4Q17 Earnings Release

Transcription

1 4Q17 Earnings Release March 19 th, 2018 International Risk Rating Fitch Ratings Standard and Poor s BBB / stable BBB / stable Domestic Risk Rating Feller-Rate AA-/ stable / 1 st Class Level 1 Fitch Ratings AA-/ stable / 1 st Class Level 1 4Q17 Results Conference Call Tuesday, March 20 th, :30 ET (NY Time) 16:30 Santiago Time Dial: From US: +1 (844) From Chile: +1 (230) From other countries: +1 (412) ID: COPEC 2017 / Q17 / 4Q16 4Q17 / 3Q17 EBITDA Net income was US$639 million and 15.4% up on That was mainly due to higher operating income of US$423 million, largely in the forestry business where Arauco had a better performance with increased revenue across all its business lines, particularly wood pulp, as a result of higher prices and volumes. There were also lower taxes of US$78 million, partly offsetting a more negative non-operating income that decreased US$438 million. Net income dropped 19.9% to US$106 million, largely due to lower non-operating income in a quarter marked by non-recurrent effects. At Arauco there were higher financial costs related to the repurchase of bonds, along with a negative effect from an adjustment made on revaluation of biological assets, and an increase in impairment provision of fixed assets. Aditionally, Igemar had a fixed asset impairment at its subsidiary Orizon. That was partly offset by lower taxes associated with the positive effects of tax reforms in Argentina and the United States. Operating income also increased 70.3%, mainly because of wood pulp price increases and a better performance at Copec. Net income was 66. 1% down QoQ, due to lower operating and non-operating income. In the forestry business, Arauco had a lower performance because of a decrease in wood pulp, panel and sawn timber volumes. The fuels business dropped on account of lower margins at Copec and Terpel, and a drop in volume at Abastible due to seasonal factors. There were also the non-recurrent effects mentioned in the previous paragraph. EBITDA in 2017 was US$2.220 million, increasing 27.7% on EBITDA in 4Q17 was US$529 million, 30.2% up YoY and 17.2% down QoQ. Net Debt / EBITDA Debt decreased in 4Q17 with a net debt/ebitda ratio of 2.3 times. That was lower than the 2.4 times in 3Q17, mainly due to a higher 12-month EBITDA. 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Revenues 5,324 5,204 4, % 2.3% 20,353 16, % EBIT % (26.0%) 1, % EBITDA* % (17.2%) 2,220 1, % Adjusted EBITDA** % (23.7%) 2,231 1, % Non operating income (296) 57 (7) (3,922%) (622.1%) (472) (34) (1294.7%) Total profit (43.2%) (75.9%) % Profit attributable to controlers (19.9%) (66.1%) % Profit attributable to minority (25) (342.3%) (207.1%) (52.8%) EBITDA Margin 9.9% 12.3% 8.9% 11.2% (19.1%) 10.9% 10.4% 4.8% EBITDA / Net interest expenses (29.1%) (54.9%) % * EBITDA = Operating Income + Depreciation + Amortization + Fair value cost of timber harvested + Others **Adj. EBITDA = Net Income + fin. costs - fin. income + tax + dep & amort + fair value cost of timber harvested - gain from changes in biological assets + exchange rate differences (For details see exhibit in page 25). Figures in US$ million C o nt act Inf o rmat io n: Cristián Palacios Juan Pablo Serrano José Pablo Carvallo Director of Finance and IR Investor Relations Investor Relations cristian.palacios@empresascopec.cl juan.serrano@empresascopec.cl jose.carvallo@empresascopec.cl 1

2 SIMPLIFIED OWNERSHIP STRUCTURE 99.20% 39.79% Highlights of the Quarter Terpel completes purchase of ExxonMobil assets In November 2016, the subsidiary Copec S.A. signed contracts with ExxonMobil on a regional agreement to produce and distribute Mobil lubricants, including markets in Colombia, Ecuador and Peru, and renew the contractual relations that Copec and ExxonMobil have had in Chile for years. Furthermore, the agreement also considered the following: (i) the operation and marketing of fuels for the Jorge Chávez International Airport in Lima, Peru; and (ii) the fuels business ExxonMobil currently operates in Colombia and Ecuador. The aim of the deal was also to buy the assets related to all these operations, like industrial plants and facilities. It was estimated at that time that one way of optimizing the business was to channel it through the subsidiary Terpel, which was invited to purchase it from ExxonMobil in Colombia, Peru and Ecuador, a deal that was accepted at that time by the corporate government bodies at Terpel. On March 15 th, Organización Terpel Corporation (a subsidiary of Terpel) acquired the companies ExxonMobil Andean Holding LLC., ExxonMobil del Perú S.R.L., ExxonMobil Aviación Perú S.R.L., ExxonMobil de Colombia S.A. and ExxonMobil de Colombia Sociedad Portuaria S.A. Terpel also acquired ExxonMobil Ecuador Ltda. In accordance with the conditions imposed on the transaction by Colombia s Superintendency of Industry and Commerce: - Organización Terpel Corporation transferred the shareholding in ExxonMobil Colombia S.A. to an autonomous trust controlled by a third party. - This autonomous trust shall transfer the lubricants business with all the related logistics to Terpel as soon as possible and then sell the fuels business to a third party. The total amount paid was US$714.7 million, which includes the cash of the companies involved in the transaction, which subject to reconciliation in the next few days amounts to about US$230 million. The price mentioned above was financed with bank loans. Terpel will continue to implement the conditions imposed by the Colombian regulatory authority. Lastly, contractual relations were renewed between ExxonMobil and Copec for the distribution of lubricants in Chile. Grayling Project on Schedule The Grayling Project continues its course on schedule. To date, the progress 70%. The particleboard mill located in Grayling, Michigan, U.S.A., will cost approximately US$ 400 million and will have a capacity of 800,000 m 3 per year. Rollout of the first panel is estimated to occur during late Dissolving Pulp The Dissolving Pulp Project continues its course. To date, the progress is 11%. The estimated investment for the project is US$ 185 million. This project should take about two years of construction, with the ramp-up scheduled to occur during the end of Arauco acquired Masisa s subsidiary in Brazil In September 2017, Arauco do Brasil S.A. agreed with Masisa S.A. the total buyout of the social rights of the subsidiary named Masisa do Brasil Ltda. The transaction price was approximately US$ million, with a final payment of US$ 52.8 million. The main assets of Masisa do Brasil S.A. consist of two industrial complexes located in Ponta Grossa (Paraná) and Montenegro (Rio Grande do Sul) in Brazil, with a total annual installed capacity of 300,000 m 3 of MDF, 500,000 m 3 of MDP and 660,000 m 3 of melamine capacity. The transaction was finally closed at the end of the year, which means that at December 31st, 2017 Arauco do Brasil S.A has consolidated the assets acquired. Arauco to acquire Masisa s subsidiary in Mexico In December 2017, Inversiones Arauco Internacional Limitada and AraucoMex, S.A. de C.V. agreed with Masisa S.A. the total buyout of the social rights of its subsidiaries in Mexico. The transaction price is for approximately US$ 245 million. Main assets consist of three industrial complexes located in Chihuahua, Durango and Zitácuaro in Mexico, with a total annual installed capacity of 220,000 m 3 of MDF; 519,000 m 3 of PB; 426,000 m 3 of melamine; 66,000 tons of resins; 60,600 tons of formaldehyde and 22.8 million m 2 of impregnation lines. The transaction is subject to a series of conditions precedent, customary in this type of operations, with the most relevant one being the approval by the Mexican antitrust authority. The transaction is estimated to be materialized during

3 CONSOLIDATED RESULTS 4Q17 / 4Q16. Net income in the quarter, net of minority participation, was US$106 million, dropping 19.9% YoY. That was mainly due to lower nonoperating income, in a quarter marked by non-recurrent effects in the forestry, fuels and fishing businesses. At Arauco there was a higher financial cost related to the repurchase of bonds for US$65 million, along with a negative effect of US$54 million from an adjustment made on revaluation of biological assets, and an increase in impairment provision of fixed assets of US$28 million. Igemar had a negative effect of US$80 million before taxes, on account of fixed asset impairment recorded by Orizon. That was partly offset by lower taxes from the positive effects of tax reforms in Argentina and the United States, of US$84 million. Operating income increased in the forestry and fuels businesses and amounted to US$274 million, which was a 70.3% increase YoY. There was an increase in operating income, mainly in the forestry business, with Arauco improving its performance due to increased revenues across its business lines, highlighting the wood pulp business due to higher prices in the quarter. The fuels business had a higher operating income, mainly because of greater volumes at Copec, in the industrial channel and at service stations, and at Terpel. Abastible had lower operating incomes because of a lower performance in Colombia, which was partly offset by increases in Chile, Peru and Ecuador. The company s gross margin rose 19.6%, amounting to US$871 million, which mainly came from Arauco s subsidiaries for US$446 million; with Copec accounting for US$313 million; Abastible for US$91 million; Sonacol for US$14 million; and Igemar for US$8 million. 4Q17 / 3Q17. The controller s net income fell 66.1% QoQ, explained by lower operating and non-operating income. Operating income dropped in the forestry and fuels businesses, decreasing 26.0% QoQ. In the forestry business, Arauco had a lower performance because of decreased revenue, related to a drop in volumes in the wood pulp, panels and sawn timber businesses. There was a drop in the fuels business due to lower margins, partly offset by higher volumes at Copec and Terpel. Abastible s operating income fell because of lower volumes in Chile, from the seasonal effect, and in Peru. The drop in non-operating income was explained by non-recurrent effects in the forestry, fuels and fishing businesses, as mentioned above. Simplified Income Statement 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Revenues 5,324 5,204 4, % 2.3% 20,353 16, % Cost of sales (4,453) (4,262) (3,821) (16.5%) (4.5%) (16,907) (13,937) -21.3% Administration & distribution expenses (598) (572) (568) (5.2%) (4.5%) (2,235) (1,975) (13.2%) Operating Income % (26.0%) 1, % Other income (4) (104.4%) (106.4%) (48.1%) Other costs & expenses (150) (7) (54) (177.4%) (2082.1%) (380) (123) % Finance costs (146) (83) (83) (75.4%) (76.5%) (403) (362) -11.4% Finance income % 17.9% (28.9%) Share of profits of associates (7) (115.2%) (110.5%) % Foreign exchange differences 2 15 (3) 161.6% (86.4%) % Other results (3) 0 (3) 13.3% (1599.0%) (8) (13) 33.6% Non Operational income (296) 57 (7) (3,921.7%) (622.1%) (472) (34) (1294.7%) Income tax expense 103 (92) (11) 1,011.6% 212.0% (80) (157) 49.4% Total profit (43.2%) (75.9%) % Profit attributable to controlers (19.9%) (66.1%) % Profit attributable to minority (25) (342.3%) (207.1%) (52.8%) EBIT % (26.0%) 1, % Depreciation & Amortization % 1.7% % Fair value cost of timber harvested (10.2%) (17.9%) (1.8%) EBITDA % (17.2%) 2,220 1, % Figures in US$ million 3

4 2017 / 2016 (accumulated). Net income in the year, net of minority participation, was US$639 million, 15.4% up on that as of December This was largely due to operating income increasing US$423 million, along with lower tax of US$78 million, partly offset by more negative non-operating income of US$438 million. Operating income rose, mainly in the forestry business, where Arauco had a better performance due to higher revenue across all its business lines, particularly wood pulp, as a result of higher prices and volumes throughout the year. The fuels business also had an increase in operating income, particularly at the subsidiary Copec, due to higher margins in Chile and Colombia, along with a greater sales volume in the gas station channel in Chile. Moreover, income increased from the consolidation of MAPCO operations in the United States. Abastible s operating income improved, because of better performance in Chile and Colombia, and the consolidation of the operations of Solgas in Peru and Duragas in Ecuador. The company s gross earnings rose 24.7%, amounting to US$3.446 million, which mainly came from Arauco s subsidiaries for US$1.664 million; with Copec accounting for US$1.282 million; Abastible for US$409 million; Sonacol for US$55 million; and Igemar for US$37 million. Non-operating income dropped, mainly due to an increase in other expenses, related to the forest fires that hit the subsidiary Arauco in the first quarter and fixed asset impairment at Igemar in the fourth quarter of There was also a lower other income caused by an adjustment made on revaluation of biological assets and higher financial costs related to the repurchase of bonds, both at Arauco Quarterly EBITDA Net Income Figures in US$ million 4

5 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Var 17 / 16 EBITDA Forestry % (11.6%) 1,375 1, % Fuels % (24.9%) % Copec % (17.4%) % Abastible % (51.2%) % Sonacol % (10.0%) % Fishing (42.8%) (59.9%) (36.3%) Others (5) (4) (4) (22.8%) (2.2%) (18) (14) 26.9% TOTAL % (17.2%) 2,220 1, % CAPEX Forestry % 37.8% (1.6%) Fuels (83.1%) (30.0%) 406 1,148 (64.6%) Fishing % (60.5%) % Others (1) % 0.0% % TOTAL (56.6%) (0.4%) 1,109 1,835 (39.6%) EBITDA change by business (4Q 17 v/s 4Q 16) (MMUS$) EBITDA change by business (4Q 17 v/s 3Q 17) (MMUS$) Q 16 Forestry Fuels Fishing Others 4Q 17 3Q 17 Fuels Forestry Fishing Others 4Q 17 EBITDA change by business (Accum 17 v/s Accum 16) (MMUS$) ,738 2,220 Accum 16 Forestry Fuels Others Fishing Accum 17 5

6 ARAUCO 4Q17 / 4Q16. Arauco posted a profit of US$83 million in 4Q17, US$9 million up YoY. That was due to operating income increasing US$86 million, largely related to greater wood pulp revenue from higher prices, and also increased revenue in the panels and sawn timber businesses. There was also a positive tax effect from tax reforms in Argentina and the United States. Consolidated operating revenue increased 4.6%, explained by higher revenue across all business lines. The greater wood pulp revenue was due to prices increasing 30.1%, partly offset by volumes falling 11.1%. The timber business revenues rose, because of an increase in panels, with prices and volume increasing 1.4% and 7.4%, respectively. Sawn timber price rose 7.5% and the volume fell 9.7%. The unit production costs of bleached short-fiber and bleached long-fiber wood pulp decreased 3.3% and 0.1%, respectively. They were higher in 4.3% for unbleached long-fiber wood pulp. Non-operating income dropped US$162 million, mainly due to higher financial costs from the prepayment of bonds and debt refinancing undertaken in the fourth quarter. There was also a drop in other net revenue from the effect of an adjustment on revaluation of biological assets. All markets in Asia were active, with strong demand specially from China, favoured by restrictions on unsorted waste paper imports. Wood pulp prices rose 40% to 50% January through December, and in all Asian markets, paper producers managed to transfer these increases thanks to strong demand. The largest increases and the transfer to paper prices mainly occurred in the fourth quarter. Late in that period, markets stabilized with no signs of deterioration, just normal seasonal fluctuations. Actually, the interest in consolidating volume reserve contracts for next year is strong, and there are large possibilities that the terms will be more favorable. Europe, a market that has been quite depressed for several years, has shown clear signs of recovery and demand has increased significantly. Similar to the situation in Asia, prices rose from 30% to 50%, depending on the type of wood fiber, with eucalyptus short-fiber wood pulp increasing the most. Inventories were always low, which continued up to late in the fourth quarter. With the sole exception of the tissue industry, the additional costs that paper producers had to absorb were passed on to final products and generally mills were operating at peak capacity the whole year. This market continued to be particularly active in the fourth quarter, with prices rising with no signs of decline. Market Status Wood Pulp Revenue in 2017 increased on 2016, driven by higher sales prices and volumes. Although production remained stable, inventories fell more than 20%, due to quite a long stoppage at the Constitución mill from a blockade by an association of truck owners and certain production losses at the mill in Argentina. Prices increased greatly throughout almost the entire year and this was mainly evident in the last quarter of All markets generally had active demand, due to healthy economies that were able to absorb the higher wood pulp supply. Furthermore, this new production was also offset by operating problems of existing mills that lost a large part of their annual capacity. Changes 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 / 16 Volume Pulp (11.1%) (12.8%) 2.7% Panels 7.4% (3.6%) 2.4% Saw n timber (9.7%) (8.0%) (4.6%) Prices Pulp 30.1% 11.2% 12.6% Panels 1.4% (0.0%) 3.2% Saw n timber 7.5% 0.3% 7.0% ARAUCO 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Sales 1,331 1,393 1, % (4.5%) 5,238 4, % Pulp** % (4.0%) 2,451 2, % Wood Products** % (6.0%) 2,625 2, % Forestry % (13.4%) % Services % 127.6% % EBITDA* % (11.6%) 1,375 1, % EBIT % (14.5%) % Non operating income (175) 9 (13) % (1947.3%) (380) (28) (1241.6%) Net income % (44.1%) % Figures in US$ million *Adj. EBITDA informed by Arauco was US$343 million for 4Q17, US$378 million for 3Q17, US$245 million for 4Q16 Adj. EBITDA = Net Income + fin. costs - fin. income + tax + dep & amort + fair value cost of timber harvested - gain from changes in biologica assets + exchange rate differences **Includes energy sales 6

7 Timber Sawn Timber and Remanufactured Products 2017 was a good year for prices and margins. Nevertheless, sales were hit by the forest fires early in the year. Prices were driven by robust demand from China, the rest of Asia, the Middle East and Latin America. The forecast for 2018 is that this trend will continue, with good growth in China and the rest of Asia. Construction should carry on increasing in Latin America and the United States and there is also optimism in Europe. Demand growth forecasts are more moderate for the Middle East. Regarding supply, there are no major announcements of additional capacity, except in the United States and Brazil. Producers in Europe, Oceania and North America are placing more wood fiber in their own markets. In regard to costs, the fiber movements and the logistical costs that are on the increase need to be monitored. There were mixed results in the remanufactured product area. The first half of the year was much better than the second half, in which prices dropped mainly due to oversupply, mostly from Brazil, particularly pronounced in the last quarter of the year. Volume and prices are expected to improve as of the second quarter of 2018, largely due to demand seasonality in the United States. Plywood 2017 was a very good year for plywood, with billing and margins improving substantially compared to previous periods. There is optimism for 2018 due to the development of value-added products. The leading markets where this product is sold, including the United States, Mexico, Chile, Europe and Oceania, are growing and there are no large supply increases. Prices, and therefore margins, should carry on increasing. Panels (MDF, PB and Melamine) 2017 was also a good year for Chile and Latin America, particularly for prices and due to a better sales mix, despite there being greater supply from Brazil and Mexico. This improvement continued in the fourth quarter. This good sales mix and price situation is expected to carry on consolidating in 2018, largely due to marketing action and to better sales volumes from higher growth in the region. There were good conditions in Argentina in 2017, with higher billing and prices is expected to be positive due to the higher growth of the economy, but price forecasts are more conservative because of greater competition and potential imports from Brazil. Brazil had a stable year for volumes and prices compared to There were some positive variations of value-added products like melamine should be a challenging year for Arauco because of the consolidation of the company acquired, and for the industry, because of the new mills that will start to operate. This is besides it being a year of political elections. There is, however, optimism that the market and local economy will grow. In the United States and Canada, the year ended with a slight increase in volume and prices. Billing increased a little more for melamine products than the average of the other products promises to be a positive year, with construction and the economy growing at a good rate, but with more supply from new MDF mills and the Grayling particleboard mill, which will also be entering the market by late this period. 4Q17 / 3Q17. Net income dropped 44.1% QoQ. This is explained by a decrease in operating and non-operating income. Operating revenue dropped 4.5%, related to lower volumes in the wood pulp, panels and sawn timber businesses, which fell 12.8%, 3.6% and 8.0%, respectively. That was partly offset by a wood pulp price increase of 11.2%. The unit production costs of wood pulp rose 4.3% for bleached short-fiber, 3.7% for bleached long-fiber and 4.5% for raw long-fiber. Non-operating income fell US$162 million, mainly due to higher financial costs from the prepayment of bonds and debt refinancing undertaken in the fourth quarter. There was also lower other net income related an adjustment in revaluation of biological assets / 2016 (accumulated). Arauco had net income of US$270 million as of December, which was US$56 million up on the previous year. That is explained by a US$328 million increase in operating income, related to higher revenue across all business lines, highlighting wood pulp from higher prices and volumes in the year. There was also lower tax from the positive effects of tax reforms in Argentina and the United States. That was partly offset by more negative non-operating income, due to the effects of the forest fires in the early months of the year in Chile, along with a lower revaluation of biological assets due to adjustments. There was also a higher financial cost from the repurchase of bonds made in the fourth quarter. Consolidated revenue rose 10.0%, explained by higher revenue in the wood pulp, panels, timber and forestry segments. The increase in wood pulp revenue was due to volume growing 2.7% and prices rising 12.6%. Revenue rose in the timber business, largely due to an increase in panels with prices and volume increasing 3.2% and 2.4%, respectively. Sawn timber prices rose 7.0% but volume dropped 4.6%. There was also a decrease in unit production costs of bleached and raw long-fiber wood pulp of 4.1% and 2.7%, respectively. Bleached short-fiber wood pulp production costs rose 2.5%. Production by Business Sales Volumes by Business ,248 1,264 1, , ,261 1,216 1, Pulp (th ton) Panels (th m3) Sawn Timber (th m3) Pulp (th ton) Panels (th m3) Sawn Timber (th m3) 4Q 16 3Q 17 4Q Q 16 3Q 17 4Q 17

8 COPEC 4Q17 / 4Q16. Copec had net income of Ch$32,658 million in 4Q17, which was up on the Ch$19,131 million in 4Q16. This is explained by higher operating income, mainly due to a volume increase at Copec in the industrial channel and at service stations, and at Terpel. There was a greater effect of the revaluation of inventories (FIFO) in Chile. That was partly offset by lower margins in Colombia. EBITDA increased 38.3% to Ch$86,420 million. Non-operating income was more unfavorable due to lower income from foreign exchange differences and higher other expenses by function. The total sales volume in Chile rose 4.3% because of the gas station channel increasing 3.2%, and the industrial channel 3.2%. Terpel s EBITDA fell 4.1%, due to lower margins and the positive effect of the revaluation of inventories that was less than the same quarter of last year, and the sale of operations in Mexico. That was partly offset by an increase in the liquid fuel sales volume of 1.5% in Colombia, 5.5% in Panama and 5.4% in Ecuador, and they remained stable in the Dominican Republic. The NGV business had a volume increase of 3.3% in Peru and a 9.8% decrease in Colombia, continuing the trend evident since Q17 / 3Q17. Net income in the quarter fell Ch$12,443 million QoQ. That difference is explained by a drop in operating income, mainly due to lower margins, partly offset by volume increases at Copec and Terpel. EBITDA dropped 18.4%. Volumes at service stations and in the industrial channel in Chile rose 1.7% and 9.0%, respectively. In regard to Terpel, volume increased 1.6% in Colombia, 6.0% in the Dominican Republic and 1.5% in Ecuador, but dropped 3.3% in Panama. The vehicle natural gas volume in Colombia remained stable but increased 4.8% in Peru. Non-operating income dropped Ch$8,174 million QoQ, due to lower income from foreign exchange differences and higher other expenses by function. That was partly offset by higher other revenue by function. COPEC CONSOLIDATED (Including Terpel & Mapco) 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Revenues 2,315,080 2,215,694 2,041, % 4.5% 8,965,701 7,454, % EBITDA 86, ,852 62, % (18.4%) 397, , % EBIT 59,562 81,099 42, % (26.6%) 295, , % Non operating income (17,043) (8,869) (6,524) (161.2%) (92.2%) (45,263) (42,992) (5.3%) Net income 32,658 45,101 19, % (27.6%) 167, , % Copec Chile physical sales (thousand of m3) 2,515 2,397 2, % 4.9% 9,823 9, % Gas stations channel 1,364 1,341 1, % 1.7% 5,331 5, % Industrial channel 1,151 1,056 1, % 9.0% 4,492 4,693 (4.3%) Copec Chile market share 56.8% 57.5% 57.3% (0.8%) (1.2%) 57.2% 58.1% (1.5%) Figures in millions of Chilean pesos TERPEL 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Revenues 4,239,483 3,871,004 3,826, % 9.5% 15,346,261 14,431, % EBITDA 151, , ,187 (4.1%) (29.3%) 686, , % EBIT 98, , ,825 (26.7%) (41.1%) 497, , % Non operating income (39,601) (37,002) (20,521) 93.0% 7.0% (135,440) (144,223) (6.1%) Net income Profit attributable to controlers 27,393 79,805 79,203 (65.4%) (65.7%) 212, ,393 (0.6%) Profit attributable to minority interest (99.5%) Terpel physical sales (thousand of m3) Colombia 1,826 1,798 1, % 1.6% 7,067 7, % Panama % (3.3%) (2.2%) Ecuador % 1.5% % Dominican Republic (0.0%) 6.0% % Gazel NGV physical sales (thousand of m3) Colombia (9.8%) (0.3%) (8.0%) Peru % 4.8% % Mexico (100.0%) (100.0%) (4.7%) Figures in millions of Colombian pesos MAPCO 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Revenues % 0.8% 1, % EBITDA % (37.3%) % Mapco physical sales (thousand of m3) % 1, Figures in US$ thousands *M arket share figures as of November

9 2017 / 2016 (accumulated). Copec had net income of Ch$167,466 million, which was up on the Ch$130,401 million in That increase was due to higher margins in Chile and Colombia, the positive effect of the revaluation of inventories (FIFO) in both countries, and a higher sales volume in the gas station channel in Chile. Moreover, income improved from the consolidation of the MAPCO operations in the United States. EBITDA rose 23.7% to Ch$ 397,134 million. Total volumes in Chile rose 0.3% because of a 4.5% increase in the gas station channel, partly offset by the industrial channel dropping 4.3%. Market share of 2017 was 57.2%. Terpel s EBITDA increased 6.2%, largely due to higher margins. Liquid fuel sales rose 0.8% in consolidated terms, explained by increases of 6.2% in Ecuador, 4.8% in the Dominican Republic and 0.6% in Colombia, partly offset by a 2.2% decrease in Panama. The vehicle natural gas volume dropped 8.0% in Colombia, continuing the trend as of 2015, and Peru had an increase of 3.6%. There was a 4.7% decrease in Mexico, due to Terpel leaving such market in the fourth quarter of The MAPCO EBITDA was US$39 million with physical sales of 1,961 thousand m 3 in the same period. Copec s consolidated non-operating income was more negative, mainly due to higher other expenses. * 9

10 ABASTIBLE 4Q17 / 4Q16. Abastible had a net income decrease of 13.3% in 4Q17 amounting to Ch$2,842 million. That was due to lower operating and nonoperating income. Operating income fell Ch$ 901 million because of the lower performance in Colombia and partly offset by increases in Chile, Peru and Ecuador. EBITDA dropped 7.7% to Ch$17,193 million. The company had sales in Chile of 107 thousand tons of liquefied gas in the quarter, a 4.8% increase on The sales volume of Inversiones del Nordeste in Colombia increased 3.2% to 52 thousand tons of liquefied gas sold. Physical sales in Peru and Ecuador were 127 thousand and 111 thousand tons. Non-operating income dropped Ch$5,463 million, because of a decrease in associates and joint ventures and related to fixed asset impairment at Sonamar. There were also lower other revenues. 4Q17 / 3Q17. Abastible s net income fell 87.0% QoQ. Operating income was down Ch$18,996 million, mainly due to lower volume in Chile because of the seasonality effect and in Peru. Non-operating income was down Ch$5.428 million QoQ, because of a decrease in associates and joint ventures related to fixed asset impairment at Sonamar and lower other earnings. EBITDA dropped 52.5% / 2016 (accumulated). Abastible had net income of Ch$ million in 2017, which was a 5.3% decrease. That was due to nonoperating income falling Ch$8,964 million, mainly because of lower foreign exchange differences and higher net financial costs, partly offset by other earnings by function. Operating income increased 3.0% due to the better performance of IN in Colombia and the consolidation of the operations of Solgas and Duragas, which was partly offset by lower operating income in Chile. EBITDA rose 8.4% to Ch$107,157 million. The company had sales in Chile of 472 thousand tons of liquefied gas in 2017, which was a decrease on sales of 459 thousand tons in The sales volumes of Inversiones del Nordeste in Colombia grew 5.6% to 199 thousand tons of liquefied gas sold. The sales volumes of Solgas in Peru and Duragas in Ecuador were 518 thousand and 426 thousand tons, respectively. LPG sales in Chile and Peru dropped 26.7% and 2.8%, respectively, QoQ. Deliveries increased 1.9% in Colombia and were stable in Ecuador. ABASTIBLE CONS. (Includes Chile, Colombia, Peru, Ecuador) 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Sales 174, , , % (15.5%) 736, , % EBITDA 17,193 36,181 18,633 (7.7%) (52.5%) 107,157 98, % EBIT 8,055 27,051 8,956 (10.1%) (70.2%) 69,892 67, % Non operating income (4,229) 1,199 1,234 (442.8%) (452.7%) (2,644) 6,320 (141.8%) Net income 2,842 21,846 3,279 (13.3%) (87.0%) 46,581 49,177 (5.3%) Abastible Chile LPG physical sales (thousand of tons) % (26.7%) % Bottled channel % (27.7%) % Bulk channel % (24.0%) % Figures in million chilean pesos INVERSIONES DEL NORDESTE (Colombia) 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Sales 142, , , % 17.5% 507, , % EBITDA 13,559 26,241 26,817 (49.4%) (48.3%) 90,921 87, % IN Colombia LPG physical sales (thousand of tons) % 1.9% % Figures in million colombian pesos SOLGAS (Peru) 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Sales 249, , ,642 (7.3%) (16.6%) 1,076, , % EBITDA 13,602 18,727 15,556 (12.6%) (27.4%) 64,712 56, % Solgas Perú LPG physical sales (thousand of tons) (2.8%) (2.8%) % Figures in thousand soles peruanos DURAGAS (Ecuador) 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Sales % 2.3% % EBITDA % (45.9%) % Duragas Ecuador LPG physical sales (thousand of tons) % 0.0% % Figures in US$ thousands 10

11 PESQUERA IQUIQUE-GUANAYE (IGEMAR) 4Q17 / 4Q16. Igemar had a loss attributable to the controller s owners of US$52.9 million in 4Q17, which was down on the loss of US$26.8 million in 4Q16. That was due to non-operating income dropping US$ 63.7 million, related to fixed asset impairment of US$79.7 million recognized by the subsidiary Orizon in 4Q17. Operating income fell US$3.2 million, partly explained by price decreases of fishmeal, fish oil and canned fish, along with higher distribution costs and administration and sales expenses. Physical fishmeal and frozen fish sales were 6.0 th. and 2.5 th. tons, dropping 17.0% and 47.1%, respectively, YoY. Aditionally 1.6 th. tons of fish oil and 737 th. cases of canned fish were sold, increasing 83.1% and 29.5%, respectively. The fish processed was 19 th. tons, falling 6.7% YoY. Fishmeal, fish oil and canned fish prices dropped 7.7%, 25.9% and 2.9%, respectively. Frozen fish prices increased 29.6%. 4Q17 / 3Q17. Net income dropped US$93.0 million QoQ. That is explained by a non-operating decrease of US$131.6 million, related to fixed asset impairment recognized by the subsidiary Orizon in the fourth quarter and the net income generated from the sale of Selecta in Brazil by Corpesca in the third quarter. Operating income fell US$4.7 million, largely related to higher administration and sales expenses and the lower sales volume of fishmeal, fish oil and frozen fish / 2016 (accumulated). Igemar posted a loss attributable to the controller s owners of US$20.9 million as of December 31 th, 2017, which was less than the loss of US$35.2 million as of December 31 th, Although the total loss increased because of lower operating and nonoperating income, the controller s portion was less negative as the losses were mainly focused at the subsidiary Orizon, which is where the noncontrolling interests lie. There was also the positive income of Corpesca and the extraordinary net income generated from the purchase of an additional shareholding in such subsidiary that only affect the controller s portion. The negative change in operating income was mainly because of higher costs from lower own catches landed by the industrial fleet because of a longer fishing season for jack mackerel and the lower sardine and anchovy productivity. There were also lower fishmeal and fish oil prices. Physical fishmeal sales were 26.5 th. tons, dropping 4.7% on sales in Aditionally, 7.2 th. tons of fish oil, 17.2 th. tons of frozen fish, and 2.4 million cases of canned fish were sold, increasing 38.7%, 5.8%, and 11.0%, respectively, on the previous year. The fish processed was th. tons, increasing 3.5% on Fishmeal and fish oil prices fell 10.2% and 29.2%, respectively. Frozen and canned fish prices rose 18.1% and 1.5%, respectively. It should be highlighted that in the fourth quarter the company stated a negative effect in other expenses of US$80 million, related to fixed asset impairment recorded by the subsidiary Orizon. IGEMAR CONSOLIDATED 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Sales (2.2%) (17.2%) % EBITDA* (42.8%) (59.9%) (36.3%) EBIT (4.7) (0.2) (1.5) 211.2% % (5.6) 7.8 (171.8%) Non operating income (95.5) 36.0 (31.8) 200.2% (365.2%) (72.2) (49.3) (46.3%) Net income (52.9) 40.1 (26.8) 97.3% (232.0%) (20.9) (35.2) 40.5% Physical sales Fishmeal (tons) 6,026 10,725 7,263 (17.0%) (43.8%) 26,513 27,815 (4.7%) Fish Oil (tons) 1,609 2, % (45.8%) 7,227 5, % Canned Fish (tons) 737, , , % 38.3% 2,363,975 2,128, % Frozen Fish (tons) 2,531 6,704 4,790 (47.1%) (62.2%) 17,212 16, % Catches (tons) 19,396 17,992 20,798 (6.7%) 7.8% 164, , % Figures in US$ million *Ebitda = Operating Income + Depreciation + Amortization Igemar calculates its EBITDA as follows: Operating Income + Depreciation + Amortization + Other expenses + Other Income 11

12 OTHER AFFILIATES Sonacol Sonacol had net income of Ch$5.716 million in 4Q17, which was up on the Ch$5,576 million in 4Q16. That was mainly because of operating income increasing 4.6%, due to a 8.0% increase in the volumes pipelined. In accumulated terms, net income was Ch$ million, which was up on the Ch$23,133 million in That was mainly because of operating income increasing 5.5% and less negative non-operating income of 10.1%. The volumes pipelined were 5.6% higher than the previous year. OTHER RELATED COMPANIES Metrogas and Agesa On April 1, 2016, the split of Metrogas S.A. came into force. On the one hand, there is Metrogas S.A., which has the natural gas distribution operations and keeps the assets and liabilities of the franchise sector in the company. On the other hand, there is Aprovisionadora Global de Energía S.A., which was the company hived off from the split, which is engaged in the supply business with all the assets and liabilities of the non-franchise sector. Metrogas had net income of Ch$1.204 million in 4Q17, against a loss of Ch$1,746 million in 4Q16. This change is explained by a 13.6% increase in non-operating income due to higher income from monetary correction and lower financial costs, partly offset by a drop in operating income from a cost increase. Volume, excluding deliveries to electric power generating companies, rose 6.2%, related to higher dispatches to customers in the residential and commercial sector, which increased 11.9%, and higher industrial volume of 3.5%. AGESA had net income of US$8.2 million in 4Q17. The total income of both companies dropped 94.1% on the previous year. Metrogas had an accumulated net income of Ch$ million, lower than the Ch$ million of the previous year, explained by a drop in operating and non-operating income, principally related to the company split and higher sales costs from the hydrocarbon price increase. Volume, excluding deliveries to electric power generating companies, rose 6.6%, related to higher dispatches to customers in the residential-commercial and industrial sectors, which increased 12.2% and 3.1%, respectively. AGESA had net income of US$54.4 million as of December 2017, which was down on the US$160.3 million as of December 2016, which included the extraordinary net income generated from the sale of the interest in GNL Quintero. Altogether, the income of both companies dropped 47.5% in US$ dollars. Corpesca The company posted a loss of US$10.4 million in 4Q17, which was up on the loss of US$62.9 million in 4Q16, because of greater non-operating income, compared to higher other impairment-related expenses in That was partly offset by lower operating income YoY. In accumulated terms, the company posted net income of US$99.8 million, which was up on the US$79.2 million loss in 2016, mainly due to higher income from the sale of 60% of the subsidiary Selecta in Brazil. Operating income was lower than last year, because of a 34.8% price decrease of fishmeal and fish oil, partly offset by a 34.0% sales volume increase of fishmeal and fish oil. Net income from other affiliates and associates 4Q 17 3Q 17 4Q 16 4Q17 / 4Q16 4Q17 / 3Q17 Accum 17 Accum 16 Chg. 17 / 16 Sonacol* 5,716 6,939 5, % (17.6%) 24,273 23, % Camino Nevado (2.2) 147.9% 267.1% 1.1 (8.8) 112.3% Metrogas* 1,204 23,529 (1,746) 169.0% (94.9%) 43,287 47,291 (8.5%) Agesa (94.1%) (44.0%) (66.1%) Corpesca (10.4) (62.9) 83.5% (109.3%) 99.8 (79.2) 226.0% Laguna Blanca** (1.9) 234.1% (30.7%) 13.3 (8.9) 249.1% Figures in US$ million * Figures in millions of Chilean pesos ** Parent company of Mina Invierno, formerly named Isla Riesco 12

13 CONSOLIDATED BALANCE SHEET ANALYSIS As of December 31, 2017, consolidated current assets rose 9.2% on those as of December 31, That difference was principally driven by increases of trade receivables and other accounts receivable, along with higher inventories, mainly at the subsidiary Copec. Moreover, there were higher cash and cash equivalents at the parent company and Abastible, partly offset by lower current tax assets at Arauco and Copec. Non-current assets as of December 31, 2017 increased 1.7% on those at the close of There was an increase in property, plant and equipment at Copec and Arauco. That was partly offset by a decrease of non-current biological assets, largely due to the plantations hit by forest fires at the subsidiary Arauco early in the year. Current liabilities rose 17.7%, mainly because of higher accounts payable at Copec and Arauco and an increase in other current financial liabilities at Igemar, Copec and Abastible. There was also an increase in other current non-financial liabilities from higher dividends payable. Non-current liabilities dropped 1.9%, mainly due to lower other noncurrent financial liabilities and deferred tax liabilities of the subsidiary Arauco, partly offset by higher other non-current non-financial liabilities. Altogether, the company s shareholders equity increased 4.1% on that at December 2016, mainly because of an increase in other reserves. There were also greater retained earnings. Simplified Balance Sheet Statement Dec-17 Dec-16 Chg. 17 / 16 Current assets ,2% Non-current assets ,7% TOTAL ASSETS ,4% Short term financial debt ,3% Other current liabilities ,7% Total current liabilities ,7% Long term financial debt (1,9%) Other non-current liabilities (1,9%) Total non-current liabilities (1,9%) TOTAL LIABILITIES ,7% Non-controlling interests (2,9%) Shareholder's Equity ,5% TOTAL EQUITY ,1% Leverage* 0,46 0,49 (5,9%) Net financial debt (2,1%) ROCE** 8,3% 6,6% 1,6pp Figures in US$ million * Leverage = Net financial debt / Total equity ** ROCE = (Anualized EBIT + Gain from changes in fair value of biological assets + Financial income) / (Total current assets - Total current liabilities + Non-current biological assets + Property, Plant and Equipment - Net non-current assets classified as held for sale) CASH FLOW STATEMENT ANALYSIS The operating cash flow as of December 2017 increased 5.4% compared to the previous year, largely explained by higher charges from sales of goods and service provision at Copec, and to a lesser extent at Arauco and Abastible. That was partly offset by greater payments to suppliers for goods and services at Copec, and to a lesser extent, at Arauco and Abastible. There were also higher net payments to and on behalf of employees at Copec. Regarding the investing cash flow, 2017 was less negative than The main effect was a lower cash flow used to gain control of subsidiaries or other businesses in 2017, related to the acquisitions of Solgas and Duragas by Abastible, and MAPCO by Copec, undertaken the previous year. There was also a decrease in other payments to gain an interest in joint ventures at Arauco, related to the purchase of Tafisa in That was partly offset by greater purchases of property, plant and equipment at Arauco and Copec, along with higher other payments to acquire equity or debt instruments of other entities of Igemar, related to the purchase of Corpesca shares. The financing cash flow had a higher net disbursement of US$525 million in 4Q17, with the outlay increasing 1,383.8% compared to the same period in That is explained by higher loan payment from refinancing undertaken by Arauco, which included the repurchase of bonds issued at the international market of US$741 million. CASH FLOW STATEMENT Dec-17 Dec-16 Cash flow s from (used in) operating activities 1,594 1,512 Cash flow s from (used in) investing activities (1,015) (1,821) Cash flow s from (used in) financing activities (563) (38) Net increase (decrease) in cash and cash equivalents 16 (347) Figures in million US$ 13

14 DEBT ANALYSIS Total financial debt: MUS$6,595 Bonds 65% Debt by Type Others 4% Debt by Currency Chilean Pesos 3% Chilean UF 29% Arauco 65,5% Debt by Subsidiary Copec 16,5% Sonacol 1,9% Abastible 3,5% Bank Debt 31% US Dollar 59% Others 2% Colombian Pesos 7% EC Holding 9,6% Igemar 1,2% Others 3.9 Net Debt / EBITDA Dividend distribution and Dividend Yield* Figures in US$ million 0,9% 1,0% ,3% 406 1,6% 1,4% ,1% 308 2,3% 262 1,8% 223 1,3% 268 Financial debt maturities Figures in US$ million 1, , Dividends (MM USD) Dividend Yield *Dividend Yield is calculated based on dividends paid per calendar year. Market value and exchange rate at the end of each year ** Dividends paid by Empresas Copec on a calendar year basis Dividend policy of 40% since

15 BREAKDOWN BY OPERATING SEGMENTS (Accumulated as of December 2017) Figures as of December 2017 Arauco Copec Abastible Sonacol Igemar Others Subtotal Elimin. Total Revenues from external clients 5,238,139 13,753,459 1,153,877 49, ,853 1,489 20,353,315-20,353,315 Revenues betw een segments ,006 10,300 31, ,638 (114,638) - Interest Income 19,640 10,863 3, ,233 46,518-46,518 Interest Expense (287,958) (89,096) (17,146) (4,037) (5,153) 741 (402,649) - (402,649) Interest expense, net (268,318) (78,233) (13,886) (3,873) (4,795) 12,974 (356,131) - (356,131) Income (loss) from the reporting segment 270, ,607 79,544 37,321 (49,749) 38, , ,379 EBIT 619, , ,404 55,208 (5,595) (19,685) 1,210,807-1,210,807 Depreciation 408, ,220 57,433 9,860 24,211 1, , ,995 Amortization 13,327 51,058 2, ,036-68,036 Fair value cost of timber harvested 334, , ,100 EBITDA 1,374, , ,490 65,068 19,001 (18,025) 2,219,938-2,219,938 Share in income (loss) of associates 17,017 14,918 9,773-25,065 35, , ,971 Income (expense) from income taxes (268,318) (78,233) (13,886) (3,873) (4,795) 12,974 (356,131) - (356,131) Investments by segment Payments for acq. prop., plant and equip. 448, ,778 71,194 11,880 16, , ,427 Acquisition other long term assets 179, , ,184 Payments for acq. affiliates and associates 15, , ,416-44,416 Purchase of intangible assets 10,468 38, ,986 53,791-53,791 Other Payments for Investments Total investments 653, ,211 72,098 11,880 43,782 4,963 1,108,818-1,108, Country of origin of operating revenue Operating revenues - local (chile) 3,103,366 6,942, ,195 49, ,853 1,489 10,787,622-10,787,622 Operating revenues - foreign (foreign companies) 2,134,773 6,811, , ,565,693-9,565,693 Total operating revenues 5,238,139 13,753,459 1,153,877 49, ,853 1,489 20,353,315-20,353,315 Assets by segment 14,173,218 4,869,271 1,293, , ,995 1,036,983 22,174,215-22,174,215 Equity method investments 368,772 60,161 56, , , , ,512 Liabilities by segments 7,056,325 3,077, , , ,807 (90,356) 11,260,762-11,260,762 Country of origin of non-current assets Nacionalidad activos no corrientes 6,920,237 1,640, , , , ,581 10,413,591-10,413,591 Foreign 4,482,618 1,377, , ,396,491-6,396,491 Total non-current assets 11,402,855 3,018,230 1,063, , , ,581 16,810,082-16,810,082 Total non-current assets Breakdown by country Chile Colombia USA/Canada Panama Argentina Brazil Uruguay Ecuador Dominican Republic Peru Mexico Total Revenues 10,667,669 4,436,794 2,417, , , , , , , ,789-20,353,315 Non-current assets 10,304, ,335 1,178, , ,511 1,274,536 1,785,312 36,209 3, ,723-16,810,082 Figures in thousand US$ 15