SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16
OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of February, 2006
Durango Corporation
(f/k/a Grupo Industrial Durango, S.A. de C.V.)
- -------------------------------------------------------------------
(Translation of registrant's name into English)
Torre Corporativa Durango, Potasio 150, Cuidad Industrial,
Durango, Durango, Mexico
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F. Form 20-F [x] Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934. Yes No [x]
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-_____________.
Durango, Durango, Mexico - Corporacion Durango, S.A. de C.V. (BMV: CODUSA)
("Durango" or the "Company"), the largest integrated paper producer in Mexico,
today announced its unaudited consolidated results for the First quarter 2006.
All figures were prepared in accordance with Mexican generally accepted
accounting principles and are stated in constant Mexican pesos as of March 31,
2006 converted into U.S. dollars using the exchange rate at the end of each
period.
INDUSTRY BUSINESS ENVIRONMENT 2006
Current market conditions are improving in the industry and most analyst are
optimistic about the outlook for the business. However, as they expected,
year-over-year results were negatively impacted by higher costs, especially
energy and freight, and lower containerboard and corrugated container prices.
As a result, the industry was unable to recover its 1Q'05 earnings level.
DURANGO'S BUSINESS ENVIRONMENT 1Q' 2006
The Company was able to weather the tough cost production environment and the
negative effect of the strong peso, largely due to initiatives carried out
during 2005 and 1Q'06 to exploit its four key competitive advantages:
Lower energy mix cost than for the U.S. industry;
Lower domestic fiber mix cost than for the U.S. industry;
Lower SG&A and overhead expenses than that of its peers; and
Dominant market share position in Mexico
COMPANY HIGHLIGHTS 1Q' 2006
Financial and operating fundamentals of Company continued strengthening in
1Q'06;
Durango believes that its operating results outperformed the industry
average in 1Q'06;
Durango recovered its EBITDA level of 1Q'05, while the EBITDA of the three
key players in or sector declined approximately 50% Q o Q.
In 1Q'06, the company's EBITDA was US$22.3 Million compared to US$22.6
million in 1Q'05
In 1Q06, Durango continued with its successful cost reduction program and
capital expenditure discipline
In 1Q'06, the Company announced a debt reduction program of US$100.0
Million. In 1Q'06 Durango achieved a net debt reduction of US$60.0 million.
This marks an important milestone in Durango's ongoing strategic vision
At the end of 1Q06 the Company incorporates the Tizayuca's Industrial Unit,
a free-debt and earnings accretive transaction.
DURANGO'S PERFORMANCE
Item 1Q06 1Q05 % 4Q05
Total Shipments (000 Short Tons) 343.7 317.4 8% 336.6
Pricing (US$/Short Ton) 548 574 -4% 543
Net Sales (US$ Million) 188.4 182.0 3% 182.7
Unit Cost (US$/Short Ton) 473 496 -5% 473
EBITDA (US$ Million) 22.3 22.6 -1% 18.2
EBITDA Margin 12% 12% -1% 10%
SHIPMENTS
The Company's total shipments increased by 8% in 1Q06 compared with 1Q05.
Shipments (000 Short Tons) 1Q06 1Q05 %
Paper 169.2 149.3 13%
Packaging 171.9 165.9 4%
Other 2.7 2.2 23%
Total 343.7 317.4 8%
PRICE
Durango's average sales price per short ton decreased by 4% to US$548 in
1Q06 from US$574 in 1Q05.
Prices (US$/Short Ton) 1Q06 1Q05 %
Paper 497 556 -11%
Packaging 592 586 1%
Other 983 864 14%
Mix Price (US$/Short Ton) 548 574 -4%
NET SALES
Total net sales increased by 3% to US$188.4 million in 1Q06 from US$182.0
million in 1Q05.
Net Sales (US$ Million) 1Q06 1Q05 %
Paper 84.1 83.0 1%
Packaging 101.7 97.2 5%
Other 2.6 1.9 40%
Total 188.4 182.0 3%
PRODUCTION COST
Unit production cost decreased by 5% in 1Q06 compared to 1Q05.
Unit Cost (US$/Short Ton) 1Q06 1Q05 %
Total 473 496 -5%
EBITDA
The Company was able to recover its 1Q'05 earnings level. EBITDA remains
almost flat in 1Q'06 compared to 1Q'05, an outstanding achievement under
the current tough cost environment.
EBITDA (US$ Million) 1Q06 Margin 1Q05 Margin %
Paper 11.0 13% 11.7 14% -6%
Packaging 10.9 11% 10.5 11% 4%
Other 0.4 15% 0.4 21% 3%
Total 22.3 12% 22.6 12% -1%
"EBITDA.- According to the Company's Restructured Credit Agreement,
Consolidated EBITDA means, for any period, the sum of the following for
the Company and its Subsidiaries: a) operating income for such period;
b) to the extent deducted in determining such operating income for such
period, the sum of the following: i) depreciation, ii) amortization,
iii) any other non-cash charges other than any such non-cash charges
that represent accruals of, or reserves for, cash disbursements to be
made in any future accounting period, iv) the aggregate amount of all
cash severance payments actually made in cash, v) taxes paid or payable,
and vi) non-cash charges incurred in connection with pension plans; and
c) the aggregate amount of interest income accrued during such period.
DEBT REDUCTION PROGRAM
The Company has adopted a debt reduction program under which it plans to
reduce its outstanding debt by US$100.0 Million during 2006. This would
represent additional US$75.0 Million debt reduction than the scheduled
debt. During the first quarter of 2006 the Company has pre-paid US$60.0
Million. This marks and important milestone in Durango's ongoing strategic
vision to continue building stronger financial fundamentals.
TIZAYUCA INCORPORATION
Durango announced the incorporation of the "Tizayuca Paper and Packaging
Company", a Mexican leading producer of high quality linerboard and
packaging products.
This transaction represents the right step in the right industry's cycle
moment to continue strengthening Durango's operative structural
fundamentals. Tizayuca is an integrated state-of-the-art paper mill and
box plant with a paper production capacity of 200,000 short tons/year and
converting production capacity of 100,000 short tons/year. The industrial
Complex is strategically located at 35 miles from the huge market of
Mexico City area.
The whole operation was supported by G.E. Capital under an attractive and
7.5 year operating lease agreement by US$50.0 Million that does not require
Durango to incur additional debt.
Tizayuca is currently running at 60% of its installed capacity and Durango
plans to fully integrate it into its production system to fully capture
synergies and to move it at more than 90% operating rate within the next
12 months. Tizayuca will be earnings accretive to Durango.
CEO STATEMENT
Commenting on the industry and the Company's outlook, Miguel Rincon,
Durango Chairman and CEO, said . . .
Durango is fully committed to continue building stronger financial an
operative fundamentals to become "best in class". We remain committed to
capture opportunities of the new recovering cycle and seeking the best
alternatives to create value for shareholders... concluded Rincon.
Special Note Regarding Forward-Looking Statements
This press release contains statements that are forward-looking within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements are only
predictions and are not guarantees of future performance. Investors are
cautioned that any such forward-looking statements are and will be, as the
case may be, subject to many risks, uncertainties and factors relating to
the operations and business environments of Corporacion Durango and its
subsidiaries that may cause the actual results of the Company to be
materially different from any future results expressed or implied in such
forward-looking statements.
CONTACTS
Corporacion Durango, S.A. de C.V.
Mayela R. Velasco
+52 (618) 829 1008
mrinconv@corpdgo.com.mx
Miguel Antonio R.
+52 (618) 829 1070
rinconma@corpdgo.com.mx
CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2005 AND MARCH 31, 2006 (UNAUDITED)
EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS
AS OF MARCH 31, 2006
(Stated in thousands of Pesos and Dollars)
US$ DLLS.
December 31, Mar 31, Mar 31,
2005 2006 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................$ 708,863$ 336,498 30,890
Accounts receivable, net ......................... 1,719,276 1,750,619 160,703
Taxes recoverable and other assets ............... 45,647 66,197 6,077
Inventories, net ................................. 1,209,101 1,188,442 109,096
Prepaid expenses ................................. 15,790 23,154 2,125
Total current assets ................... 3,698,677 3,364,910 308,892
PROPERTY, PLANT AND EQUIPMENT, net ................. 11,025,339 11,199,229 1,028,065
OTHER ASSETS, net .................................. 262,625 261,610 24,015
Total assets ..........................$ 14,986,641$ 14,825,749 1,360,972
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank loans and current portion of long-term debt . 260,876 206,158 18,925
Interest payable ................................. 13,886 7,965 731
Trade accounts payable ........................... 853,456 955,965 87,756
Notes payable .................................... 48,960 42,036 3,859
Accrued liabilities .............................. 480,614 398,700 36,600
Employee profit-sharing .......................... 1,009 996 91
Total current liabilities ............. 1,658,801 1,611,820 147,962
LONG-TERM DEBT ..................................... 6,562,716 6,104,083 560,342
LONG-TERM NOTES PAYABLE ............................ 65,078 60,752 5,577
DEFERRED TAXES...................................... 1,619,018 1,648,651 151,343
LIABILITY FOR EMPLOYEE BENEFITS..................... 310,547 309,651 28,425
Total long term liabilities ............ 8,557,359 8,123,137 745,687
Total liabilities ..................... 10,216,160 9,734,957 893,648
STOCKHOLDERS' EQUITY:
Majority interest ................................ 4,711,693 4,713,675 432,705
Minority interest ................................ 58,788 377,117 34,619
Total stockholders' equity ............. 4,770,481 5,090,792 467,324
Total liabilities and stockholders' equi$ 14,986,641$ 14,825,749 1,360,972
Exchange rate: $ 10.8935
CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN FINANCIAL POSITION
EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS
AS OF MARCH 31, 2006
(Stated in thousands of Pesos and Dollars)
*
Full Year Acum. Mar Acum. Mar
2005 2006 US$ 2006
OPERATING ACTIVITIES:
Net income (loss) ..............................................$ 165,312$ -106,491 -9,776
Add (deduct)- Charges (credits) to income which do
not require (generate) resources:
Depreciation and amortization ........................... 426,722 98,041 9,000
Loss on sale of property, plant and equipment ........... -1,711 -296 -27
Impairment of long-lived assets ......................... -114,781 0 0
Deferred income taxes ................................... 243,247 24,786 2,275
Other.................................................... -26,331 10,724 984
Total items which do not require cash.................... 527,146 133,255 12,233
Net resources generated from income .......................... 692,458 26,764 2,457
Changes in operating assets and liabilities:
Decrease (Increase) in inventories ......................... -90,768 20,659 1,896
Decrease (Increase) in current assets ...................... 92,975 -27,914 -2,562
Decrease (increase) in account receivables, net ............ 20,208 -31,343 -2,877
(Decrease) increase in accounts payable and
accrued liabilities ...................................... -148,963 7,737 710
Resources generated by continued operating .................. 565,910 -4,097 -376
Assets and liabilities discontinued .......................... -23,364 0 0
Resources generated by operating activities .................. 542,546 -4,097 -376
FINANCING ACTIVITIES:
Increase (Decrease) in bank loans and others ............ -4,245,074 -516,068 -47,374
Increase (Decrease) in capital .......................... 293,227 0 0
Increase (Decrease) in subsidiaries' capital stock ...... 0 217,987 20,011
Gain on shares sales .................................... 2,999,298 97,032 8,907
Net resources generated from financing activities ............ -952,549 -201,049 -18,456
INVESTMENT ACTIVITIES:
Acquisition of property, plant and equipment............. -136,581 -162,493 -14,917
Sale of property, plant and equipment.................... 75,414 1,079 99
Profit on sale of discontinued operations................ 337,269 0 0
Acquisition of shares ................................... -54,466 0 0
Increase in deferred assets ............................. 28,448 -5,805 -533
Net resources applied to investing activities ................ 250,084 -167,219 -15,350
INCREASE IN CASH AND CASH EQUIVALENTS .......................... -159,919 -372,365 -34,182
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD............ 868,782 708,863 65,072
CASH & CASH EQUIVALENTS AT END OF THE PERIOD ...................$ 708,863$ 336,498US 30,890
* The exchange rate of 10.8935 was used for translation purposes.
CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS
AS OF MARCH 31, 2006
Thousands of Pesos Thousands of Dollars
1Q 1Q 1Q 1Q
2005 2006 Var 2005 2006 Var
NET SALES ...............................$ 2,094,402$ 2,052,362 -2% 182,039 188,402 3%
COST OF SALES ........................... 1,811,596 1,770,011 -2% 157,468 162,483 3%
Gross profit........................ 282,806 282,351 0% 24,571 25,919 5%
Selling and Administrative expenses 152,270 156,869 3% 13,224 14,401 9%
Operating income ................... 130,536 125,482 -4% 11,347 11,518 2%
FINANCIAL EXPENSE:
Interest expense ........................ 152,681 148,701 -3% 13,216 13,651 3%
Interest income ......................... -14,669 -8,286 -44% -1,270 -761 -40%
Exchange (gain) loss, net ............... 26,334 161,603 514% 2,278 14,835 551%
Gain on monetary position ............... -56,531 -53,476 -5% -4,873 -4,909 1%
Total financial expense ............... 107,815 248,542 131% 9,351 22,816 144%
OTHER INCOME (EXPENSES):
Other income (expense), net ............. -62,519 53,568 N/A -5,416 4,918 N/A
Total other income (expense) .......... -62,519 53,568 N/A -5,416 4,918 N/A
Income (loss) before income and asset t -39,798 -69,492 75% -3,420 -6,380 87%
Provisions for income and asset taxes ... 10,155 12,213 20% 895 1,121 25%
Provision for deferred income taxes ..... 77,560 24,786 -68% 6,697 2,275 -66%
Net income after taxes ................ -127,513 -106,491 -16% -11,012 -9,776 -11%
Discontinued operations ................. -12,348 0 -100% -1,068 0 -100%
Net income before minority interest......$ -115,165$ -106,491 -8% -9,944 -9,776 -2%
Minority interest...................... -41,553 4,333 N/A -3,594 397 N/A
Majority net income....................$ -73,612$ -110,824 51% -6,350 -10,173 60%
Operating income ...................... 130,536 125,482 -4% 11,347 11,518 2%
Depreciation & amortization ........... 107,447 95,417 -11% 9,327 8,759 -6%
Interest income ....................... 14,669 8,286 -44% 1,270 761 -40%
Employee retirement obligations ....... 2,417 10,724 344% 209 984 371%
Allowance for doubtful accounts ....... 4,819 2,546 -47% 417 234 -44%
EBITDA ................................ 259,888 242,455 -7% 22,570 22,256 -1%
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. CORPORACION DURANGO, S.A. DE C.V.
Date: April 27, 2006 By /s/ Mayela Rincon de Velasco
--------------------------------
Name: Mayela Rincon de Velasco
Title: Chief Financial Officer