ARAUCO Corporate Presentation 4Q 2018
Arauco Overview Business Segments Financial Highlights Recent Events and Initiatives Sustainability
3 HISTORY OF ARAUCO: A CONTINUED EXPANSION … Now Back in 1996 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 Canada Europe (1) 2 Panel mills 8 Panel mills United States 1 Sawmill 7 Panel mills Mexico Brazil 2 Panel mills 4 Panel mills South Africa (1) Chile Argentina Uruguay (2) Chile 2 Panel mill 1 Pulp mill 2 Pulp mills 1 Pulp mill 5 Pulp mills 8 Sawmills Argentina 4 Panel mills 7 Sawmills 1 Pulp mill 2 Panel mills 1 Sawmill Revenues Revenues US$5.9 billion US$641 million Pulp Capacity Pulp Capacity 1.1 million t 4.0 million t Panel Capacity (3) Panel Capacity 10.9 million m 3 0 m 3 Sawn Timber Capacity Sawn Timber Capacity 2.9 million m 3 1.9 million m 3 Number of Mills (3) Number of Mills 47 11
4 ARAUCO AT A GLANCE National rating (2) Shareholder Structure (1) Financial highlights Dec. 2018 US$ million Angelini Group 31% 1,851 AA AA- EBITDA 74,68% EBITDA Margin (Stable) (Stable) 1,076 4,510 Cash Debt* International rating (2) 60,82% 1.9x 61% Net debt/ Net Debt/ EBITDA Equity BBB- BBB 740 920 (Stable) (Stable) Net income CAPEX 99,98% Baa3 (Stable)
5 DIVERSIFIED SALES AROUND THE WORLD Revenues The Netherlands MUS$5,955 Germany Canada Sales by Portugal Division USA Spain China Mexico United Colombia Arab Costa Rica Emirates Peru Brazil South Uruguay Africa Chile Argentina Australia Sales by Industrial Offices Over 68% Commercial Offices Region Montes del Plata, JV withStoraEnso SonaeArauco, JV withSonaeIndustria Of our revenues are fromexports
6 FOUR STRATEGIC BUSINESS SEGMENTS IN A DIVERSIFIED OPERATIONAL FOOTPRINT Complementary Wood products Forestry Pulp energy operations 4 Mills 7 Sawmills Plywood: 710 th. m 3 10 Power Plants 5 Mills 4 Remanufacturing 674,020 Ha (1) MDF: 515 th. m 3 606 MW 2,905 th. t facilities HB (4) : 60 th. m 3 Surplus: 219 MW 2,588 th. m 3 PB: 300 th. m 3 2 Mills 1 Sawmill 2 Power Plants MDF: 300 th. 1 Mill 1 Remanufacturing 132,617 Ha (1) 82 MW 3 m 350 th. t facility Surplus: 15 MW 260 th. m 3 PB: 317 th. m 3 4 Mills MDF: 1,530 th. m 3 134,331 Ha (1) 720 th. m 3 PB: 1 Power Plant 1 Mill 91 MW (2) 76,804 Ha (1)(2) 700 th. t (2) Surplus: 50 MW 9 Mills MDF: 1,470 th. m 3 PB: 2,320 th. m 3 2 Mills 3 MDF: 220 th. m 3 PB: 339 th. m 10 Mills (3) MDF: 741 th. m 3 1 Sawmill (3) PB: 1,165 th. m 3 25 th. m 3 OSB: 258 th. m 3 10.9 million m 3 2.9 million m 3 4.0 million t TOTAL 1.0 million Ha 779 MW
7 WE ARE A MAIN PLAYER IN THE GLOBAL MARKET Market Pulp Capacity (thousandtonnes) Arauco* #2 MAPA market pulp producer 3,955 + 1,270 = 5,225 in the world World Panels Capacity (thousandm 3 ) Arauco* #2 Grayling and Mexico panels producer in 9,549 + 1,359 = 10,908 the world
8 MAXIMIZING THE VALUE OF EVERY TREE BSKP / UKP BHKP PULP Black Licquor PULP MILLS Chips HEAT ENERGY & STEAM PRODUCTION WOOD PRODUCTS MDF / HB / PBO MILLS Plywood Sawn Timber Remanufactured Wood Products WOOD PRODUCTS
Arauco Overview Business Segments Financial Highlights Recent Events and Initiatives Sustainability
10 FORESTRY: THE BASE FOR GROWTH
11 FORESTRY: THE BASE FOR GROWTH Total Plantations Planting and harvesting In thousand hectares In thousand hectares Environmental Certifications 1,769 th. hectares owned Pine : 71 th. Our forests plantations Eucalyptus: 63 th. have international Others: 0.2 th. certification in Forestry 1,018 th. hectares Management and Chain Pine: 0.1 th. planted of Custody Eucalyptus: 76 th. Others: 0.4 th. For detailed information about each certification, you can visit Pine : 95 th. 659 th. has .of Pine our website Eucalyptus: 18 th. 336 th. has. of Eucalyptus Others: 20 th. Pine : 493 th. Eucalyptus: 179 th. Others: 3 th.
12 FORESTRY: THE BASE FOR GROWTH Bioforest research and development Bioforest was formed in 1990 by Arauco and one of its achievements has been the increase in the plantations production by 40% 51 researchers highly trained • work Bioforest has a wide participation in local and international organizations that are leaders in the forestry-industrial in order to scientific knowledge develop and • In addition, Bioforest aims to fulfill the environmental apply objectives for the protection and conservation of biodiversity the best present in our native forests technologies, maximizing the forestry and industrial resources
13 PULP: ARAUCO´S MAIN INDUSTRIAL ACTIVITY
14 PULP: ARAUCO´S MAIN INDUSTRIAL ACTIVITY Sales volume: 3.7 million tonnes Pulp Sales 95% MUS$2,955 Of pulp sales go to exports Pulp production million tonnes 3.8 3.1
15 PULP : OUR MILLS Licancel 160 th. t UKP Constitucion Alto Parana 355 th. t UKP 350 th. t BSKP & Fluff Swing mill Arauco Mill Line 1 & Line 2 290 th. t BHKP 510 th. t BSKP Montes del Plata Nueva Aldea 1,400 th. t BHKP 520 th. t BHKP Arauco owns 50% 520 th. t BSKP Valdivia 550 th. t Bleached pulp Swing mill
16 PULP: COMPETITIVE ADVANTAGES TO EFFICIENTLY SUPPLY THE MARKETS Cost advantage Balance between short and long fiber HARDWOOD SOFTWOOD (45%) (55%) BSKP BHKP 33% 45% Total Capacity 3,955 th. ADt UKP 13% Fluff SOFTWOOD 9% (37%) DP 10% BSKP 20% With MAPA’s new capacity BSKP BHKP and Dissolving Pulp Project (DP) Total Capacity UKP 5,225 th. ADt 10% Fluff BHKP* 7% 53% HARDWOOD (63%)
17 PULP: COMPETITIVE ADVANTAGES TO EFFICIENTLY SUPPLY THE MARKETS Average Distance Average Distance Mill to Port Forest to Mill Km Km Licancel 420 85 Chile Constitucion 316 Argentina 80 Nueva Aldea 63 Arauco (1) Uruguay 282 220 km. 35 (weighted Valdivia 301 average*) Alto Paraná 1,200 0 Montes del Plata
18 PULP MARKET SCENARIO: BHKP - NBSK INDEXES AND BCP (1) CAPACITY GROWTH No new significant capacity scheduled to enter the market in the next 4 years Horizonte II Rizhao Klabin El Dorado Maranhao Tres APP Lagoas Guaiba II Montes Fray MAPA del Plata Veracel Bentos Mucuri Nueva Kerinci Aldea Chenming Santa Oji Zhanjiang Fe Nantong APP Guangxi Ilim Metsa Forecast Price gap between NBSK and BHKP 2019-2022 ➢ December 2018: US$ 174 / ton +1.8 Mt ➢ Average (Jan. 2018 – Dec. 2018): US$ 129 / ton
19 PULP MARKET SCENARIO: BCP DEMAND FORECAST 2019-2022 +5.2%
20 WOOD PRODUCTS: WIDE VARIETY OF APPLICATIONS
21 WOOD PRODUCTS: WIDE VARIETY OF APPLICATIONS Sales evolution Wood Products US$ million Sales +4.0% MUS$ 2,721 Main applications Panels • Furniture • Construction • Mouldings • Packaging Solid Wood
22 PANELS: EXPANSION OF THE PRODUCT MIX Sales volume: 5.4 million m 3 Panel Sales MUS$ 1,725 Panels production In million cubic meters 2 2
23 PANELS: OUR MILLS * * 470 MDF 974 PB 428 PB 216 PB 856 MDF 140 MDF 516 OSB East Coast West Coast 1,304 PB 800 HB 846 MDF 154 MDF * 416 PB 360 MDF 250 MDF 300 PB * 1,530 MDF 710 Plywood 236 PB** 720 PB 515 MDF 42 MDF 60 HB Legend 300 PB MDF: Medium Density Fiberboard HB: Hardboard 300 MDF PB: Particle Board 260 PB OSB: Oriented Strand Board Commercial offices 23
24 SOLID WOOD: HIGH QUALITY PRODUCTION STANDARDS Sales volume*: 2.8 million m 3 Solid Wood Sales MUS$996 Solid Wood production* In million cubic meters
25 SOLID WOOD: OUR MILLS * 50 ST 2,589 ST 408 Rem 13 MP 318 ST 67 Rem Legend ST: Sawn Timber Rem: Remanufactured Wood Products MP: Impregnation of Melamine Paper Commercial offices
26 ENERGY: KEY PART OF OUR VALUE CHAIN
27 ENERGY: KEY PART OF OUR VALUE CHAIN Highlights Revenues • Electricity generation from renewable energies is part of our production process MUS$87 • In Chile, Argentina and Uruguay, we are self-sufficient in net electricity consumption and we sell the surplus to the local grid • 5 cogeneration plants in Chile and 1 plant in Uruguay are registered under the Kyoto Protocol Clean Development Mechanism (CDM) The surplus energy injected in Chile is equivalent to providing energy to 284 MW 550,000 houses Sold to National Grid in Chile, 779 MW Argentina and Uruguay Installed capacity
Arauco Overview Business Segments Financial Highlights Recent Events and Initiatives Sustainability
29 SOLID CAPITAL STRUCTURE Adjusted EBITDA US$ million Adjusted EBITDA Margin EBITDA by Division CAPEX Net Debt US$ million US$ million The lowest since 2010 1.9 x
Arauco Overview Business Segments Financial Highlights Recent Events and Initiatives Sustainability
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