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 second fiscal
quarter. All figures were prepared in accordance with Mexican generally
accepted accounting principles and are stated in constant Mexican pesos as
of June 30,2006 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 analysts are
optimistic about the outlook for the business. However, as 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 2Q'05 and 1H'05 earnings
level.
DURANGO'S BUSINESS ENVIRONMENT 2Q'2006
In spite of an uncertain electoral-political year in Mexico, stagnant demand,
lower price, strong currency, and higher raw material and energy costs,
Durango's focused initiatives allowed it to outperform the industry.
The Company's results for 2Q'06 and 1H'06 were better than those of similar
periods in 2005.
COMPANY HIGHLIGHTS 2Q'2006
Financial and operating fundamentals of Company continued strengthening in
2Q'06;
Right market strategies and productivity gains resulted in increases in
shipments of 11% QoQ and 10% YoY. Net sales grew 10% QoQ and 7% YoY;
Right operative strategies along the productive chain allowed the Company
to reduce its unit production cost by 4%;
Durango's EBITDA grew by 30% QoQ, from US$21.5 million in 2Q'05 to US$28
million in 2Q'06;
Durango's EBITDA grew by 14% YoY from US$44.1 million in 1H'05 to US$50.2
million in 1H'06;
Durango's EBITDA margin in 2Q'06 was 13%, one of the best in our industry
sector, reflecting its improved operational fundamentals;
Durango believes that its operating results again outperformed the industry
average in 2Q'06;
In its first quarter operation into Durango, Tizayuca's results exceeded
company's expectations
In 2Q'06, Durango successfully continued its relentless working capital
and expenditure discipline programs;
Consistent with its announced plans to reduce debt by US$100 million in
2006, at the end of 2Q'06 Durango made debt payments of US$75.9 million.
DURANGO'S PERFORMANCE
Item 2Q06 2Q05 % Ac06 Ac05 %
Total Shipments ('000 Short Tons) 390.2 350.9 11% 733.9 668.3 10%
Pricing (US$/Short Ton) 550 556 -1% 549 564 -3%
Net Sales (US$ Million) 214.8 195.1 10% 403.2 377.1 7%
Unit Cost (US$/Short Ton) 467 486 -4% 470 491 -4%
EBITDA (US$ Million) 28.0 21.5 30% 50.2 44.1 14%
EBITDA Margin 13% 11% 2% 12% 12% 1%
SHIPMENTS
The Company's total shipments increased by 11% in 2Q06 compared with 2Q05,
and increased by 10% on an accumulated basis for the six-month period.
Shipments (000 Short Tons) 2Q06 2Q05 % Ac06 Ac05 %
Paper 197.4 169.5 16% 366.6 318.8 15%
Packaging 190.4 179.2 6% 362.3 345.1 5%
Other 2.4 2.3 3% 5.1 4.5 13%
Total 390.2 350.9 11% 733.9 668.3 10%
PRICE
Durango's average sales price per short ton decreased by 1% to US$550 in
2Q06 from US$556 in 2Q05. On an accumulated basis, the average sales price
per short ton decreased by 3% to US$549 in the second half of 2006 from
US$564 in the second half of 2005.
Prices (US$/Short Ton) 2Q06 2Q05 % Ac06 Ac05 %
Paper 508 516 -1% 503 535 -6%
Packaging 588 589 0% 590 587 0%
Other 986 926 6% 984 896 10%
Mix Price(US$/Short Ton)550 556 -1% 549 564 -3%
NET SALES
Total net sales increased by 10% to US$214.8 million in 2Q06 from US$195.1
million in 2Q05. On an accumulated basis, net sales increased by 7% to
US$403.2 million for the six months ended on June 30, 2006 from US$377.1
million for the six months ended on as of June 30, 2005.
Net Sales (US$ Million) 2Q06 2Q05 % Ac06 Ac05 %
Paper 100.3 87.5 15% 184.4 170.4 8%
Packaging 112.1 105.5 6% 213.8 202.6 5%
Other 2.4 2.1 10% 5.0 4.0 24%
Total 214.8 195.1 10% 403.2 377.1 7%
PRODUCTION COST
Unit production cost decreased by 4% in 2Q06 compared to 2Q05. On an
accumulated basis, the unit production cost decreased by 4% to US$470 as of
June 30, 2006 from US$491 as of June 30, 2005.
Unit Cost (US$/Short Ton) 2Q06 2Q05 % Ac06 Ac05 %
Total 467 486 -4% 470 491 -4%
EBITDA
EBITDA increased by 30% in 2Q'06 compared to 2Q'05, an outstanding
achievement under the current tough cost environment.
EBITDA (US$ Million) 2Q06 Margin 2Q05 Margin %
Paper 15.1 15% 9.1 10% 67%
Packaging 12.2 11% 11.9 11% 3%
Other 0.6 27% 0.6 29% 2%
Total 28.0 13% 21.5 11% 30%
EBITDA increased by 14% in 2H'06 compared to 2H'05.
EBITDA (US$ Million) Ac06 Margin Ac05 Margin %
Paper 26.1 14% 20.8 12% 26%
Packaging 23.1 11% 22.3 11% 3%
Other 1.0 21% 1.0 25% 2%
Total 50.2 12% 44.1 12% 14%
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 plans to reduce its outstanding debt by US$100.0 Million
during 2006. This would represent US$75.0 million above its scheduled debt
payments for this year. As of the second quarter of 2006, the Company has
already repaid US$75.9 Million. This marks an important milestone in
Durango's ongoing strategic objective to continue building stronger
financial fundamentals.
CEO STATEMENT
Commenting on the industry and the Company's outlook, Miguel Rincon,
Durango's Chairman and CEO, said ...
"We remain optimistic about the Company's new operating and financial
fundamentals. We are building to capture market opportunities from the
industry cycle and the Mexican economy recovery as they occur. All of
this should allow the Company to move towards our ultimate goal to
further strengthen our capital structure, on our way to becoming a
world class company"... concluded Rincon.
CONFERENCE CALL
You are cordially invited to our Company's Second Quarter 2006 Conference
Call, which will be held on Thursday, July 27, 2006 - 1:00 p.m. (EST)
// 12:00 p.m. (Mexico - Durango). Investors may participate in the
live Conference Call by dialing (800) 322-5044 (US Participants) or
(617) 614-4927 (International Participants) with 32327322 as Passcode.
Please dial in at least 10 minutes prior to the start of the call.
CORPORACION DURANGO, S.A. DE C.V. AND SUBSIDIARIES 11.2723
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2005 AND JUNE 30, 2006 (UNAUDITED)
EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS
AS OF JUNE 30, 2006
(Stated in thousands of Pesos and Dollars)
US$ DLLS.
December 31, Jun 30, Jun 30,
2005 2006 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................$ 712,949$ 460,689 40,869
Accounts receivable, net ......................... 1,725,825 1,968,245 174,609
Taxes recoverable and other assets ............... 46,464 18,701 1,659
Inventories, net ................................. 1,213,467 1,242,980 110,269
Prepaid expenses ................................. 15,757 25,788 2,288
Total current assets ................... 3,714,462 3,716,403 329,693
PROPERTY, PLANT AND EQUIPMENT, net ................. 11,044,451 11,571,832 1,026,572
OTHER ASSETS, net .................................. 262,079 261,020 23,156
Total assets ..........................$ 15,020,992$ 15,549,255 1,379,422
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank loans and current portion of long-term debt . 262,825 189,766 16,835
Interest payable ................................. 14,325 8,034 713
Trade accounts payable ........................... 856,959 1,033,702 91,703
Notes payable .................................... 49,478 41,344 3,668
Accrued liabilities .............................. 484,038 727,292 64,520
Employee profit-sharing .......................... 1,007 780 69
Total current liabilities ............. 1,668,632 2,000,918 177,508
LONG-TERM DEBT ..................................... 6,552,790 6,156,663 546,176
LONG-TERM NOTES PAYABLE ............................ 66,675 44,333 3,933
DEFERRED TAXES...................................... 1,623,469 1,724,075 152,948
LIABILITY FOR EMPLOYEE BENEFITS..................... 309,900 307,767 27,303
Total long term liabilities ............ 8,552,834 8,232,838 730,360
Total liabilities ..................... 10,221,466 10,233,756 907,868
STOCKHOLDERS' EQUITY:
Majority interest ................................ 4,740,859 4,913,319 435,875
Minority interest ................................ 58,667 402,180 35,679
Total stockholders' equity ............. 4,799,526 5,315,499 471,554
Total liabilities and stockholders' equi$ 15,020,992$ 15,549,255 1,379,422
Exchange rate: $ 11.2723
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 JUNE 30, 2006
(Stated in thousands of Pesos and Dollars)
*
Full Year Acum. Jun Acum. Jun
2005 2006 US$ 2006
OPERATING ACTIVITIES:
Net income (loss) ..............................................$ 164,941$ -222,145 -19,707
Add (deduct)- Charges (credits) to income which do
not require (generate) resources:
Depreciation and amortization ........................... 429,222 201,405 17,867
Loss (Gain) on sale of property, plant and equipment .... -1,707 33 3
Impairment of long-lived assets ......................... -114,542 0 0
Deferred income taxes ................................... 242,816 -20,480 -1,817
Other.................................................... -26,276 22,609 2,006
Total items which do not require cash.................... 529,513 203,567 18,059
Net resources generated from income .......................... 694,454 -18,578 -1,648
Changes in operating assets and liabilities:
Decrease (Increase) in inventories ......................... -90,579 -29,513 -2,618
Decrease (Increase) in current assets ...................... 92,781 17,732 1,573
Decrease (increase) in account receivables, net ............ 20,166 -242,420 -21,506
(Decrease) increase in accounts payable and
accrued liabilities ...................................... -148,946 405,345 35,959
Resources generated by continued operating .................. 567,876 132,566 11,760
Assets and liabilities discontinued .......................... -419,183 0 0
Resources generated by operating activities .................. 148,693 132,566 11,760
FINANCING ACTIVITIES:
Increase (Decrease) in bank loans and others ............ -3,840,367 -479,501 -42,538
Increase (Decrease) in capital .......................... 292,617 0 0
Gain on shares sales .................................... 2,993,053 0 0
Net resources generated from financing activities ............ -554,697 -479,501 -42,538
INVESTMENT ACTIVITIES:
Acquisition and sale of property, plant and equipment.... -62,347 -210,007 -18,630
Profit on sale of discontinued operations................ 336,567 807 72
Acquisition of shares ................................... -54,353 0 0
Increase in minority interest ........................... 0 314,327 27,885
Increase in deferred assets ............................. 28,388 -10,452 -927
Net resources applied to investing activities ................ 248,255 94,675 8,399
INCREASE IN CASH AND CASH EQUIVALENTS .......................... -157,749 -252,260 -22,379
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD............ 870,698 712,949 63,248
CASH & CASH EQUIVALENTS AT END OF THE PERIOD ...................$ 712,949$ 460,689US 40,869
* The exchange rate of 11.2723 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 JUNE 30, 2006
Thousands of Pesos Thousands of Dollars
2Q 2Q 2Q 2Q
2005 2006 Var 2005 2006 Var
NET SALES ...............................$ 2,189,519$ 2,420,952 11% 195,055 214,770 10%
COST OF SALES ........................... 1,916,150 2,054,128 7% 170,660 182,228 7%
Gross profit........................ 273,369 366,824 34% 24,395 32,542 33%
Selling and Administrative expenses 162,140 170,518 5% 14,447 15,127 5%
Operating income ................... 111,229 196,306 76% 9,948 17,415 75%
FINANCIAL EXPENSE:
Interest expense ........................ 142,170 148,266 4% 12,771 13,153 3%
Interest income ......................... -2,619 -3,948 51% -233 -350 50%
Exchange (gain) loss, net ............... -272,605 246,978 N/A -24,520 21,910 N/A
Gain on monetary position ............... -11,111 17,965 N/A -959 1,594 N/A
Total financial expense ............... -144,165 409,261 N/A -12,941 36,307 N/A
OTHER INCOME (EXPENSES):
Other income (expense), net ............. -73,201 74,643 N/A -6,544 6,622 N/A
Total other income (expense) .......... -73,201 74,643 N/A -6,544 6,622 N/A
Income (loss) before income and asset t 182,193 -138,312 N/A 16,345 -12,270 N/A
Provisions for income and asset taxes ... 12,891 23,106 79% 1,126 2,050 82%
Provision for deferred income taxes ..... 169,217 -45,212 N/A 15,217 -4,011 N/A
Net income after taxes ................ 85 -116,206 N/A 2 -10,309 N/A
Discontinued operations ................. -31,178 0 -100% -2,804 0 -100%
Net income before minority interest......$ 31,263$ -116,206 N/A 2,806 -10,309 N/A
Minority interest...................... -2,582 9,788 N/A -233 868 N/A
Majority net income....................$ 33,845$ -125,994 N/A 3,039 -11,177 N/A
Operating income ...................... 111,229 196,306 76% 9,948 17,415 75%
Depreciation & amortization ........... 107,626 100,177 -7% 9,605 8,887 -7%
Interest income ....................... 2,619 3,948 51% 233 350 50%
Employee retirement obligations ....... 15,397 11,909 -23% 1,385 1,056 -24%
Allowance for doubtful accounts ....... 4,182 2,983 -29% 376 265 -30%
EBITDA ................................ 241,053 315,323 31% 21,547 27,973 30%
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 JUNE 30, 2006
Thousands of Pesos Thousands of Dollars
Ac Ac Ac Ac
2005 2006 Var 2005 2006 Var
NET SALES ...............................$ 4,302,253$ 4,489,288 4% 377,094 403,172 7%
COST OF SALES ........................... 3,743,843 3,838,256 3% 328,128 344,711 5%
Gross profit........................ 558,410 651,032 17% 48,966 58,461 19%
Selling and Administrative expenses 315,453 328,281 4% 27,671 29,528 7%
Operating income ................... 242,957 322,751 33% 21,295 28,933 36%
FINANCIAL EXPENSE:
Interest expense ........................ 294,710 296,763 1% 25,987 26,804 3%
Interest income ......................... -17,276 -12,255 -29% -1,503 -1,111 -26%
Exchange (gain) loss, net ............... -246,329 408,225 N/A -22,242 36,745 N/A
Gain on monetary position ............... -67,042 -35,115 -48% -5,832 -3,315 -43%
Total financial expense ............... -35,937 657,618 N/A -3,590 59,123 N/A
OTHER INCOME (EXPENSES):
Other income (expense), net ............. -135,783 128,003 N/A -11,960 11,540 N/A
Total other income (expense) .......... -135,783 128,003 N/A -11,960 11,540 N/A
Income (loss) before income and asset t 143,111 -206,864 N/A 12,925 -18,650 N/A
Provisions for income and asset taxes ... 23,491 35,761 52% 2,021 3,171 57%
Provision for deferred income taxes ..... 246,290 -20,480 N/A 21,914 -1,736 N/A
Net income after taxes ................ -126,670 -222,145 75% -11,010 -20,085 82%
Discontinued operations ................. -43,499 0 -100% -3,872 0 -100%
Net income before minority interest......$ -83,171$ -222,145 167% -7,138 -20,085 181%
Minority interest...................... -44,043 14,110 N/A -3,827 1,265 N/A
Majority net income....................$ -39,128$ -236,255 504% -3,311 -21,350 545%
Operating income ...................... 242,957 322,751 33% 21,295 28,933 36%
Depreciation & amortization ........... 215,703 196,179 -9% 18,932 17,646 -7%
Interest income ....................... 17,276 12,255 -29% 1,503 1,111 -26%
Employee retirement obligations ....... 17,808 22,609 27% 1,594 2,040 28%
Allowance for doubtful accounts ....... 8,990 5,545 -38% 793 499 -37%
EBITDA ................................ 502,734 559,339 11% 44,117 50,229 14%
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: July 26, 2006 By /s/ Mayela Rincon de Velasco
--------------------------------
Name: Mayela Rincon de Velasco
Title: Chief Financial Officer