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
- -------------------------------------------------------------------
(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 its third fiscal quarter.
All figures were prepared in accordance with Mexican generally accepted
accounting principles and are stated in constant Mexican pesos as of September
30, 2006 converted into U.S. dollars using the exchange rate at the end of each
period.
INDUSTRY BUSINESS ENVIRONMENT 2006
Pricing and market conditions continued improving financial performance during
3Q 2006 despite high raw material, energy and transportation costs.
The industry expects lower volumes during the fourth quarter due to
seasonality, as well as higher energy and raw material cost due to
winter weather. Analysts have a positive outlook on containerboard
and newsprint but are cautious about the economic conditions.
DURANGO'S PERFORMANCE 3Q'2006
In spite of a strong currency and the lag of price implementation in our
Mexican operations, the Company achieved its best quarter since 2002 mainly
due to strong volumes, price increases, productivity efficiencies and cost
control strategies.
The Company's results for the three months and the nine months ended on
September 30, 2006 were better that those for similar periods in 2005. The
Company was able to continue reducing debt.
OPERATING PERFORMANCE
Item 3Q06 3Q05 % Ac06 Ac05 %
Total Shipments ('000 Short Tons) 389.0 330.8 18% 1,123.0 999.9 12%
Pricing (US$/Short Ton) 606 554 10% 569 560 2%
Net Sales (US$ Million) 235.9 183.2 29% 639.1 560.3 14%
Unit Cost (US$/Short Ton) 508 489 4% 483 490 -1%
EBIT (US$ Million) 21.8 6.3 243% 50.7 27.6 83%
EBITDA (US$ Million) 32.8 18.0 82% 83.0 62.2 34%
EBITDA Margin 14% 10% 4% 13% 11% 2%
FINANCIAL HIGHLIGHTS 3Q'2006
The company is on its way of further strengthen its balance sheet thorg debt
reduction
Item 3Q06 3Q05 Var
Accumulated EBITDA 83.0 62.2 34%
Consolidated Debt (US$ Million) 548.2 639.4 -91.2
LTM Interest Coverage 2.1X 1.6X -
3Q' Interest Coverage 2.7X 1.5X -
LTM Leverage Ratio 5.4X 7.0X -
Net Debt Leverage Ratio 4.9X 6.3X -
SHIPMENTS
The Company's total shipments increased by 18% in 3Q'06 compared with 3Q'05,
and increased by 12% on an accumulated basis for the nine-month period.
The increase in volumes was mainly due to improving market conditions and
our sales effort.
Shipments (000 Short Tons) 3Q06 3Q05 % Ac06 Ac05 %
Paper 188.9 146.9 29% 555.5 465.7 19%
Packaging 197.1 181.5 9% 559.4 527.3 6%
Other 3.0 2.4 25% 8.0 6.9 17%
Total 389.0 330.8 18% 1,123.0 999.9 12%
Of the quarterly shipment increase, Tizayuca accounted for 25.4 thousand
short tons. On an accumulated basis 56.8 thousand short tons.
PRICE
Durango's average sales price per short ton increased by 10% to US$606 in
3Q'06 from US$554 in 3Q'05. On an accumulated basis, the average sales
price per short ton increased by 2% to US$569 in the first nine months of
2006 from US$560 during the first nine months of 2005.
Prices (US$/Short Ton) 3Q06 3Q05 % Ac06 Ac05 %
Paper 577 516 12% 528 529 0%
Packaging 630 580 9% 604 584 3%
Other 939 893 5% 968 895 8%
Mix Price (US$/Short Ton) 606 554 10% 569 560 2%
NET SALES
Total net sales increased by 29% to US$235.9 million in 3Q'06 from US$183.2
million in 3Q'05. On an accumulated basis, net sales increased by 14% to
US$639.1 million for the nine months ended on September 30, 2006 from
US$560.3 million for the nine months ended as of September 30, 2005.
Net Sales (US$ Million) 3Q06 3Q05 % Ac06 Ac05 %
Paper 109.0 75.8 44% 293.4 246.3 19%
Packaging 124.2 105.2 18% 337.9 307.8 10%
Other 2.8 2.1 31% 7.8 6.1 27%
Total 235.9 183.2 29% 639.1 560.3 14%
PRODUCTION COST
Unit production cost increased by 4% in 3Q'06 compared to 3Q'05. On an
accumulated basis, the unit production cost decreased by 1% to US$483
as of September 30, 2006 from US$490 as of September 30, 2005. This
increase was due to a higher raw material and energy cost.
>
Unit Cost (US$/Short Ton) 3Q06 3Q05 % Ac06 Ac05 %
Total 508 489 4% 483 490 -1%
EBITDA
EBITDA increased by 82% in 3Q'06 compared to 3Q'05, due to strong volumes
and a higher price mix which offset the increases in raw material and
energy cost, an outstanding achievement under the current tough cost
environment.
EBITDA (US$ Million) 3Q06 Margin 3Q05 Margin %
Paper 20.1 18% 7.1 9% 183%
Packaging 12.9 10% 10.6 10% 22%
Other -0.1 -5% 0.4 19% N/A
Total 32.8 14% 18.0 10% 82%
EBITDA increased by 34% for the nine months ended as of September 30,
2006 compared with the nine months ended as of September 30, 2005.
EBITDA (US$ Million) Ac06 Margin Ac05 Margin %
Paper 46.1 16% 27.8 11% 66%
Packaging 36.0 11% 32.9 11% 9%
Other 0.9 12% 1.4 23% -37%
Total 83.0 13% 62.2 11% 34%
*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 continues to execute its plan to reduce its outstanding
debt by US$100.0 Million during 2006. This would represent a reduction
of US$75.0 million above its scheduled debt payments for this year.
As of the third quarter of 2006, the Company had already repaid US$87.7
Million. This marks an important milestone in Durango's ongoing
strategic objective to continue building stronger financial fundamentals.
We are estimating at the end of the year a Net Leverage Ration of 4.6X.
CEO STATEMENT
Commenting on the industry and the Company's outlook, Miguel Rincon,
Durango's Chairman and CEO, said... "Our new operating and financial
fundamentals allowed us to deliver our strongest quarter of the last
few years. Durango's positive results validate the Company's business
strategy and our relentless search for productivity gains and
continue strengthening our balance sheet. The industry expect lower
volumes during the fourth quarter due to seasonality as well as
higher energy and raw material cost due to winter weather. We remain
cautious about economic condition in the US and Mexico"...
concluded Rincon.
CONFERENCE CALL
You are cordially invited to our Company's Third Quarter 2006
Conference Call, which will be held on Friday, October 27, 2006
- 1:00 p.m. (EST) // 12:00 p.m. (Mexico - Durango). Investors
may participate in the live Conference Call by dialing
(800) 510-9836 (US Participants) or (617) 614-3670
(International Participants) with 34570653 as Passcode.
Please dial in at least 10 minutes prior to the start of the
call.
CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2005 AND SEPTEMBER 30, 2006 (UNAUDITED)
EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS
AS OF SEPTEMBER 30, 2006
(Stated in thousands of Pesos and Dollars)
US$ DLLS.
December 31, Sep 30, Sep 30,
2005 2006 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................$ 722,042$ 583,627 53,088
Accounts receivable, net ......................... 1,750,072 1,844,426 167,774
Taxes recoverable and other assets ............... 46,688 40,130 3,650
Inventories, net ................................. 1,230,676 1,175,259 106,905
Prepaid expenses ................................. 16,040 36,455 3,316
Total current assets ................... 3,765,518 3,679,897 334,734
PROPERTY, PLANT AND EQUIPMENT, net ................. 11,214,876 11,379,251 1,035,089
OTHER ASSETS, net .................................. 266,792 257,422 23,416
Total assets ..........................$ 15,247,186$ 15,316,570 1,393,239
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank loans and current portion of long-term debt . 265,882 173,960 15,824
Interest payable ................................. 14,269 5,352 487
Trade accounts payable ........................... 868,832 892,275 81,164
Notes payable .................................... 49,952 35,234 3,205
Accrued liabilities .............................. 489,777 761,066 69,229
Employee profit-sharing .......................... 1,025 65,389 5,948
Total current liabilities ............. 1,689,737 1,933,276 175,856
LONG-TERM DEBT ..................................... 6,668,125 5,852,766 532,384
LONG-TERM NOTES PAYABLE ............................ 66,713 37,978 3,455
DEFERRED TAXES...................................... 1,647,423 1,834,580 166,879
LIABILITY FOR EMPLOYEE BENEFITS..................... 315,473 310,094 28,207
Total long term liabilities ............ 8,697,734 8,035,418 730,924
Total liabilities ..................... 10,387,471 9,968,694 906,781
STOCKHOLDERS' EQUITY:
Majority interest ................................ 4,799,993 4,953,214 450,558
Minority interest ................................ 59,722 394,662 35,900
Total stockholders' equity ............. 4,859,715 5,347,876 486,458
Total liabilities and stockholders' equi$ 15,247,186$ 15,316,570 1,393,239
Exchange rate: $ 10.9935
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 SEPTEMBER 30, 2006
(Stated in thousands of Pesos and Dollars)
*
Full Year Acum. Sep Acum. Sep
2005 2006 US$ 2006
OPERATING ACTIVITIES:
Net income (loss) ..............................................$ 167,925$ -43,663 -3,972
Add (deduct)- Charges (credits) to income which do
not require (generate) resources:
Depreciation and amortization ........................... 434,670 306,075 27,841
Loss (Gain) on sale of property, plant and equipment .... -1,738 7,671 698
Impairment of long-lived assets ......................... -116,602 0 0
Deferred income taxes ................................... 247,133 118,809 10,807
Other.................................................... -26,749 33,985 3,091
Total items which do not require cash.................... 536,714 466,540 42,438
Net resources generated from income .......................... 704,639 422,877 38,466
Changes in operating assets and liabilities:
Decrease (Increase) in inventories ......................... -92,208 55,417 5,041
Decrease (Increase) in current assets ...................... 94,450 -13,857 -1,260
Decrease (increase) in account receivables, net ............ 20,529 -94,354 -8,583
(Decrease) increase in accounts payable and
accrued liabilities ...................................... -151,620 335,461 30,514
Resources generated by continued operating .................. 575,790 705,544 64,178
Assets and liabilities discontinued .......................... -426,721 0 0
Resources generated by operating activities .................. 149,069 705,544 64,178
FINANCING ACTIVITIES:
Increase (Decrease) in bank loans and others ............ -3,909,428 -982,905 -89,408
Increase (Decrease) in capital .......................... 297,879 0 0
Gain on shares sales .................................... 3,046,878 0 0
Net resources generated from financing activities ............ -564,671 -982,905 -89,408
INVESTMENT ACTIVITIES:
Acquisition and sale of property, plant and equipment.... -62,592 -172,623 -15,702
Profit on sale of discontinued operations................ 342,619 0 0
Acquisition of shares ................................... -55,330 0 0
Increase in minority interest ........................... 0 319,077 29,024
Decrease (Increase) in deferred assets .................. 28,899 -7,508 -683
Net resources applied to investing activities ................ 253,596 138,946 12,639
INCREASE IN CASH AND CASH EQUIVALENTS .......................... -162,006 -138,415 -12,591
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD............ 884,048 722,042 65,679
CASH & CASH EQUIVALENTS AT END OF THE PERIOD ...................$ 722,042$ 583,627US 53,088
* The exchange rate of 10.9935 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 SEPTEMBER 30, 2006
Thousands of Pesos Thousands of Dollars
3Q 3Q 3Q 3Q
2005 2006 Var 2005 2006 Var
NET SALES ...............................$ 2,063,017$ 2,593,639 26% 183,178 235,924 29%
COST OF SALES ........................... 1,823,713 2,173,222 19% 161,877 197,683 22%
Gross profit........................ 239,304 420,417 76% 21,301 38,241 80%
Selling and Administrative expenses 168,318 181,089 8% 14,954 16,472 10%
Operating income ................... 70,986 239,328 237% 6,347 21,769 243%
FINANCIAL EXPENSE:
Interest expense ........................ 143,041 142,269 -1% 12,730 12,941 2%
Interest income ......................... -10,373 -7,698 -26% -922 -700 -24%
Exchange (gain) loss, net ............... 8,690 -173,095 N/A 773 -15,746 N/A
Gain on monetary position ............... -28,302 -111,588 294% -2,531 -10,150 301%
Total financial expense ............... 113,056 -150,112 N/A 10,050 -13,655 N/A
OTHER INCOME (EXPENSES):
Other income (expense), net ............. 35,973 -11,024 N/A 3,198 -1,003 N/A
Total other income (expense) .......... 35,973 -11,024 N/A 3,198 -1,003 N/A
Income (loss) before income and asset t -6,097 378,416 N/A -505 34,421 N/A
Provisions for income and asset taxes ... 62,629 56,382 -10% 5,582 5,129 -8%
Provision for deferred income taxes ..... -213,099 139,657 N/A -18,980 12,704 N/A
Net income after taxes ................ 144,373 182,377 26% 12,893 16,588 29%
Discontinued operations ................. -3,320 0 -100% -296 0 -100%
Net income before minority interest......$ 147,693$ 182,377 23% 13,189 16,588 26%
Minority interest...................... 13,592 822 -94% 1,211 74 -94%
Majority net income....................$ 134,101$ 181,555 35% 11,978 16,514 38%
Operating income ...................... 70,986 239,328 237% 6,347 21,769 243%
Depreciation & amortization ........... 108,160 99,599 -8% 9,608 9,060 -6%
Interest income ....................... 10,373 7,698 -26% 922 700 -24%
Employee retirement obligations ....... 8,607 10,969 27% 766 998 30%
Allowance for doubtful accounts ....... 4,541 3,196 -30% 404 291 -28%
EBITDA ................................ 202,667 360,790 78% 18,047 32,818 82%
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 SEPTEMBER 30, 2006
Thousands of Pesos Thousands of Dollars
Ac Ac Ac Ac
2005 2006 Var 2005 2006 Var
NET SALES ...............................$ 6,410,225$ 7,134,810 11% 560,272 639,096 14%
COST OF SALES ........................... 5,606,118 6,054,279 8% 490,005 542,394 11%
Gross profit........................ 804,107 1,080,531 34% 70,267 96,702 38%
Selling and Administrative expenses 487,285 513,655 5% 42,625 46,000 8%
Operating income ................... 316,822 566,876 79% 27,642 50,702 83%
FINANCIAL EXPENSE:
Interest expense ........................ 442,781 444,268 0% 38,717 39,745 3%
Interest income ......................... -27,925 -20,125 -28% -2,425 -1,811 -25%
Exchange (gain) loss, net ............... -242,071 242,484 N/A -21,469 20,999 N/A
Gain on monetary position ............... -96,506 -147,896 53% -8,363 -13,465 61%
Total financial expense ............... 76,279 518,731 580% 6,460 45,468 604%
OTHER INCOME (EXPENSES):
Other income (expense), net ............. -101,755 119,350 N/A -8,762 10,537 N/A
Total other income (expense) .......... -101,755 119,350 N/A -8,762 10,537 N/A
Income (loss) before income and asset t 138,788 167,495 21% 12,420 15,771 27%
Provisions for income and asset taxes ... 85,927 92,349 7% 7,603 8,300 9%
Provision for deferred income taxes ..... 45,402 118,809 162% 3,605 10,968 204%
Net income after taxes ................ 7,459 -43,663 N/A 1,212 -3,497 N/A
Discontinued operations ................. -47,603 0 -100% -4,168 0 -100%
Net income before minority interest......$ 55,062$ -43,663 N/A 5,380 -3,497 N/A
Minority interest...................... -23,443 15,187 N/A -1,927 1,339 N/A
Majority net income....................$ 78,505$ -58,850 N/A 7,307 -4,836 N/A
Operating income ...................... 316,822 566,876 79% 27,642 50,702 83%
Depreciation & amortization ........... 326,485 298,251 -9% 28,540 26,706 -6%
Interest income ....................... 27,925 20,125 -28% 2,425 1,811 -25%
Employee retirement obligations ....... 26,734 33,985 27% 2,360 3,038 29%
Allowance for doubtful accounts ....... 13,693 8,807 -36% 1,197 790 -34%
EBITDA ................................ 711,659 928,044 30% 62,164 83,047 34%
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: October 25, 2006 By /s/ Mayela Rincon de Velasco
--------------------------------
Name: Mayela Rincon de Velasco
Title: Chief Financial Officer