may be revoked under certain circumstances in accordance with applicable law and the terms of the concession title. Partial assignments of concession titles may be rescinded under certain circumstances established in the corresponding assignment agreements. Foreign investment in special companies incorporated under the Ley de Puertos may not exceed 49%, except through vehicles or securities deemed by applicable Mexican law as “neutral investments.”
 
Mexican Navigation Law
 
The Mexican Navigation Law (Ley de Navegación y Comercio Marítimos) was enacted in 2006, with its most recent amendments effective as of January 23, 2014. This law: (i) strengthens the reservation of cabotage services for Mexican individuals dedicated to shipping or Mexican shipping companies; (ii) establishes mechanisms and procedures for the resolution of maritime controversies or disputes and (iii) in general terms, is protective of the Mexican shipping industry. Nevertheless, there can be no assurance that the percentage of Mexican-flagged vessels operating in Mexico will continue to increase in the future.
 
36
The law gives precedence to international treaties ratified by Mexico to foster uniformity in the type of regime applicable to specific circumstances such as the Hague Visby Rules, CLC/FUND Conventions, 1976 Limitation Convention, Salvage Convention, COLREGS, and MARPOL. (All vessels navigating Mexican waters must enter into protection and indemnity insurance agreements.)
 
Listed below are some of the salient points of the legislation:
 

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

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

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

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

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

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

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

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

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

 •
maritime privileges are also considered within the law.
 
The law establishes time limits for commencement of proceedings with respect to 7 specific types of contracts as follows:
 

 •
bareboat charter;
 

 •
time charter;
 

 •
voyage charter;
 

 •
carriage of goods;
 

 •
passengers;
 

 •
salvage; and
 

 •
towage.
 
37
Regulations of the Mexican Navigation Law
 
On March 4, 2015, the Regulations of the Mexican Navigation Law (“Reglamento de la Ley de Navegación y Comercio Marítimos”) were published in Mexico’s Official Gazette and became effective 30 days thereafter. Enactment of the regulations represented a significant event in the merchant maritime sector and were aimed at enhancing legal certainty and promoting trade. In particular, the regulations reduced administrative complexity by consolidating several existing laws or regulations into a single set of regulations.
 
The regulations develop various substantive aspects of the Mexican Navigation Law, including:
 

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

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

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

 •
revisions to conform hydrocarbons terminology to the new Hydrocarbons Law.
 
Following the adoption of the regulations, several topics covered by the Mexican Navigation Law are addressed in a single document, including merchant marine education, maritime insurance, vessel inspection, maritime public registry, flag and registration of vessels and naval crafts, and marine prevention.
 
Mexican Energy Reforms
 
On December 12, 2013, the Mexican government passed legislation amending articles 25, 27 and 28 of the Mexican Constitution (Constitución Política de los Estados Unidos Mexicanos) and providing 21 transitional articles to establish the legal framework for reforming the Mexican energy sector. The reforms aim to modernize the Mexican energy sector and increase private investment by, inter alia:
 

 •
providing for PEMEX and CFE to become state-owned, for-profit companies (empresas productivas del estado, 100% Mexican);
 

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

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

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

 •
allowing PEMEX to transfer its rights to explore for and develop oil and gas resources to private entities upon application to SENER;
 
38

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

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

 •
creating the National Agency of Industrial Security and Environmental Protection of the Hydrocarbon Sector (Agencia Nacional de Seguridad Industrial y de Proteccion al Medio Ambiente del Sector de Hidrocarburos) to regulate and supervise matters concerning operational security and environmental protection in the oil and gas industry.
 
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 deep-water exploration areas. “Round two”, which began in June 2017, was divided into four tenders, the first of which involved the award of production sharing contracts, while the following three rounds involved the award of license contracts. “Round three” began in September 2017 and consisted of three tenders, the first of which involved the award of production sharing contracts, with the following two rounds featuring license contracts. Additionally, there are the so-called “farmouts” in which PEMEX will conduct oil and gas operations jointly with a third party, either to increase production, share risks, obtain geological information or access new technology. Farmouts were scheduled to be divided into four tenders, the first of which resulted in the signing of a license contract in March 2017. The bidding process for the remaining farmout tenders began in 2017 and resulted in two license contracts signed in March 2018.
 
In October 2021, the government presented its five-year plan for 2020-2024, which prioritizes investments in shallow waters and conventional onshore areas, and excludes unconventional onshore and deep-water areas. Furthermore, the plan indicates that the current administration does not intend to initiate new bidding processes for the award of further exploration and production rights until the current contracts demonstrate that they can generate profits for the government.
 
On March 26, 2021, President Andrés Manuel López Obrador proposed legislation to amend certain provisions of the Hydrocarbons Law (the “Amendment”) to, among other things, prevent speculation in the oil market and curtail the illegal trafficking of gasoline. Following a spirited legislative debate, the Amendment was passed by the Mexican government and became effective on May 5, 2021 following its publication in the Federal Official Gazette.
 
This Amendment introduces key modifications to the regulatory structure for the granting of permits for midstream and downstream activities under the Hydrocarbons Law, establishing heightened requirements on companies applying for permits to refine oil, process natural gas, or engage in various other activities including transportation, storage, distribution, compression, liquefaction, decompression, regasification, commercialization, and retail of hydrocarbons, fuels and petrochemicals. In particular, the Amendment:
 

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

 •
modifies the procedure for the approval of applications to assign a permit, moving from the current “deemed approval” system under which an assignment application is deemed approved if the authorities fail to respond within the relevant time period, to one in which the failure of the authorities to respond within such period will result in denial of the application;
 
39

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

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

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

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

 •
provides that where a permit holder has failed to exercise their rights or perform their duties within the time period specified in the permit, or within 365 days if no period is specified, CRE or SENER may declare the permit to have expired and be of no further legal validity.
 
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 exist, the authority has no obligation to compensate the permit holders for their losses during the period of suspension.
 
The Mexican government might also consider changes to ports concessions already granted to third parties, as well as those that are in the process of being granted. We cannot provide any assurance that certain political decisions of the Mexican government will not put at risk the permanence of port concessions, or that such decisions will not have a negative effect on our business.
 
We continue to analyze the scope and implications of the Mexican Energy Reforms and the recent Amendment on our business. We cannot predict the full impact that these changes will have on our business, financial condition and results of operations once they are fully implemented. Despite the uncertainties introduced by the recent Amendment, we believe that the reforms have the potential to significantly increase Mexican oil and gas production in the coming years. Although there is no guarantee that such an effect will materialize, we believe that an increase in Mexican oil and gas production would likely have a positive impact on our business, financial condition and results of operations.
 
Mexican Tax Reforms
 
During the 2018 fiscal year, the Mexican government, through the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público), announced certain new federal tax provisions. These include provisions allowing taxpayers to offset accrued amounts only against contributions those taxpayers must pay on their own liabilities, provided both derive from the same federal tax, including ancillary charges. This change eliminates the ability of taxpayers to offset accrued amounts against withholdings by third parties or against taxes other than the one to be offset. The changes which were included in the Federal Tax Code effective January 1, 2020.
 
40
On October 30, 2019, the Mexico’s Congress approved various amendments to different federal tax provisions. Key changes include:
 

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

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

 •
An increase in the income tax withholding rate, on interests earned through the financial system, from 1.04% to 1.45%.
 
We cannot predict the full impact that the changes described above will have on our business, financial condition and results of operations upon implementation, including the effect on our business of higher costs due to additional compliance measures. Our initial assessments indicate that the changes will increase our income tax base in the coming years, primarily as a result of the new limitations on tax deductions. In addition, we cannot predict the indirect impact that this legislation could have on our customers and shareholders. It is possible that our shareholders may be required to pay more taxes than they would have paid prior to the implementation of the tax reforms.
 
Environmental Regulation
 
Our operations are subject to Mexican federal and state laws and regulations relating to the protection of the environment, as well as technical environmental requirements issued by the SEMARNAT. Under the General Law of Ecologic Equilibrium and Protection of the Environment (Ley General de Equilibrio Ecológico y Protección al Ambiente) and the General Law for Integral Prevention and Handling of Residues (Ley General de Prevención y Gestión Integral del Residuos), the SEMARNAT and other authorized ministries have promulgated standards, for, among other things, water discharge, water supply, emissions, noise pollution, hazardous substances, transportation and solid waste generation. The terms of the port concessions also impose on us certain environmental law compliance obligations. See “- Insurance.”
 
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.
 
41
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.
 
Insurance
 
Our business is affected by a number of risks, including mechanical failure of vessels and other transportation equipment, collisions, property loss of vessels and other transportation equipment, piracy, cargo loss or damage, as well as business interruption due to political circumstances in Mexico and in foreign countries, hostilities and labor strikes. In addition, the operation of any oceangoing vessel is subject to the inherent possibility of catastrophic marine disaster, including oil spills and other environmental accidents, and the liabilities arising from owning and operating vessels in international trade.
 
We maintain insurance to cover the risk of partial or total loss of or damage to all of our assets, including, but not limited to, harbor and seagoing vessels, port facilities, port equipment, land facilities and offices. In particular, we maintain marine hull and machinery and war risk insurance on our vessels, which covers the risk of actual or constructive total loss. Additionally, we have protection and indemnity insurance for damage caused by our operations to third persons. With certain exceptions, we do not carry insurance covering the loss of revenue resulting from a downturn in our operations or resulting from vessel off-hire time on certain vessels. In certain instances, and depending on the ratio of insurance claims to insurance premiums paid, we may choose to self-insure our over-the-road equipment following prudent guidelines. We believe that our current insurance coverage is adequate to protect against the accident-related risks involved in the conduct of our business and that we maintain a level of coverage that is consistent with industry practice. However, we cannot assure you that our insurance would be sufficient to cover the cost of damages suffered by us or damages to others, that any particular claim will be paid or that such insurance will continue to be available at commercially reasonable rates in the future. OPA 90, by imposing potentially unlimited liability upon owners, operators and bareboat charters for certain oil pollution accidents in the United States, made liability insurance more expensive for ship-owners and operators.

42
Organizational Structure
 
We hold a majority of the voting stock in each of our subsidiaries. The most significant subsidiaries, as of March 31, 2023, include:
 
Name
  
Country of
Incorporation
  
Ownership
Interest
    
Voting
Interest
  
Autotransportación y Distribución Logística, S.A. de C.V. (Logistics)
  
Mexico
    
100
%
    
100
%
TMM Logistics, S.A. de C.V. (Logistics)
  
Mexico
    
100
%
    
100
%
Transportación Marítima Mexicana, S.A. de C.V. (Parcel tankers, and offshore vessels)
  
Mexico
    
100
%
    
100
%
Prestadora de Servicios MTR, S.A. de C.V. (Ports)
  
Mexico
    
100
%
    
100
%
Bimonte, S.A. de C.V. (Ports)
  
Mexico
    
100
%
    
100
%
Services and Solutions Optimus, S. de R.L. de C.V. (Ports)
  
Mexico
    
100
%
    
100
%
Administradora Marítima TMM, S.A.P.I. de C.V. (Shipping agencies)
  
Mexico
    
100
%
    
100
%
TMM Parcel Tankers, S. A. de C. V. (Parcel vessels)
  
Mexico
    
100
%
    
100
%
Almacenadora de Deposito Moderno, S. A. de C. V. (Warehousing)
  
Mexico
    
100
%
    
100
%
TMM Almacenadora S.A.P.I. de C.V.(Warehousing)
  
Mexico
    
100
%
    
100
%
Inmobiliaria Dos Naciones, S. R. L. de C. V. (Shipyard)
  
Mexico
    
100
%
    
100
%
Operadora Portuaria de Tuxpan, S.A. de C.V. (Ports)
  
Mexico
    
100
%
    
100
%

Property, Vessels and Equipment
 
Our 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:
 
 
Years Ended December 31,
        
 
2022
    
2021
    
Estimated
Amortization Life
(Years)
  
 
(in thousands of Pesos)
  
API Acapulco
 $      
$
94,607
      
-
  
Accumulated amortization
       
(94,607
)
        
Concession rights and related assets - net
$
  __    
$
-
          

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

43
   
Years Ended December 31,
        
   
2022
    
2021
    
Estimated Total
Useful Lives
(Years)
  
   
(in thousands of Pesos)
  
Shipyard
  
$
114
      
149
      
40
  
Drydocks (major vessel repairs / mud vessels refurbished in 2021)
    
68,161
      
72,783
      
2.5
  
Buildings and installations
    
103,815
      
116,714
    
20 and 25
  
Warehousing equipment
    
601
      
387
      
10
  
Computer equipment
    
182
      
277
    
3 and 4
  
Terminal equipment
    
20,996
      
23,337
      
10
  
Ground transportation equipment
    
3,132
      
2,564
    
4, 5 and 10
  
Other equipment
    
10,101
      
8,434
          
   
$
$ 207,102
    
$
224,645
          
Land
    
1,147,174
      
1,199,550
          
Construction in progress
    
136,495
      
116,743
          
Total Property, Vessels and Equipment-net
  
$
$ 1,490,771
    
$
1,540,938
          

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 2022, the Company did not recognize any revaluation effect as it did not consider it necessary to perform a new appraisal of its properties, while in December 2021 the Company recognized a revaluation gain of $254.0 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 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.
 
During the third quarter of 2021, we refurbished three mud vessels (“Redfish 4”, “Beluga 2” and “Go Canopus”) prior to commencement of their operations under a long-term charter contract with PEMEX.
 
As of December 31, 2021, one RTG crane has been pledged to secure our obligations under the financing agreement with PNC Bank, N.A. In addition, three properties have been pledged to secure our obligations under our lines of credit with Banco Autofin and Banco del Bajio.
 
On January 8, 2021, the vessel “Olmeca” was sold to the company Athene Shipping Limited, and was delivered in Singapore. The proceeds were used to prepay credit line with Act Maritime LLC for $3.5 million dollars in December 2020.
 
In December 2021, our subsidiary Inmobiliaria TMM, S.A. de C.V. wrote off three properties for a value of $191.0 million.
 
44
In August of 2022, the companies TMM Logistics, S.A. de C.V., Inmobiliaria TMM, S.A. de C.V. and Almacenadora de Depósito Moderno, S.A. de C.V. disposed of five properties to liquidate certain liabilities valued at $118.7 million.
 
In January of 2022, the Company sold the supply vessel “Isla Colorado” to Buzca Soluciones de Ingeniería, S.A.
 
ITEM 4A.
UNRESOLVED STAFF COMMENTS
 
None.
 
ITEM 5
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
Executive Overview
 
We generate our revenues and cash flows by providing our customers with value-added multimodal transportation and logistics services, such as warehousing, storage management, ports and terminals operations, cargo handling and logistics support. Our commercial and strategic alliances allow us to market a full range of services in the context of a total supply chain distribution process. Through such alliances, we have been able to benefit not only from synergies, but also from the operational expertise of our alliance partners, enhancing our own competitiveness.
 
Our operating results are generally affected by a variety of factors, including macroeconomic conditions, fluctuations in exchange rates, operating performance of our business units, changes in applicable regulations and fluctuations in oil prices. The effect of changes in these factors impacts our revenues and operating results.
 
Over the last few years, we have made and continue to make significant changes to our business, including:
 

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

 •
Changes in management.  We have recently made various changes to our senior management team. Effective September 1, 2020, Mrs. Vanessa Serrano Cuevas assumed the role of Chief Executive Officer. , In 2021, Mr. Luis Rodolfo Capitanachi Dagdug assumed the role of Chief Financial Officer and . Axel Xavier Vera de Castillo assumed the role of Chief Information Officer. As of 2022, Luis Manuel Ocejo Rodríguez, Christian Venus Vázquez Coria, Gerardo Meza Vázquez, Alejandro Romero Rodríguez and Víctor Velázquez Romo, assumed the positions of Deputy General Director, Legal Director, Internal Audit Manager, Director of Maritime Operations and Director of Maritime Infrastructure, respectively. Finally, in February 2023, Maricela González Méndez joined the Company as Commercial Director.
 

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