4Q18 Earnings Release

4Q18 Results Conference Call

March 8th, 2018

International Risk Rating

Fitch Ratings Standard andPoor'sBBB / stable BBB / stable

Domestic Risk RatingFeller-Rate

AA / stable / 1stClass Level 1

Fitch Ratings

AA-/ stable / 1stClass Level 1

Thursday, March 14th, 2018

  • 15:30 ET (NY Time)

  • 16:30 Santiago Time

Dial:

From US: +1 (844) 204-8586 From Chile: +56 44 208-1274

From other countries: +1 (412) 317-6346

ID: COPEC

2018 / 2017

Net income was US$1.071 million and 67.5% up YTD, mainly due to operating income increasing US$544 million, largely in the forestry business, where Arauco had a better performance arising from greater revenue across its main business lines, particularly pulp from higher prices. Non-operating income was also less negative by US$214 million.

Net income was US$148 million and increased 39.8% YoY, explained by a less negative non-operating income of US$221 million, mainly due to the non-recurrent effects in 2017 which included the impairment charge recognized at the subsidiary Orizon and financial expenses at Arauco from the refinancing of long-term liabilities, among other effects. Operating income rose US$13 million because of an increase in the fuels business, mainly Copec associated with a better performance in Chile and the United States.

Net income dropped 52.1% QoQ, due to lower operating income in the forestry business, largely related to a decrease in the pulp segment, with price and volume decreases. Operating income was more negative, due to lower earnings in associates and joint ventures.

EBITDA

EBITDA in 4Q18 was US$564 million, increasing 6.6% YoY, mainly because of the better performance of the fuels business. EBITDA dropped 23.0% QoQ, due to a decrease in the forestry business.

In the forestry business, Arauco closed the acquisition of two panel mills of Masisa in Mexico. The Grayling mill also started to produce the first panels, and the MAPA and Dissolving Pulp projects continued to progress according to schedule. In the fuelsbusiness, as part of the purchase ofExxonMobil'sassets in Colombia, Peru and Ecuador, the autonomous trust sold the service station business in Colombia to Peru-based Primax for US$232 million, thereby complying with the conditions ofColombia'sregulatory authority. Copec also successfully refinanced a US$500 million loan. Mina Justa Project progress at 17%.

Highlights

Net Debt / EBITDA

Indebtedness was in line with 3Q18 with a Net Debt / EBITDA ratio of 2.0 times, due to a proportional increase in 12M EBITDA and net debt.

Revenues

EBIT

EBITDA*

4Q 18

3Q 18

4Q 17

4Q18 / 4Q17

4Q18 / 3Q18

Chg. 18 / 17

6,057

6,045

5,324

13.8%

0.2%

23,970

20,353

17.8%

287

488

274

4.8%

(41.2%)

1,755

1,211

44.9%

564

733

530

6.6%

(23.0%)

2,767

2,220

24.7%

Adjusted EBITDA**

578

742

498

16.2%

(22.0%)

2,799

2,217

26.2%

Non operating income

(75)

(57)

(296)

75%

(31.1%)

(258)

(472)

45.3%

Total profit

162

320

81

101.3%

(49.2%)

1,119

659

69.7%

Profit attributable to controllers

148

308

106

39.8%

(52.1%)

1,071

639

67.5%

Profit attributable to minority

15

12

(25)

159.9%

28.2%

48

20

139.6%

EBITDA Margin

9.3%

12.1%

9.9%

(6.3%)

(23.1%)

11.5%

10.9%

5.9%

EBITDA / Net interest expenses

6.8

8.9

3.9

73.1%

(24.1%)

8.6

6.2

37.3%

Accum 18 Accum 17

* EBITDA = Operating Income +Depreciation +Amortization +Fair value cost of timber harvested +Others **Adj. EBITDA = Net Income +fin. costs - fin. income +tax +dep & amort +fair value cost of timber harvested - gain from changes in biological assets +exchange rate differences

(For details see exhibit in page 24).

Figures in US$ million

EBITDA figures for 1Q18, 2Q18 y 3Q18, have been adjusted in -MMUS$ 6,5; -MMUS$ 7,9 y -MMUS$ 12,3, respectively, due to re-estimations for fair value of timber harvested.

Contact Information:

Cristián PalaciosDirector of Finance and IR+562 24617042cristian.palacios@empresascopec.clJuan Pablo SerranoInvestor Relations+562 24617046juan.serrano@empresascopec.clJosé Pablo CarvalloInvestor Relations+562 24617015jose.carvallo@empresascopec.cl

SIMPLIFIED OWNERSHIP STRUCTURE

Highlights of the Quarter

Progress with the MAPA project

In February 2019, the earth-moving works began and the water treatment plant construction was finished. The new line is expected to start its operations in the second quarter of 2021.

Acquisition of Masisa Mexico

On January 31, 2019, Arauco acquired the shares of Masisa S.A.'sMexican subsidiaries. The acquisition included the industrial complexes located in Durango and Zitacuro, that jointly account for three Particleboard lines with a total capacity of 300.000 m3and 1 MDF line with a total capacity of 250.000 m3. The transaction totaled US$ 160 million.

Grayling project in its final stage

In February 2019, the first rollout of panels were produced in the new particleboard mill located in Grayling, Michigan, United States. This investment amounted to approximately US$450 million and the capacity is 800,000 m3of PB per year. Ramp up is expected to start in March 2019.

Valdivia project update

The dissolving pulp project continues its course with progress of 65% as of late January 2018. The estimated investment is US$190 million. It is expected to start up in late 2019.

Forestry wildfires control

As of the end of February 2019, total area affected by wildfires reached approximately 555 hectares, a 5.5% decrease compared to the previous season.

Update on the ExxonMobil asset purchase process

As part of the acquisition ofExxonMobil'sassets in Colombia, Peru and Ecuador, on November 30, 2018 the"autonomous trust"sold the fuel distribution business in Colombia to the peruvian company Primax for US$232 million, thereby complying with conditions regulated byColombia'sauthority. It should be highlighted that Terpel started to consolidate thelubricant and liquid fuels operations in Peru and Ecuador as of April, and the lubricants business in Colombia in July.

Successful Refinancing of Copec

The company refinanced a US$500 million syndicated loan by means of a Club Deal of five banks. The new facility has a bullet structure and 5-year maturity, along with better conditions than the previous loan.

Mina Justa Project update

According to the plan, progress of Mina Justa Project amounts to more than 17% at the end of January. Currently, more than 3,400 people participate in its development, which demands an investment of aroundUS$ 1,600 million, and which is expected to begin production at the end ofnext year.

Alxar, through Empresas Copec, participates with 40% of Mina Justa. The project is located in Ica, Peru, and is expected to reach a production of up to 150 thousand tons per year of fine copper during the first years of operation, with an average of 115 thousand tons per year in the 16 years of planned useful life.

CONSOLIDATED RESULTS

4Q18 / 4Q17.Earnings attributable to the controller (hereinafter referred to as"net income")were US$148 million in the quarter, increasing 39.8% YoY. That was mainly due to non-operating income rising US$221 million, and to an operating income increasing US$13 million.

Non-operatingincome increased, mainly due to lower other expenses at Igemar related to the impairment charge recognized at the subsidiary Orizon in 4Q17. Likewise, there was an increase in other revenue at Copec from the sale of real estate assests and the ExxonMobil fuels business in Colombia; and at Arauco from an adjustment to the revaluation of biological assets in 4Q17. There were also lower financial expenses at Arauco, due to the charges from refinancing long-term liabilities undertaken in 4Q17.

Operating incomealso increased, mainly in thefuels businessat Copec, on account of the better performance in Chile and the United States explained by higher margins. That was partly offset by the lower effect of inventory revaluation at Copec and Terpel. Abastible posted an operating income increase due to a better performance in all the countries in which it operates, highlighting a higher margin in Chile.

Cost of sales

Administration & distribution expensesOperating Income

Other income

Other expenses Other gains (losses) Finance costs Finance income

Income StatementRevenues

Share of profits of associates Foreign exchange differences Other results

Total profit

Profit attributable to controllers Profit attributable to minority

Non Operational incomeIncome tax expense

EBIT

Depreciation & Amortization

Fair value cost of timber harvested

EBITDA

Figures in US$ million

Theforestry businesshad an operating income increase, mainlyexplained by lower D&A expenses and a better performance of thepulp business in a scenario of higher prices.

Thecompany'sgross margin rose 4.3%, amounting to US$908 million, which mainly came fromArauco'ssubsidiaries of US$450 million; with Copec accounting for US$341 million; Abastible for US$93 million; Sonacol for US$12 million; and Igemar for US$12 million.

Lastly, income tax expenses increased, mainly at Arauco, due to the higher pre-tax net income and the positive effect in 4Q17 associated with the tax reforms in Argentina and the United States.

4Q18 / 3Q18.Net incomefell 52.1% QoQ, mainly explained by operational factors.

Operating incomedropped mainly in theforestry business,because of a decrease in the pulp segment, with price and volume decreases. The wood products revenues fell, due to lower panel and sawn timber volumes.

Thefuels businesshad a higher EBITDA, mainly due to Copec, because of a volume increase and a higher margin in Chile, along with the better performance of Mapco. That was partly offset by a lower inventory revaluation effect in Chile and Colombia. Despite this,operating incomedropped because of the higher depreciation and amortization expense associated with the incorporation of operations in Colombia, Peru and Ecuador from the purchase ofExxonMobil'sassets. There was also an operating income decrease at Abastible, largely due to the lower volumes in Chile from the seasonality effect of the quarter.

Non-operating incomewas more negative, mainly due to lowerincome in associates and joint ventures at Sonae Arauco, Metrogas,Agesa, Gasmar and the loss in the recently incorporated Cumbres Andinas, along with higher other expenses at Arauco. That was partly offset by an increase in other revenue at Copec.

2018 / 2017 (YTD).Net incomein the year, net of minority participation, was US$1.071 million, 67.5% up on that YTD 2017. That was largely due to operating income increasing US$544 million, along with less negative non-operating income of US$214 million.

Theoperating incomeincrease mainly came from the forestry business, whereAraucohad a better performance due to greater revenue of its main business lines, highlighting pulp as a result of higher prices.

EBITDA

796

564

In the fuels business, the subsidiaryCopechad higher operating income. There were increased margins, partly explained by the greater effect of the revaluation of inventories in Chile, the better performance of Mapco, and because Terpel started to gradually consolidate the operations from the acquisition ofExxonMobil'sassets as of the second quarter. All that was offset by a lower revaluation of inventories in Colombia.

Abastible'soperating income improved, with higher volumes in allthe countries in which it operates. That was partly offset by a worseperformance in Peru due to lower margins, and in Colombia from higher distribution costs and administration expenses.

Thecompany'sgross earnings rose 20.9%, amounting to US$4.165 million, which mainly came fromArauco'ssubsidiaries of US$2.232 million; with Copec accounting for US$1.394 million; Abastible for US$424 million; Igemar for US$60 million; and Sonacol for US$56 million.

Non-operating incomewas less negative, mainly due to a drop in other net expenses which in 2017 reflected the effects of wildfires in Chile early in the year. Moreover, there was an increase in other expenses by function due to the sale of real estate assets at Copec, and Terpel selling the liquid fuels business of ExxonMobil in Colombia. Financial expenses also dropped, as a result of the accounting effects generated in 2017 for the refinancing ofArauco'slong-term liabilities. That was partly offset by lower foreign exchangedifferences and decreased income from associates and joint ventures, essentially at Corpesca which in 2017 recognized net income from the sale of its interest in Selecta.

Net Income

335

148

EBITDA figures for 1Q18, 2Q18 y 3Q18, have been adjusted in -MMUS$ 6,5; -MMUS$ 7,9 and -MMUS$ 12,3, respectively, due to re-estimations for fair value of timber harvested.

Figures in US$ million

4Q 17

4Q 18

3Q 18

EBITDA

Forestry

345

515

Fuels

222

214

Copec

169

145

Abastible

39

51

Sonacol

15

18

Fishing

5

7

Others

(7)

(3)

TOTAL

564

733

CAPEX

Forestry

342

194

Fuels

259

89

Fishing

31

4

Others

22

30

TOTAL

654

316

EBITDA change by business (4Q 18 v/s 4Q 17)

4Q 17

4Q18 / 4Q17

4Q18 / 3Q18

Accum 18

Accum 17

Var 18 / 17

351

(1.8%)

(33.0%)

1,841

1,375

33.9%

180

23.2%

3.9%

917

844

8.6%

136

23.7%

16.2%

667

612

9.1%

28

39.9%

(23.6%)

184

167

9.6%

16

(9.7%)

(17.8%)

66

65

1.6%

3

52.4%

(39.3%)

30

19

57.0%

(5)

(53.7%)

(117.4%)

(20)

(18)

12.6%

530

6.6%

(23.0%)

2,767

2,220

24.7%

233

46.7%

76.4%

921

654

40.8%

106

144.1%

191.5%

1,023

406

151.9%

12

171.3%

706.5%

37

44

(16.5%)

(1)

0.0%

0.0%

235

5

0.0%

350

87.0%

107.1%

2,216

1,109

99.9%

6

564

Forestry

4Q 18

EBITDA change by business (4Q 18 v/s 3Q 18)

( M M US$)

42

2

8

FuelsFishingOthers

3Q 18

EBITDA change by business (Accum 18 v/s Accum 17)

(M M US$)

Fuels

466

73

11

Accum 17

2

( M M US$)

FishingOthersForestry

4Q 18

ForestryFuelsFishingOthersAccum 18

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EC - Empresas Copec SA published this content on 08 March 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 08 March 2019 23:54:06 UTC