CONFERENCE CALL PRESENTATION. Third Quarter 2018 Results November 23 rd, 2018

Transcription

1 CONFERENCE CALL PRESENTATION Third Quarter 2018 Results November 23 rd, 2018

2 AGENDA CONSOLIDATED RESULTS REVIEW BY BUSINESS DIVISION HIGHLIGHTS OF THE QUARTER Q & A 2

3 THIRD QUARTER CONFERENCE CALL DISCLAIMER This presentation may include market outlooks and forward-looking statements, which are based on the beliefs and assumptions of Empresas Copec s management and on information currently available to the Company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Empresas Copec and could cause results to differ materially from those expressed in such forward-looking statements. This presentation contains certain performance measures that have been adjusted with respect to IFRS definitions, such as EBITDA. 3

4 CONSOLIDATED RESULTS QUARTERLY PERFORMANCE QUARTERLY EBITDA (Million of US$) EBITDA 17% up YoY and 7% down QoQ IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III Net income stable at high levels, with $923 million YTD 166 Sale of Guacolda QUARTERLY NET INCOME (Million of US$) Sale of Selecta + Insurance payments IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III

5 CONSOLIDATED RESULTS PERFORMANCE EBITDA (Million US$) EBITDA rose mainly in the forestry sector, in a scenario of better pulp prices % Offset, partly, due to a decrease in fuels from a drop in margins. Y o Y EBITDA CHANGES BY COMPANY 3Q18 EBITDA BREAKDOWN 5

6 CONSOLIDATED RESULTS PERFORMANCE NET INCOME (Million US$) Net Income remains stable: Higher results in the forestry sector, especially in pulp % Drop in the fuels sector, mainly at Copec Increase in the exchange rate has a negative impact when the fuel sector is consolidated in dollars. Decrease in fishing due to net income generated from Corpesca selling Selecta at 3Q17. Y o Y NET INCOME CHANGES BY COMPANY 3Q18 NET INCOME BREAKDOWN 6

7 CONSOLIDATED RESULTS INCOME STATEMENT Net income remained in line with last year s HIGHER OPERATING INCOME Stronger result in Arauco, related to higher revenues in all business lines, mainly in pulp division. Offset by lower results in Copec, due to a drop in margins and a higher exchange rate. DROP IN NON-OPERATING INCOME Lower result in associates and joint ventures, due to income generated in the sale of Selecta by Corpesca during 3Q17, for US$ 38 million. Greater other expenses in Arauco, due to the reversal of a provision associated with forest fires registered in 3Q17. Negative exchange differences from an increase in the exchange rate. CONSOLIDATED INCOME STATEMENT Million USD 3Q 18 3Q 17 Change Net income (3) Operating income Non operating income (57) 57 (114) Other Income (11) Other expenses (35) (5) (30) Other profit (loss) (3) (1) (1) Financial Income Financial expense (92) (83) (10) Profit in associated and JV's (36) Exchange Differences (9) 15 (23) Gain (losses) on net monetary position (4) 0 (4) Taxes (111) (92) (19) EBITDA

8 CONSOLIDATED RESULTS FINANCIAL RATIOS KEY FINANCIAL RATIOS Profitability 3Q 18 2Q 18 3Q 17 Operating margin 8.1% 9.0% 7.1% EBITDA margin 12.3% 13.1% 12.3% ROCE 11.5% 10.7% 8.3% Leverage 3Q 18 2Q 18 3Q 17 EBITDA / net interest expense Net debt / EBITDA 2.0x 2.1x 2.4x COMMENTS Net debt / EBITDA falls with respect to 2Q18, due to an increased LTM EBITDA and a higher cash level. Operating margin rose YoY mainly as a result of higher pulp prices in the forestry sector, and drops QoQ partly from a lower revaluation of inventories effect in fuels. Well-balanced debt schedule for the coming years. Financial debt maturities Figures in US$ million NET FINANCIAL DEBT / EBITDA Net Debt / EBITDA ,8 2,8 2,7 2,6 2,6 2,7 2,8 3,0 2,9 2, ,6 1,7 2,5 2,4 2,4 2,4 2,2 2,4 2,3 2,4 2,3 2,4 2,1 2,0 8

9 AGENDA CONSOLIDATED RESULTS REVIEW BY BUSINESS DIVISION 03 HIGHLIGHTS OF THE QUARTER 04 Q & A 9

10 10 FORESTRY

11 REVIEW BY BUSINESS DIVISION FORESTRY Net income rose on a better pulp price scenario HIGHER OPERATING INCOME Revenues growing in pulp and wood products showing good price scenario for both hardwood and softwood Higher sales volume in panels, due to consolidation of assets acquired from Masisa Brasil. MORE NEGATIVE NON OPERATING INCOME Greater other expenses, due to the reversal of a provision associated with forest fires registered in 3Q17, for US$35 million. Negative exchange differences from an increase in the exchange rate. ARAUCO INCOME STATEMENT Million US$ 3Q 18 3Q 17 Change Net income Operating income Non operating income (32) 9 (41) Other Income (7) Other expenses (18) 8 (26) Other profit (loss) Financial Income Financial expense (53) (54) 1 Profit in associated and JV's 5 7 (2) Exchange Differences (6) 3 (9) Gain (losses) on net monetary position Taxes (75) (52) (23) EBITDA Lower other income, mainly from a drop in the revaluation of biological assets. Rise in taxes due to a better performance. 11

12 REVIEW BY BUSINESS DIVISION FORESTRY - PULP COMMENTS Y o Y: increase in EBITDA explained by higher prices. PULP - Production & sales volumes (Th. tons) Unit production costs of unbleached long-fiber, bleached long-fiber and short-fiber increased 7.5%, 6.2% and 2.3%, respectively, due to higher costs of wood and chemicals. Q o Q: drop in EBITDA due to lower volumes. Unit production costs were flat for unbleached softwood. They rose 1.2% for bleached hardwood and 2.3% for bleached softwood. SCHEDULED MAINTENANCE STOPPAGES (DAYS) 3Q 17 2Q 18 3Q 18 Production Sales Volumes PULP - EBITDA (Million US$) Country Mill 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Arauco L Arauco L Chile Constitución Licancel Valdivia Nueva Aldea 16 Argentina Alto Paraná Uruguay Montes del Plata Q 17 2Q 18 3Q 18 Net Sales Price Sales Volume Y o Y 22.2% 29.8% -5.3% Q o Q -1.7% 0.5% -1.4% 12

13 REVIEW BY BUSINESS DIVISION FORESTRY - PULP OUTLOOK At the end of September, producer inventories were at 33 days for softwood and 41 days for hardwood. Global demand rose 2.7%, with China growing 7.0%. 60 INVENTORIES (days of supply) 50 World Demand Changes* 9M18 / 9M17 North America 5,465 (5.0%) Western Europe 10, % China 11, % Others 9, % Total (th. tons) 37, % Softwood Hardwood 13 *PPPC World-20

14 REVIEW BY BUSINESS DIVISION FORESTRY - PULP OUTLOOK In Q4 paper demand is clearly down and affecting pulp demand and prices Pulp price adjustments for November The change in trend is due to low demand on paper, not on oversupply Medium term outlook continues to be positive because of lack of new supply 900 NET PULP PRICES IN CHINA (US$ / ton) NBSK / BHKP PRICES (US$ / ton) US$ 1,230/t Δ US$ 180/ton US$ 1,050/t abr-18 may-18 jun-18 jul-18 ago-18 sep-18 oct-18 nov BHKP BSKP Softwood Hardwood *Gap as of 06/12/

15 REVIEW BY BUSINESS DIVISION FORESTRY - WOOD PRODUCTS 116 WOOD PRODUCTS - EBITDA (Million US$) PANELS Production & sales volumes (Th. m 3 ) Q 17 2Q 18 3Q 18 3Q 17 2Q 18 3Q 18 Production Sales Volumes Panels Price Sales Volume Y o Y -7.0% 13.4% Q o Q -3.9% 6.5% SAWN TIMBER Production & sales volumes (Th. m 3 ) PLYWOOD Production & sales volumes (Th. m 3 ) Sawn Timber* Price Sales Volume Y o Y 6.0% -5.8% Q o Q -1.9% 4.5% 3Q 17 2Q 18 3Q 18 Production Sales Volumes 3Q 17 2Q 18 3Q 18 Production Sales Volumes 15 *Includes sawn timber, remanufactured solid wood and plywood.

16 REVIEW BY BUSINESS DIVISION FORESTRY - WOOD PRODUCTS OUTLOOK North America 45% Housing Starts Index at 1.23 million units per year as of October. PB / MDP: markets were stable in the last quarter. We expect an increase in sales for next year because of Grayling. Remanufactured products: demand has been healthy due to lower supply from China and Brazil. We believe demand will remain good and prices could increase. Nevertheless, attention is focused on trade negotiations between China and US. Plywood: Demand could decrease slightly due to the upcoming winter effects. US HOUSING STARTS INDEX (th. units) Housing starts october-18 1,228,

17 REVIEW BY BUSINESS DIVISION FORESTRY - WOOD PRODUCTS OUTLOOK South & Central America 37% Brazil: panel market growing by 5%-6% compared to last year and it is expected to remain steady until December Argentina: the slow down in local economy is affecting our product sales, the lower Argentine peso is impacting our US Dollar margins. However, there is a chance to export some of our products, specially lumber, PB and MDF, neutralizing the negative effects Chile: demand is expected to remain stable. Good mix of products has enabled us to have better sales. Asia & Oceania 12% Asia: for the coming months we expect prices to remain stable. Japan has been a strong market and will continue on this trend in the future. Europe & Middle East 6% Europe: demand and prices remain flat. The coming months could bring an improvement in volume since local producers appear to be producing at maximum capacity. Prices are more difficult to predict due to aggressive prices offered from Brazil Middle East: demand remains strong and there is a positive outlook for this market in the coming months. Prices are stable and volumes are increasing 17

18 FUELS 18 18

19 REVIEW BY BUSINESS DIVISION FUELS - COPEC Net income dropped due to lower operating and non-operating performance. COPEC INCOME STATEMENT OPERATING INCOME DECREASED Lower margins in Chile, especially in the industrial channel, together with a drop in decalaje in Colombia. Higher distribution costs at Terpel, from the consolidation of the lubricant business of ExxonMobil in Colombia. Increased SG&A at Copec, due to a higher depreciation in Chile. Million Chilean Pesos 3Q 18 3Q 17 Change Net income 30,256 45,101 (14,845) Operating income 71,204 81,099 (9,896) Non operating income (20,037) (8,869) (11,169) Other Income 4,260 1,411 2,849 Other expenses (6,200) (3,486) (2,715) Other profit (loss) 193 (734) 927 Financial Income 1,477 1,606 (130) Financial expense (21,445) (14,012) (7,433) MORE UNFAVORABLE NON-OPERATING INCOME Higher financial expense in Terpel from an increased debt level. Lower profit from exchange differences. Profit in associated and JV's 3,503 3, Exchange Differences (311) 3,250 (3,561) Gain (losses) on net monetary position (1,514) 66 (1,580) Taxes (15,825) (20,681) 4,856 EBITDA 100, ,852 (5,604) 19

20 REVIEW BY BUSINESS DIVISION FUELS - COPEC MARKET SHARE (accumulated august-18) FUEL VOLUMES IN CHILE Y/Y (th. m 3 ) 2, % 2,384 Copec 56,1% Others 43,9% 3Q 17 3Q 18 Industrial Channel: 1.2% decrease in volumes YoY. Gas Stations: Remained flat YoY. LIQUID FUELS MARKET SHARE EVOLUTION (%) OUTLOOK 57% Stability in margins, excluding potential FIFO effects. Sustained leadership in gas stations due to a strong network positioning. 49% Mapco showing interesting growth in volumes (+4.4%). Focus on margin stabilization, operation efficiency, and improving product mix at convenience stores. 20

21 REVIEW BY BUSINESS DIVISION FUELS - COPEC TERPEL - KEY FIGURES* Million COP 3Q 18 3Q 17 Change Revenues 4,993,012 3,871,004 1,122,008 EBITDA 206, ,615 (8,187) Non-operating income (60,937) (37,002) (23,934) Lower margins in Colombia from a negative FIFO effect (decalaje) Liquid fuels volumes rising in Terpel, especially in the gas stations channel in Colombia. EXXONMOBIL ASSETS (Volumes in th. m 3 ) 2T18 3T18 COUNTRY EBITDA Volumes EBITDA Volumes Colombia Peru Ecuador Total PHYSICAL SALES OF LIQUID FUELS - (Th. m 3 ) PHYSICAL SALES OF NGV - (Th. m 3 ) % % 2, % +5.5% % +0.4% -8.8% 2, % -2.9% % *Figures in Colombian Pesos (COP)

22 REVIEW BY BUSINESS DIVISION FUELS - ABASTIBLE Net income decreased due to higher taxes and a lower non-operating result. OPERATING INCOME EDGED DOWN Higher SG&A in Chile. Offest by increase in volumes Colombia, Peru and Ecuador, and were stable in Chile ABASTIBLE INCOME STATEMENT Million Chilean Pesos 3Q 18 3Q 17 Change Net income 18,603 21,846 (3,243) Operating income 26,753 27,051 (298) Non operating income (69) 1,199 (1,268) Other Income 1, ,043 Other expenses (159) (1,136) 978 Other profit (loss) (1,949) 241 (2,190) Financial Income DROP IN NON-OPERATING INCOME Lower profit on net monetary position, due to a negative effect from a higher level of debt in UF. Lower other income Higher taxes, because of the profit generated due to a higher exchange rate at consolidating the operation in Peru, which is registered in US dollars. Financial expense (2,748) (2,622) (126) Profit in associated and JV's 3,708 3, Exchange Differences (289) 308 (597) Gain (losses) on net monetary position (966) 93 (1,060) Taxes (6,698) (4,925) (1,772) EBITDA 34,596 36,181 (1,585) 22

23 REVIEW BY BUSINESS DIVISION FUELS - ABASTIBLE VOLUMES IN CHILE Y/Y (Th. tons) % +0.1% 146 COMMENTS Industrial/bulk channel Chile: 3.1% decrease in physical sales. Bottled channel Chile: volumes were up by 1.4%. Colombia: 1.3% increase in physical sales. Peru: volumes were up by 17.0%, mainly in the wholesale channel. Ecuador: volumes rose 6.4% 3Q 17 3Q 18 OUTLOOK VOLUMES IN COLOMBIA Y/Y (Th. tons) +1.3% Chile: bottled market growing due to housing growth, greater commercial dynamism and population increase due to immigration. Bulk channel affected by loss of contracts. Colombia: growth in volumes and margins Q 17 3Q 18 Peru: continue with volume growth, through increased distribution coverage and second brand optimization. Prices of the raw material to the downside after a long period of rise, which improves the chances of enhancing margins. Ecuador: Duragas continued gaining market share (37.9% vs 37.0% YoY). 23

24 REVIEW BY BUSINESS DIVISION FUELS - SONACOL Stability in net income HIGHER OPERATING INCOME Higher rate charged for transportation of liquid fuels, compensated by lower volumes.. NON-OPERATING INCOME DECREASED Loss from exchange differences. SONACOL INCOME STATEMENT Million Chilean Pesos 3Q 18 3Q 17 Change Net income 6,886 6,939 (53) Operating income 10,050 9, Non operating income (773) (611) (162) Other Income (19) Other expenses (49) (56) 8 Other profit (loss) SONACOL VOLUMES - (Th. m 3 ) -5.8% Financial Income (21) Financial expense (597) (632) 36 Profit in associated and JV's Exchange Differences (157) 8 (164) Gain (losses) on net monetary position Taxes (2,391) (2,305) (86) EBITDA 10,050 11,621 (1,570) 3Q 17 3Q 18 24

25 OTHER INVESTMENTS 25 25

26 REVIEW BY BUSINESS DIVISION OTHER INVESTMENTS AFFILIATES AND ASSOCIATES QUARTERLY NET INCOME Million US$ 3Q 18 3Q 17 Change Affiliated Companies Igemar (6.6) 40.1 (46.7) Camino Nevado Associated Companies Corpesca (3.4) (115.2) Laguna Blanca Metrogas (1.9) AGESA IGEMAR: Unfavorable result as a consequence of a lower non-operating performance, due to income generated in the sale of the 60% of Selecta Brasil by Corpesca, and the purchase of additional shareholding in Corpesca, both during 3Q17. CORPESCA: It recorded a lower profit, explained by the sale of the 60% of Selecta Brasil in 3Q17. LAGUNA BLANCA: Results were flat YoY. METROGAS: Net income decreased, related to lower sales in the industrial and retail channel. AGESA: Results up 6,7%. 26

27 AGENDA CONSOLIDATED RESULTS REVIEW BY BUSSINES DIVISION 03 HIGHLIGHTS OF THE QUARTER 04 Q & A 27

28 HIGHLIGHTS OF THE QUARTER ARAUCO PROGRESS WITH THE MAPA PROJECT In October 2018, Arauco signed the main contracts with two of the leader suppliers of pulp industry equipment worldwide: Andritz and Valmet. The contracts amounted to approximately 600 million Suppliers will be Valmet and Andritz, two of the most important companies in the sector. Valmet will supply the recovery boiler, power boilers, dryer and bale handler. Andritz will supply the wood preparation equipment, digestors, fiber line, evaporators, recausticing and lime kiln. In the process of the financing of the project, Arauco completed the placement of two bonds, for UF 8.5 million, approximately US$ 340 million, in the local market: The first one has a tenor of 10 years bullet with a yield of 2.38%. The second one has a tenor of 25 years bullet with a yield of 2.88%. It was the biggest local issuance of the year in Chile. 28

29 HIGHLIGHTS OF THE QUARTER ARAUCO ARAUCO S PROJECT STATUS Grayling Particleboard Mill Project at 93% completion. Capacity: 800,000 m 3 /year. Total investment: US$ 450 million. Rollout of first panel: late Valdivia Dissolving Pulp Project at 48% completion. Total estimated CAPEX: US$ 185 million. Two years of construction. Ramp-up is expected during late

30 HIGHLIGHTS OF THE QUARTER TERPEL UPDATE ON THE PROCESS TO ACQUIRE EXXONMOBIL S ASSETS On March 2018, Terpel acquired the lubricants and fuels distribution businesses of ExxonMobil in Colombia, Peru and Ecuador The investment was for US$714.7 million, which included US$230 million in cash. The Colombian operation was transferred to an autonomus trust, in order to divide the lubricant from the fuels distribution business. On July, Terpel repurchased the lubricants business in Colombia from the autonomous trust. At the same time, it sold in part payment, a portion of Terpel s lubricant assets to the autonomous trust, which included the lubricants plant in Bucaramanga and the contracts related to the industrial lines (Maxter). In late March, Terpel started to consolidate operations in Peru and Ecuador. In July it incorporated the lubricant business in Colombia. During such month, it began to sell Mobil lubricants from the terminated inventories to industrial customers and distributors that had signed contracts with ExxonMobil. Finally. On August 3, Terpel re-inaugurated the recently acquired lubricant factory at Cartagena, and started joint production of the Mobil and Terpel brands. ExxonMobil s fuels business and the lubricants operation with production headquarters in Bucaramanga continue to be operated independently by the autonomous trust. 30

31 AGENDA CONSOLIDATED RESULTS REVIEW BY BUSINESS DIVISION 03 HIGHLIGHTS OF THE QUARTER 04 Q & A 31

32 Rodrigo Huidobro Chief Financial Officer Phone: (56-2) Cristián Palacios Director of Finance and IR Phone: (56-2) Juan Pablo Serrano Investor Relations Phone: (56-2) José Pablo Carvallo Investor Relations Phone: (56-2)