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Mexico City, October 19th, 2006

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.

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