Net income for the year improved over 2006 and net sales grew in real terms.
However, operating profit was lower due to significant cost pressures throughout
the year that were not recuperated.
Net sales for the year grew 3 percent in real terms, driven by higher volume. The
Company’s market shares remained unchanged, confirming the slowdown in the
economy. The slower demand was evident in the fourth quarter and in addition in
the month of December the wholesale trade significantly reduced purchases in
anticipation of the new IETU tax which took effect on January 1st, 2008.
Operating profit was 6 percent below last year, derived from cost pressures in
some of the Company’s main raw materials such as cellulose and recycled
fibers, with prices increasing more than 40 percent year over year. In addition to
the cost pressures, during the month of September, the company had lower
productivity in four of its plants due to the lack of supply of natural gas during one
week. Also, during the fourth quarter, the company operated at lower productivity
due to the slowdown in demand.
Net income from continuing operations was similar to the previous year, since
last year results were negatively affected by the appreciation of the exchange
rate over a long position in financial instruments, situation that did not occur in
2007. In addition, we had a lower effective tax rate due to the recovery of certain
taxes related to the deductibility of employee profit sharing from the income tax
base.
The quality of the corporation’s earnings is reflected in a solid financial position
and an important generation of cash.
We generated EBITDA of almost $6,700 million pesos during the year and as of
December 31st, we ended with $2,915 million pesos in cash after having invested
$2,500 million pesos ($1,490 in capital expenditures and $1,010 in the repurchase
of stock) and having paid out a dividend to our shareholders of $3,028
million pesos.
We continue with our CAPEX program. As part of this plan, we started up a new
tissue machine ($75 million dollars) during the fourth quarter of the year. Also,
during the second quarter of 2008, we plan to initiate local production of raw
materials for wet wipes ($50 million dollars) which will translate into important
cost savings.
Under United States generally accepted accounting principles (US GAAP), the
annual results expressed in millions of dollars, were as follows: Net Sales of
$1,923, 7 percent above the prior year; Operating Profit of $528, 1 percent below
the prior year; and, Net Income from continuing operations of $335, 5 percent
above 2006.
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