Jul 31, 2006. /Lesprom Network/. Corporacion Durango, S.A. de C.V., the largest integrated paper producer in Mexico, announced its unaudited consolidated results for its second fiscal quarter . Current market conditions are improving in the industry and most analysts are optimistic about the outlook for the business. However, as expected, year-over-year results were negatively impacted by higher costs, especially energy and freight, and lower containerboard and corrugated container prices. As a result, the industry was unable to recover its second quarter 2005 and first half 2005 earnings level. In spite of an uncertain electoral-political year in México, stagnant demand, lower price, strong currency, and higher raw material and energy costs, Durango’s focused initiatives allowed it to outperform the industry. The company’s results for second quarter 2006 and first half 2006 were better than those of similar periods in 2005. Company highlights second quarter 2006: - Financial and operating fundamentals of company continued strengthening in second quarter 2006; - Right market strategies and productivity gains resulted in increases in shipments of 11% quarter-on-quarter and 10% year-on-year. Net sales grew 10% quarter-on-quarter and 7% year-on-year . - Right operative strategies along the productive chain allowed the company to reduce its unit production cost by 4%; - Durango’s EBITDA grew by 30% quarter-on-quarter, from $21.5 million in second quarter 2005 to $28 million in second quarter 2006; - Durango’s EBITDA grew by 14% year-on-year from $44.1 million in first half 2005 to $50.2 million in first half 2006; - Durango’s EBITDA margin in second quarter 2006 was 13%, one of the best in our industry sector, reflecting its improved operational fundamentals; - Durango believes that its operating results again outperformed the industry average in second quarter 2006; - In its first quarter operation into Durango, Tizayuca’s results exceeded company’s expectations - In second quarter 2006, Durango successfully continued its relentless working capital and expenditure discipline programs; - Consistent with its announced plans to reduce debt by $100 million in 2006, at the end of second quarter 2006 Durango made debt payments of $75.9 million. The company’s total shipments increased by 11% in second quarter 2006 compared with second quarter 2005, and increased by 10% on an accumulated basis for the six-month period. Durango’s average sales price per short tonne decreased by 1% to $550 in second quarter 2006 from $556 in second quarter 2005. On an accumulated basis, the average sales price per short tonne decreased by 3% to $549 in the second half of 2006 from $564 in the second half of 2005. Total net sales increased by 10% to $214.8 million in second quarter 2006 from $195.1 million in second quarter 2005. On an accumulated basis, net sales increased by 7% to $403.2 million for the six months ended on June 30, 2006 from $377.1 million for the six months ended on as of June 30, 2005. Unit production cost decreased by 4% in second quarter 2006 compared to second quarter 2005. On an accumulated basis, the unit production cost decreased by 4% to $470 as of June 30, 2006 from $491 as of June 30, 2005. EBITDA increased by 30% in second quarter 2006 compared to second quarter 2005, an outstanding achievement under the current tough cost environment. Commenting on the industry and the company’s outlook, Miguel Rincón, Durango’s chairman and CEO, said: “We remain optimistic about the company’s new operating and financial fundamentals. We are building to capture market opportunities from the industry cycle and the Mexican economy recovery as they occur. All of this should allow the company to move towards our ultimate goal to further strengthen our capital structure, on our way to becoming a world class company,” concluded Mr. Rincón.