Due to the resolution adopted by the Extraordinary Shareholder’s Meeting held on September 28th., 2006, regarding the divestiture of the Writing and Printing Papers and notebooks businesses and in accordance with the guidelines established in the Mexican Financial Information Norms, the financial statements being presented include the operations of the Consumer Products (PROCON) Business, showing the divested business as a separate line called “Discontinued Operations” and finally the total Net Income for the entire corporation.
OPERATING RESULTS – PROCON (1)
Third Quarter Ended
September 30th
2006
2005
% CHG
NET SALES
$4,835
$4,573
6
OPERATING PROFIT
1,323
1,231
8
INTEGRAL FINANCING COST
10
255
96
NET INCOME BEFORE TAXES AND EPS
1,313
976
35
NET INCOME FOR CONTINUOUS OPERATIONS
845
606
39
DISCONTINUED OPERATIONS
100
80
24
NET INCOME
945
686
38
EARNINGS PER SHARE (Pesos)
0.82
0.59
39
EBITDA
1,585
1,501
6
The Consumer Products business continued to show a positive trend, regarding sales growth and Operating Profit, which initiated several years ago when a strategy was established to participate more actively in all market segments.
Sales volume this quarter was almost 7 percent higher than the same period of last year, driven mainly by growths in units sold of disposable diapers and bath tissue. Sales growth in these product categories has been sustained in the last years and this has translated into having the plants operate at higher utilization rates thus attaining higher efficiencies and productivity. This growth has given rise to the need to increase the installed capacity for these products, for which a capital expenditure program in excess of $350 million dollars has been announced for the next three years.
Pressures on costs continue and we continue to be affected by increases in the main inputs, particularly those associated with natural gas and oil, energy and pulp. Nevertheless and due to the incremental volumes with which the corporation has operated and the results from the continuous cost savings programs that have been implemented in all areas, an Operating Profit growth higher than Net Sales growth was achieved. The Operating Profit margin was close to 29 percent, almost 1 percent higher than the previous year.
During the third quarter of the year, we were no longer impacted by the effects of the of the appreciation of the exchange rate on a long position in financial derivative instruments, reason for which the integral financing cost was substantially lower than the prior year and enabled Net Income to grow above the Operating Profit growth.
The quality of the corporation’s earnings is reflected in its strong financial position.
As of September 30, 2006, we ended with $2,303 million pesos of cash after having made investments of $1,116 million pesos (fixed assets or CAPEX of $742 million and own stock re-purchases of $374 million) and having paid out dividends of $2,709 million pesos in the last twelve months.
Under generally accepted accounting principles in the United States (USGAAP), results for the quarter for the total Company, in millions of U.S. dollars, were as follows: Net Sales of $550, 10 percent higher than the prior year; Operating Profit of $143, 8 percent more than the previous year; and, Net Income of $86, 32 percent above last year.
Income Statements (1)
Nine months ended September 30th, 2006 and 2005
2006
%
2005
%
Net sales
14,628
13,423
Cost of sales
8,344
7,944
Gross profit
6,284
43
5,479
41
Operating expenses
2,237
2,029
Operating profit
4,047
28
3,450
26
Integral financing cost
409
739
Income before tax & Employee profit sharing
3,638
2,711
Tax & Employee profit sharing
1,266
1,042
Net income for continued operations
2,372
16
1,669
12
Discontinued operations
211
360
Net income
2,583
18
2,029
15
Earnings per share (Pesos)
2.24
1.74
EBITDA
4,818
4,232
Share Buyback Program
2006
2005
Repurchased shares during the 9 month period
9,365,400
12,198,500
Financial Statement (1) as of September 30th, 2006 and 2005
2006
2005
Assets
Cash
2,303
2,317
Accounts receivable
3,501
3,141
Inventories
1,497
1,265
Current assets for discontinued operations
2,317
2,003
Property, plant and equipment
12,758
13,578
Fixed assets for discontinued operations
3,238
3,902
Total
25,614
26,206
Liabilities and consolidated tockholder’s equity
Bank loans
99
101
Derivative instruments short term
457
408
Accounts payable
1,695
1,520
Accumulated liabilities
1,327
1,222
Dividends payable
1,354
1,319
Provision for taxes and profit sharing
838
470
Current liabilities for discontinued operations
1,086
1,018
Derivative Instruments long term
0
304
Long term loans
5,042
5,283
Deferred taxes
1,767
2,064
Long term liabilities for discontinued operations
607
820
Net equity
11,342
11,677
Total
25,614
26,206
Statements of Changes in Financial Position
from January 1st to September 30th, 2006 and 2005 (1)
2006
2005
Net income
2,583
2,029
Depreciation
771
782
Discontinued Operations
(211)
(360)
Deferred taxes
(125)
(205)
Changes in working capital
323
705
Sources generated by operating activities
3,341
2,951
Dividend payments
(1,402)
(1,361)
CAPEX
(404)
(619)
Share repurchases
(365)
(472)
Financing activities paid
(101)
(888)
Derivative instruments
(501)
564
Sources generated
568
175
Cash at the beginning of the period
1,735
2,142
Cash at the end of the period
2,303
2,317
(1) Prepared in accordance with Mexican financial information standards and expressed in millions of pesos as of September 30th, 2006 purchasing power.
Kimberly-Clark de México manufactures, markets
and distributes consumer, personal care and paper based
products.