||( in millions of US dollar )
The 2005 figures are pro-forma since they exclude the acrylic laminate, constant
velocity joint and valve lifter businesses to make them more comparable with the
- In addition, 2005 results do not include the results for companies
divested through the dissolution of the association with Dana.
net sales for 2006, compared to 2005, rose 3.7% to US $1,940. This increase was
mainly due to higher sales at DESC Chemical, DESC Consumer Products and DESC AUTOMOTIVE.
In addition, exports increased 6.4% compared to the previous year, partially driven
by DESC Consumer Products and DESC Chemical, reaching US $828 million, compared
to the US $778 million reported in 2005.
Operating Income and EBITDA declined
by 8.7% and 6.7%, respectively, compared to 2005. This was the result of higher
prices of butadiene and styrene at DESC Chemical, decreased profitability of the
Polystyrene due to strong price competition, the increase in the price of grain
in the Pork Business, in addition to lower sales in DESC Real Estate mainly in
the "Punta Mita" development as a result of the political uncertainty
due to the presidential elections of 2006.
In relation to 2005, 2006 sales increased 1.9% due to higher sales from businesses
focused on the spare parts market and the association with CIE AUTOMOTIVE in the
stamping business, which offset the decline in sales due to the divestiture of
the Original Equipment segment of the Piston business.
EBITDA increased 6.8%
due to new contracts in the stamping business and higher sales from businesses
focused on the spare parts market, despite a decrease in market share from the
"Big Three" (GM , Ford and DCX ) in the face of strong competition from
Asian automakers. On the other hand, operating margin registered an increase of
1% from 2.2% in 2005 to 3.2% in 2006.
Significant Events of Automotive
Segment in 2006
Dissolution of partnership
- On May 31, 2006, DESC
and Dana executed a Share Purchase-Sale Master Contract to dissolve their joint
venture. This contract was submitted to a U.S. federal judge to request approval
from the bankruptcy court due to Dana's filing proceedings under Chapter 11 of
the United States Bankruptcy Code. Accordingly, on July 6, 2006, the Court approved
the dissolution of the joint venture maintained by DESC and Dana through Spicer,
S.A. de C.V., thus enabling the parties to complete the transaction. Following
this dissolution, DESC acquired the equity held by Dana in the light, medium and
heavy drive shaft business and the coupling and seals business in the spare parts
segment and received U.S. $ 19.5 million in cash. Dana assumed the equity held
by DESC in the axle, shaft, forging and smelting businesses.
venture between DESC and CIE Automotive, S.A. ("CIE")
- On February
, 2006, DASA executed an agreement with CIE (a Spanish entity) to enter into a
joint venture named CIE Desc Automotive, S.A. de C.V. ("CIE DESC Automotive"),
which will be engaged in the manufacture of different automotive components. DESC
and CIE will each own 50% of the capital outstanding represented by an initial
joint investment of U.S. $ 97 million. DESC provided this amount by contributing
its subsidiary Pintura Estampado y Montaje, S.A. de C.V. to the joint venture,
while CIE invested cash and contributed its subsidiary CIE Celaya, S.A. de C.V.
- In November 2006, DESC Automotriz, S.A. de C.V. sold its entire shareholding
in Stamping & Wheels, S.A. de C.V. ("SW") to CIE DESC Automotive
for U.S. $ 4 million. Prior to the sale, SW recognized an impairment charge of
$132.7 million resulting from the loss of certain customer contracts in 2006.
Sale of original equipment assets of Pistones Moresa, S.A. de C.V.
On February , 2006, DESC's subsidiary Pistones Moresa, S.A. de C.V. sold all the
assets used to manufacture pistons for original equipment to Kolbenschmidnt Pierburg
AG for approximately U.S.$ 7.6 million. DESC continues to operate its spare parts
pistons business and bolts used for original equipment and for spare parts.
On August, 2006, one of the subsidiaries of CIE DESC
Automotive was awarded a long-term contract for U.S.$ 360 million approximately,
over a nine-year period to supply paint and accessories for DaimlerChrysler pickups.
A state-of-the-art plant will be created for this purpose, which will require
an investment of U.S.$ 52 million and is expected to begin operations at the beginning