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.B. de C.V. (BMV: CODUSA)
("Durango" or the "Company"), the largest integrated paper producer in Mexico,
today announced its unaudited consolidated results for its fourth fiscal
quarter and full year 2006. All figures were prepared in accordance with
Mexican generally accepted accounting principles and are stated in constant
Mexican pesos as of December 31, 2006 converted into U.S. dollars using the
exchange rate at the end of each period reported.
INDUSTRY BUSINESS ENVIRONMENT 2006
While the North American paper and packaging industry faced a positive
business environment in 2006, conditions in Mexico were different. The US
industry experienced higher prices (specially containerboard) and stronger
volumes, but in Mexico price increases lagged those in the US.
DURANGO'S PERFORMANCE 2006
In spite of weaker market conditions in Mexico, we believe Durango's operating
performance in 2006 was one of the best in the industry with a 48% EBITDA
growth year over year. The Company reported its best annual results since
2001. This achievement was the result of further strengthening of our
operating fundamentals and the realization of productivity gains.
Contributing to our strong operating performance was the successful
turnaround of the recently incorporated Tizayuca operation. At the same time,
Durango continued to improve its financial fundamentals by reducing debt in the
amount of US$100 million during 2006.
OPERATING PERFORMANCE
Item 2006 2005 % 4Q06 4Q05 %
Total Shipments ('000 Short Tons) 1,506.8 1,336.5 13% 384.8 336.6 14%
Pricing (US$/Short Ton) $580 $555 4% $609 $541 13%
Net Sales (US$ Million) 873.4 742.3 18% 234.3 182.1 29%
Unit Cost (US$/Short Ton) 487 484 1% 496 467 6%
EBIT (US$ Million) 75.5 33.4 126% 24.8 5.7 333%
EBITDA (US$ Million) 119.0 80.5 48% 36.0 18.4 96%
EBITDA Margin 14% 11% 3% 15% 10% 5%
FINANCIAL HIGHLIGHTS 2006
During 2006, the Company remained focused on its strategy to strengthen its
financial structure and balance sheet. Better operating results and disciplined
management of working capital and CAPEX, as well as an equity contribution of
US$30 million, enabled the Company to continue to execute its debt reduction
program. The resulting paydown of debt substantially enhanced our main
financial ratios.
Item 2006 2005 Var
Accumulated EBITDA (US$ Million) 119.0 80.5 38.5
Consolidated Debt (US$ Million) 535.9 635.9 -100.0
Interest Coverage 2.4X 1.6X +0.8X
4Q' Interest Coverage 2.9X 1.4X +1.5X
Leverage Ratio 4.5X 7.9X -3.5X
Net Debt Leverage Ratio 4.2X 7.1X -2.9X
SHIPMENTS
The Company increased shipments by 13% from 1,336.5 thousand short tons in 2005
to 1,506.8 thousand short tons in 2006. Shipments increased by 14% in 4Q'06
compared to 4Q'05.
Shipments (000 Short Tons) 2006 2005 % 4Q06 4Q05 %
Paper 752.0 618.1 22% 196.6 152.4 29%
Packaging 744.0 708.6 5% 185.6 181.3 2%
Other 10.8 9.7 11% 2.7 2.9 -5%
Total 1,506.8 1,336.5 13% 384.8 336.6 14%
Of the 196.6 thousand short tons year to year growth in shipments, our new
operation in Tizayuca accounted for 75.0 thousand short tons on an accumulated
basis and 23.4 thousand short tons for 4Q'06. Such shipments were to third
parties.
PRICING
While the market price in the US increased by aprox 6%, our average price
increased by 4% from US$555 per ton in 2005 to US$580 per ton in 2006.
Prices (US$/Short Ton) 2006 2005 % 4Q06 4Q05 %
Paper 546 515 6% 596 474 26%
Packaging 608 585 4% 617 590 5%
Other 976 937 4% 1,001 957 5%
Mix Price (US$/Short Ton) 580 555 4% 609 541 13%
NET SALES
As a result of higher volumes and a 4% price increase, net sales grew by
18% from US$742.3 million in 2005 to US$873.4 million in 2006. Net sales
increased by 29% from US$182.1 million in 4Q'05 to US$234.3 million in
the 4Q'06.
Net Sales (US$ Million) 2006 2005 % 4Q06 4Q05 %
Paper 410.4 318.6 29% 117.1 72.3 62%
Packaging 452.5 414.7 9% 114.5 107.1 7%
Other 10.5 9.1 15% 2.7 2.7 -1%
Total 873.4 742.3 18% 234.3 182.1 29%
PRODUCTION COST
The Company was able to improve its operating fundamentals and competitiveness
by further reducing its unit production cost, which only increased by 1% in
2006 compared to 2005. Unit production cost increased by 6% from US$467 in the
4Q'05 to US$496 in the 4Q'06 primarily as a result of increases in raw
materials and energy costs.
Unit Cost (US$/Short Ton) 2006 2005 % 4Q06 4Q05 %
Total 487 484 1% 496 467 6%
EBITDA
Supply chain improvements, manufacturing productivity gains and greater
distribution efficiencies led to greater shipments, better product mix
and lower production cost, which, coupled with a positive pricing industry
cycle, allowed the Company to achieve its best results since 2001. Our
EBITDA increased by 48% from US$80.5 million in 2005 to US$119.0 in 2006.
EBITDA (US$ Million) 2006 Margin 2005 Margin %
Paper 70.2 17% 37.0 12% 90%
Packaging 47.5 10% 41.4 10% 15%
Other 1.3 13% 2.1 23% -37%
Total 119.0 14% 80.5 11% 48%
EBITDA increased by 96% for the three months ended as of December 31,2006
compared with the quarter ended as of December 31, 2005.
EBITDA (US$ Million) 4Q06 Margin 4Q05 Margin %
Paper 24.1 21% 9.2 13% 162%
Packaging 11.5 10% 8.7 8% 32%
Other 0.4 16% 0.5 18% -13%
Total 36.0 15% 18.4 10% 96%
*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.
CAPEX
To further strengthen its operating fundamentals and competitiveness,
the Company invested US$22.0 million of CAPEX during 2006.
TIZAYUCA TURNAROUND
Durango incorporated the Tizayuca industrial unit in April, 2006. This
new operation is a state of the art paper mill and packaging plant with
an annual production capacity of 200,000 and 100,000 short tons,
respectively. Prior to its incorporation, Tizayuca had been performing
at a very low capacity utilization rate and running as an inconsistent
operation in a difficult labor environment leading to historically
negative results. During the period from April to December 2006,
Durango successfully implemented an intensive turnaround program to
fully capture envisioned synergies, consisting mainly of productivity
and market strategies, better product mix, lower production cost per
unit and a more favorable labor culture. After the successful
implementation of these initiatives, Tizayuca was able to generate an
EBITDA from April to December of US$9.6 million, and after an operating
lease charge of US$4.6 million generated a Net EBITDA of US$5.0 Million
compared to a proforma loss of US$5.9 million in the same period of 2005.
DEBT REDUCTION PROGRAM
The Company was able to achieve its debt reduction goal of US$100.0
Million during 2006. As a results of debts repayments and EBITDA
improvements, the Company reduced its Net Leverage Ration to 4.2X and
its Interest Coverage Ratio to 2.9X by the end of 2006.
Durango intends to apply all of its available cash flow to further
improve its financial ratios by relentlessly pursuing debt reduction.
CEO STATEMENT
Commenting on the industry and the Company's outlook, Miguel Rincon,
Durango's Chairman and CEO, said . . .
"The solid 2006 results at Durango were the result of the right business
strategy in a tough business environment in Mexico. Looking at future we
expect to continue improving our performance an strengthening our
financial and operating fundamentals, as the best way to continue
building real value for our stakeholders"... concluded Rincon.
CONFERENCE CALL
You are cordially invited to our Company's Full Year 2006 Results
Conference Call, which will be held on Wednesday, February 28, 2007 -
1:00 p.m. (EST) // 12:00 p.m. (Mexico - Durango). You may participate in
the live Conference Call by dialing (866) 543-6408 (US Participants) or
(617) 213-8899 (International Participants) with 42577408 as Passcode.
Please dial in at least 10 minutes prior to the start of the call.
Replay will be available from 02/28/2007 - 3:00 p.m. to 03/07/2007 -
11.59 p.m. by dialing (888) 286-8010 (US Participants) or
(617) 801-6888 (International Participants) with 60808652 as Passcode.
CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES 10.8116
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2005 AND DECEMBER 31, 2006 (UNAUDITED)
EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS
AS OF DECEMBER 31, 2006
(Stated in thousands of Pesos and Dollars)
US$ DLLS.
December 31, Dec 31, Dec 31,
2005 2006 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................$ 728,963$ 466,807 43,176
Accounts receivable, net ......................... 1,769,427 1,956,210 180,936
Taxes recoverable and other assets ............... 46,710 0 0
Inventories, net ................................. 1,244,473 1,216,846 112,550
Prepaid expenses ................................. 16,289 32,960 3,049
Total current assets ................... 3,805,862 3,672,823 339,711
PROPERTY, PLANT AND EQUIPMENT, net ................. 11,356,508 11,183,125 1,034,364
OTHER ASSETS, net .................................. 270,932 225,339 20,842
Total assets ..........................$ 15,433,302$ 15,081,287 1,394,917
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank loans and current portion of long-term debt . 268,088 171,682 15,879
Interest payable ................................. 14,129 4,473 414
Trade accounts payable ........................... 878,248 976,889 90,356
Notes payable .................................... 50,251 54,879 5,076
Accrued liabilities .............................. 493,970 650,039 60,124
Employee profit-sharing .......................... 1,041 8,199 758
Total current liabilities ............. 1,705,727 1,866,161 172,607
LONG-TERM DEBT ..................................... 6,768,724 5,622,266 520,022
LONG-TERM NOTES PAYABLE ............................ 66,414 142,990 13,226
DEFERRED TAXES...................................... 1,666,963 1,762,614 163,030
LIABILITY FOR EMPLOYEE BENEFITS..................... 320,369 307,084 28,403
Total long term liabilities ............ 8,822,470 7,834,954 724,680
Total liabilities ..................... 10,528,197 9,701,115 897,288
STOCKHOLDERS' EQUITY:
Majority interest ................................ 4,844,456 4,948,590 457,711
Minority interest ................................ 60,649 431,582 39,918
Total stockholders' equity ............. 4,905,105 5,380,172 497,630
Total liabilities and stockholders' equi$ 15,433,302$ 15,081,287 1,394,917
Exchange rate: $ 10.8116
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 DECEMBER 31, 2006
(Stated in thousands of Pesos and Dollars)
*
Full Year Acum. Dec Acum. Dec
2005 2006 US$ 2006
OPERATING ACTIVITIES:
Net income (loss) ..............................................$ 170,548$ 207,410 19,184
Add (deduct)- Charges (credits) to income which do
not require (generate) resources:
Depreciation and amortization ........................... 438,805 409,158 37,844
Loss (Gain) on sale of property, plant and equipment .... -1,765 0 0
Impairment of long-lived assets ......................... -118,412 -12,094 -1,119
Deferred income taxes ................................... 250,913 124,264 11,494
Other.................................................... -27,165 41,364 3,826
Total items which do not require cash.................... 542,376 562,692 52,045
Net resources generated from income .......................... 712,924 770,102 71,229
Changes in operating assets and liabilities:
Decrease (Increase) in inventories ......................... -93,639 27,627 2,555
Decrease (Increase) in current assets ...................... 95,915 30,039 2,778
Decrease (increase) in account receivables, net ............ 20,847 -186,783 -17,276
(Decrease) increase in accounts payable and
accrued liabilities ...................................... -153,714 256,840 23,756
Resources generated by continued operating .................. 582,333 897,825 83,043
Assets and liabilities discontinued .......................... -433,343 0 0
Resources generated by operating activities .................. 148,990 897,825 83,043
FINANCING ACTIVITIES:
Increase (Decrease) in bank loans and others ............ -3,970,096 -1,246,514 -115,294
Increase (Decrease) in capital .......................... 302,501 0 0
Gain on shares sales .................................... 3,094,160 0 0
Net resources generated from financing activities ............ -573,435 -1,246,514 -115,294
INVESTMENT ACTIVITIES:
Acquisition and sale of property, plant and equipment.... -62,557 -237,397 -21,958
Profit on sale of discontinued operations................ 347,936 0 0
Acquisition of shares ................................... -56,189 0 0
Increase in minority interest ........................... 0 322,066 29,789
Decrease (Increase) in deferred assets .................. 29,347 1,864 172
Net resources applied to investing activities ................ 258,537 86,533 8,004
INCREASE IN CASH AND CASH EQUIVALENTS .......................... -165,908 -262,156 -24,248
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD............ 894,871 728,963 67,424
CASH & CASH EQUIVALENTS AT END OF THE PERIOD ...................$ 728,963$ 466,807US 43,176
* The exchange rate of 10.8116 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 DECEMBER 31, 2006
Thousands of Pesos Thousands of Dollars
4Q 4Q 4Q 4Q
2005 2006 Var 2005 2006 Var
NET SALES ...............................$ 2,015,171$ 2,533,285 26% 182,064 234,312 29%
COST OF SALES ........................... 1,738,096 2,063,656 19% 157,031 190,875 22%
Gross profit........................ 277,075 469,629 69% 25,033 43,437 74%
Selling and Administrative expenses 213,748 201,590 -6% 19,312 18,647 -3%
Operating income ................... 63,327 268,039 323% 5,721 24,790 333%
FINANCIAL EXPENSE:
Interest expense ........................ 167,316 139,682 -17% 15,116 12,920 -15%
Interest income ......................... -15,998 -10,015 -37% -1,446 -927 -36%
Exchange (gain) loss, net ............... -102,350 -108,516 6% -9,250 -10,037 9%
Gain on monetary position ............... -108,357 -101,085 -7% -9,794 -9,349 -5%
Total financial expense ............... -59,389 -79,934 35% -5,374 -7,393 38%
OTHER INCOME (EXPENSES):
Other income (expense), net ............. -9,931 -67,906 584% -904 -6,281 595%
Total other income (expense) .......... -9,931 -67,906 584% -904 -6,281 595%
Income (loss) before income and asset t 112,785 280,067 148% 10,191 25,902 154%
Provisions for income and asset taxes ... -20,607 39,357 N/A -1,861 3,640 N/A
Provision for deferred income taxes ..... 204,791 3,624 -98% 18,507 335 -98%
Net income after taxes ................ -71,399 237,086 N/A -6,455 21,927 N/A
Impairment .............................. -118,412 -12,094 -90% -10,701 -1,119 -90%
Discontinued operations ................. -64,870 0 -100% -5,863 0 -100%
Equity in the income of associated compan -1,978 -3,011 52% -179 -278 55%
Net income before minority interest......$ 113,861$ 252,191 121% 10,288 23,324 127%
Minority interest...................... 7,920 40,578 412% 715 3,752 425%
Majority net income....................$ 105,941$ 211,613 100% 9,573 19,572 104%
Operating income ...................... 63,327 268,039 323% 5,721 24,790 333%
Depreciation & amortization ........... 97,792 100,176 2% 8,835 9,266 5%
Interest income ....................... 15,998 10,015 -37% 1,446 927 -36%
Employee retirement obligations ....... 16,200 9,865 -39% 1,464 912 -38%
Allowance for doubtful accounts ....... 9,846 1,035 -89% 890 95 -89%
EBITDA ................................ 203,163 389,130 92% 18,356 35,990 96%
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 DECEMBER 31, 2006
Thousands of Pesos Thousands of Dollars
Ac Ac Ac Ac
2005 2006 Var 2005 2006 Var
NET SALES ...............................$ 8,475,857$ 9,725,371 15% 742,336 873,408 18%
COST OF SALES ........................... 7,386,213 8,163,575 11% 647,036 733,269 13%
Gross profit........................ 1,089,644 1,561,796 43% 95,300 140,139 47%
Selling and Administrative expenses 705,378 720,414 2% 61,937 64,647 4%
Operating income ................... 384,266 841,382 119% 33,363 75,492 126%
FINANCIAL EXPENSE:
Interest expense ........................ 616,495 590,643 -4% 53,833 52,665 -2%
Interest income ......................... -44,284 -30,340 -31% -3,871 -2,738 -29%
Exchange (gain) loss, net ............... -348,163 137,717 N/A -30,719 10,962 N/A
Gain on monetary position ............... -206,725 -252,052 22% -18,157 -22,814 26%
Total financial expense ............... 17,323 445,968 2474% 1,086 38,075 3406%
OTHER INCOME (EXPENSES):
Other income (expense), net ............. -112,908 53,260 N/A -9,666 4,256 N/A
Total other income (expense) .......... -112,908 53,260 N/A -9,666 4,256 N/A
Income (loss) before income and asset t 254,035 448,674 77% 22,611 41,673 84%
Provisions for income and asset taxes ... 66,172 132,105 100% 5,742 11,940 108%
Provision for deferred income taxes ..... 250,913 124,264 -50% 22,112 11,303 -49%
Net income after taxes ................ -63,050 192,305 N/A -5,243 18,430 N/A
Impairment .............................. -118,412 -12,094 -90% -10,701 -1,119 -90%
Discontinued operations ................. -113,208 0 -100% -10,031 0 -100%
Equity in the income of associated compan -1,978 -3,011 52% -179 -278 55%
Net income before minority interest......$ 170,548$ 207,410 22% 15,668 19,827 27%
Minority interest...................... -15,883 55,998 N/A -1,212 5,091 N/A
Majority net income....................$ 186,431$ 151,412 -19% 16,880 14,736 -13%
Operating income ...................... 384,266 841,382 119% 33,363 75,492 126%
Depreciation & amortization ........... 427,353 401,215 -6% 37,375 35,972 -4%
Interest income ....................... 44,284 30,340 -31% 3,871 2,738 -29%
Employee retirement obligations ....... 43,346 44,375 2% 3,824 3,950 3%
Allowance for doubtful accounts ....... 23,750 9,917 -58% 2,087 885 -58%
EBITDA ................................ 922,999 1,327,229 44% 80,520 119,037 48%
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: February 27, 2007 By /s/ Mayela Rincon de Velasco
--------------------------------
Name: Mayela Rincon de Velasco
Title: Chief Financial Officer