corporaciÓn durango, s.a. de c.v. sep 27, 2005 the largest papermaker in méxico… investor...
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CORPORACIÓN DURANGO, S.A. DE C.V.
Sep 27, 2005
The largest papermaker in México…
INVESTOR PRESENTATION
The CompanyCORPORACIÓN
DURANGO
THE COMPANY
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The Company
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The largest papermaker in México
A competitive company in the international compass, in operations, processes, products and capital cost
Positioned to benefit from the next cycle of recovery of the national economy and of the international paper industry
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CORPORACIÓN
DURANGO
Combined sales for $ 1,000 millions of dollarsduring the last twelve months
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Corporación Durango:
through Grupo Industrial Durango, is the largest manufacturer of brown papers in Mexico;
is the largest national producer of newsprint through Grupo Pipsamex;
its packaging division, Empresas Titán, is the largest manufacturer of corrugated packaging in Mexico;
is the Mexican paper company with the largest industrial operations in the United States, with Durango-McKinley Paper Company;
and is also one of the largest manufacturers of bleached paper for writing and printing and paper sacks for the national cement and food industry in Mexico.
Corporate ProfileCORPORACIÓN
DURANGO
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Operational OrganizationCORPORACIÓN
DURANGO
SALES CONTRIBUTIONPER SEGMENT
RESULTS CONTRIBUTIONPER SEGMENT
BROWNPAPERS
NEWSPRINTBOND
PACKAGING
BROWNPAPERS
NEWSPRINT BOND
PACKAGING
32%
13%42%
13%
14%
20% 19%
47%
BROWNPAPERS
NEWSPRINT
BOND
CORRUGATEDCONTAINERS
PACKAGING AND SACKS
FORMS
NOTEBOOKS
BROWN PAPER
CORRUGATEDCONTAINERS
1st. Half, 2005 1st. Half, 2005
DIVISION
PAPERDIVISION
PAPER PRODUCTSDIVISION
PAPER PRODUCTSDIVISION
PAPER
GRUPOINDUSTRIAL
DURANGO PIPSA-MEXGRUPO
T I T A NEMPRESAS
FORMA-TODO McKINLEYPAPER
McKINLEYCONTAINER
CORPORACIÓN
DURANGO
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The Company / LeadershipCORPORACIÓN
DURANGO
1,075
CORPORACIÓNDURANGO
SMURFITMEXICO
GRUPOCOPAMEX
KIMBERLYCLARK
935
552
354
O E M
309
GRUPOGONDI
220
The Largest Papermakerin México
PACKAGING
BROWNPAPERS
809
354220
GRUPODURANGO
SMURFITMEXICO
GRUPOGONDI
NEWSPRINTand B O N D
266
104
PIPSA OEM
609
430
240
TITAN SMURFITMEXICO
GRUPOGONDI
Thousands Tons
PRODUCTION 2004
Based on Thousands Tons of Manufactured Paper in 2004
-Source: National Camera of Pulp and Paper Industry
Building a World-Class Company
Operating 40 industrialplants in México andin the South of the United States
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MONTERREY
DURANGO
CULIACAN
GUADALAJARAQUERETARO
CD. DE MEXICO
TRES VALLES
TUXTEPEC
TAPACHULA
CHIHUAHUA
PREWITT
MEXICALI
NOGALES
ALBUQUERQUE
EL PASO
DALLAS
RIO BRAVO
HOUSTON
REGIONALPRESENCE MARKET
U.S.22%
MEXICO78%
THE COMPANY
PHOENIX
BAJIOParticleboard PlantCellulose PlantPaper MillPackaging PlantWastepaper Collecting Center to RecycleHeadquarter Offices
NAFTA
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*
*
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*40 industrial plantsin Mexico and US
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CORPORACIÓN
DURANGO
Strategic ReengineeringCORPORACIÓN
DURANGO
STRATEGIC REENGINEERING2002 - 2004
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Strategic Reengineering
Business Strategic Plan (2002 – 2004)
1-
2-
3-
FINANCIAL REENGINEERING
OPERATIONAL REENGINEERING
ORGANIZATIONAL REENGINEERING
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CORPORACIÓN
DURANGO
HARD TIMES . . . Times of Opportunities
Financial Reengineering
Provide the company with a more solid and competitive structure of capital, to face in the future any depression like the one we had."
Friendly negotiation with creditors
Significant Reduction of debt
Considerable Reduction of interest rate
Important Reduction of financial cost
Significant Extension of the period of amortization
Substantial Growth of financial flexibility
OBJETIVE:
GOALS:
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. . . objective achieved
An Efficient
"
CORPORACIÓN
DURANGO
ACHIVEMENTS :
FINANCIAL REENGINEERING
$1’077
$649
11.2%
6.9%
$115
$45
1.0
8.0
DEBT (Million Dollars)
INTEREST RATEANNUAL AVERAGE
FINNANCIAL ANNUAL COST(Million Dollars)
DEBT MATURITY(Years)
BeforeRestructuring
AfterRestructuring
- 40% - 36% - 61%
81%
DEBT/ ASSTS
48%
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* In this restructuring the Company honored 100% of its obligations with its creditors. One portion of debt has been exchanged for 75% of capital, benefiting in a better financial structure for the Company.
Financial Reengineering
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CORPORACIÓN
DURANGO
40% Debt reduction
Reduction of interest rate from 11.2% to 6.9% annual average
61% Annual financial cost reduction
Saving for $560 millons of dollars in financial cost in the following 8 years
8 years new debt matirity profile
An efficient financial reengineering
Wide financial flexibility
CALENDAR OF DEBT AMORTIZATION 2005 - 2012
MainShareholders
80% 20%Invest ors
CONTROLEQUITY
Public
$18
2005
$27$24
2006 2007 2008 2009 2010
DEBT AMORTIZATION
Million Dollars
$23$24 $26
2005 - 2012
$459
2011 2012
$32
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Operational Reengineering (2002 – 2004)CORPORACIÓN
DURANGO
Optimize the operational platform, divesting those non strategic operations or non viable in the business vision assets of the company, to invest those resources in order to reduce debt and strength the operations"
Rationalize operations
Increase productivity
Increase production
Improve mixture of products and prices
Control production costs below industry costs
OBJECTIVES:
GOALS:
OPERATIONAL REENGINEERING
"
. . . objective achieved
Divestitures of non strategic assets per $ 124 MD
Strengthen of the Financial Structure
Investment in internal projects and reduction of debt
Considerable Increase of productivity
ACHIEVEMENTS:
An Efficient
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Incorporate advanced technology in systems, operations and processes to optimize and simplify the operational and administrative structure, rationalize operations, improve processes, reduce costs and improve the productivity of the company"
OBJECTIVES
Organizational Reengineering (2002 – 2005)
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CORPORACIÓN
DURANGO
ORGANIZATIONAL REENGINEERING
. . . objective achieved
Redesign an organizational structure into a flatter, thinner, more balanced and more focused one
Reduction of personnel from 8,174 in 2000 to 7,551 in June 2005, a reduction of 623 persons
Real Increase of 26.0% in the productivity (Production/Personnel) of the human resource
ACHIEVEMENTS:
An Efficient
OutlookCORPORACIÓN
DURANGO
OUTLOOK2005 - 2010
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Paper IndustryCORPORACIÓN
DURANGO
Highly intensive in Investment (1.5 : 1.0)
Sensitive to economy cycles
Sensitive to the balance global offer-demand
Sensitive to the cost of energy
Sensitive to the volatility of international raw material cost (China)
Cyclical in profitability (1.0 : 2.0)
All of this establishes a high barrier for new participants to enter in the new sector
Today, a new generation of leaders is in charge of the international industry, highly oriented to reach a competitive a return for investment
Recovery of the industry profitability to be expected in the last quarter 2006
Attractive perspective of return of investment in the industry in a middle term, in line with other industrial branches intensive in capital
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Strengths and Competitive AdvantagesCORPORACIÓN
DURANGO
Market leader
Competitive structure of cost of production
Economy of scale
Latest technology
High vertical integration
International synergies
Competitive products and services
Wide net of production and national distribution
Exposure to markets of high growth
Diversification of products, markets and costumers
Solid business relationship with an important foundation of national and international costumers
Low cost of capital
Financial flexibility
Public Company listed in the Mexican Stock exchange Market (CODUSA) and regulated by the Securities and Exchange Commission (SEC)
The best management practices and corporate governance
Business Transparency
Intellectual capital of high growth, proved in crisis
Ecological company and socially responsible
COMPANYFUNDAMENTALS
LOW PRODUCTIONCOST
LOW COSTOF CAPITAL
MARKETLEADER
CORPORACIÓN
DURANGO
During the last 20 years, the company has been writing a story of growth and development in the paper
industry, distinguishing itself for its ability to successfully endure recurring crises in the Mexican and international economies, as well as crises in its own industry, emerging from these with improved
competitive advantages in a challenging world where
the only constant is change.
ConclusionsCORPORACIÓN
DURANGO
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CORPORACIÓN DURANGO, S.A. DE C.V.
. . . Building a world class company