Fitch Affirms Kimberly-Clark de Mexico, S.A. de C.V. FC/LC Ratings at 'BBB+/A'.

NEW YORK -- Fitch Ratings has affirmed the 'BBB+' foreign currency senior unsecured debt rating and the 'A' local currency senior unsecured debt rating of Kimberly-Clark de Mexico, S.A. de C.V. (KCM). Fitch has also affirmed its long-term rating of 'AAA'(mex) on the National Scale. The Rating Outlook is Stable.

The ratings reflect KCM's dominant business position, stable cash flows, and strong financial profile. KCM maintains a leading market presence in every product category in which it participates. KCM's business strength is supported by a solid brand portfolio, a low cost structure, an extensive distribution network, and access to Kimberly-Clark Corporation's (Kimberly-Clark; NYSE: KMB) technology, and research and development capabilities. KCM has long-term growth opportunities due to its favorable demographics, low product penetration, and disposable income growth in Mexico.

KCM's foreign currency rating, which is above Mexico's sovereign ceiling (rated 'BBB-' by Fitch), is based on the company's debt-payment track record, export sales, strong capital structure and liquidity, and implicit support from Kimberly-Clark (rated 'AA' by Fitch). KCM maintains large cash balances relative to debt levels to ensure liquidity in the event of economic downturns or other unforeseen events. KCM is a strategic investment for Kimberly-Clark, which owns 47.9% of the company. KCM is Kimberly-Clark's largest and most profitable affiliate, the only one that holds a seat on Kimberly-Clark's board of directors.

During the first nine months of 2004, revenues increased by 11%, boosted primarily by volume growth in the consumer products segment. Price competition for paper-based consumer products in Mexico has been aggressive in recent years and it continued to affect profit margins in 2004. Margins have also been hurt by increased advertising and marketing expenses, affecting profitability for all market participants including KCM. Nonetheless, KCM's operating margins continue to be well-above competitors? due to considerable economies of scale advantages, partial vertical integration and production efficiencies. Profitability has also been hurt by incremental costs in pulp, chemicals, packaging, and energy. Although KCM's recycling facilities provide approximately 50% of pulp needs, the company is exposed to pulp prices on the remaining half.

KCM's long-term strategy is to maintain a conservative debt profile. At Sept. 30, 2004, KCM's debt totaled US$530 million, of which only $59 million is due over the next 12 months. The debt was composed of the US$250 million senior notes due 2009, a US$50 million private placement due 2005, US$176 million equivalent of peso-denominated long-term notes due 2010 and 2013, and approximately US$54 million of unsecured long-term bank loans. At Sept. 30, 2004, KCM's liquidity position was strong, with a balance of cash and marketable securities of US$232 million and committed available credit lines for up to US$300 million.

The company's low debt levels and strong cash flow generating ability have resulted in interest coverage ratios in the range of 12 times (x) - 13x in recent years. During the first nine months of 2004, the EBITDA to interest expense ratio was 11.5x and net debt to EBITDA was 0.6x. Over the past several years, KCM has financed capital expenditures with cash, has paid important cash dividends that average slightly more than $200 million per year, and has continued to buy back shares on a discretionary basis.

KCM is the largest Mexican manufacturer and marketer of paper-based consumer products (tissue, disposable diapers, feminine care, notebooks, and away-from-home products, which account for about 85% of revenues) and printing and writing paper (15% of revenues). The combination of access to Kimberly-Clark's global brands and development of proprietary local brands has allowed the company to successfully target customers of all income levels for each product category. In 2003, KCM had US$1.5 billion of revenues and US$503 million of EBITDA.