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Earnings Release Second Quarter 2019
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TABLE OF CONTENTS
2Q19 HIGHLIGHTS ............................................................................................... 3
RELEVANT EVENTS .............................................................................................. 3
SUBSEQUENT EVENTS ........................................................................................ 4
REVIEW OF 2Q19 CONSOLIDATED RESULTS ................................................ 5
SALES .............................................................................................................................................. 6
OPERATING COSTS .................................................................................................................... 7
OTHER OPERATING EXPENSES .............................................................................................. 7
EBITDA ........................................................................................................................................... 8
FINANCIAL RESULT .................................................................................................................... 8
NET INCOME (LOSS) ................................................................................................................... 8
FREE CASH FLOW ..................................................................................................................... 10
CAPITAL EXPENDITURES ........................................................................................................ 10
DEBT ............................................................................................................................................. 10
FINANCIAL RATIOS ................................................................................................................... 12
REVIEW OF RESULTS BY BUSINESS ............................................................... 13
PULP MARKET ............................................................................................................................ 13
PULP SEGMENT ......................................................................................................................... 13
SOFTYS ......................................................................................................................................... 14
PACKAGING ................................................................................................................................ 18
RISK MANAGEMENT ......................................................................................... 20
MARKET RISK ............................................................................................................................. 20
FINANCIAL RISK ......................................................................................................................... 20
Risk arising from the conditions of the financial markets ............................... 21
Credit risk .............................................................................................................. 23
Liquidity risk ......................................................................................................... 24
OPERATIONAL RISKS ............................................................................................................... 25
Industrial and forestry operations risk ............................................................... 25
Continuity and cost of acquisition of materials and services .......................... 26
Environmental factors risk .................................................................................. 26
Risk associated with community relations ........................................................ 27
Compliance risk .................................................................................................... 28
Cyber risk .............................................................................................................. 28
RISK ARISING FROM THE POLITICAL AND ECONOMIC CONDITIONS IN THE COUNTRIES WHERE CMPC OPERATES .............................................................................. 28
ABOUT CMPC ..................................................................................................... 30
FORWARD-LOOKING STATEMENTS ............................................................. 30
FINANCIAL TABLES............................................................................................ 31
GLOSSARY ........................................................................................................... 36
CONFERENCE CALL
Date: August 8th, 2019 Time: 11:00 AM ET Conference ID: 9594518 US Toll-Free: +1 (866) 209-2934 International Dial-In: +1 (647) 689-5682 Webcast: click here
IR CONTACTS
Colomba Henríquez [email protected] + (56) 2 2441 2791
Petya Miteva [email protected] + (56) 2 2441 2713
Agustina Mussolini [email protected] + (56) 2 2441 2616
ir.cmpc.cl
3
2Q19 HIGHLIGHTS
Consolidated sales of USD1,442 million, 1% lower QoQ and 11% YoY, mainly driven by lower Pulp sales, compensated by higher Softys sales.
Market pulp volumes of 891,000 tons, 8% higher QoQ and 4% lower YoY.
BEKP prices 9% lower QoQ and 17% YoY, reaching CIF USD629/ton. BSKP prices of CIF USD633/ton, 10% lower QoQ and 26% YoY.
BEKP cash cost of USD195/ton, decreasing 7% QoQ and 1% YoY. BSKP cash cost of USD326/ton, 4% lower QoQ and 2% lower YoY.
Tissue paper sales volumes of 174,000 tons, stable QoQ and 3% higher YoY. Personal Care products sales volumes of 1,554 million units, 3% higher QoQ and 16% higher YoY.
Packaging sales volumes of 201,000 tons; 4% lower QoQ and 3% lower YoY.
EBITDA of USD325 million, 3% lower QoQ and 36% lower YoY, mainly as a result of the lower pulp prices during the quarter.
Net income of USD62 million, representing an 8% QoQ increase and a 35% YoY decrease.
Negative free cash flow at USD276 million, compared to negative at USD56 million in 1Q19 and positive at USD99 million in 2Q18. The quarterly result is related to increased cash spending on dividend disbursement, tax payment and capital expenditure.
Net debt to EBITDA ratio of 2.0x, compared to 1.7x in 1Q19 and 2.2x in 2Q18.
USD Mil l ion 2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
Sales 1.618 1.449 1.442 -1% -11% 3.113 2.891 -7%
EBITDA 507 335 325 -3% -36% 906 660 -27%
EBITDA Margin 31,3% 23,1% 22,5% -60 bps -880 bps 29,1% 22,8% -630 bps
Net Income (Loss) 95 57 62 8% -35% 239 119 -50%
CAPEX 99 77 158 105% 59% 202 235 16%
Free Cash Flow 99 (56) (276) 389% N/A 169 (333) N/A
Total Assets 14.770 15.196 14.892 -2% 1% 14.770 14.892 1%
Net Debt 3.223 2.925 3.192 9% -1% 3.223 3.192 -1%
Market Capitalization 9.201 8.843 6.847 -23% -26% 9.201 6.847 -26%
Closing Exchange Rate (CLP/USD) 651,21 678,53 679,15 0% 4% 651,21 679,15 4%
Average Exchange Rate (CLP/USD) 620,94 667,34 683,80 2% 10% 611,82 675,38 10%
Closing Exchange Rate (BRL/USD) 3,86 3,90 3,84 -2% -1% 3,86 3,84 -1%
Average Exchange Rate (BRL/USD) 3,60 3,77 3,92 4% 9% 3,42 3,84 12%
4
RELEVANT EVENTS
New CMPC Packaging corporate structure – As of June 1, 2019 the Company integrated the
activities of its subsidiaries Papeles Cordillera, Envases Impresos, Chimolsa and Sorepa into a
single business unit, consolidating their operations in order to
benefit from different productive and distribution synergies.
Acquisition of Papelera Panamericana – On April 5, 2019, Softys
finalized the acquisition of Papelera Panamericana (Activar S.A.C.
and Papelera Panamericana S.A.), a Peruvian company with
presence in the Arequipa and Southern Peruvian markets since 1983.
Papelera Panamericana is the local market leader in Arequipa, with more than 60% market
share. The company’s mill produces tissue paper, which is then converted into paper napkins,
paper towels and toilet paper. The acquisition of 100% of the company totaled USD13 million.
Acquisition of plantations in Brazil – In June 2019, CMPC executed the purchase of plantations
in Brazil, not including the land, of approximately 9 million m3 of wood cover. The transaction
closed at BRL117 million, which is equivalent to USD46 million.
5th CMPC Investor Day – On June 13 and 14, 2019 took place the 5th CMPC Investor Day in Santiago and Maule, Chile. The first day included presentations by the senior management of the company, among whom the company CEO and the CEOs of the business divisions. They exposed on the strategies and challenges facing the company as well as their respective businesses and markets. During the second day of the event there was a visit to the boxboard plant in Maule, one of the most modern ones in Latin America.
SUBSEQUENT EVENTS
CMPC issues its third Green Bond – On July 4, CMPC issued its third Green Bond, this time in
Chile, for the equivalent of approximately USD100 million in Chilean Unidades de Fomento,
obtaining a total demand for approximately USD340 million. The 10-year term bond obtained
an effective annual placement rate of 1.22% with a spread over the reference rate of
0.57%.This new issuance is in line with the Green Bond Principles (GBP) coordinated by the
International Association of Market Capitals (ICMA) and
supported by the World Bank. Among the projects that
CMPC will finance through this issuance are the investment
in machines that produce paper bags for retail (USD4 million),
the modernization of a paper machine in the Puente Alto mill (USD12.7 million) and the
improvement of the Laja mill waste treatment plant (USD36.6 million).
Institutional Investor 2019 Recognition – Empresas CMPC received recognition by the 2019 Latin American Executive Team publication of Institutional Investor in the Most Honored Company category. The company was also recognized in the categories for Best IR
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Professional, Best IR Team, Best Investor Relations Program, Best ESG, Best Analyst Days and Best Website for the Pulp & Paper industry. CMPC CEO presents Forest Sector SDG Roadmap – On July 16, 2019 Francisco Ruiz-Tagle, CMPC CEO, launched the World Business Council for Sustainable Development (WBCSD)
Forest Sector SDG Roadmap on behalf of eleven leading forest companies at a United Nations High-Level Political Forum in New York. The aim of the roadmap is to maximize the sector’s contribution to the achievement of the Sustainable Development Goals (SDGs) and help unlock the business opportunities that present themselves on this journey to 2030 and beyond.
Joint Venture between CMPC and European partners GUSCO Handel G. Schürfeld + Co. GmbH – At the beginning of July, it was agreed to create a joint venture under the name of CMPC Europe GmbH & Co. KG, in order to deepen and strengthen the collaboration between the partners. The activities carried out by GUSCO in all matters related to CMPC will be transferred to this joint venture. This includes the products of CMPC Pulp, CMPC Containerboard and CMPC Maderas. The new company will begin operations in January 2020, subject to the approval of the corresponding antitrust authorities. Softys emerges as the leader in tissue products in Brazil with the acquisition of SEPAC – On August 6, 2019 CMPC announced the acquisition of Brazilian tissue and personal care products company SEPAC for the amount of BRL1,312 million (approx. USD332 million), which is subject to the fullfilment of the conditions precedent. SEPAC has operations in the south of Brazil with an annual tissue paper capacity of 135,000 tons and prominent local brands such as Duetto, Paloma, Stylus and Maxim. After the transaction has been materialized, Softys Brazil will become the largest manufacturer and distributor of this kind of products in the Brazilian market.
6
REVIEW OF 2Q19 CONSOLIDATED RESULTS
SALES
Total Sales Revenue reached USD1,442 million for the quarter, a 1% and an 11% decrease
from 1Q19 and 2Q18 respectively.
QoQ, the decline was a result of a
7% decrease in Packaging sales
(USD17 million) with both lower
sales volumes and lower prices, and
a 1% decrease in Pulp (USD7 million),
mainly due to lower pulp prices
partially compensated by higher
sales volumes. This was partially
offset by a 3% increase in Softys
sales (USD16 million), primarily
explained by higher volumes of
personal care products and higher
tissue paper prices.
YoY, revenue decreased due to lower sales in Pulp (-21%, USD188 million), mainly as a result
of lower pulp prices. Packaging sales also decreased YoY (-6%, USD14 million) as a result of
lower corrugated box sales and lower prices. On the other hand, Softys sales increased 5%
(USD26 million) due to higher volumes of tissue paper and personal care products.
The composition of sales by geographic area in 2Q19 remained relatively unchanged from
1Q19. Compared to 2Q18, the percentage of sales to Asia decreased and the sales in Latin
America increased.
20%
51%
29%
Sales by Destination2Q19
Domestic Sales ChileExport SalesForeign Subsidiaries
49%
15%
36%
Sales by Business2Q19
Pulp Packaging Softys
1,449
-79
+73
-7 -10
+10 +6
1,442
Sales1Q19
Pulp -7
Packaging -17
Softys +16
Sales 2Q19
QoQ Revenues Analysis to Third Parties
1,618
-163 -25 -6 -7-5
+31
1,442
Sales2Q18
Pulp -188
Packaging -14
Softys +26
Sales 2Q19
YoY Revenues Analysis to Third Parties
∆ Prices ∆ Volumes
7
OPERATING COSTS
Operating Costs, excluding depreciation and amortization, stumpage and decreases due to
harvest, totaled USD928 million, 1% higher both QoQ and YoY. The QoQ result is due higher
sales volumes of forestry products, pulp and personal care products. This was compensated
by decreased operating costs in the Pulp business, related to planned maintenance downtime
and the cost of forest fire prevention efforts which took place in 1Q19. There were also lower
costs in Packaging due to the decrease in pulp prices. The YoY increase relates to higher direct
costs in Softys, related to the increase in sales volumes and higher cost of raw material. This
was partially offset by lower operating costs in Pulp and Packaging due to lower sales volumes
and lower pulp prices in the case of Packaging. 2Q19 Consolidated Operating Costs
represented 64% of total revenues, up from 63% reported in 1Q19 and 57% reported in
2Q18.
OTHER OPERATING EXPENSES
Other Operating Expenses totaled USD189 million; a 3% QoQ and a 4% YoY decrease. The
QoQ decrease is primarily due the lower administrative expenses in Softys. The YoY decrease
is mainly related to lower distribution costs in Pulp, due to lower sales volumes. Consolidated
Other Operating Expenses in 2Q19 represented 13% of total revenues, stable compared to
1Q19 and increasing from 12% in 1Q19.
3% 3% 3%6% 7% 6%
6% 6% 6%
6% 6% 7%
6%7% 7%
7%8% 8%
6%7% 8%
13%11% 12%
20%20% 20%
28% 25% 24%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2Q18 1Q19 2Q19
Sales by Geographic Area
Argentina
Europe
Chile
Other LATAM
Mexico
Peru
Other
Brazil
USA and Canada
Asia
8
EBITDA
EBITDA totaled USD325 million during the quarter, down 3% QoQ and 36% YoY with an
EBITDA Margin of 22.5%, a decline from 23.1% reported in 1Q19 and 31.3% reported in
2Q18.
The quarterly EBITDA decrease is related to lower EBITDA
in the Packaging business (USD13 million) primarily as a
result of the lower sales of corrugated boxes, corrugate
paper and boxboard as well as of the lower Pulp EBITDA
(USD9 million) due to lower pulp prices. However, the
Softys business division increased its EBITDA by 44%
(USD14 million), as a result of higher sales and lower
administrative expenses. The lower YoY EBITDA is
attributed to the decrease in Pulp EBITDA (USD170
million), due to lower pulp prices. Additionally, Packaging
(USD7 million) and Softys (USD3 million) reported a
decrease in EBITDA due to higher operating costs and
administrative expenses.
FINANCIAL RESULT
Financial Expenses totaled USD48 million in 1Q19, a 9% decrease compared to 1Q19 and to
2Q18. The decline both QoQ and YoY is a result of lower interest rates obtained on bank
loans. Additionally, Financial Income totaled USD4.5 million, a decrease compared to the
USD6.7 million in 1Q19 and an increase compared to the USD3.2 million in 2Q18.
NET INCOME (LOSS)
CMPC reported a Net Income of USD62 million in 2Q19, compared to a Net Income of USD57
million in 1Q19 and USD95 million in 2Q18.
The QoQ increase is mainly explained by a positive effect in Other Gains (Losses) and lower
Income Taxes, partially offset by a higher Depreciation and Stumpage rates and lower EBITDA.
81%
5%
14%
EBITDA by Business2Q19
Pulp Packaging Softys
335
-9 -13
+14
-2
325
EBITDA1Q19
Pulp Packaging Softys Holding &Others
EBITDA2Q19
QoQ EBITDA Variation by Business
507 -170 -7 -3 -3
325
EBITDA2Q18
Pulp Packaging Tissue Holding &Others
EBITDA2Q19
YoY EBITDA Variation by Business
9
The YoY decrease is also mainly related to the lower EBITDA generation in this quarter, offset
by lower Income Taxes.
(1) Other Non-Operating includes: Share Results in Associated Companies, Other Gains (Losses) and Income Taxes.
Currency Exchange Rate Differences resulted in a USD5.2 million loss in the second
quarter, compared to losses of USD6.5 million and USD9.5 million in 1Q19 and 2Q18
respectively.
Indexation Unit Results registered a USD5.8 million gain in the quarter, compared to a gain
of USD9.4 million in 1Q19 and a loss of USD0.8 million in 2Q18. The result for the quarter
includes a USD6.9 million gain related to the accounting effect of hyperinflation in
Argentina.
Other Gains (Losses) resulted in a USD9.6 million loss. This quarterly result includes a
USD3.7 million loss related to the write-off of forestry assets due to forest fires during the
last season. Other Gains (Losses) may also include non-core business revenue and other
items, such as insurance claims deductibles, donations, and the relative effects of changes
in the fair value of financial instruments including forwards and swaps (different from those
under hedge accounting), among others.
Income Taxes amounted to a USD25 million negative effect in 2Q19, compared to negative
USD48 million in 1Q19 and negative USD170 million in 2Q18. The result for the quarter
is explained by a USD69 million income tax provision, partially offset by a USD43 million
gain from a lower deferred tax provision, which includes a USD8.5 million loss related to
the effect of currency exchange rate movement on deferred taxes. It is important to note
that CMPC’s tax accounting is in local currencies (except in Chile) and when it differs from
its functional currency, the depreciation against the US dollar, particularly the Brazilian
Real, decreases the tax base of assets measured in dollars, and therefore increases the
Deferred Taxes account, which is a non-cash effect.
57
- 10
- 14.4 - 0.3
+ 2.2
+ 29.5
- 2.3
62
NetIncome1Q19
EBITDA Dep. &Stumpage
Net Biol.Income
Net Fin.Costs
OtherNon
Oper. (1)
FX Diff. &Index.
Results
NetIncome2Q19
QoQ Net Income Analysis
95
-182 -8 -3
+6
+143+11
62
NetIncome2Q18
EBITDA Dep. &Stumpage
Net Biol.Income
Net Fin.Costs
OtherNon
Oper. (1)
FX Diff. &Index.
Results
NetIncome2Q19
YoY Net Income Analysis
10
FREE CASH FLOW
Free Cash Flow reached negative USD276 million in 2Q19, compared to negative USD56
million in 1Q19 and positive USD99 million in 2Q18. The lower free cash flow generation QoQ
is mainly related to the increase in the payment of taxes, dividends and capital expenditures.
The YoY decrease is mainly due to the lower EBITDA generation as well as higher dividends
and tax disbursements.
CAPITAL EXPENDITURES
Capital Expenditures in 2Q19 totaled USD158 million, up 88% compared to 1Q19 and 46% compared to 2Q18. These capital expenditures are mainly related to forest maintenance and disbursements related to the Zárate project. The acquisition of Papelera Panamericana and the purchase of forest plantations in Brazil are also included.
FINANCIAL DEBT
CMPC’s Financial Debt stood at USD3,713 million as of June 30, 2019, decreasing 2%
compared to March 31, 2019 and 4% compared to June 30, 2018.
USD Mill ion 2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
EBITDA 507 335 325 -3% -36% 906 660 -27%0% 0%0% 0%
(-) Capex (99) (77) (158) 105% 59% (202) (235) 16%
(-) Dividends (66) (51) (124) 142% 87% (66) (176) 164%
(-) Net Financial Expenses (60) (27) (46) 75% -22% (82) (73) -11%
(-) Income tax (74) (89) (184) 106% 147% (96) (273) 183%
(+/-) Working Capital Variation (108) (147) (89) -40% -18% (290) (236) -19%
Free Cash Flow 99 (56) (276) 389% N/A 169 (333) N/A
USD Million 2Q18 1Q19 2Q19 QoQ YoY
( i) Current Interest-Bearing Liabilities 329 424 377 -11% 14%
( ii) Non-Current Interest-Bearing Liabilities 3,573 3,373 3,364 0% -6%
( iii) Other Obligations (31) (30) (29) -1% -5%
( iv) Net Hedging Current Liabilities related to Debt Instruments (2) 7 7 1% N/A
(v) Net Hedging Non-Current Liabilities related to Debt Instruments (6) 9 (6) N/A -3%
Total Debt ( (i) + (ii) + (iii) + (iv) + (v) ) 3,863 3,783 3,713 -2% -4%
Cash* 639 858 521 -39% -19%
Net Debt 3,223 2,925 3,192 9% -1%
99 77
158
2Q18 1Q19 2Q19
Capital Expenditures
11
Cash held by the Company as of June 30, 2019 totaled USD521 million, 39% lower QoQ
and 19% YoY. The QoQ decrease in Cash is explained by the increased disbursement of
taxes, dividends and capital expenditure.
Net Financial Debt was USD3,192 million as of June 30, 2019, up 9%% compared to March
31, 2019 and down 1% compared to June 30, 2018.
Financial Debt Breakdown
Amortization Schedule
(1) The 2019 figure includes USD43 million in accrued interest.
278 214 164
635 537 599
1,094
196
2019(1) 2020 2021 2022 2023 2024 2025/2031 2032/2041
90%
3%4%3%
Debt by Currency
USD CLP BRL Other
3%
82%
8%
7%
Debt by Instrument
Banks Bonds BNDES ECA
98%
2%
Debt by Interest Rate
Fixed Rate Floating Rate
12
FINANCIAL RATIOS
(1) Liquidity = Cash and Cash Equivalent / 18m Amortizations and 18m Net Financial
The Net Debt/EBITDA ratio in 2Q19 was
2.0x, up from 1.7x in 1Q19 and down from
2.2x in 2Q18.
The Debt/Tangible Net Worth ratio was
0.45x, lower compared to 0.47x in 1Q19
and compared to 0.48x in 2Q18.
The Interest Coverage Ratio was
7.52x, compared to 8.35x in 1Q19
and 7.02x in 2Q18.
The Liquidity Ratio(1) was 1.29x
compared to 1.80x in 1Q19 and
0.98x in 2Q18.
2.2x
1.8x1.6x 1.7x
2.0x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
2Q18 3Q18 4Q18 1Q19 2Q19
Net Debt / EBITDA
Internal Policy
0.48x 0.47x 0.47x 0.47x 0.45x
0.30x
0.40x
0.50x
0.60x
0.70x
0.80x
0.90x
2Q18 3Q18 4Q18 1Q19 2Q19
Debt / Tangible Net Worth
Internal Policy Covenant
7.02x7.66x
8.50x 8.35x7.52x
0.3x
1.3x
2.3x
3.3x
4.3x
5.3x
6.3x
7.3x
8.3x
9.3x
2Q18 3Q18 4Q18 1Q19 2Q19
Interest Coverage Ratio
Internal Policy Covenant
0.98x
1.97x
2.17x
1.80x
1.29x
0.3x
0.5x
0.7x
0.9x
1.1x
1.3x
1.5x
1.7x
1.9x
2.1x
2.3x
2Q18 3Q18 4Q18 1Q19 2Q19
Liquidity Ratio
Internal Policy
13
REVIEW OF RESULTS BY BUSINESS
PULP MARKET
According to PPPC G-100, after the first semester of 2019, chemical pulp shipments
decreased -2.8% (BHKP -5.9% and softwood +1.1%)*. This decrease in volume is explained
by paper demand, which has remained weak during the last months as a result of the
combination of slow global economic activity, the trade war between China and the USA, and
a persistent decline in graphic paper consumption. As a consequence, pulp experienced
downward pressure. Buyers in virtually all markets have drained the stocks they had but
nonetheless, contract volumes continue to shrink while spot purchases are on the rise to cover
short-term consumption needs only. Despite this, PPPC still forecast global demand growth of
2.5% in 2019.
According to Hawkins Wright, in terms of supply, global pulp capacity was expected to increase 1.1% this year but as of May total production decreased -1.6% due to market-related downtime. New long-term investments in pulp mills have been announced: UPM confirmed new BEK mill in Uruguay in 2022 with a capacity of 2.1 million tons/year.
In terms of price, there has been a drop in pulp prices for both fibers, especially in China where prices declined by about USD100/ton for both BSKP and BEKP this past quarter due to a mixture of macro-economic and industry-specific factors. P&W demand continues being the most affected final-user segment this year. The projection for the year was a decrease of -1.7% and it has already fallen -5.7% as of May. The decrease is seen mainly in North America (-8.6% YoY) and Europe (-7.5% YoY). In the tissue segment, growth was forecasted at 3.3%, but the demand has increased only 3.1%.
* Source: PPPC, World Chemical Market Pulp Global 100 Report – May 2019, Hawkins Wright.
14
PULP SEGMENT
During 2Q19, Pulp & Forestry sales totaled USD711 million, down 1% QoQ and 21% YoY.
Forestry
Forestry sales volumes to third parties increased 22% QoQ due to increased pulpwood sales (+134%) in the local Chilean and Argentinean market and higher sawing logs sales (+15%) in Chile, Argentina and Brazil. There were also higher sales of remanufactured wood sales (+9%), given higher sales in Chile and exports to the USA, and increased sawn wood sales volumes (+1%), related to higher exports to China. Lower sales volumes of plywood (-10%) due to lower sales in Chile and lower exports to Latin America and the US partly offset the positive effect.
YoY, forestry volumes sold to third parties increased by 1%, explained by higher volumes of pulpwood (+387%), with increased sales in Chile, and remanufactured wood (+14%), as a result of higher sales in Chile and the US. This was partly offset by lower sales of plywood (-23%), with sales in Chile and exports to Europe, USA and Latin America, sawn wood (-15%) in Chile and China, and lower sawing logs sales (-14%) in Chile and Argentina.
Forestry average sales prices decreased 16% QoQ, related to a change in the product mix. YoY, average prices decreased by 13%, also due to a change in the product mix and lower solid wood products’ prices.
Pulp Sales & EBITDA
USD Mill ion 2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
Pulp Sales 899 718 711 -1% -21% 1,685 1,428 -15%
- Pulp Sales 749 589 578 -2% -23% 1,412 1,167 -17%
- Forestry Sales 150 129 132 3% -12% 273 261 -4%
EBITDA 444 283 274 -3% -38% 777 558 -28%
EBITDA Mg. 49.4% 39.5% 38.6% -620 bps -290 bps 46.1% 39.0% -710 bps
Third Party Sales Volumes
2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
- Pulpwood 16 33 78 134% 387% 39 111 186%
- Sawing Logs 457 341 392 15% -14% 810 733 -10%
- Sawn Wood 202 170 171 1% -15% 383 341 -11%
- Remanufactured Wood 44 46 50 9% 14% 83 96 15%
- Plywood 123 105 94 -10% -23% 222 200 -10%
- Others 148 123 216 75% 46% 262 339 29%
Total ( t h. m3
) 989 819 1 ,001 22% 1% 1,799 1 ,820 1%
15
Pulp
During 2Q19, there were no scheduled maintenance downtimes at our mills. The Company has no scheduled maintenance for 3Q19 and has scheduled maintenance at Laja (16 days) and Guaíba I (15 days) for 4Q19.
Pulp production in 2Q19 totaled 1,078,000 tons, increasing 23% QoQ and 3% YoY. Hardwood production totaled 865,000 tons in 2Q19, up 25% QoQ and 2% YoY. The QoQ increase is due to the scheduled maintenance at Guaíba II, Santa Fe I and Santa Fe II during 1Q19. The YoY increase is the result of the better operational performance of the Guaíba mill. Softwood production reached 213,000 tons, increasing 15% QoQ, related to the Pacifico maintenance downtime during 1Q19, and increased 4% YoY, related to the better operational performance of the Laja mill.
BEKP cash cost(3) reached USD195/ton during 2Q19, down 7% QoQ, mainly due to the maintenance downtime at Guaíba II and Santa Fe I and II during 1Q19. YoY, costs decreased 1% due to the positive effect of the local currency depreciation, partly compensated by higher pulpwood costs in Chile.
BSKP cash cost(3) reached USD338/ton during 2Q19, decreasing 4% QoQ and 2% YoY. The QoQ decrease is mainly explained by the maintenance at the Pacifico mill in 1Q19, offset by higher pulpwood costs. The YoY decrease is related to the positive effect of the local currency depreciation, partly compensated by higher pulpwood costs.
(3) Cash cost = wood + chemicals + energy + materials + labor costs.
Pulp Production
2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
BSKP(1) 204 185 213 15% 4% 390 398 2%
BEKP 847 694 865 25% 2% 1,631 1,558 -4%
Total Pulp ( t h. Tons) 1,051 879 1 ,078 23% 3% 2,021 1,957 -3%
Papers(2) 28 31 33 6% 17% 59 64 9%
(1) Includes UKP
(2) Includes Sackraft produced in the Laja mill and P&W paper produced in the Guaiba mill
197 209 195
2Q18 1Q19 2Q19
BEKP Cash Cost (USD/ton)
332 338 326
2Q18 1Q19 2Q19
BSKP Cash Cost (USD/ton)
16
Market pulp sales volumes experienced an 8% increase QoQ, explained by higher softwood sales (+14%) and hardwood (+7%) sales. The QoQ increase in hardwood sales volumes was mainly due to higher exports to Europe, China and Latin America, while the softwood increase is related to higher exports to Europe and Asia. YoY, sales volumes decreased by 4% with hardwood down 6%, due to higher lower sales in Europe, Asia and the US, and softwood up 6%, with higher sales in China.
Pulp average sales prices (including a small tonnage of P&W papers and energy sold to the Chilean grid) decreased 9% QoQ and 20% YoY. The average effective net export price for softwood was CIF 633 USD/ton and CIF 629 USD/ton for hardwood. During 2Q19, the price spread between the two fibers was CIF 4 USD/ton, compared with CIF 12 USD/ton in 1Q19.
EBITDA declined 3% QoQ and 38% YoY in 2Q19, reaching USD274 million. The EBITDA margin contracted to 38.6%, compared to 39.5% in 1Q19 and 49.4% in 2Q18.
The QoQ EBITDA decrease resulted primarily from lower hardwood, softwood and forestry products prices. The above was partially compensated by higher pulp and forestry products’ sales volumes, and lower forestry protection and maintenance costs, due to the lack of maintenance downtimes during the quarter. Lower pulp and forestry products’ prices as well as lower hardwood volumes mainly explain the YoY decrease.
Third Party Sales Volumes
2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
BSKP 170 158 180 14% 6% 334 338 1%
BEKP 757 665 710 7% -6% 1.431 1.375 -4%
Total ( Th. Tons) 927 823 891 8% -4% 1.765 1.713 -3%
P&W Guaiba (Th. Tons) 10 11 13 22% 33% 22 23 5%
714 712 709677
649 634600 583 586 574 566
593635 630
742
836 854 852806
703
633
587 576 582 594 613 625595
544496 486 480
507
580616
694
737757761
726692
629
400
450
500
550
600
650
700
750
800
850
900
US
D/t
on
CIF
CMPC Average Net Pulp Export Price Evolution
BSKP BEKP
17
SOFTYS
In 2Q19, Softys sales increased 3% QoQ and 5% YoY, reaching USD512 million. Sales during the quarter without the effect of the Argentinean hyperinflation would have been USD502 million, compared to USD495 million in 1Q19.
Tissue Paper sales volumes were stable QoQ and increased 3% from 2Q18. QoQ, higher volumes in Chile, Argentina and Colombia were offset by lower volumes in Mexico and Ecuador. The year on year increase was due to higher sales volumes in Mexico, related to the growth in market share in this segment.
Personal Care Products sales volumes grew 3% compared to 1Q19 and 16% compared to 2Q18. The QoQ result was driven by the higher volumes of baby diapers in Argentina, Brazil, Peru, Colombia and Chile in addition to an increase in the volume of wet wipes in Chile. YoY, personal care products sales volumes benefited from sales growth in all product categories across the majority of countries where we operate, highlighting the increase in diapers and feminine care in Brazil, Argentina and Peru and Peru in the wet wipes case. Average sales prices (measured in US Dollars) increased 3% for tissue paper and remained stable for personal care products compared to 1Q19. Annually, prices increased by 1% for tissue paper and decreased 6% for personal care products. The QoQ increase is due to higher prices in local currencies, revenue management initiatives and sales mix optimization. The lower average prices for personal care products YoY reflect a change in the product mix.
Softys Sales & EBITDA
USD Mill ion 2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
Sales 486 495 512 3% 5% 964 1.007 4%
EBITDA 49 32 46 44% -6% 99 77 -22%
EBITDA Mg. 10,0% 6,4% 8,9% 250 bps -110 bps 10,3% 7,7% -260 bps
Third Party Sales Volumes
2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
- Chile 40 39 41 4% 2% 77 80 5%
- Brazil 33 32 32 0% -4% 64 64 -1%
- Mexico 31 39 38 -4% 20% 66 77 17%
- Argentina 26 23 25 5% -4% 50 48 -3%
- Peru 23 24 24 -1% 2% 47 48 2%
- Uruguay 5 5 5 -1% -1% 10 10 2%
- Colombia 7 7 7 7% 6% 13 14 6%
- Ecuador 4 4 3 -20% -23% 8 7 -12%
Total T issue Paper ( Th. Tons) 169 173 174 0% 3% 334 347 4%
- Diapers 798 866 909 5% 14% 1.568 1.775 13%
- Feminine Care 313 346 337 -2% 8% 638 683 7%
- Others 231 294 308 4% 33% 437 602 38%
Total Personal Care ( M . U nit s) 1.342 1 .506 1 .554 3% 16% 2.642 3 .060 16%
18
EBITDA in 2Q19 increased 44% QoQ, but decreased 6% YoY, reaching USD46 million. EBITDA margin was 8.9% in 2Q19, up from 6.4% in 1Q19 and down from 10.0% in 2Q18. The quarterly EBITDA without the effect of Argentine hyperinflation would have been USD48 million and the EBITDA margin 9.6%.
The sequential EBITDA increase is due to higher sales volumes of personal care products and higher sales prices in both categories. There were also lower operating costs associated to lower pulp prices and a lower purchase of third-party jumbos in Brazil, as well as lower expenses associated with internal efficiency initiatives. The YoY decrease is attributed to higher costs due an increase in the recycled paper prices and the purchase of jumbos from third parties in Chile and Mexico, partially offset by higher sales volumes of tissue paper and personal care products.
PACKAGING
In 2Q19, Packaging sales decreased by 7% QoQ and 6% YoY, totaling USD220 million.
Sales volumes to third parties decreased 4% sequentially due to the lower volumes of corrugated boxes (-23%) related to the end of fruit season in Chile and lower corrugated paper (-8%) due lower production during the quarter. This was partially offset by higher volumes of molded pulp trays (+20%) related to higher sales of apple trays, paper bags (+5%) due to higher volumes in Mexico, Peru and Argentina and boxboard (+2%) due to higher sales in Asia (Ex. China) and Middle East.
The YoY sales volumes sold to third parties decreased 3% driven by lower sales of corrugated paper (-26%) explained by lower production in 2Q19, molded pulp trays (-8%) related to lower trays sales of apples, avocados and eggs, paper bags (-2%) as a result of lower volumes in Chile, Argentina and Mexico. This was partially mitigated by higher volumes of boxboard (+5%) due the higher production of Maule mill.
Packaging Sales & EBITDA
USD Mill ion 2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
Sales 233 236 220 -7% -6% 464 456 -2%
EBITDA 24 29 17 -43% -29% 48 46 -3%
EBITDA Mg. 10,1% 12,5% 7,7% 770 bps 210 bps 10,3% 10,2% -10 bps
Third Party Sales Volumes
2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
- Boxboard 90 93 95 2% 5% 169 188 11%
- Paper Bags 23 21 22 5% -2% 44 44 -1%
- Other Papers 22 19 19 3% -12% 45 38 -15%
- Corrugated Paper 29 23 21 -8% -26% 55 44 -19%
- Corrugated Boxes 37 48 37 -23% 0% 89 85 -4%
- Molded Pulp Trays 8 6 7 20% -8% 13 13 -6%
Total ( Th. Tons) 208 210 201 -4% -3% 415 412 -1%
19
Average sales prices decreased by 3% QoQ primarily due to lower prices in boxboard and the variation in product mix. YoY, average prices also decreased 3% mainly driven by lower prices of boxboard. EBITDA in 2Q19 experienced a downward trend of 43% compared to 1Q18 and 29% from 2Q18, reaching USD17 million. EBITDA margin was 7.7% in 2Q19, compared to 12.5% in 1Q19 and 10.1% in 2Q18.
The sequential QoQ decrease in EBITDA is mainly related to lower revenues from the corrugated boxes sales, driven by the end of fruit season, corrugated paper due the maintenance program of the Puente Alto mill in 2Q19 and boxboard due lower average sales prices. The annual decrease results mainly from lower revenues from the corrugated paper and boxboard sales, as well as higher administrative expenses. In addition, there was a positive effect in operational costs as a result of the decrease in pulp prices, both QoQ and YoY.
20
RISK MANAGEMENT
Empresas CMPC and subsidiaries are exposed to a combination of market, financial and
operating risks inherent to their business. CMPC seeks to identify and manage such risks in
the most adequate manner to minimize potential adverse effects. CMPC’s Board of Directors
establishes the strategy and general framework for the Company’s risk management, which is
then implemented on a decentralized basis through the different business units. At a corporate
level, there are Board Committees, which are in charge of monitoring the definition of policies
and strategies for proper risk management adopted by the Board of Directors. These
committees include the Audit, Financial Risk, Ethics and Compliance, and Corporate Affairs
committees. In addition, management suites such as the Risk, Finance, Compliance and Internal
Audit departments coordinate and control the execution of prevention and mitigation policies
of the main risks identified.
MARKET RISK
A considerable share of CMPC’s revenue is derived from products, whose price depends on
the prevalent conditions in international markets over which the Company has no significant
influence or control. These factors include fluctuations in global demand (mainly driven by
economic conditions in China, North America, Europe and Latin America), variations in the
industry’s installed capacity, inventory levels, business strategies and competitive advantages
of the main players in the forestry industry, availability of substitute products and the stage of
the product’s life cycle. One of CMPC’s main product categories is Bleached Kraft Pulp, which
represents over 40% of consolidated sales and is distributed to mora than 215 customers in
45 countries in Asia, Europe, America and Oceania.
On the other hand, the Company benefits, with certain limitations, from the diversification of
its business lines and the vertical integration of its operations to have some flexibility in
managing its exposure to fluctuations in pulp prices. The impact of a possible decrease in pulp
prices would be offset to a limited extent by the resulting reduced input cost of certain other
more elaborate products, especially tissue paper and boxboard.
It should be noted that the ability to redistribute the export of our products to different
markets in response to potential adverse circumstances and still achieve our desired price
could be limited.
FINANCIAL RISK
The main financial risks identified by CMPC are: risk arising from the conditions of the financial
markets (including foreign currency exchange rate and interest rate risks), credit risk and
liquidity risk.
The Company follows the policy of concentrating a large portion of its financial debt, funds
placement operations, foreign exchange and derivatives trading in its subsidiary, Inversiones
CMPC S.A. The purpose of this policy is to optimize resources, achieve an economy of scale,
and improve operating control.
21
On the other hand, the ability to access loans in local or international capital markets may be
restricted because of external reasons at the time when financing is needed, which could have
material adverse effects on our flexibility when reacting to various economic and market
conditions.
Risk arising from the conditions of the financial markets
(i) Foreign currency exchange rate risk: CMPC is affected by currency fluctuations in three
ways: a) the Company’s income, costs and expenses, which directly or indirectly are
denominated in currencies other than the functional currency; b) exchange rate variations
arising from a possible accounting mismatch that exists between assets and liabilities in the
Unaudited Consolidated Balance Sheet denominated in currencies other than its respective
functional currency; and c) the provision of deferred taxes, particularly in Brazil, for those
companies that use a functional currency different from the tax currency.
Exports by CMPC and its subsidiaries accounted for approximately 51% of sales in the second
quarter of 2019, the primary destinations being the markets of Asia, Europe, Latin America
and the United States. Most of these export sales were made in USD.
On the other hand, CMPC’s domestic sales in Chile and those of its subsidiaries in Argentina,
Brazil, Colombia, Ecuador, Mexico, Peru and Uruguay, represented 49% of the Company’s total
sales. These sales were primarily made in the local currency of the respective country.
Because of the above-mentioned, the cash inflow from sales in US dollars or indexed to this
currency amounts to approximately 63% of the Company’s total sales. At the same time,
expenses, raw materials, supplies and replacements required for continued operation, such as
investing in property, plants and equipment, are also mostly denominated in or indexed to US
dollars.
Due to the nature of CMPC’s business, the Company’s subsidiaries makes sales or acquire
payment commitments in currencies other than their functional currency. In order to avoid the
exchange rate risk of currencies, hedging transactions are carried out through derivatives in
order to fix the exchange rates in question. As of June 30, 2019, a significant portion of the
estimated sales of cardboard and wood in Europe, in euros and British pounds, was covered
up to the current year. In 2020, the same strategy will be employed.
Considering that the structure of the Company’s cash flows is highly indexed to the US dollar,
most liabilities have been incurred in that currency. In the case of foreign subsidiaries, which
collect receivables in local currency, part of their debt is denominated in the same currency to
reduce financial and accounting mismatches. Other mechanisms used to reduce accounting
mismatches are: managing the currency denomination of the financial investment portfolio,
occasional contracting of short-term future operations and, in certain cases, transactions using
options, which are subject to limits previously authorized by the Board of Directors and
represent a small amount in relation to the Company’s total sales.
From an accounting point of view, fluctuations in the exchange rate of local currencies have
an impact on the deferred tax provision. This effect is caused by the difference in value of
assets and liabilities in the financial accounting as opposed to the value reflected in the tax
22
accounting when the functional currency (US dollar) is different from the tax currency (local
currency of the respective business unit). The main impact is derived from the pulp segment
of Brazil. Thus, devaluation in the currencies of those countries with respect to the US dollar
implies a higher deferred tax provision. Although these adjustments in the provision do not
involve a cash flow, they cause volatility in the reported financial results.
Sensitivity analysis
The Company has a net asset currency risk accounting exposure in relation to currencies other
than the US dollar, which is the Company’s functional currency. As of this date, the Company
has more assets than liabilities denominated in currencies other than the US dollar, including
the underlying rights and obligations of current derivative contracts, in the amount of
USD1,644 million as of June 30, 2019 (USD1,167 million as of December 31, 2018). In
addition, if the exchange rate of these currencies (mostly Chilean pesos, Mexican pesos and
new Peruvian soles) appreciated or depreciated by 10%, it is estimated that the effect on the
Company's equity would be an increase or decrease of USD164 million calculated with figures
as of June 30, 2019. The same analysis carried out with figures as of December 31, 2018,
estimated an effect of USD117 million. The effect described above would have been recorded
as credit or charge in the Reserves for Exchange Differences by Conversion and as loss or gain
for the year, as shown below:
As of June 30, 2019 and December 31, 2018, the Company has assets in Brazil, whose
functional currency for financial purposes is the US Dollar and for tax effects its Brazilian real.
This generates temporary differences due to the variation of the mentioned currency. It should
be noted that, like the previous sensitivity, this analysis is forward-looking using the closing
figures of the corresponding periods. Below is the sensitivity analysis of this concept:
(ii) Interest rate risk: the Company's financial investments bear interest primarily at fixed
interest rates, eliminating the risk of changes in the market interest rate. Financial liabilities are
mostly at fixed interest rates. For debt with variable interest rates, CMPC minimizes the risk
by using derivative instruments, thereby managing to fix the interest rate for approximately
98% of the debt. It should be noted that the remaining 2% is mainly debt in Brazilian real.
Th US D Th US D Th US D Th US D
Effect of foreign currency translation differences on reserves 155,519 (155,519) 115,801 (115,801)
Effect on profit (loss) 8,848 (8,848) 879 (879)
Net effect on profit (loss) 164,367 (164,367) 116,680 (116,680)
June 30, 2019 Decermber 31, 2018
10%
appreciation
10%
depreciation
10%
appreciation
10%
depreciation
Th USD Th USD Th USD Th USD
Effect on income tax expenses (65,163) 65,163 68,694 (68,694)
June 30, 2019 Decermber 31, 2018
10%
appreciation
10%
depreciation
10%
appreciation
10%
depreciation
23
Credit risk
Credit risk arises primarily from the potential insolvency of certain customers of CMPC´s
subsidiaries and the consequent inability to collect on outstanding accounts receivable and
finalize transactions.
In order to minimize its exposure to credit risk, CMPC through its subsidiaries, has signed credit
insurance policies that cover a significant portion of sales, both export and local. The insurance
policies that the Company holds are provided by Atradius Credit Insurance NV (rated A2
according to the credit rating agency Moody’s) and Compañía de Seguros de Crédito Continental
S.A. (rated AA- according to both Humphreys and Fitch Ratings credit rating agencies). Both
policies cover 90% of the total amount of each invoice, both for preferential and non-
preferential clients. Additionally, CMPC also has at its disposal letters of credit and other
instruments, which allow to ensure and mitigate the credit risk.
Furthermore, the CMPC Corporate Credit Committee is in charge of supervising and
evaluating on a regular basis its clients’ ability to pay, as well as managing the granting, rejection
or modification of clients’ lines of credit. For that purpose, CMPC has a Credit Policy applicable
to all its subsidiaries, which allows control and management of the credit risk associated with
line of credit pay sales terms.
Accounts receivable according to coverage as of June 30, 2019 and December 31, 2018 are
detailed as follows:
Effective management of credit risk and wide distribution and diversity of sales has resulted in
very low customer portfolio credit losses, which in the current period amount to 0.02% of
sales (0.05% of sales as of December 31, 2018).
There is also credit risk in the execution of financial operations (counterpart risk). Counterpart
risk arises when there is a likelihood that the counterpart to a financial contract will not be able
to fulfill the financial obligations to the Company that it has incurred. To reduce this risk in its
financial operations, CMPC establishes individual exposure limits by financial institution,
approved periodically by the Board of Directors of Empresas CMPC S.A.
The financial institutions in which CMPC has investments are detailed as follows:
06/30/2019 12/31/2018
% %
Credit Insurance or Letters of Credit 83% 79%
Not covered with insurance policies 17% 21%
Trade accounts receivable 100% 100%
24
Liquidity risk
This risk arises should the Company be unable to fulfill its obligations as a result of insufficient
liquidity. CMPC manages this risk through the appropriate distribution, extension of due dates
and limits on the amount of its debt, as well as by maintaining a liquidity reserve and
management of its operating and investment cash flows.
The Company, as previously mentioned, has a policy of concentrating its financial debt in the
subsidiary Inversiones CMPC S.A. which finances the operating subsidiaries. Debt is primarily
incurred through bank loans and bonds placed in international markets and in the local Chilean
market.
Portfolio % Th USD Portfolio % Th USD
Banco Itaú Corpbanca - Chile 15.12% 78,185 22.05% 211,874
BNP Paribas New York - Estados Unidos 14.51% 75,000 - -
Scotiabank - Chile 14.01% 72,444 12.54% 120,482
Banco Santander - Chile 12.85% 66,449 21.15% 203,213
Banchile Corredores de Bolsa S.A. - Chile 12.36% 63,868 4.13% 39,695
Banco BCI - Chile 6.49% 33,557 12.19% 117,093
Citibank N.A. N.Y. - Estados Unidos 6.16% 31,852 4.42% 42,492
Banco Santander - Brasil 3.57% 18,452 1.39% 13,326
JP Morgan Chase Bank, N.A. - Estados Unidos 2.97% 15,370 5.82% 55,927
Scotiabank Azul - Chile 1.66% 8,570 0.92% 8,840
Banco de Chile 1.62% 8,348 0.66% 6,307
Banco Itaú - Brasil 1.59% 8,212 1.06% 10,218
MUFG Bank, Ltd. - Estados Unidos 1.16% 6,003 5.22% 50,147
Scotiabank - Perú 0.89% 4,588 0.10% 954
Citibank N.A. N.Y. - Inglaterra 0.83% 4,275 0.64% 6,186
Bank of America Merrill Lynch Banco Múltiplo S.A. - Brasil 0.83% 4,273 0.00% 17
Banco de Crédito del Perú 0.74% 3,841 0 7,361
Banco Banamex - México 0.71% 3,652 0.00% -
Banco Bradesco - Brasil 0.48% 2,486 0.04% 397
Banco Santander - México 0.45% 2,335 0.66% 6,306
Scotiabank Inverlat S.A. - México 0.32% 1,664 0.19% 1,806
Banco BBVA - Perú 0.28% 1,463 0.25% 2,359
Galicia Administradora de Fondos S.A. - Argentina 0.12% 624 0.09% 863
JP Morgan Chase Bank, N.A. - Inglaterra 0.08% 434 0.04% 414
Banco MUFG Brasil S.A. 0.08% 411 0.03% 334
Citibank - Perú 0.04% 199 0.00% 3
BBH & Co. Money Market Fund - Estados Unidos 0.00% - 0.01% 142
Banco de la Producción S.A. Produbanco - Ecuador 0.02% 95 - 7
BNP Paribas - Francia 0.02% 76 0.00% -
Banco do Brasil 0.01% 64 0.01% 87
Banco Monex, S.A. - México 0.01% 62 0.01% 105
JP Morgan Chase Bank, N.A. - Sao Paulo Branch - Brasil 0.01% 42 0.01% 92
JP Morgan Chase Bank, N.A. - Brasil 0.01% 33 0.00% 13
Goldman Sachs International - Reino Unido 0 16 0.05% 509
BancoEstado - Chile - - 2.18% 20,980
BBVA Corredores de Bolsa S.A. - Chile - - 1.71% 16,452
Consorcio Corredores de Bolsa S.A. - Chile - - 1.01% 9,659
BancoEstado S.A. Corredores de Bolsa - Chile - - 0.64% 6,112
HSBC Bank - Chile - - 0.01% 50
Subtotal 100.00% 516,943 100.00% 960,822
Plus: cash and bank accounts 38,008 39,244
Total cash and cash equivalents and other financial assets 554,951 1,000,066
Issuer06/30/2019 12/31/2018
Portfolio % Th USD Portfolio % Th USD
Banco Itaú Corpbanca - Chile 15.12% 78,185 22.05% 211,874
BNP Paribas New York - Estados Unidos 14.51% 75,000 - -
Scotiabank - Chile 14.01% 72,444 12.54% 120,482
Banco Santander - Chile 12.85% 66,449 21.15% 203,213
Banchile Corredores de Bolsa S.A. - Chile 12.36% 63,868 4.13% 39,695
Banco BCI - Chile 6.49% 33,557 12.19% 117,093
Citibank N.A. N.Y. - Estados Unidos 6.16% 31,852 4.42% 42,492
Banco Santander - Brasil 3.57% 18,452 1.39% 13,326
JP Morgan Chase Bank, N.A. - Estados Unidos 2.97% 15,370 5.82% 55,927
Scotiabank Azul - Chile 1.66% 8,570 0.92% 8,840
Banco de Chile 1.62% 8,348 0.66% 6,307
Banco Itaú - Brasil 1.59% 8,212 1.06% 10,218
MUFG Bank, Ltd. - Estados Unidos 1.16% 6,003 5.22% 50,147
Scotiabank - Perú 0.89% 4,588 0.10% 954
Citibank N.A. N.Y. - Inglaterra 0.83% 4,275 0.64% 6,186
Bank of America Merrill Lynch Banco Múltiplo S.A. - Brasil 0.83% 4,273 0.00% 17
Banco de Crédito del Perú 0.74% 3,841 0 7,361
Banco Banamex - México 0.71% 3,652 0.00% -
Banco Bradesco - Brasil 0.48% 2,486 0.04% 397
Banco Santander - México 0.45% 2,335 0.66% 6,306
Scotiabank Inverlat S.A. - México 0.32% 1,664 0.19% 1,806
Banco BBVA - Perú 0.28% 1,463 0.25% 2,359
Galicia Administradora de Fondos S.A. - Argentina 0.12% 624 0.09% 863
JP Morgan Chase Bank, N.A. - Inglaterra 0.08% 434 0.04% 414
Banco MUFG Brasil S.A. 0.08% 411 0.03% 334
Citibank - Perú 0.04% 199 0.00% 3
BBH & Co. Money Market Fund - Estados Unidos 0.00% - 0.01% 142
Banco de la Producción S.A. Produbanco - Ecuador 0.02% 95 - 7
BNP Paribas - Francia 0.02% 76 0.00% -
Banco do Brasil 0.01% 64 0.01% 87
Banco Monex, S.A. - México 0.01% 62 0.01% 105
JP Morgan Chase Bank, N.A. - Sao Paulo Branch - Brasil 0.01% 42 0.01% 92
JP Morgan Chase Bank, N.A. - Brasil 0.01% 33 0.00% 13
Goldman Sachs International - Reino Unido 0 16 0.05% 509
BancoEstado - Chile - - 2.18% 20,980
BBVA Corredores de Bolsa S.A. - Chile - - 1.71% 16,452
Consorcio Corredores de Bolsa S.A. - Chile - - 1.01% 9,659
BancoEstado S.A. Corredores de Bolsa - Chile - - 0.64% 6,112
HSBC Bank - Chile - - 0.01% 50
Subtotal 100.00% 516,943 100.00% 960,822
Plus: cash and bank accounts 38,008 39,244
Total cash and cash equivalents and other financial assets 554,951 1,000,066
Issuer06/30/2019 12/31/2018
25
To maintain a liquidity reserve, in addition to the cash and cash equivalents held by the
Company, in March 2017, the subsidiary Inversiones CMPC S.A. obtained a Committed Line
of credit with Banco Santander, Export Development Canada, Scotiabank & Trust (Cayman)
Ltd. and MUFG Bank, Ltd., acting as a structurer. This credit line amounts to USD400 million
and is valid for a maximum of 3 years from the date it was obtained. In August 2018, this
committed credit line was extended for two additional years (from September 13, 2020 to
September 14, 2022) for a total amount of USD200 million with Banco Santander and
Scotiabank & Trust (Cayman) Ltd. As of June 30, 2019, the credit line is fully available.
The financial policy followed by CMPC, contained in its financial objectives policy, along with
its strong competitive position and high quality assets, enables Empresas CMPC S.A. to have
an international credit rating of BBB- according to Standard & Poor’s (stable outlook), BBB
according to Fitch Ratings (stable outlook) and Baa3 according to Moody’s (stable outlook),
one of the best in the forestry, pulp and paper industry in the world.
OPERATIONAL RISKS
Industrial and forestry operations risk
An event causing an unforeseen shutdown of the Company’s production facilities could
prevent us from fulfilling the needs of our customers and reaching production goals and could
force unscheduled expenses related to the maintenance of and investment in assets, all of
which could adversely affect CMPC’s financial performance. The most significant occurrences
that could cause shutdowns include earthquakes, floods, storms and droughts, as well as
situations resulting from fires, equipment malfunction, supply interruptions, spills, explosions,
malicious acts and terrorism, among others. Shutdowns can also be caused by illegal actions
of others, such as occupations, blockades and sabotage.
CMPC’s operational risk management objectives are to efficiently and effectively protect
employees, the Company's assets, the environment and the continuity of business operations
in general. For that purpose, the Company uses a balanced combination of accident and
prevention measures and insurance coverage. Loss prevention work is systematic and carried
out in accordance with pre-established guidelines and regular inspections by insurance
company specialists.
In addition, CMPC has a continuous improvement plan for its operational risk conditions in
order to minimize the probability of occurrence and attenuate the possible effects of losses
incurred. Each of the Company's business units manages these plans in accordance with
regulations and standards defined and implemented at a corporate level.
CMPC and its subsidiaries maintain insurance coverage to protect themselves against a
substantial part of their main risks. These risk transfers are purchased from high quality local
and international insurance companies. The risks associated with the operating activities of the
business are periodically reviewed to optimize coverage, according to the insurance market´s
competitive offers. In general, the conditions on limits and deductibles of insurance policies
26
are established on the basis of maximum estimated losses for each risk category and the
coverage conditions offered in the market.
All the Company’s infrastructure assets (buildings, installations, equipment, etc.) are covered
for operational risks by insurance policies at their replacement value.
In turn, forest plantations can suffer losses due to fires and other natural risks, which have
partial insurance coverage limited by deductibles and compensation maximums, determined in
accordance with the historical losses and the levels of prevention and protection implemented.
Additionally, losses of forest plantations due to fires or other natural disasters, can generate
shortages of lumber and increase the price of lumber, which would negatively impact the
operations of the Company. Other risks that are only partially covered, such as biological risks,
could adversely affect plantations.
Continuity and cost of acquisition of materials and services
CMPC’s businesses involves complex logistics in which timeliness, quality and cost-effective
supplies and services are fundamental to operational continuity and competitiveness.
CMPC seeks to maintain close long-term relationships with its contractors, with which CMPC
works on an ongoing and systematic basis to develop high operating standards with an
emphasis on employee safety and improved working conditions.
With respect to electrical energy, most of CMPC's industrial operations have their own energy
supply using biomass and natural gas for energy generation with the remainder supplied
through third-party agreements. During the second quarter of 2019, own generation
represented 65% of the consumption by operations in Chile. In addition, the mills have
contingency plans to address restrictive supply scenarios.
Among CMPC’s many suppliers of products and services, there are companies that provide
specialized support and logistics services for its forestry and industrial operations. If these
services are not performed at the required quality level or the contractual relationship with
the supplier companies is affected by regulations, labor conflicts or other contingencies, the
operations of CMPC could be affected.
Environmental factors risk
CMPC’s operations are regulated by environmental standards in Chile and in the other
countries where it operates. CMPC has been adopting best practices for sustainable
development of its businesses, which has meant the voluntary adoption of and compliance
with standards stricter than required by legal regulations. This has enabled the Company to
adapt to modifications in environmental legislation and meet the new requirements. However,
climate change as well as future changes in these environmental regulations or in the
interpretation of these laws might have an impact on the Company’s operations. It is important
to point out that failing to comply with these or other environmental regulations could cause
the Company additional costs, which might affect its profitability.
Since 2012, CMPC's plantations in Chile and Brazil have maintained a certification granted by
the Forest Stewardship Council® (FSC®). This accreditation, represents a reaffirmation of
27
CMPC's concern for the environment and sustainable development and complements similar
other long-standing certifications that CMPC has held. In addition, CMPC has a PEFC forestry
management certification and an ISO 14,001 environmental management system certification
covering most of its operations. Since 2015, Empresas CMPC has been included in the Dow
Jones Sustainability Index Chile and since 2017 – in the MILA Pacific Alliance Index, which
include 29 Chilean companies and 42 Latin American companies respectively that meet the
sustainability criteria better than their industry peers. Additionally, CMPC is part of the
FTSE4Good index since 2015 acknowledging the Company’s commitment to corporate social
responsibility and sustainable development.
Risk associated with community relations
CMPC runs forestry and industrial operations in different geographical locations in Chile and
abroad. The Company's community relationship management policy aims to contribute to the
environmental and social sustainability of all these communities, generating programs for
employment, education and the furthering of productive development, including support for
micro-entrepreneurship initiatives by families that live in these areas and places, as well as
permanent communication spaces.
The forestry and industrial presence of CMPC in Chile includes municipalities in the regions of
Biobío and Araucanía, where attacks and acts of violence have taken place that have been
widely reported by the media and investigated by the corresponding institutions. The affected
areas have low development levels and various long-standing social problems. Despite the
escalation in the amount and violence of the actions indicated, until now the problem has been
limited to specific areas and the effects on CMPC have been limited.
More detail on CMPC's community relations activities can be found in the Integrated Report
published annually. However, it is worth highlighting the initiatives to safeguard and appreciate
the ancestral Mapuche culture, including the protection of 22 sites of cultural interest and the
support of productive and artisan enterprises.
In the field of education, the CMPC Foundation, which in 2019 is turning 19, benefits more
than 6,500 children from 58 schools, kindergartens and nurseries in 11 municipalities. It
provides training and counseling to 222 teachers, 71 school principals and 138 nursery
teachers and assistants. Additionally, in March 2019 was launched the HIPPY Program, an
international program run in 17 countries which is dedicated to home visits with aiming to
empower parents so that they themselves can foster learning from home for their children in
pre-school age. The program was kicked off with an initial training carried out by an
international consultant, in which participated the national coordinators and tutors from the
Metropolitan Region of Santiago. In this first stage, the program aims to build a team of 32
tutors and include 460 families in the Araucanía and the Metropolitan regions.
In the cultural sphere, the Jorge Alessandri Park located in Coronel, an eleven hectares park
open to the community in the Bío-Bío Region, received approximately 70,729 visits in its
cultural and educational areas in the first semester of 2019 and the Artequín Museum of
CMPC in Los Angeles, Chile, received 9,742 visitors over the same period. In July 2016,
construction work began on a new Cultural Park of 4.8 hectares called Parque Alessandri in
Nacimiento.
28
Compliance risk
The compliance risk is associated with the Company’s ability to comply with legal, regulatory,
contractual, and any non-contractual obligations and standards which the Company has
imposed on itself, in addition to the risks already discussed above. Every business unit at CMPC
regularly reviews its operating and administrative processes in order to ensure proper
compliance with the laws and regulations applicable to it. In addition, CMPC is renowned for
maintaining a proactive attitude in matters of safety, the environment, labor conditions, market
operations and community relations.
The Company has implemented and is taking actions that continue to strengthen a series of
processes, controls and systems to prevent the occurrence of acts of corruption, both internal
and public. Within the framework of this constant concern, better international practices and
modified corporate governance structures have been adopted in order to deepen and the
described efforts more efficient. Together with the existence of board committees that
oversee the correct identification and mitigation of these risks, there are independent
corporate areas that participate in these processes, whose objective is to make the defined
controls and preventive actions defined more effective. These areas are the Risk, Finance,
Compliance and Internal Audit Management. These structures, standards and controls have
been implemented with the support of experts, both domestic and foreign, in order to obtain
an expert, independent and objective point of view of the best practices and industry
standards.
Cyber risk
The increase in cases of a breach of cybersecurity and cybercrime in Chile and the world
present a potential risk to the security of our information technology systems, including those
of our productive mills, our service providers, as well as the confidentiality, integrity and
availability of information stored in these systems, some of which depend on the services
provided by third parties.
CMPC and its main IT service providers have contingency plans and have adopted measures
to prevent or mitigate the impact of events such as interruptions, failures or breaches, due to
causes such as natural calamities, power outages, security breaches, computer viruses or
cybersecurity attacks. Despite that, the company remains susceptible to possible information
attacks in the countries where it operates.
RISK ARISING FROM THE POLITICAL AND ECONOMIC CONDITIONS IN THE
COUNTRIES WHERE CMPC OPERATES
Changes in the political or economic conditions in the countries where CMPC operates could
affect the Company's financial and operating performance, as well as the fulfilment of its
business plan.
CMPC has industrial operations in 8 countries (Chile, Brazil, Argentina, Colombia, Ecuador,
Mexico, Peru and Uruguay). The operations located in Chile account for 59% of total assets
and originate 52% of sales. In turn, Brazil represents approximately 28% of CMPC's total
assets.
29
In the countries where CMPC operates, the state has substantial influence over many aspects
of the private sector, including changes in tax regulations, monetary policies, the exchange rate
and public spending. It can also influence regulatory aspects, such as labor and environmental
regulations. In recent years, in countries such as Chile, Mexico, Peru and Colombia, tax reforms
have been implemented, while in Brazil a tax reform is currently under discussion. All these
legal modifications impact or will impact the economic performance of the Company by
decreasing its cash flows destined to pay for the investments made there as well as affecting
its savings and future investments.
In the event that there are restrictions on international trade such as protectionist actions, as
announced by economic powers recently, the execution of our commercial strategy could be
affected. However, despite the fact that a significant part of our exports are destined for the
Asian market, our commercial relations with all countries and the final customers of our
products have remained fluid and balanced.
30
ABOUT CMPC
Empresas CMPC produces forestry, pulp, paper, and tissue, personal care and packaging
products throughout Latin America. The Company aims to deliver world-class products, from
forestry to finished products, to its global customer base. Its high quality timber and production
facilities are strategically located in countries including Chile, Brazil, Argentina, Mexico, Peru,
Colombia, Uruguay and Ecuador, hiring more than 17 thousand direct collaborators, making
CMPC a truly regional company with a competitive cost structure. The Company sells more
than 25 different product lines in more than 45 countries, always seeking long-term
relationships.
FORWARD-LOOKING STATEMENTS
This earnings release may contain forward-looking statements. Such statements are subject
to risks and uncertainties that could cause Empresas CMPC’s actual results to differ
materially from those set forth in the forward-looking statements. These risks include:
market, financial and operational risks. All of them are described in CMPC’s Consolidated
Financial Statements, Note 3 (“Risk Management”) as well as in the Risk Analysis section of
this document.
In compliance with the applicable rules, Empresas CMPC S.A. publishes this document on its
web site (www.cmpc.cl) and sends it to the Comisión para el Mercado Financiero the
Financial Statements of the Company and its corresponding notes, which are available for
consultation and review on its website (www.cmfchile.cl).
31
FINANCIAL TABLES
BALANCE SHEET
USD Thousands 2Q18 1Q19 2Q19 QoQ YoY
Current Assets 3.417.114 3 .794.249 3 .465.027 -9% 1%
Cash and Cash Equivalents 639.472 857.993 520.520 -39% -19%
Accounts Receivable 976.340 1.066.179 1.042.294 -2% 7%
Inventory 1.200.703 1.303.086 1.336.374 3% 11%
Biological Assets 327.176 327.816 328.940 0% 1%
Tax Assets 148.438 88.299 93.558 6% -37%
Other Current Assets 124.985 150.876 143.341 -5% 15%
Non Current Assets 11.352.887 11.402.042 11.426.524 0% 1%
Intangible Assets, Different from Goodwill 20.342 32.100 30.532 -5% 50%
Goodwill 105.086 104.090 107.921 4% 3%
Property, Mills and Equipment, Net 7.759.399 7.899.331 7.882.210 0% 2%
Biological Assets 3.143.728 3.040.046 3.046.677 0% -3%
Deferred Tax Assets 82.720 91.995 104.668 14% 27%
Other Non Current Assets 241.612 234.480 254.516 9% 5%
TOTAL ASSETS 14.770.001 15.196.291 14.891.551 -2% 1%0 0
Current L iabil ities 1 .276.280 1 .628.436 1 .284.413 -21% 1%
Other Financial Liabilities 335.137 432.353 387.911 -10% 16%
Operating Liabilities 695.149 811.583 732.451 -10% 5%
Other Current Liabilities 245.994 384.500 164.051 -57% -33%
Non Current L iabil ities 5 .279.396 5 .310.546 5 .269.248 -1% 0%
Other Financial Liabilities 3.600.047 3.406.940 3.388.153 -1% -6%
Deferred Tax Liabilities 1.576.376 1.544.026 1.519.001 -2% -4%
Other Non Current Liabilities 102.973 359.580 362.094 1% 252%
Non Controll ing Participations 2.186 2 .208 2 .236 1% 2%- -
Equity Attr ibutable to the Owners of the Controller 8 .212.140 8 .255.101 8 .335.654 1% 2%- -
TOTAL LIABILIT IES & SHAREHOLDERS' EQUITY 14.770.001 15.196.291 14.891.551 -2% 1%
Note: Balance sheet numbers are based on the quarterly Consolidated Financial Statements of Empresas CMPC S.A. and its subsidiaries
32
INCOME STATEMENT
USD Thousands 2Q18 1Q19 2Q19 QoQ YoY 6M18 6M19 YoY
Sales 1,618,259 1,449,302 1,441,992 -1% -11% 3,113,119 2,891,294 -7%
Operating Costs(1) (914,992) (919,400) (928,191) 1% 1% (1,830,533) (1,847,591) 1%
Operating Margin 703,267 529,902 513,801 -3% -27% 1,282,586 1 ,043,703 -19%
Other Operating Expenses (2)(196,460) (194,922) (189,113) -3% -4% (376,867) (384,035) 2%
EBITDA (3) 506,807 334,980 324,688 -3% -36% 905,719 659,668 -27%
EBITDA Margin (%) 31.3% 23.1% 22.5% -60 bps -880 bps 29.1% 22.8% -628 bps
Depreciation, Amortizations and Stumpage (158,716) (152,178) (166,584) 9% 5% (301,494) (318,762) 6%
Increase in Biological Assets due to Forests Growth and
Price Effects26,842 27,062 27,101 0% 1% 57,020 54,163 -5%
Decrease in Biological Assets due to Harvest (42,249) (45,402) (45,774) 1% 8% (90,280) (91,176) 1%
Operating Income 332,684 164,462 139,431 -15% -58% 570,965 303,893 -47%
Financial Expenses (52,812) (52,459) (47,993) -9% -9% (104,609) (100,452) -4%
Financial Income 3,169 6,747 4,495 -33% 42% 6,601 11,242 70%
Share Results in Associated Companies 3 (2) 1 N/A -67% 6 (1) N/A
Foreign Exchange Difference (9,489) (6,485) (5,195) -20% -45% (11,657) (11,680) 0%
Indexation Unit Results (772) 9,399 5,820 -38% N/A (1,427) 15,219 N/A
Other Gains (Losses) (8,074) (16,323) (9,636) -41% 19% (11,295) (25,959) 130%
Income Taxes (169,857) (48,116) (25,346) -47% -85% 209,467 (73,462) -65%
Net Income (Loss ) 94,852 57 ,223 61 ,577 8% -35% 239,117 118,800 -50%
Net Income (Loss), attributable to owners of the parent 95,081 57,187 61,574 8% -35% 239,304 118,761 -50%
Net Income (Loss), attributable to non-controlling interest (229) 36 3 -92% N/A (187) 39 N/A
(1) Operating Costs are calculated as: Costs of Sales minus Stumpage minus Decrease in Biological Assets due to Havest minus Depreciation
(2) Other Operating Expenses are calculated as: Distribution Costs plus Administration Expenses plus Other Functional Expenses
(3) EBITDA is calculated as: Sales minus Operating Costs minus Other Operating Expenses
33
CASH FLOW STATEMENT
USD Thousands 2Q18 1Q19 1Q19 QoQ YoY 6M18 6M19 YoY
Cash Flow from Operating Activ ities 111,262 98 ,213 41 ,022 -58% -63% 302,840 139,235 -54%
Cash collection from operating activ ities
Proceeds from sales of goods and services delivered 1,635,044 1,476,482 1,611,664 9% -1% 3,097,713 3,088,146 0%
Proceeds of premiums and services, annuities and other obligations on
policies subscribed4,434 7,813 253 -97% -94% 21,303 8,066 -62%
Other proceeds from operating activities 60,608 83,928 48,733 -42% -20% 145,005 132,661 -9%
Payments for operating activ ities
Payments to suppliers for goods and services (1,185,485) (1,199,186) (1,265,392) 6% 7% (2,344,121) (2,464,578) 5%
Payments to and on behalf of employees (111,622) (116,146) (111,005) -4% -1% (239,750) (227,151) -5%
Payments for premiums, benefits, annuities, and other obligations derived
from suscribed policies(1,122) (17,010) (4,464) -74% 298% (4,703) (21,474) 357%
Other payments from operating activities (216,099) (48,663) (54,988) 13% -75% (276,308) (103,651) -62%
Net cash flows from (used in) operating activ ities 185,758 187,218 224,802 20% 21% 399,139 412,020 3%
Income taxes paid (reimbursed) (74,496) (89,005) (183,780) 106% 147% (96,299) (272,785) 183%
Cash Flow from Investment Activ ities (95,083) (69 ,695) (151,023) 117% 59% (193,837) (220,718) 14%
Cash flows used for acquiring subsidiaries - - (13,217) N/A N/A - (13,217) N/A
Amounts obtained from the sale of property, plant and equipment - 5 1 -79% N/A - 6 N/A
Purchases of property, plant and equipment (77,719) (60,528) (77,308) 28% -1% (161,201) (137,836) -14%
Purchases of intangible assets - (150) - N/A N/A - (150) N/A
Purchases of other long-term assets (21,606) (16,452) (67,470) 310% 212% (40,718) (83,922) 106%
Interest received 4,242 6,099 4,390 -28% 4% 8,082 10,489 30%
Other cash inflows (outflows) - 1,331 2,581 94% N/A - 3,912 N/A
Cash Flow from Financing Activ ities (200,332) (140,009) (234,012) 67% 17% (284,528) (374,021) 31%
Proceeds raised through short-term loans 32,984 29,534 19,258 -35% -42% 119,877 48,792 -59%
Proceeds raised through loans 32,984 29 ,534 19 ,258 -35% -42% 119,877 48 ,792 -59%
Loans reimbursements (102,385) (80,596) (73,747) -8% -28% (241,930) (154,343) -36%
Payments of financing lease liabilities (468) (4,997) (4,599) -8% 882% (5,664) (9,596) 69%
Dividends paid (66,429) (51,338) (124,172) 142% 87% (66,473) (175,510) 164%
Interest paid (64,034) (32,612) (50,752) 56% -21% (90,338) (83,364) -8%
Net increase (decrease) in cash and cash equivalents before
effect of exchanges rate change(184,153) (111,491) (344,014) 209% 87% (175,525) (455,505) 160%
Effects of variation in the exchange rate on cash and cash equivalents (19,492) 1,980 6,540 230% N/A (17,757) 8,520 N/A
Net increase (decrease) in cash and cash equivalents (203,645) (109,511) (337,474) 208% 66% (193,282) (446,985) 131%
Cash and cash equivalents at beginning of period 843,117 967,504 857,993 -11% 2% 832,754 967,504 16%
Total Cash and Cash Equivalents at the end of the per iod 639,472 857,993 520,520 -39% -19% 639,472 520,520 -19%
34
INCOME STATEMENT DATA BY BUSINESS UNIT
June 2019
June 2018
Pulp Packaging Softys Total Other (3 )
Operating income from external customers 1,428,320 456,064 1,006,910 2,891,294 - - 2,891,294
Operating income between operating segments of the same entity 171,107 13,039 483 184,629 13,832 (198,461) -
Income from External and Related Customers 1 ,599,427 469,103 1 ,007,393 3 ,075,923 13 ,832 (198,461) 2 ,891,294
Cost of Sales (1,263,170) (408,628) (759,404) (2,431,202) - 173,673 (2,257,529)
Distribution Costs (28,985) (12,861) (81,846) (123,692) - 2,814 (120,878)
Administrative Costs (60,399) (22,042) (51,355) (133,796) (37,792) 14,664 (156,924)
Raw Materials an Supplies Used (835,191) (354,792) (710,940) (1,900,923) - 176,299 (1,724,624)
Employee Benefit Expenses (107,231) (45,723) (126,841) (279,795) (13,070) - (292,865)
Depreciation & Amortization Expense (171,299) (27,262) (46,978) (245,539) (12,648) 3,447 (254,740)
Interest Income 11,864 1,587 1,348 14,799 64,469 (68,026) 11,242
Interest Expense (64,165) (4,387) (28,667) (97,219) (73,392) 70,159 (100,452)
Other Significant Income (Expense) Items (20,536) 1,782 (1,630) (20,384) (12,710) 7,135 (25,959)
Total Other Significant Income (Expense) Itms (72 ,837) (1 ,018) (28 ,949) (102,804) (21 ,633) 9 ,268 (115,169)
Share in Income of Associates (1) - - (1) - - (1)
Income Tax (Charge) Credit (86,164) (4,326) 21,472 (69,018) (4,672) 228 (73,462)
EBITDA Determined by Segment (1 ) 557,599 46 ,322 77 ,177 681,098 (11 ,316) (10 ,114) 659,668
Operating Profit (Loss ) (2 ) 285,265 19 ,060 30 ,199 334,524 (23 ,964) (6 ,667) 303,893
Profit (Loss ) Before Taxes 204,418 16 ,328 5 ,697 226,443 123,433 (157,614) 192,262
Profit (Loss ) 118,254 12 ,002 27 ,169 157,425 118,761 (157,386) 118,800
In th. USD
Bus iness Areas (Operating Segments ) Adjustments
& E liminationsTotal CMPC
Pulp Packaging Softys Total Other (3)
Operating income from external customers 1,684,625 464,160 964,334 3,113,119 - - 3,113,119
Operating income between operating segments of the same entity 162,546 13,923 743 177,212 14,489 (191,701) -
Income from External and Related Customers 1,847,171 478,083 965,077 3,290,331 14,489 (191,701) 3,113,119
Cost of Sales (1,285,042) (414,758) (697,295) (2,397,095) (0) 174,788 (2,222,307)
Distribution Costs (34,401) (13,313) (87,305) (135,019) - 2,819 (132,200)
Administrative Costs (54,539) (22,839) (44,579) (121,957) (32,493) 13,579 (140,871)
Raw Materials an Supplies Used (873,298) (365,008) (651,856) (1,890,162) - 165,751 (1,724,411)
Employee Benefit Expenses (108,396) (49,405) (123,056) (280,857) (13,563) - (294,420)
Depreciation & Amortization Expense (163,953) (26,319) (44,266) (234,538) (3,047) 3,869 (233,716)
Interest Income 1,642 1,489 901 4,032 49,322 (46,753) 6,601
Interest Expense (53,376) (2,316) (19,279) (74,971) (76,391) 46,753 (104,609)
Other Significant Income (Expense) Items (7,403) 1,510 (428) (6,321) (2,625) (2,349) (11,295)
Total Other Significant Income (Expense) Itms (59,137) 683 (18,806) (77,260) (29,694) (2,349) (109,303)
Share in Income of Associates 6 - - 6 - - 6
Income Tax (Charge) Credit (201,835) (7,861) (17,748) (227,444) 17,977 - (209,467)
EBITDA Determined by Segment (1) 777,225 47,591 99,275 924,091 (14,957) (3,415) 905,719
Operating Profit (Loss) (2) 512,234 21,272 55,009 588,515 (18,004) 454 570,965
Profit (Loss) Before Taxes 457,118 19,550 (12,177) 464,491 221,327 (237,234) 448,584
Profit (Loss) 255,283 11,689 (29,925) 237,047 239,304 (237,234) 239,117
(1) Corresponds to gross profit plus depreciation and amortization, plus cost of formation of harvested plantations, plus higher cost of the exploited and sold part of the plantations derived from revaluation for their natural
growth (Biological Assets), less distribution costs, less administrative expenses and less other expenses, by function.
(2) Corresponds to profits (losses) before income tax expense, finance income and costs, foreign currency translation differences, income from indexation units, other profits (losses) and income of associates.
(3) Corresponds to the operations of Empresas CMPC S.A., Inversiones CMPC S.A., Servicios Compartidos CMPC S.A. and Portuaria CMPC S.A. not included in the main segments.
In th. USD
Business Areas (Operating Segments) Adjustments &
EliminationsTotal CMPC
35
PROFITABILITY RATIOS
LIQUIDITY, DEBT AND ACTIVITY RATIOS
Profitabil ity Ratios 2Q18 1Q19 2Q19
Net Profit Margin (annual):
Net Income (Loss) / Sales Income 7.68% 3.95% 4.11%
Annual Return on Equity (ROE):
Net Income (Loss) / Average Total Assets for the period 5.78% 2.75% 2.85%
Annual Return on Assets (ROA):
Net Income (Loss) / Average Total Assets for the period 3.22% 1.52% 1.59%
Return on Operating Assets (annual):
Operating Income / Average Operating Assets for the period (1) 8.52% 4.88% 4.51%
Div idend y ield:
Dividends Per Share (rolling year) (2) / Share Market Price (3) 0.81% 1.95% 3.33%
Profit per Share (USD):
Net Income (Loss), attributable to owners of the parent / # shares (4) 0.096 0.023 0.048
(1) Operating Assets: Accounts Receivable + Inventory + Net Property, Mills and Equipment + Biological Assets
(2) Dividends paid, in USD
(3) Market stock price at the end of the period
(4) Calculated based on the average amount of shares for the period
Liquidity 2Q18 1Q19 2Q19
Current L iquidity :
Current Assets/Current Liabilities 2.68 2.33 2.70
Quick Ratio:
Cash and Cash Equivalent/Current Liabilities 1.73 1.52 1.65
Debt 2Q18 1Q19 2Q19
Debt Ratio:
Total Debt/Equity 0.80 0.84 0.79
Current Debt Ratio:
Current Liabilities/Total Debt 19.5% 23.5% 19.6%
Non-Current Debt Ratio:
Non-Current Liabilities/Total Debt 80.5% 76.5% 80.4%
Financial Cost Coverage: 5.29 3.01 2.91
Book Value per Share:
Equity/# Shares USD 3.28 3.30 3.33
Activ ity 2Q18 1Q19 2Q19
Asset Turnover Ratio:
Revenue / Average Total Assets 0.42 0.38 0.39
Inventory Turnover :
Cost of Goods Sold / Average Inventory 3.66 3.48 3.47
Days ' Sales in Inventory :
Average Inventory*360 days / Cost of Goods Sold 98.3 days 103.4 days 103.7 days
36
GLOSSARY
Biological assets: Forestry plantations which are supposed to be used as raw materials for pulp production,
sawing logs and other solid wood products.
Green Bond: Bonds that meet the requirements set forth in the Green Bond Principles of the World Bank.
Proceeds are used to finance or refinance projects with sustainable environmental impact.
CAPEX (capital expenditures): The amount spent on acquiring or improving productive assets such as
buildings, machinery and equipment, or vehicles, with the purpose of increasing the capacity or efficiency
of a company.
Working capital: Inventory + accounts receivable – accounts payable.
Bleached Eucalyptus Kraft Pulp (BEKP): Pulp from eucalyptus wood used as a raw material for a wide range
of papers.
Bleached Softwood Kraft Pulp (BSKP): Pulp from pine wood used as a raw material for a wide range of
papers.
Stumpage: An expense recognized at the time of harvesting and selling a forest associated with the formation
of the harvested property.
Derivative contract: Contract between two or more parties whose value depends on the performance of a
certain underlying asset as the payment and price of the contract are directly related to the evolution of the
market price of said underlying asset.
Financial debt: Bank debt and debt securities, long and short term, issued by the Company.
Net financial debt: Financial debt that cannot be settled with cash. In other words, short-term financial debt
+ long-term financial debt - cash - cash equivalents.
Days Sales Outstanding (DSO): (12 rolling months of outstanding accounts receivable)/(sum of 12 rolling
months credit sales)*365
EBITDA (Earnings before interest, Taxes, Depreciation and Amortization): Valuation of the operational cash
flow. It is obtained by subtracting the fixed expenses from the contribution margin.
Contribution margin: Direct income minus direct costs.
Functional currency: Currency used by the Company for accounting purposes.
Debt ratio: Relationship between the total debt of the Company and its equity.
Lease liability: Debt related to long-term lease agreements according to the IFRS 16 norm which came into
effect starting January 2019.
Quick ratio: Measure of a company's ability to meet its short-term obligations defined as its ability to convert
assets into cash.
RPP (Receivable Purchase Program): Contracts for the sale of portfolios of accounts receivable, which
substantially transfer the risk of default to the counterparty, in this case the financial institutions.
Softys: Business unit dedicated to the manufacturing and distribution of tissue paper, personal care products
and Away-from-Home products.
QoQ: Quarter on quarter, compares current with previous quarter results.
YoY: Year on year, compares current quarter with the same quarter in the previous year.
Replacement value: The monetary amount that it would cost to replace an asset at the present time,
according to its current worth.
