6-K 1 cd2q2005.txt CORPORACION DURANGO 2ND QUARTER RESULTS 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 July, 2005 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-_____________. 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: Julio 27, 2005 By /s/ Mayela Rincon de Velasco -------------------------------- Name: Mayela Rincon de Velasco Title: Chief Financial Officer 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 second quarter of 2005. 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 2005 and 2004 were prepared on a pro-forma basis with Paneles Ponderosa as a discontinuous operations. During the first semester of the 2005 the Mexican economy, the industrial sector and the consumption continued showing signals of great weakness, under the frame of a prolonged monetary restriction and loss of competitiveness of the manufacturing sector due to an exchange rate highly overvalued and also an increasing cost of energetics. In spite of this adverse business environment, Corporacion Durango developed and executed a package of operative and market strategies that allowed it to increase net sales by 19.0% in the semester, from $316.8 million dollars in the first semester of 2004 to $377.1 million dollars in this semester. Furthermore, EBITDA grew 33.0% in this semester, form $33.3 million dollars in the first semester of 2004 to $44.1 million dollars in this semester. In the second quarter of the 2005 sales increase 20% with respect to the same period of the previous year, from $163.0 million dollars in the 2004 to $195.1 million dollars in the second quarter of 2005. The EBITDA also grew 21% in this quarter, from $17.9 million dollars in the 2004 to $21.5 million dollars in the second quarter of 2005. As a result of the substantial reduction of its debt and lower interest rate, the financial cost of the company in the semester decreased 59%, from $60.4 million dollars in the first semester of 2004 to $24.5 million dollars in the first semester of 2005, which reflects a great financial flexibility and a sound business strategic vision of the company. Total debt (principal and accrued interest) at the end of the first half of 2005 was US$637.1 million, down US$344.7 form the first half of 2004. As a part of its strategy of high focus in its core business, the paper and packaging industry, during the first semester of 2005 the company divested a non-strategic and low-profit wood plant in Chihuahua, Mex. and acquired a new corrugated container plant conveniently located in Monterrey, N.L. Looking to the second semester of 2005, the company considers that their results will be smaller to those of the first semester, due to the expected over-cost in energy and raw materials, to the weakness of the international prices in its main sector of brown papers which will temporarily hurt the results of its operations in Mexico and E.U.A., as well as the negative effect of the present level of appreciation of the exchange rate in the competitiveness of the country, of its clients and in the company. Durango remains committed to reduce debt and create shareholder value... concluded Miguel Rincon, Durango's Chairman and CEO. PERFORMANCE Item 2Q05 2Q04 % Total Shipments('000 Short Tons) 350.9 328.6 7% Pricing (US$/Short Ton) 556 496 12% Net Sales (US$Million) 195.1 163.0 20% Unit Cost (US$/Short Ton) 486 429 13% EBITDA (US$Million) 21.5 17.9 21% EBITDA Margin 11% 11% 0% SHIPMENTS The Company's total shipments and shipments in its industry segment increased 7% as compared with the second quarter of 2004. Shipments (000 Short tons) 2Q05 2Q04 % 1H05 1H04 % Paper 169.5 160.1 6% 318.8 311.1 2% Packaging 179.2 166.2 8% 345.1 329.0 5% Other 2.3 2.4 -5% 4.5 5.5 -18% Total 350.9 328.6 7% 668.3 645.6 4% PRICE The average sales price increased by 12% to US$556 from US$496 in the second quarter of 2004 primarily as a result of the companies pricing recovery strategy supported on the stational strengthening of industry paper pricing. The average packaging unit price increase by 12% from the second quarter of 2004. Prices (US$/Short Ton) 2Q05 2Q04 % 1H05 1H04 % Paper 516 461 12% 535 447 20% Packaging 589 525 12% 587 528 11% Other 926 775 20% 896 735 22% Total 556 496 12% 564 491 15% NET SALES Total net sales grew by 20% to US$195.1 million from US$163.0 million in the second quarter of 2004, mainly due to increases in packaging sales prices. Net Sales (US$ Million) 2Q05 2Q04 % 1H05 1H04 % Paper 87.5 73.9 18% 170.4 139.0 23% Packaging 105.5 87.2 21% 202.6 173.8 17% Other 2.1 1.9 13% 4.0 4.0 0% Total 195.1 163.0 20% 377.1 316.8 19% Net sales from the paper segment increased by 18% to US$87.5 million from US$73.9 million in the second quarter of 2004; net sales from the packaging segment increased by 21% to US$105.5 million from US$87.2 million in the second quarter of 2004. The average packaging unit price increased by 12% from the second quarter of 2004. PRODUCTION COST The unit production cost increased 13% from the second quarter of 2004. Unit Cost (US$/Short Ton) 2Q05 2Q04 % 1H05 1H04 % Total 486 429 13% 491 430 14% SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased from US$13.3 million in the second quarter of 2004 to US$14.4 million in the second quarter of 2005. semester to semester the SG&A increased to US$27.7 million in the first half of 2005 from US$25.5 million in the first half of 2004, mainly due to a higher selling efforts and commissions to increase by 19% our net sales in a highly competitive market. EBITDA EBITDA increased by 21% from the second quarter of 2004. EBITDA as a percentage of net sales was 11% in the second quarter of 2005 remaining flat compared with the 11% of the second quarter of 2004. EBITDA (US$ Million) 2Q05 Margin 2Q04 Margin % Paper 9.1 10% 4.9 7% 83% Packaging 11.9 11% 12.9 15% -8% Other 0.6 29% 0.1 3% 889% Total 21.5 11% 17.9 11% 21% EBITDA (US$ Million) 1H05 Margin 1H04 Margin % Paper 20.8 12% 7.2 5% 190% Packaging 22.3 11% 25.7 15% -13% Other 1.0 25% 0.4 9% 172% Total 44.1 12% 33.3 11% 33% *EBITDA.- According with the Restructured Credit Agreement the 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 of payable, and vi)non-cash charges incurred in connection with pension plans; and c)the aggregate amount of interest income accrued during such period. NET INCOME Net Income increased from a net loss of US$28.1 million in the second quarter of 2004 to a net gain of US$2.8 million in the second quarter of 2005. 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. CONTACTS Corporacion Durango, S.A. de C.V. The Global Consulting Group Mayela R. Velasco Kevin Kirkeby +52 (618) 829 1008 (646) 284-9416 mrinconv@corpdgo.com.mx kkirkeby@hfgcg.com Miguel Antonio R. +52 (618) 829 1070 rinconma@corpdgo.com.mx

CORPORACION DURANGO S.A .DE C.V. 6-K