CONFERENCE CALL PRESENTATION First Quarter 2017 Results May 26 th, 2017 www.empresascopec.cl
AGENDA 01 02 03 04 CONSOLIDATED RESULTS REVIEW BY BUSINESS DIVISION HIGHLIGHTS OF THE QUARTER Q & A www.empresascopec.cl 2
FOURTH 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
CONSOLIDATED RESULTS QUARTERLY PERFORMANCE QUARTERLY EBITDA (Million of US$) 587 544 491493 509 471 429 425 383 405 350 491 544 555 398 564 521 518 441 520 576 497 494 475 442 395 416 406 Recovery in EBITDA II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I QUARTERLY NET INCOME (Million of US$) Net Income affected by forest fires 253 2010 2011 2012 2013 2014 2015 2016 291 340 295 272 138 227 154 86 166 239 247 217 83 361 216 193 154 161 143 124 42 133 173 2017 Impact of forest fires: 117 132 US$ 133 million 182 49 7 II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I 2010 2011 2012 2013 2014 2015 2016 2017 4
CONSOLIDATED RESULTS PERFORMANCE NET INCOME (Million US$) Net income decreased mainly due to negative effect of forest fires, together with a lower result in the Parent Company. 133 30 6 2 0.4 5 6 13-63.0% -63.0% 3 1 1 5 6 8 77 Offset, partially, by a better result in Copec. 98 46 49 Y o Y NET INCOME CHANGES BY COMPANY 1Q 17 NET INCOME COMPOSITION 5
CONSOLIDATED RESULTS PERFORMANCE EBITDA (Million US$) EBITDA rose explained by better operating performance in the fuels and forestry sectors, together with the consolidations of new operations. 44 +18.9% +18.9% 33 5 1 3 15 35 2 5-2 153-293 Local currency appreciation boosted the recognition of the fuels division results. 416 494 Y o Y EBITDA CHANGES BY COMPANY 1Q 17 EBITDA COMPOSITION 6
CONSOLIDATED RESULTS INCOME STATEMENT Net income was strongly affected by the effect of forest fires. CONSOLIDATED INCOME STATEMENT MORE UNFAVORABLE NON-OPERATING INCOME expenses of US$ 178 million before taxes related to forest fires. HIGHER OPERATING INCOME higher result in Copec, consequence of better margins in Chile and Colombia. stronger result in Arauco, due to higher revenue in pulp and panels businesses. partially offset by a drop in Abastible due to lower sales in Chile. LOWER TAX RESULT: There was a positive effect of US$ 45.5 million related to forest fires. Million USD 1Q 17 1Q 16 Change Net income 49 133 (83) Operating income 271 209 62 Non operating income (199) (18) (182) Other Income 53 61 (8) Other expenses (203) (28) (175) Other profit (loss) (1) 0 (1) Financial Income 15 21 (6) Financial expense (89) (94) 5 Profit in associated and JV's 19 6 13 Exchange Differences 9 18 (9) Gain (losses) on net monetary position (2) (3) 1 Taxes (12) (52) 39 EBITDA 494 416 78 7
CONSOLIDATED RESULTS FINANCIAL RATIOS KEY FINANCIAL RATIOS Profitability 1Q 17 4Q 16 1Q 16 Operating margin 5.6% 3.5% 5.5% EBITDA margin 10.1% 8.9% 10.9% ROCE 6.9% 6.6% 7.9% Leverage 1Q 17 4Q 16 1Q 16 EBITDA / net interest expense 6.1 5.9 6.9 Net debt / EBITDA 2.9x 3.0x 2.3x COMMENTS net debt/ebitda decreases to 2.9x with respect to 4Q16, due to a better EBITDA margins increased compared to 4Q16 well-balanced debt schedule for the coming years. FINANCIAL DEBT MATURITIES (MMUS$) NET FINANCIAL DEBT / EBITDA EVOLUTION 1,600 1,400 1,200 1,393 1,282 1,000 800 600 400 200 0 838 644 672 558 657 581 528 534 222 124 Cash 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Debt Maturities Cash Net Debt / EBITDA 2.5 2.1 1.6 1.7 3.2 3.5 3.9 3.4 2.8 2.5 2.8 2.7 2.6 2.6 2.4 2.4 2.4 2.2 2.4 2.3 2.7 2.8 3.0 2.9 8 *ROCE: includes financial income
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FORESTRY 10
REVIEW BY BUSINESS DIVISION FORESTRY Net income was strongly hit by a negative effect from forest fires. ARAUCO INCOME STATEMENT LOWER NON OPERATING INCOME higher other expenses due to forest fires experienced in the first quarter. HIGHER OPERATING INCOME higher revenue in the pulp business due to higher volumes. panels business was boosted due to higher prices and volumes. BETTER RESULT IN TAXES: Million US$ 1Q 17 1Q 16 Change Net income (46) 52 (98) Operating income 118 97 21 Non operating income (189) (16) (172) Other Income 48 58 (10) Other expenses (193) (21) (173) Other profit (loss) 0 0 0 Financial Income 6 11 (5) Financial expense (60) (70) 10 Profit in associated and JV's 8 4 4 Exchange Differences 1 1 0 Gain (losses) on net monetary position 0 0 0 Taxes 26 (27) 53 EBITDA 293 261 33 positive effect in taxes due to a decrease in deferred tax liabilities linked to forest fires. 11
REVIEW BY BUSINESS DIVISION FORESTRY PULP COMMENTS Y o Y: increase in EBITDA explained by higher volumes. Prices remained stable. Cash costs for long-fiber and short-fiber decreased 7.8% and 5.9%, respectively. For unbleached long-fiber, they decreased 8.3%. 147 PULP - EBITDA (Million US$) 128 177 Q o Q: increase in EBITDA explained by higher prices. Cash cost for bleached long-fiber and short-fiber dropped 3.9% and 1.7%, respectively. Unbleached long-fiber increased 8.1%. Net Sales Price Sales Volume Y o Y 10.2% -0.7% 11.4% Q o Q 3.9% 6.4% -2.9% 1Q 16 4Q 16 1Q 17 PULP - PRODUCTION & SALES VOLUMES (Th. tons) 997 914 940 946 968 869 Mill Stoppages for 2Q, 3Q and 4Q: Arauco Line 1 Montes del Plata Licancel Arauco Line 2 Nueva Aldea Argentina Valdivia 15 days March 11 days May 11 days June 13 days October 10 days November 25 days November 11 days Nov-Dec 1Q 16 4Q 16 1Q 17 Production Sales Volumes 12
REVIEW BY BUSINESS DIVISION FORESTRY PULP OUTLOOK Price gap currently at US$ 67/ton. (US$ 156/ton at the end of 4Q16). Since October until May, prices have risen systematically. In long fiber, prices continue with positive trend, however, slowdown in demand is expected as we enter summer months in the Northern Hemisphere. Hardwood prices have increased in every month of 2Q17. A more challenging scenario is expected due to demand seasonality and higher supply coming from OKI s line 2 and Fibria s Horizonte II. 1150 1050 950 850 750 650 550 450 350 PULP PRICES (US$ / ton) May 23rd US$860/ton ~US$67/ton US$793/ton Inventories in the hands of producers reached 29 days for softwood and 38 days for hardwood. Softwood Hardwood Global demand has grown 6.3% as of March. China up 22.1%. INVENTORIES (days of supply) DESTINATION Ch. 16/15 North America 2.5% Western Europe (3.6%) Eastern Europe 11.5% Latin America (1.9%) Japan 5.7% China 22.1% Global demand changes in pulp as of March 2017 60 50 40 30 20 March 2017 38 days 29 days Others Asia/Africa 6.4% 10 Total 6.3% Softwood Hardwood 13
REVIEW BY BUSINESS DIVISION FORESTRY WOOD PRODUCTS WOOD PRODUCTS - EBITDA (Million US$) PANELS PRODUCTION & SALES VOLUMES (Th. m 3 ) 86 78 1,141 1,147 1,1731,132 1,159 1,182 63 1Q 16 4Q 16 1Q 17 1Q 16 4Q 16 1Q 17 Production Sales Volumes Panels Price Sales Volume Y o Y 3.4% 3.1% Q o Q -1.4% 4.4% WOOD PRODUCTS PRODUCTION & SALES VOLUMES (Th. m 3 ) 755 829 780 797 769 730 Sawn Timber Price Sales Volume Y o Y 2.1% -6.4% Q o Q -0.2% -8.4% 1Q 16 4Q 16 1Q 17 Production Sales Volumes 14
REVIEW BY BUSINESS DIVISION FORESTRY WOOD PRODUCTS OUTLOOK North America Housing Starts Index at 1.2 million units per year, after reaching 1.3 million units in February 2017 MDF: Prices overall stable, imports from our operations in Brazil being sold in this market MDF moldings: Stable demand and increasing prices Particleboard: Balanced market overall. In Mexico, positive trend in prices Plywood: Opportunity for price hikes given lower supply from Chile US HOUSING STARTS INDEX (th units) Housing starts 1,172,000 15
REVIEW BY BUSINESS DIVISION FORESTRY WOOD PRODUCTS OUTLOOK South & Central America Brazil: Instability in markets affects sales volume, while prices remain stable. Part of production is being exported to other markets (such as North America). Argentina: Supply and demand in balance. Increase in sales of value added products Chile: Since sales volume in market has been lower after the forest fires, we expect price hikes in the short term Asia & Oceania Asia: We expect price hikes to continue during the second quarter of 2017. European producers pushing for price hikes to compensate higher shipping costs Oceania: Price and sales volume stable Europe & Middle East Europe: Less supply from Brazil has enabled to increase prices. Price hikes in plywood Middle East: Increasing shipping costs from Europe and better-than-expected demand have enabled some price hikes 16
FUELS 17
REVIEW BY BUSINESS DIVISION FUELS COPEC Net income rose, mainly due to a higher operating income. COPEC INCOME STATEMENT Million Chilean Pesos 1Q 17 1Q 16 Change HIGHER OPERATING INCOME: higher margins in Chile and Colombia. in 1Q17 the inventory revaluation effect (FIFO) was positive in Colombia whereas it had been negative in 1Q16 in Chile and Colombia. positive contribution from Mapco. LESS UNFAVORABLE NON-OPERATING INCOME: positive exchange differences. offset by higher financial cost. Net income 50,883 33,180 17,703 Operating income 84,018 56,738 27,280 Non operating income (9,150) (12,739) 3,589 Other Income 2,349 1,476 873 Other expenses (3,114) (3,069) (45) Other profit (loss) (149) (86) (62) Financial Income 1,967 2,816 (849) Financial expense (14,945) (13,100) (1,845) Profit in associated and JV's 2,701 2,723 (22) Exchange Differences 3,007 (2,084) 5,091 Gain (losses) on net monetary positio (966) (1,415) 449 Taxes (20,031) (9,477) (10,554) EBITDA 108,750 76,224 32,526 18
REVIEW BY BUSINESS DIVISION FUELS COPEC FUEL VOLUMES IN CHILE (accumulated) Shell 20.2% Others 8.1% COMMENTS Industrial Channel: 3.9% decrease in volumes. Gas Stations: 4.0% increase in volumes. OUTLOOK Petrobras 13.1% Copec 58.6% Stability in margins, excluding potential FIFO effects. Sustained leadership in gas stations due to a strong network positioning. 40% FUELS MARKET SHARE EVOLUTION (%) PRODUCT SALES VOLUMES* Y/Y 70% Total market volumes (Th. m 3 1Q 17 Market's change Copec's change ) 65% Gasoline 1,186 1.2% 5.3% 60% Kerosene 4-6.7% -1.6% 55% Diesel 2,374-4.9% -5.0% Turbo 379 9.1% 11.1% 50% Fuel oils 263 18.5% 15.4% 45% Total 4,204-0.8% 0.2% 19
REVIEW BY BUSINESS DIVISION FUELS COPEC TERPEL - KEY FIGURES Millions of Colombian pesos 1Q 17 1Q 16 Change Revenues 3,588,928 3,451,436 137,492 EBITDA 157,723 134,045 23,677 Non-operating income (29,331) (41,660) 12,329 PHYSICAL SALES OF LIQUID FUELS - (Th. m 3 ) PHYSICAL SALES OF NGV - (Th. m 3 ) 2,171 16 5 47 17 +12.8 +8.6% -2.7% -6.9% -2.0% 2,127 104 2 3 +8.1% +19.3% -2.5% 2 +2.5% 107 20
REVIEW BY BUSINESS DIVISION FUELS ABASTIBLE Net income decreased due to a lower operating income. DECREASE IN OPERATING INCOME lower sales volumes in Chile. higher SG&A and distribution costs in Chile. offset, in part, by greater sales volumes in Colombia and the contribution of the operations in Peru and Ecuador. STABLE NON-OPERATING INCOME higher financial expenses. offset, in part, due to higher financial income. ABASTIBLE INCOME STATEMENT Million Chilean Pesos 1Q 17 1Q 16 Change Net income 5,378 9,883 (4,506) Operating income 12,039 14,296 (2,257) Non operating income (1,418) (1,395) (23) Other Income 525 342 183 Other expenses (400) (618) 218 Other profit (loss) (129) (106) (23) Financial Income 766 372 395 Financial expense (3,083) (2,542) (541) Profit in associated and JV's 1,168 961 207 Exchange Differences 268 729 (461) Gain (losses) on net monetary position (533) (532) (1) Taxes (3,529) (2,489) (1,040) EBITDA 21,439 20,215 1,224 21
REVIEW BY BUSINESS DIVISION FUELS ABASTIBLE VOLUMES IN CHILE Y/Y (Th. tons) 93.1-4.3% COMMENTS Industrial/bulk channel Chile: 3.1% increase in physical sales. Bottled channel Chile: volumes decreased 7.7%. Colombia: 12.9% increase in physical sales. 89.1 OUTLOOK 1Q 16 1Q 17 VOLUMES IN COLOMBIA Y/Y (Th. tons) +12.9% Important gas availability for Abastible from Argentina. The Peruvian market was strongly affected by mudslides during the first part of the year. 48.7 43.2 1Q 16 1Q 17 22
REVIEW BY BUSINESS DIVISION FUELS SONACOL Net income remained stable with respect to last year s. INCREASE IN OPERATING INCOME volumes transported grew 1.9%. HIGHER NON-OPERATING INCOME: higher financial expense. less unfavourable exchange differences. SONACOL VOLUMES - (Th. m 3 ) +1.9% SONACOL INCOME STATEMENT Million Chilean Pesos 1Q 17 1Q 16 Change Net income 5,430 5,365 65 Operating income 8,135 8,038 98 Non operating income (843) (969) 125 Other Income 8 1 7 Other expenses (28) (3) (24) Other profit (loss) 0 0 0 Financial Income 20 23 (4) Financial expense (721) (798) 77 Profit in associated and JV's 0 0 0 Exchange Differences (122) (192) 70 Gain (losses) on net monetary po 0 0 0 Taxes (1,862) (1,810) (52) 2,369 2,415 EBITDA 9,632 9,552 80 23 1Q 16 1Q 17
OTHER INVESTMENTS 24
REVIEW BY BUSINESS DIVISION OTHER INVESTMENTS AFFILIATED AND ASSOCIATED - Quarterly total net income Million US$ 1Q 17 1Q 16 Change Affiliated Companies Igemar (3.7) (4.3) 0.5 Alxar 0.8 (1.4) 2.2 Associated Companies Corpesca 1.2 (13.4) 14.7 Laguna Blanca 5.1 (2.5) 7.6 Metrogas 2.9 14.3 (11.4) Aprovisionadora 14.2 - - IGEMAR: Lower loss due to a better result in associated and JV s, partly offset, by a drop in operating income as a consecuence of lower fishmeal and fishoil sales. CORPESCA: Recorded a better result than last year due to lower other expenses. Operating result, however, remained stable. LAGUNA BLANCA: Presents a profit due to higher sales prices and lower production costs. METROGAS: Lower profit in relation to last year s due to the separation in two companies (Metrogas and Aprovisionadora). Sales volumes grew in the residential-commercial and industrial channels. APROVISIONADORA: Recorded a profit of US$ 14.2 million. The company was created the 1 st of April 2016, therefore it did not report on 1Q16. 25
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HECHOS RELEVANTES DEL TRIMESTRE EMPRESAS COPEC EMPRESAS COPEC ANNOUNCES ITS 2017 INVESTMENT PLAN Fishing 2% Empresas Copec S.A. held its Annual Ordinary Shareholders Meeting in April, during which the company officially announced its investment plan for 2017. Forestry 36% This will be about US$ 1.983 million for growth and maintenance of its productive activities. 1,983 USD Million It will allocate around 36% of this investment to the forestry business, 62% to the fuels business and the rest to the fisheries sector and other activities. Fuels 62% 26
HECHOS RELEVANTES DEL TRIMESTRE ARAUCO GROUNDBREAKING CEREMONY FOR NEW PARTICLEBOARD MILL IN MICHIGAN On April 12, 2017, Arauco conducted groundbreaking ceremonies for its new US$ 400 million particleboard mill in Grayling, Michigan. The plant s structure will measure approximately 76,000 square meters, and have an annual capacity of 800,000 m 3 of particleboard. Once finished, it will be the most modern particleboard plant in North America. In terms of location, it is placed in a strategic sector where it will improve our logistics and support client growth within that region. 30
HECHOS RELEVANTES DEL TRIMESTRE ARAUCO ARAUCO OBTAINS US$ 300 MILLION COMMITTED FACILITY TO FINANCE GRAYLING PROJECT In order to finance the construction of the particleboard mill in Grayling, Michigan, Arauco, through its subsidiary Flakeboard America, obtained a committed facility loan for a total of US$ 300 million. Scotiabank, Banco Estado and EDC were the three banks that will finance this project. The tenor of this loan will be a total of seven years: disbursements can be made during the first two years, and will then be amortized semiannually for the next five years, with a final balloon payment of 70% of the total loan. The loan has a floating rate interest rate with a spread at competitive market prices. The Grayling Project is expected to cost approximately US$ 400 million; the remaining US$ 100 million will be financed with Flakeboard America s own resources. 28
HECHOS RELEVANTES DEL TRIMESTRE ARAUCO NEW STRATEGIC PLAN DE RAIZ IN PLACE AFTER RECENT FOREST FIRES During the past summer, Arauco was impacted by one the largest forest firest in the history of Chile. In pursuance of adapting to climate changes that increase the likelihood of forest fires to propagate, Arauco has decided to create a new strategic plan with four fundamental pillars: Prevention Protection Reforestation / Restoration Improving the quality of life Through these four pillars, there are 14 initial projects which are already in course, including the recovery of our production chain, the restoration of native forests, the protection of water basins, and prevention awareness with local communities. The plan will have a committee including the President, the Executive Vice-President, the CEO, the COO, and the Senior Vice-President of Commercial & Corporate Affairs. 29
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Rodrigo Huidobro Chief Financial Officer rodrigo.huidobro@empresascopec.cl Phone: (56-2) 2461 70 61 Cristián Palacios Director of IR and Investments cristian.palacios@empresascopec.cl Phone: (56-2) 2461 70 42 Leopoldo Silva Investor Relations leopoldo.silva@empresascopec.cl Phone: (56-2) 2461 70 15 Juan Pablo Serrano Investor Relations juan.serrano@empresascopec.cl Phone: (56-2) 2461 70 46 www.empresascopec.cl