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 Abril 30th, 2004
Durango Corporation
(f/k/a Grupo Industrial Durango, S.A. de C.V.)
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(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-_____________.
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 30th, 2004 By /s/ Mayela Rincon de Velasco
Durango, Mexico --------------------------------
Name: Mayela Rincon de Velasco
Title: Chief Financial Officer
Durango, Mexico, April 30, 2004 - Corporacion Durango, S.A. de
C.V., (NYSE: CDG, BMV: CODUSA) ("Durango" or the "Company"), the
largest integrated paper producer in Mexico, today announced its
unaudited consolidated results for the 1Q 2004. All figures were
prepared in accordance with Mexican generally accepted accounting
principles and are stated in constant Mexican pesos as of the end of
each period and converted into U.S. dollars using the exchange rate at
the end of each period. All comparative figures for the first quarter
2004 and 2003 were prepared on a pro-forma basis after excluding the
results of the Pronal and Molded Pulp operations as well as
discontinued operations.
H I G H L I G H T S
o Financial Restructuring Agreement In Principle Reached
o Terms of Financial Restructuring Announced Today
o Strong shipments growth of 9% vs 1Q 2003
o Pricing still 4% below 1Q 2003
o Net sales growth of 5% for the first time in three years
o Substantial cost increases of raw material and energy offset
through improved and rationalized manufacturing operations
o Unit cost 1% below 1Q 2003, one of the lowest in the industry
o EBITDA only US$ 0.6 million below the same quarter of last year
o EBITDA margin of 10%, today one of the best in our industry
INDUSTRY OUTLOOK
After several years of restructuring, the paper industry today shows
sound fundamentals. For the long term, on the supply side, the
capacity outlook remains the best in 30 years and new supply growth is
likely to be well below historical average levels for the coming years.
Most analysts agree that the worst is over, total paper demand will
continue to grow and the industry will enter into a long lasting and
profitable cycle.
With customer and mill inventories at low levels, destocking completed,
relatively little new global capacity on stream (mostly in China), and
a 5% reduction in global capacity, any pickup in demand should lead to
a rapid restocking and pricing recovery. On the cost side, growing
fiber and energy costs remain a key concern for the industry.
Tighter markets and the weak dollar should fuel a strong recovery in
U.S. industry profitability. However, due to the strength of their
currencies against U.S. dollar, the recovery for the paper industry in
Europe, Canada and Mexico is expected to be quite modest in 2004.
PERFORMANCE
Although the North American paper industry is showing signs of cyclical
recovery, most major companies continued to report losses in their
primary paper operations for the first quarter of 2004 and overall
earnings were lackluster.
The Company's results for the first quarter 2004 have been affected by
the delay of the implementation of price increases and the continued
higher raw material and energy costs, coupled with a slower economic
growth and weaker demand in Mexico than in the US.
Item 1Q04 1Q03 VAR EBITDA
EFFECT*
Total Shipments('000 Short Tons) 316.9 291.9 9% +2.9
Pricing (US$/Short Ton) 485 503 -4% -6.1
Net Sales (US$Million) 153.8 146.9 5% +1.5
Unit Cost (US$/Short Ton) 436 440 -1% +1.1
EBITDA (US$Million) 14.7 15.3 -4% -0.6
EBITDA Margin 10% 10% - -
*US$Million
"It is important to note the 9% shipments growth achieved this quarter
in spite of a still weak and very competitive market environment, as well
as the substantial achievement of improvement in the company's
manufacturing operations during this quarter, which allowed it to offset
more than US$5.0 million of increased cost in energy and raw material to
deliver a unit cost slightly below that of the same quarter of the last
year. The average unit cost of US$436 per short ton for our mix of
products: containerboard-packaging, newsprint and uncoated free sheet
grades confirms Durango's position among the lowest cost producers in the
industry", said Miguel Rincon, Durango CEO.
Commenting on the outlook for the second quarter, Rincon said: "We are
seeing a modest recovery of demand for our products and average price
realizations in the second quarter. This upturn, combined with our
continued focus on cost control, should position us to deliver a stronger
second quarter. We believe that most of the benefits from higher prices
and increased volumes will be realized through the second half of this
year".
FINANCIAL RESTRUCTURING
Miguel Rincon, Chairman of Corporacion Durango, commented: 'After the
Company announced that it had reached an agreement in principle with
its bank lenders and members of the Ad Hoc Bondholders Committee, who
collectively hold a substantial portion of its outstanding unsecured
indebtedness, Durango ispleased to announce at this time the principal
terms of our agreement in principle. As we stated earlier, this
consensualagreement with our creditors represents an important milestone
in our proposed financial restructuring. We expect that the proposed
recapitalization plan will result in a more adequate and competitive
capital structure for Durango and substantially enhance the financial
flexibility of the company and its operating subsidiaries. If the
restructuring is completed as planed, Durango will have one of the
lowest costs of capital of the industry with an average cash interest
rate of 4.5% annually, which, combined with lower debt, will result in
lowering our financial cost by approximately 2/3. The company will have
the opportunity to continue reducing debt through the prepayment of
portions of its debt at a 50% discount over the next 7 years.
Additionally, if the restructuring is completed as planned, the
Company's debt maturity profile will be extended thru the year 2013. As
a result of this restructuring, the Company will have not only a
competitive cost production structure but also a competitive cost of
capital, which, coupled with its market leadership, will position the
Company to benefit all of our stakeholders. We wish to thank our
creditors for their unwavering support and look forward to a swift
conclusion to this transaction".
HIGHLIGHTS FOR THE FIRST QUARTER 2004
Shipments(000 Short tons) 1Q04 1Q03
Paper 151.1 134.7
Packaging 162.8 154.0
Other 3.0 3.2
Total 316.9 291.9
Net Sales (US$ Million) 1Q04 1Q03
Paper 65.1 58.8
Packaging 86.6 85.9
Other 2.1 2.2
Total 153.8 146.9
Prices (US$/Short Ton) 1Q04 1Q03
Paper 431 437
Packaging 532 558
Other 703 691
Total 485 503
Unit Cost (US$/ Short Ton) 1Q04 1Q03
Total 436 440
EBITDA(US$ Million) 1Q04 Margin 1Q03 Margin
Paper 2.44 %3.66%
Packaging 12.0 14% 11.6 13%
Other 0.31 5% 0.2 7%
Total 14.7 10% 15.3 10%
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 companies to be materially different
from any future results expressed or implied in such forward-looking
statements.
Factors that could cause actual results to differ materially from
these forward-looking statements include, but are not limited to, the
following: the ability of Corporacion Durango and its subsidiaries
to continue as going concerns the agreement of Corporacion Durango
creditors to the restructuring plan; their ability to obtain and
maintain normal terms with vendors and service providers; their ability
to maintain contracts that are critical to their operations; their
ability to fund and execute their business plan; their ability to
attract, motivate and/o retain key executives and associates; their
ability to attract and retain customers; general economic, market, or
business conditions; the opportunities (or lack thereof) that may be
presented to and pursued by the Company and its subsidiaries; the
availability of raw materials used by the Company and its subsidiaries;
competitive actions by other companies; changes in laws or regulations,
and other factors, many of which are beyond the control of the Company
and its subsidiaries.
Additionally, other factors should be considered in connection with
any Forward Looking Statements, including other risks and uncertainties
set forth from time to time in Corporacion Durango's reports filed
with the United States Securities and Exchange Commission. Although
Corporacion Durango believes that the expectations and assumptions
reflected in the forward-looking statements are reasonable based on
information currently available to its management, Corporacion Durango
cannot guarantee future results or events. Corporacion Durango expressly
disclaims a duty to update any of the forward-looking statement.
CONTACTS
Corporacion Durango, S.A. de C.V. The Global Consulting Group
Mayela R. Velasco Isabel Vieira
+52 (618) 829 1008 (646) 284-9400
mrinconv@corpdgo.com.mx ivieira@hfgcg.com
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, 2003 AND MARCH 31, 2004 (UNAUDITED)
EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS
AS OF MARCH 31, 2004
(Stated in thousands of Pesos and Dollars)
US$ DLLS.
December 31, March 31, March 31,
2003 2004 2004
(Unaudited) (Unaudited) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................$ 658,879$ 633,326 56,674
Accounts receivable, net ......................... 2,008,535 1,975,363 176,769
Taxes recoverable and other assets ............... 94,647 42,293 3,785
Inventories, net ................................. 1,111,415 1,089,018 97,453
Prepaids ......................................... 22,974 15,484 1,386
Total current assets ................... 3,896,450 3,755,484 336,067
RESTRICTED CASH .................................... 159,961 157,245 14,071
PROPERTY, PLANT AND EQUIPMENT, net ................. 11,508,537 10,256,736 917,845
OTHER ASSETS, net .................................. 805,394 761,905 68,181
Total assets ..........................$ 16,370,342$ 14,931,370 1,336,164
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank loans and current portion of long-term debt . 8,791,003 8,105,438 725,332
Interest payable ................................. 1,409,506 1,655,285 148,127
Trade accounts payable ........................... 922,505 796,138 71,244
Notes payable .................................... 52,777 57,174 5,116
Accrued liabilities .............................. 546,451 539,909 48,315
Employee profit-sharing .......................... 2,450 2,111 189
Total current liabilities ............. 11,724,692 11,156,055 998,323
LONG-TERM DEBT ..................................... 403,938 850,461 76,105
NOTES PAYABLE ...................................... 102,192 125,016 11,187
OTHER LIABILITIES .................................. 193,214 186,596 16,698
DEFERRED TAXES...................................... 1,947,539 1,535,446 137,403
LIABILITY FOR EMPLOYEE BENEFITS..................... 202,579 200,476 17,940
Total long term liabilities ............ 2,849,462 2,897,995 259,333
Total liabilities ..................... 14,574,154 14,054,050 1,257,656
STOCKHOLDERS' EQUITY:
Majority interest ................................ 1,727,355 813,929 72,836
Minority interest ................................ 68,833 63,391 5,673
Total stockholders' equity ............. 1,796,188 877,320 78,509
Total liabilities and stockholders' equi$ 16,370,342$ 14,931,370 1,336,164
Exchange rate: $ 11.1748 per Dollar
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, 2004
(Stated in thousands of Pesos and Dollars)
*
Full Year Acum.March Acum.March
2003 2004 US$ 2003
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net income (loss) ..............................................$ -3,406,102$ -708,515 -63,403
Add (deduct)- Charges (credits) to income which do
not require (provide) cash-
Depreciation and amortization ........................... 402,003 105,259 9,419
Provision for employee benefits ......................... 41,167 1,013 91
Special items ........................................... 503,575 0 0
Amortization of Financial Comissions .................... 93,868 27,358 2,448
Provision for deferred taxes ............................ -73,204 -265,729 -23,779
Impairment .............................................. 549,514 917,982 82,148
Other.................................................... 342,968 -11,817 -1,057
Total items which do not require cash.................... 1,859,891 774,066 69,269
Net resources generated from income .......................... -1,546,211 65,551 5,866
Changes in operating assets and liabilities:
Decrease (Increase) in restricted cash ..................... -159,961 2,716
Decrease (Increase) in inventories ......................... 49,024 22,397 2,004
Decrease (Increase) in current assets ...................... 7,403 -34,803 -3,114
Decrease (increase) in account receivables, net ............ -91,815 148,723 13,309
(Decrease) increase in accounts payable and
accrued liabilities ...................................... 1,030,900 133,488 11,945
Resources generated by continued operating .................. -710,660 338,072 30,010
Assets and liabilities discontinued .......................... 180,721 -39,980 -3,578
Resources generated by operating activities .................. -529,939 298,092 26,432
FINANCING ACTIVITIES:
Increase (Decrease) in bank loans and others ............ 147,361 -248,263 -22,216
Increase (Decrease) in capital .......................... -34,873 0 0
Net resources generated from financing activities ............ 112,488 -248,263 -22,216
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment............... -108,366 -61,843 -5,534
Divestiture to property, plant and equipment............. 605,752 3,625 324
Disposition of subsidiaries ............................. 323,593 0 0
Increase in deferred assets ............................. 14,648 -17,164 -1,536
Minority interest ....................................... 0 0 0
Net resources applied to investing activities ................ 835,627 -75,382 -6,746
INCREASE IN CASH AND CASH EQUIVALENTS .......................... 418,176 -25,553 -2,530
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD............ 240,703 658,879 58,961
CASH & CASH EQUIVALENTS AT END OF THE PERIOD ...................$ 658,879$ 633,326US 56,431
* The exchange rate of 11.1748 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, 2004
Thousands of Pesos Thousands of Dollars
1Q 1Q 1Q 1Q
2003 2004 Var 2003 2004 Var
(Unaudited)(Unaudited) (Unaudited) (Unaudited)
NET SALES ...............................$ 1,655,145$ 1,718,935 4% 146,884 153,823 5%
COST OF SALES ........................... 1,445,759 1,545,198 7% 128,291 138,275 8%
Gross profit........................ 209,386 173,737 -17% 18,593 15,548 -16%
Selling and Administrative expenses 130,805 115,229 -12% 11,620 10,313 -11%
Operating income ................... 78,581 58,508 -26% 6,973 5,235 -25%
FINANCIAL EXPENSE:
Interest expense ........................ 329,322 326,495 -1% 29,282 29,217 0%
Interest income ......................... -9,036 -12,545 39% -799 -1,122 40%
Exchange (gain) loss, net ............... 327,112 -63,894 -120% 29,089 -5,718 -120%
Gain on monetary position ............... -108,078 -136,013 26% -9,615 -12,171 27%
Total financial expense ............... 539,320 114,043 -79% 47,957 10,206 -79%
OTHER INCOME (EXPENSES):
Other income (expense), net ............. -49,620 4,032 N/A -4,413 361 N/A
Total other income (expense) .......... -49,620 4,032 N/A -4,413 361 N/A
Income (loss) before income and asset t -510,359 -51,503 -90% -45,397 -4,610 -90%
Provisions for income and asset taxes ... 39,223 32,567 -17% 3,482 2,914 -16%
Provision for deferred income taxes ..... -55,377 -265,729 380% -4,924 -23,779 383%
Net income after taxes ................ -494,205 181,659 N/A -43,955 16,255 N/A
Special items ........................... -1,028 -15,124 1371% -91 -1,353 1387%
Extraordinary items ..................... 0 3,173 0 0 284 0
Impairment .............................. 0 917,982 0 0 82,148 0
Discontinued operations ................. -298,855 -15,857 -95% -26,576 -1,419 -95%
Net income before minority interest......$ -194,322$ -708,515 265% -17,288 -63,405 267%
Minority interest...................... 308 -6,246 N/A 27 -560 N/A
Majority net income....................$ -194,630$ -702,269 261% -17,315 -62,845 263%
Depreciation & amortization 94,002 105,259 12% 8,347 9,419 13%
EBITDA 172,583 163,767 -5% 15,320 14,654 -4%