3Q 2019 Corporate Presentation
OVERVIEW
ARAUCO: A CONTINUED EXPANSION 1996 NOW Alto Parana in Argentina, one of the first strategic steps to expand our business Today we are a world class player in the forestry products industry Europe ((1) 8Panel mills USA 1 Sawmill Canada 8 Panel mills 2 Panel mills Mexico Brazil 2 Panel mills 4 Panel mills SouthAfrica (1) Chile Argentina Uruguay (2) Chile 2 Panelmills 1 Pulp mill 2Pulp mills 1 Pulpmill 5 Pulp mills 8Sawmills Argentina 4Panel mills 7Sawmills 1 Pulp mill 2 Panelmills 1Sawmill (3) Revenues Revenues US$641 million US$5.5 billion Pulp Capacity Pulp Capacity 1.1 million tonnes 4.0 million tonnes Panel Capacity Panel Capacity 0 m 3 11.0 million m 3 Sawn Timber Capacity Sawn Timber Capacity 1.9 million m 3 3.1 million m 3 Number of Mills Number of Mills 11 48 Source: Arauco (1) Arauco owns 50% of European and South African mills through Sonae Arauco. (2) Arauco owns 50% of Montes del Plata mill in Uruguay. (3) September 2019 LTM As of September 2019 3
ARAUCO AT A GLANCE Financial highlights LTM National rating Shareholder Structure US$million Fitch Feller Angelini Group AA AA- 23% 74.30% 1,276 EBITDA (Stable) (Negative) EBITDA Margin Antar Chile 1,142 5,395 International rating Cash Debt* 60.82% Fitch S&P 3.3x 73% Empresas Copec BBB- Net debt/ Net Debt/ BBB EBITDA Equity (Negative) (Negative) 99.98% Moody’s 224 1,257 Net income Baa3 CAPEX (Stable) * Does not include swaps and forwards As of September 2019 4 4
DIVERSIFIED SALES AROUND THE WORLD Forestry Others 2% 0% Europe N.A. Canada 8% The 25% Netherlands Revenues Wood Spain Portugal Germany Pulp USA Products MUS$5,508 46% 52% China Mexico Colombia 4% Asia and Latam United Costa Rica Arab Oceania 23% Others Peru Emirates 40% Brazil Others Chile South -5% Uruguay Forestry Africa Australia 13% Adjusted EBITDA Argentina MUS$1,276 Wood Industrial operations Commercial Offices Products Montes del Plata, JV with Stora Enso Pulp 23% Sonae Arauco, JV with Sonae Industria 69% World sales breakdown, as of December 2018 As of September 2019 LTM (1) Pulp and Wood products include energy sales 5
THREE STRATEGIC BUSINESS SEGMENTS in thousands Forestry Pulp Wood products Complementary energy operations 4 Mills 7 Sawmills 10 Power Plants Plywood:710 m 3 2,759 m 3 665 Ha (1) 5 Mills MDF: 515 m 3 606 MW 4 Rem. Facilities 2,905 t PB: 300 m 3 Surplus: 219 MW 2 Mills 2 Power Plants 1 Sawmill: 350 m 3 1 Mill MDF: 300 m 3 82 MW 1 Rem. Facility 133 Ha (1) 350 t PB: 260 m 3 Surplus: 15 MW 4 Mills MDF: 1,530 m 3 132 Ha (1) PB: 720 m 3 1 Power Plant 1 Mill 91 MW (2) 76 Ha (1) (2) 708 t (2) Surplus: 50 MW 10 Mills MDF: 1,605 m 3 PB: 2,320 m 3 2 Mills MDF: 250 m 3 PB: 339 m 3 10 Mills (3)(4) PB: 1,165 m 3 1 Sawmill (3) MDF: 741 m 3 25 m 3 OSB: 258 m 3 Total 1.0 million ha 4.0 million t 3.1 million m 3 779 MW 11.0 million m 3 (1) Considers hectares planted, in thousands (2) Considers 50% of Montes del Plata (3) Considers 50% of Sonae Arauco (4) One PB mill in South Africa is currently shut down. As of September 2019 6
WE ARE A MAIN PLAYER IN THE GLOBAL MARKET Market Pulp Capacity (thousand tonnes) ARAUCO* 5,225 #2 In market pulp capacity in the world MAPA’s new capacity World Panels Capacity (thousand m 3 ) ARAUCO* 10,878 #2 In Panels capacity in the world World market pulp and panel competitors capacity as of December 2018. *Arauco capacity includes 50% of Montes del Plata, 50% Sonae Arauco, and MAPA Project, as of September 2019 Source: Hawkins Wright, Public fillings, Arauco estimations and Company information and fillings 7
MAXIMIZING THE VALUE OF EVERY TREE PULP BSKP/UKP BHKP Liquor Black PULP MILLS Chips HEAT ENERGY PRODUCTION &STEAM MDF/PB WOOD Plywood PRODUCTS SawnTimber Remanufactured WoodProducts MILLS WOODPRODUCTS 8
BUSINESS SEGMENTS
FORESTRY BUSINESS
FORESTRY BUSINESS Total Plantations Includes plantations in Chile, Argentina, Brazil and Uruguay Planting and harvesting In thousand hectares 1,006 In thousand hectares 2003 2005 2007 2009 2011 2013 2015 2017 Sep 2019 LTM Pine : 70 th. 1.7 million (*) Environmental Certifications Euca: 62 th. Others: 0.2 th. Our forests plantations have international hectares owned 132 th. certification in Forestry Management and Chain of Custody Euca: 75 th. 1.0 million Pine: 0.1 th. For detailed information about each certification, you can visit our Others: 0.4 th. Pine : 483 th. hectares planted web site www.arauco.com Euca: 179 th. 76 th. Pine : 94 th. Others: 3 th. Euca: 19 th. (*) includes 436 hectares of native 647 th . of Pine 665 th. Others: 20 th. 335 th . of Euca forest plantations. 133 th. 24 th . Others As of September 2019 11
FORESTRY BUSINESS Bioforest research and development Bioforest was formed in 1990 by Arauco and one of the achievements has been the increase in the plantations production by 40% 51 Highly trained researchers ● Bioforest has a wide participation in local and international organizations that are leaders in the forestry-industrial scientific knowledge work in order to develop and apply the best technologies, ● In addition, Bioforest aims to fulfill the environmental maximizing the forestry and objectives for the protection and conservation of industrial resources. biodiversity present in our native forests ● During October 2019 and after 3 years of work, Bioforest discovered a species of fungus that is affecting more than 80% of the chilean Araucaria. This fungus has already killed 10% of that protected native tree species. 12
PULP BUSINESS
PULP BUSINESS Production million tonnes 3.8 3.8 3.7 4 3.6 3.4 3.3 3 Pulp Sales 2 1 MUS - 2014 2015 2016 2017 2018 Sep 2019 LTM $2,480 EKP BSKP UKP Fluff Sales volume: 3.7 million tonnes Fluff Europe Does not include energy sales 4% 16% As of September 2019 LTM UKP 12% FLUFF DP (4) EKP (1) BSKP (2) UKP (3) America 11% China 56% EKP Rest of the 47% World 11% Korea BSKP 6% 37% (1) Eucalyptus Kraft Pulp (2) Bleached Softwood Kraft Pulp (3) Unbleached Kraft Pulp (4) Dissolving Pulp As of September 2019 LTM 14
PULP BUSINESS OUR MILLS in thousand tonnes LICANCEL 160 UKP CONSTITUCION ALTO PARANA 350 BSKP & Fluff 355 UKP Swing mill MAPA PROJECT (2021) NEW LINE 3 1,560 EKP ARAUCO MILL LINE 1: 290 EKP Line 1 will be shut down LINE 2: 510 BSKP upon completion. NUEVA ALDEA MONTES DEL PLATA 520 EKP 1,414 EKP 520 BSKP Arauco owns 50% VALDIVIA 550 Bleached pulp Swing mill As of September 2019 15
PULP BUSINESS COMPETITIVE ADVANTAGES 2. Cost Advantages 1. Logistic Efficiency Average distances from Average distances from Forests to Mills Mills to Ports ARAUCO Km 420 Chile Licancel 85 ARAUCO Constitucion 316 ARAUCO Argentina 80 63 Nueva Aldea Uruguay 282 Arauco 35 Valdivia 301 Arauco Alto Paraná 1,200 BHKP BSKP Montes del plata 0 Source: Hawkins Wright, as of August 2019 Weighted Avg. 123 (2) 158 (1) Other world includes New Zeland, Argentina and Brazil with MAPA Source: ARAUCO, as of September 2019 (1) Calculated using only export sales volume for 2018 (2) Calculated including export sales volume from ARAUCO ´ s Line 3 expected capacity and assuming Line 1’s shutdown 16
PULP BUSINESS COMPETITIVE ADVANTAGES 3. Product Diversification BCP world industry demand by End-use, 2018 (2) (55%) BSKP SOFTWOOD EKP CurrentCapacity 33% 45% 4.0 million tonnes UKP (45%) Fluff 13% HARDWOOD 9% (37%) SOFTWOOD BSKP DP 20% 9% Projected UKP Capacity EKP 10% 54% 5.2 million Including MAPA’s tonnes capacityand DP (1) Fluff 7% (63%) Source: Hawkins Wright, as of August 2019 Source: ARAUCO, as of September 2019 HARDWOOD (2) BCP: Bleached Chemical Pulp, which includes all bleached kraft pulp (and not unbleached) (1)Dissolving Pulp and sulphite pulp 17
WOOD PRODUCTS BUSINESS
WOOD PRODUCTS BUSINESS Sales evolution US$ million 2.7 2.8 3 2.7 2.6 2.6 2.5 2 Revenues 1 MUS - 2014 2015 2016 2017 2018 Sept 2019 LTM Panels Solid wood $2,736 Subdivisions Does not include energy sales As of September 2019 LTM PANELS SOLID WOOD 19
WOOD PRODUCTS BUSINESS: PANELS Production (1) million m 3 5.9 6 5.6 4.9 4.8 4.8 4.8 5 4 Panels Sales 3 2 MUS 1 - 2014 2015 2016 2017 2018 Sept 2019 LTM $1,817 MDF PB Others Sales volume (1) : 5.8 million m 3 Others** Others* Chile 4% 3% 5% Argentina Does not include energy sales 5% As of September 2019 LTM Mexico 9% PBO USA and 43% MDF Brazil Canada 54% 26% 51% As of September 2019 LTM Does not include Sonae Arauco volumes *OSB, HB, Retail and Composite panels ** EMEA, Asia, Oceania and Rest of Latam 20
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