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Corporates

Natural Resources / Chile

Empresas CMPC S.A.

September 11, 2019 1

Empresas CMPC S.A. And Inversiones CMPC

Rating Type Rating Outlook Last Rating Action

Long-Term Local Currency IDR BBB Stable Affirmed Aug. 29, 2019

Long-Term IDR BBB Stable Affirmed Aug. 29, 2019

National Long-Term Rating AA-(cl) Stable Affirmed Aug. 29, 2019

Click here for full list of ratings

Financial Summary

(USD 000) Dec 2017 Dec 2018 Dec 2019F Dec 2020F

Operating EBITDA (Before Income from Associates) 1,078,287 1,816,183 1,416,265 1,505,445

Operating EBITDA Margin (%) 21.0% 28.9% 25.3% 25.0%

FFO Margin (%) 14.9% 19.4% 20.4% 20.3%

FFO-Adjusted Leverage (x) 4.5 2.9 2.9 2.6

Total Net Debt with Equity Credit/Operating EBITDA (x) 3.4 1.6 2.2 1.8

F – Forecast.

Source: Fitch Ratings, Fitch Solutions.

Fitch Ratings affirmed Empresas CMPC S.A.’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at

‘BBB’ and its National Long-Term Rating at ‘AA–(cl)’ on Aug. 29, 2019. In addition, Fitch affirmed the Long-Term Foreign

Currency IDR for subsidiary Inversiones CMPC at ‘BBB’. The Outlook on the corporate ratings is Stable.

CMPC’s ratings reflect its strong business position as the world’s fourth-largest market pulp producer and the second-

largest tissue producer in Latin America. Due to its strong market position and production costs in the lowest quartile,

CMPC is able to generate strong cash flows during cyclical pricing downturns. The ratings are also supported by CMPC’s

consistently solid liquidity position, low refinancing risk and significant forestry investments.

The Stable Outlook incorporates an expectation that CMPC’s net leverage will remain below 2.5x and that cash flow

generation will continue to be strong, despite weaker pulp prices due to softer demand from China. In Fitch’s opinion,

CMPC’s deleveraging strategy in the past few years, combined with expectations for lower investments, places the

company in a good position to endure the negative pulp cycle with conservative credit metrics.

Key Rating Drivers

Solid Pulp Position: CMPC has a strong market pulp position as the world’s fourth-largest producer, with annual

production capacity of hardwood and softwood pulp of 4.1 million tons. The pulp and forest division accounted for about

87% of the company’s 2018 EBITDA, making CMPC highly exposed to the pulp segment’s cyclical nature. The

company’s cash production costs are among the world’s lowest for hardwood and softwood pulp, ensuring long-term

competitiveness. During 2Q19, the company’s cash cost of production was USD195 per ton for hardwood pulp and

USD326 per ton for softwood pulp, placing it firmly in the lowest quartile of the cost curve.

Excellent Regional Tissue Business: CMPC’s ratings also reflect its strong business positions in Latin America. The

company is the second-largest tissue producer in Chile, Peru, Argentina and Uruguay and has a growing presence in

Brazil and Mexico. In Fitch’s opinion, CMPC’s strategy to continue to grow its tissue business will allow it to improve the

business and market share in the region. CMPC’s strong position in tissue, which accounted for 8% of EBITDA in 2018,

https://www.fitchratings.com/gws/en/esp/issr/80091517

Corporates


Empresas CMPC S.A.


results from strong brand equity, a low production cost structure and a strong distribution network. CMPC is also Chile’s

largest producer of packaging paper, boxboard, corrugated boxes and multiwall bags. Its paper and paper products

divisions accounted for 5% of 2018 EBITDA.

Strong CFFO: Fitch projects that CMPC will generate about USD1.4 billion of EBITDA in 2019 and USD1.5 billion in

2020, and cash flow from operations (CFFO) of USD905 million and USD1.2 billion, respectively. This compares with

USD1.6 billion of EBITDA and USD870 million of CFFO in the LTM ended June 30, 2019. Fitch expects USD180 million

of FCF in 2019 and USD500 million in 2020, allowing the company to reduce debt. CMPC’s cash flows benefit from lower

investments of around USD500 million per year. CMPC is expected to continue to pursue its growth strategy in the tissue

business, organically or through acquisitions, especially in Brazil and Mexico.

Leverage to Remain Low: Fitch expects net leverage to remain below 2.5x amid low investments and projects net

debt/EBITDA of 2.2x for 2019 and 1.8x for 2020. CMPC’s net debt was USD3.5 billion as of June 30, 2019 and Fitch

projects continued reductions, absent any significant acquisitions. In Fitch’s opinion, CMPC’s capital structure could

absorb small acquisitions in the tissue business with a limited effect on leverage. In the LTM ended June 30, 2019, net

debt/EBITDA was 2.3x, per Fitch’s calculations, compared with an average of 3.5x in 2015–2017.

Significant Forestry Investments: CMPC’s ownership of approximately 1 million hectares of land throughout Chile,

Brazil and Argentina is a key credit consideration that supports its investment-grade profile. The company has developed

about 650,000 hectares of forestry assets in Chile, Brazil and Argentina. The plantations are valued at USD3.4 billion.

Importantly, the nearly ideal conditions for growing trees in the region makes these plantations extremely efficient by

global standards and gives the company a sustainable advantage in cost of fiber and transportation costs between forest

and mills.

Unexpected Downturn in Pulp Cycle: The pulp industry is very cyclical; prices move sharply based on changes in

supply and demand. Market fundaments for pulp producers are supported by a lack of new projects, with Celulosa Arauco

y Constitucion S.A.’s MAPA project scheduled for 2021 and UPM-Kymmene Oyj’s mill in Uruguay in 2022. However,

uncertainty about recovery of Chinese demand, trade disputes, slower global economic growth and weaker conditions in

the global paper and board sectors reduces the visibility of pulp price recovery during 4Q19 and 2020.

After a strong year, bleached eucalyptus kraft pulp prices declined by an average of USD150/ton during the first eight

months of 2019, while northern bleached softwood kraft fell around USD200/ton, including average prices to China. The

historically high global inventory level also pressures pulp producers to operate below full capacity.

Corporates


Empresas CMPC S.A.


Rating Derivation Relative to Peers

Rating Derivation Versus Peers

Peer Comparison CMPC is the second-largest tissue producer in Latin America and is the world’s fourth-largest market pulp producer, after Suzano S.A. (BBB–/Negative), Arauco (BBB/Stable) and International Paper Company (not rated). CMPC has annual pulp production capacity of 4.1 million tons amid a 62 million ton industry.

Similar to Arauco and Suzano, CMPC’s pulp production cash costs are among the world’s lowest, ensuring long-term competitiveness. CMPC and Arauco are rated higher than their Brazilian peers due to more diversified profiles, with operations in the more stable tissue and boards segments, respectively. Suzano has a significant size advantage in the fragmented pulp market; however, it has lower geographic and product diversification than its Chilean peers.

CMPC’s ratings incorporate the expectation that net leverage will remain below 2.5x, below that of Arauco, whose leverage is expected to increase from high investments in its MAPA project, and that of Suzano, whose leverage is higher than expected following the merger with Fibria Celulose S.A. Pulp producers’ liquidity is historically strong, and CMPC has strong access to debt and capital markets. Operating margins at CMPC and Arauco are lower than those of their Brazilian peers, as they operate in lower-margin business segments such as boards and tissue.

Parent-Subsidiary Linkage Inversiones CMPC is a wholly owned subsidiary of CMPC. All of Inversiones CMPC’s debt is unconditionally guaranteed by CMPC. Its ratings have been linked to those of CMPC through Fitch’s Parent and Subsidiary Rating Linkage criteria.

Country Ceiling No Country Ceiling constraint was in effect for these ratings.

Operating Environment About 52% of CMPC’s sales are to Europe, Asia and the U.S., while 48% is in Latin America, including approximately 21% from Chile. CMPC’s export-oriented profile mitigates the company’s exposure to Latin American demand and macroeconomic conditions in the region. The strong brand equity of CMPC’s tissue products, its low production cost structure and strong distribution network reduce volatility during market downturns.

Other Factors Not applicable

Source: Fitch Ratings.

Navigator Peer Comparison

Rating Sensitivities

Developments That May, Individually or Collectively, Lead to Positive Rating Action

An upgrade for CMPC is not considered likely in the near future;

Net debt/EBITDA below 2.0x through the cycle.

Developments That May, Individually or Collectively, Lead to Negative Rating Action

Net debt/EBITDA above 3.0x through the cycle;

Any change in the company’s strategy to preserve leverage and improve its capital structure;

Deterioration in macroeconomic conditions in countries in which the company has strong tissue businesses.

IDR/Outlook

BBB/Sta aa n bbb n bbb n bbb n bbb+ n bbb- n a- n bbb- n bbb+ nBB-/Pos bbb- n bb- n bbb n bbb n bb+ n b+ n a+ n bbb- n bb+ nBBB/Sta a n bbb n bbb+ n bbb n bbb+ n bbb- n bbb+ n bbb- n bbb+ nBB+/Sta bb- n bbb n bbb- n bbb- n bbb n bb+ n bbb n bb n bbb- nB/Neg bbb+ n bb- n bb- n bb n b+ n b+ n b+ n b n b+ nBBB-/Sta aa n bbb+ n bb+ n bbb- n bbb n bbb n bb+ n bbb n bbb+ nBBB-/Neg bbb- n bbb n bbb n bbb n bbb+ n bb+ n a- n bb+ n bbb n

Source: Fitch Ratings. Importance n Higher n Moderate n Low er

Financial

Structure

Financial

Flexibility

Financial profileIssuer

Management

and Corporate

Governance

Sector

Competitive

Intensity Sector Trend

Company's

Market Position Diversification Profitability

Operating

Environment

Business profile

Klabin S.A.

Masisa S.A.

Stora Enso Oyj

Suzano S.A.

Celulosa Arauco y Constitucion S.A.

Eldorado Brasil Celulose S.A.

Empresas CMPC S.A.

Corporates


Empresas CMPC S.A.


Liquidity and Debt Structure

Strong Liquidity: CMPC had USD521 million of cash and marketable securities as of June 30, 2019 and total debt of

USD4.1 billion. CMPC’s liquidity is enhanced by a USD400 million unused revolving committed credit facility. The

company has a manageable debt maturity profile, with USD412 million due in the short term, including factoring

transactions, as per Fitch’s methodology; USD212 million in April 2020–March 2021; and USD658 million in

April 2021–March 2022. As of June 30, 2019, total debt consisted of senior notes at 75% of total debt, working capital

lines at 9%, loans from Banco Nacional de Desenvolvimento Economico e Social (BNDES) at 7%, operating leases at

7%, and 2% for others. Fitch expects CMPC to preserve its extended debt amortization profile and strong liquidity, and to

use FCF to reduce debt.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of Environmental, Social and Governance (ESG) credit

relevance is a score of 3 – ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to

their nature or the way in which they are being managed by the entity.

CMPC has an ESG Relevance Score of 4 for EIM exposure to environmental impacts, as Chilean forestry companies are

exposed to forest fire risk, which negatively affects the credit profile and is relevant to the ratings in conjunction with other

factors.

CMPC has an ESG Relevance Score of 4 for EFM environment – energy management, as the company sells excess

energy to the grid from cogeneration based on a renewable resource, which positively affects the credit profile and is

relevant to the ratings in conjunction with other factors.

For more information on our ESG Relevance Scores, visit www.fitchratings.com/esg.

Debt Maturities and Liquidity at YE 2018

Liquidity Analysis

(USD 000) 2019F 2020F 2021F 2022F

Beginning Cash Balance 967,504 293,512 606,896 989,596

Rating Case FCF After Acquisitions and Divestitures (150,329) 499,728 516,942 552,518

Total Available Liquidity (A) 817,175 793,241 1,123,838 1,542,114

Liquidity Uses

Debt Maturities (523,663) (186,345) (134,242) (629,397)

Total Liquidity Uses (B) (523,663) (186,345) (134,242) (629,397)

Liquidity Calculation

Ending Cash Balance (A+B) 293,512 606,896 989,596 912,717

Revolver Availability 0 0 0 0

Ending Liquidity 293,512 606,896 989,596 912,717

Liquidity Score (x) 1.6 4.3 8.4 2.5

Source: Fitch Ratings, Fitch Solutions, Empresas CMPC S.A.

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Empresas CMPC S.A.


Key Assumptions

Fitch’s Key Assumptions Within Its Rating Case for the Issuer

Third-party pulp sales volume around 3.6 million tons in 2019–2021;

Average net pulp prices of USD600–USD675 per ton during 2019–2021;

Capex of USD550 million in 2019 and USD500 million in 2020 and 2021;

Acquisition of Brazilian tissue company Serrados e Pasta de Celulose is completed in 4Q19 for USD332 million;

Dividends of 40% of adjusted net income.

Scheduled Debt Maturities

(USD 000) 12/31/18

2019 523,663

2020 186,345

2021 134,242

2022 629,397

2023 553,572

Thereafter 1,932,667

Total 3,959,886


521412

212

658 608

76

2,091

0

500

1,000

1,500

2,000

2,500

Cash Short-Term Debt 2 Years 3 Years 4 Years 5 Years Beyond 5 Years


(USD Mil.)

Liquidity and Debt Maturity Schedule

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Empresas CMPC S.A.


Financial Data

(USD 000) Historical Forecast

Dec 2016 Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021

Summary Income Statement

Net Revenue 4,865,737 5,143,074 6,274,472 5,589,950 6,021,000 6,189,000

Revenue Growth (%) 0.5 5.7 22.0 -10.9 7.7 2.8

Operating EBITDA (Before Income from Associates) 969,603 1,078,287 1,816,183 1,416,265 1,505,445 1,589,299

Operating EBITDA Margin (%) 19.9 21.0 28.9 25.3 25.0 25.7

Operating EBITDAR 969,603 1,078,287 1,816,183 1,416,265 1,505,445 1,589,299

Operating EBITDAR Margin (%) 19.9 21.0 28.9 25.3 25.0 25.7

Operating EBIT 531,699 628,987 1,356,970 963,093 1,050,450 1,132,553

Operating EBIT Margin (%) 10.9 12.2 21.6 17.2 17.4 18.3

Gross Interest Expense -212,825 -219,485 -215,970 -175,647 -158,461 -146,736

Pretax Income (Including Associate Income/Loss) -35,578 119,111 880,197 557,446 661,990 755,817

Summary Balance Sheet

Readily Available Cash and Equivalents 595,843 682,754 967,504 583,512 873,222 1,235,479

Total Debt with Equity Credit 4,315,034 4,318,218 3,959,886 3,726,223 3,516,204 3,361,519

Total Adjusted Debt with Equity Credit 4,315,034 4,318,218 3,959,886 3,726,223 3,516,204 3,361,519

Net Debt 3,719,191 3,635,464 2,992,382 3,142,711 2,642,982 2,126,040

Summary Cash Flow Statement

Operating EBITDA 969,603 1,078,287 1,816,183 1,416,265 1,505,445 1,589,299

Cash Interest Paid -190,600 -208,442 -185,779 -175,647 -158,461 -146,736

Cash Tax -174,707 -69,348 -228,426 -122,638 -145,638 -166,280

Dividends Received Less Dividends Paid to Minorities (Inflow/(Out)flow) 0 0 0 0 0 0

Other Items Before FFO -65,246 -51,210 -204,833 0 0 0

Funds Flow from Operations 551,522 764,875 1,217,761 1,137,980 1,221,346 1,296,283

FFO Margin (%) 11.3 14.9 19.4 20.4 20.3 20.9

Change in Working Capital -46,739 -43,376 -100,949 -232,386 -15,077 -43,526

Cash Flow from Operations (Fitch Defined) 504,783 721,499 1,116,812 905,595 1,206,269 1,252,757

Total Non-Operating/Nonrecurring Cash Flow 0 0 0

Capex -524,636 -485,756 -379,505

Capital Intensity (Capex/Revenue) (%) 10.8 9.4 6.0

Common Dividends -36,322 -4,776 -118,966

FCF -56,175 230,967 618,341

Net Acquisitions and Divestitures 894 1,177 31

Other Investing and Financing Cash Flow Items 56,013 5,136 -183,694 0 0 0

Net Debt Proceeds 84,755 -369 -299,928 -233,663 -210,019 -154,685

Net Equity Proceeds 0 0 0 0 0 0

Total Change in Cash 85,487 236,911 134,750 -383,992 289,709 362,257

Calculations for Forecast Publication

Capex, Dividends, Acquisitions and Other Items Before FCF -560,064 -489,355 -498,440 -1,055,923 -706,541 -735,815

FCF After Acquisitions and Divestitures -55,281 232,144 618,372 -150,329 499,728 516,942

FCF Margin (After Net Acquisitions) (%) -1.1 4.5 9.9 -2.7 8.3 8.4

Coverage Ratios

FFO Interest Coverage (x) 3.8 4.6 7.4 7.4 8.6 9.7

FFO Fixed Charge Coverage (x) 3.8 4.6 7.4 7.4 8.6 9.7

Operating EBITDAR/Interest Paid + Rents (x) 5.1 5.2 9.8 8.1 9.5 10.8

Operating EBITDA/Interest Paid (x) 5.1 5.2 9.8 8.1 9.5 10.8

Leverage Ratios

Total Adjusted Debt/Operating EBITDAR (x) 4.5 4.0 2.2 2.6 2.3 2.1

Total Adjusted Net Debt/Operating EBITDAR (x) 3.8 3.4 1.6 2.2 1.8 1.3

Total Debt with Equity Credit/Operating EBITDA (x) 4.5 4.0 2.2 2.6 2.3 2.1

FFO Adjusted Leverage (x) 5.9 4.5 2.9 2.9 2.6 2.4

FFO Adjusted Net Leverage (x) 5.1 3.8 2.2 2.4 1.9 1.5


How to Interpret the Forecast Presented

The forecast presented is based on Fitch Ratings’ internally produced, conservative rating case forecast. It does not represent the forecast of the rated issuer. The forecast set out above is only one component used by Fitch Ratings to assign a rating or determine a rating outlook, and the information in the forecast reflects material but not exhaustive elements of Fitch Ratings’ rating assumptions for the issuer’s financial performance. As such, it cannot be used to establish a rating, and it should not be relied on for that purpose. Fitch Ratings’ forecasts are constructed using a proprietary internal forecasting tool, which employs Fitch Ratings’ own assumptions on operating and financial performance that may not reflect the assumptions that you would make. Fitch Ratings’ own definitions of financial terms such as EBITDA, debt or free cash flow may differ from your own such definitions. Fitch Ratings may be granted access, from time to time, to confidential information on certain elements of the issuer’s forward planning. Certain elements of such information may be omitted from this forecast, even where they are included in Fitch Ratings’ own internal deliberations, where Fitch Ratings, at its sole discretion, considers the data may be potentially sensitive in a commercial, legal or regulatory context. The forecast (as with the entirety of this report) is produced strictly subject to the disclaimers set out at the end of this report. Fitch Ratings may update the forecast in future reports but assumes no responsibility to do so. Original financial statement data for historical periods is processed by Fitch Solutions on behalf of Fitch Ratings. Key financial adjustments and all financial forecasts credited to Fitch Ratings are generated by rating agency staff.

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Empresas CMPC S.A.


Ratings Navigator

Corporates Ratings NavigatorGeneric

aaa AAA Stable

aa+ AA+ Stable

aa AA Stable

aa- AA- Stable

a+ A+ Stable

a A Stable

a- A- Stable

bbb+ BBB+ Stable

bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable

bb BB Stable

bb- BB- Stable

b+ B+ Stable

b B Stable

b- B- Stable

ccc+ CCC+ Stable

ccc CCC Stable

ccc- CCC- Stable

cc CC Stable

c C Stable

d or rd D or RD Stable

Management and

Corporate Governance

Factor

LevelsSector Risk Profile Operating Environment

Financial FlexibilityFinancial StructureProfitabilityDiversificationCompany's Market

PositionSector Trend

Sector Competitive

Intensity

Business Profile Financial Profile

Issuer Default Rating

ESG Relevance:Empresas CMPC S.A.

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Empresas CMPC S.A.



Operating Environment Management and Corporate Governance

a+ bbb a- bbb

a aa bbb+ bbb

aa bbb a

b- bbb- bbb

ccc+ bb+

Sector Competitive Intensity Sector Trend

a a a- bbb

a- bbb bbb+ bbb

bbb+ bbb bbb bbb

bbb bbb-

bbb- bb+

Company's Market Position Diversification

a a bbb+ bbb

a- bbb bbb bbb

bbb+ bbb bbb-

bbb bb+

bbb- bb

Profitability Financial Structure

a a bbb+ bbb

a- a bbb bbb

bbb+ b bbb- b

bbb bbb bb+ bbb

bbb- bbb bb

Financial Flexibility Credit-Relevant ESG Derivation

For further details on Credit-Relevant ESG scoring, see page 3.

Navigator Version: RN 2.3.6.0

Lease Adjusted FFO Gross

Leverage

Net Debt/(CFO - Capex)

FFO Margin

Market Share

Financial Access

Economic Environment

Funding Structure (LBO only)

Liquidity bbb

aClear commitment to maintain a conservative policy w ith only modest deviations

allow ed.

EBITDAR/(Gross Interest + Rents) bbb

One year liquidity ratio above 1.25x. Well-spread maturity schedule of debt but funding

may be less diversif ied.

4.5x

a-

FX Exposure bbbSome exposure of profitability to FX movements and/or debt/cash-flow match.

Effective hedging in place.

FFO Fixed Charge Cover a

Industry Structure

Barriers to Entry/Exit

Competitive Advantage

Empresas CMPC S.A.

Average combination of countries w here economic value is created and w here

assets are located.

Very strong combination of issuer specif ic funding characteristics and of the strength

of the relevant local f inancial market.Governance Structure

Management Strategy

Systemic Governance

Threat of Substitutes

Geographic Diversification

Exposure to at least three business lines or markets but w ith some performance correlation.Product/End-Market

Systemic governance (eg rule of law , corruption; government effectiveness) of the

issuer’s country of incorporation consistent w ith 'aa'

EBITDAR Margin

Volatility of Profitability

Return on invested capital in line w ith industry average.

Top-three player in most markets or leader in a w ell defined and protected niche.

Operating Efficiency

Some competitive advantages w ith reasonably good sustainability.

Neutral to negative FCF margin.

14%

14%

FCF Margin

EBIT Margin

Relative Power in Value Chain Balanced relative bargaining pow er w ith suppliers and customers.

Overall ESG

Empresas CMPC S.A. has 2 ESG rating drivers and 10 ESG potential rating driversFinancial Discipline

bbb-

issues

driverbbb+

bbb

a

issues

issues

4

3

not a

rating

driver

5

2issues

issues

0

2

10

2

0

potential

driver

Lease Adjusted FFO Net Leverage

Lease Adjusted Gross

Debt/EBITDAR

20%

Volatility of profits in line w ith industry average.

Reduced number of competitors w ith clear leader.

Moderate barriers to entry. Incumbents are generally strongly established but

successful new entrants have emerged over time.

Group Structure

Financial Transparency

Volatility of Demand

n.a.

Mature industry. Traditional markets may be under some pressure but opportunities arise in new

markets.

Demand volatility in line w ith economic cycles.

Strategy may include opportunistic elements but soundly implemented.

Good CG track record but effectiveness/independence of board less obvious. No evidence of

abuse of pow er even w ith ow nership concentration.

Group structure show s some complexity but mitigated by transparent reporting.

Good quality reporting w ithout signif icant failing. Consistent w ith the average of listed

companies in major exchanges.

Financial Sponsor Attitude (LBO

only)

Long-Term Growth Potential

key

driver

Energy management

Impact of climate change and extreme weather events on assets and operations

GHG emissions; air quality

Waste and hazardous materials management; ecological impacts; product design &

lifecycle management; supply chain management - product

Customer privacy; data security; product quality and safety; customer welfare; selling

practices and product labeling

Impact of labor negotiations and employee (dis)satisfaction; supply chain management -

labor; employee diversity and inclusion

6x

1Show ing top 6 issues

How to Read This Page: The left column shows the three-notch band assessment for the overall Factor, illustrated by a bar. The

right column breaks down the Factor into Sub-Factors, with a description appropriate for each Sub-Factor and its corresponding

category.

3.5x

3.0x

6.0x

3.0x

n.a.

Facing substitutes of comparable quality but sw itching costs are signif icant.

Some geographical diversif ication but imbalance betw een grow th and mature markets.

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Empresas CMPC S.A.



Credit-Relevant ESG Derivation

Environmental (E)

E Score

Social (S)

S Score

Governance (G)

G Score

Water and wastewater management

Waste and hazardous materials management; ecological impacts;

product design & lifecycle management; supply chain management -

product

Customer privacy; data security; product quality and safety;

customer welfare; selling practices and product labeling

Shifting social preferences; social resistance to major projects or

operations that leads to delays or cost increases

Sector-Specific Issues

Impact of climate change and extreme weather events on assets

and operations

Reference

Impact of labor negotiations and employee (dis)satisfaction; supply

chain management - labor; employee diversity and inclusion

Employee health and safety

Quality and timing of financial disclosure

Management and Corporate Governance;

Company's Market Position; Diversification;

Profitability; Financial Flexibility

Management and Corporate Governance; Sector

Competitive Intensity; Company's Market Position;

Profitability

Operating Environment; Diversification; Profitability;

Financial Structure; Financial Flexibility3

1

issues

issues

issues

issues

issues

key driver

driver

potential driver

not a rating

driver

0

2

10

2

0

Highly relevant, a key rating driver that has a signif icant impact on the rating

on an individual basis. Equivalent to "higher" relative importance w ithin

Navigator.

Relevant to rating, not a key rating driver but has an impact on the rating in

combination w ith other factors. Equivalent to "moderate" relative importance

w ithin Navigator.

Minimally relevant to rating, either very low impact or actively managed in a

w ay that results in no impact on the entity rating. Equivalent to "low er"

relative importance w ithin Navigator.

Irrelevant to the entity rating and irrelevant to the sector.

5

General Issues G Scale

Management Strategy 3 5Strategy development and implementation

ReferenceSector-Specific Issues

1

Governance Structure 3 4

3

2

How relevant are E, S and G issues to the overall credit rating?

5

Management and Corporate Governance


Financial Transparency 3 2 Irrelevant to the entity rating but relevant to the sector.

4

Diversification; Profitability; Financial Flexibility

Operating Environment; Sector Trend; Company's

Market Position; Diversification; Profitability

Human Rights, Community Relations,

Access & Affordability2

Employee Wellbeing 3

Exposure to Social Impacts

Group Structure 3 3



Board independence and effectiveness; ownership concentration

Complexity, transparency and related-party transactions

3

CREDIT-RELEVANT ESG SCALE

How to Read This Page

ESG scores range from 1 to 5 based on a 15-level color gradation. Red (5) is

most relevant and green (1) is least relevant.

The Environmental (E), Social (S) and Governance (G) tables break out the

individual components of the scale. The left-hand box shows the aggregate E, S,

or G score. General Issues are relevant across all markets with Sector-Specific

Issues unique to a particular industry group. Scores are assigned to each sector-

specific issue. These scores signify the credit-relevance of the sector-specific

issues to the issuing entity's overall credit rating. The Reference box highlights

the factor(s) within which the corresponding ESG issues are captured in Fitch's

credit analysis.

The Credit-Relevant ESG Derivation table shows the overall ESG score. This

score signifies the credit relevance of combined E, S and G issues to the

entity's credit rating. The three columns to the left of the overall ESG score

summarize the issuing entity's sub-component ESG scores. The box on the far

left identifies the [number of] general ESG issues that are drivers or potential

drivers of the issuing entity's credit rating (corresponding with scores of 3, 4 or 5)

and provides a brief explanation for the score.

Classification of ESG issues has been developed from Fitch's sector and sub-

sector ratings criteria and the General Issues and the Sector-Specific Issues

have been informed with SASB's Materiality Map.

2

1

Customer Welfare - Fair Messaging,

Privacy & Data Security3

GHG Emissions & Air Quality

Water & Wastewater Management

Empresas CMPC S.A. has exposure to extreme weather events which, in combination with other factors, impacts the rating.

S Scale

General Issues

GHG emissions; air quality

Energy management

Show ing top 6 issues

Diversification; Profitability; Financial Structure;

Financial Flexibility

Diversification; Sector Trend; Profitability; Financial

Structure; Financial Flexibility

2

2

1

5

4

Human rights; relationships with communities and/or land right

holders; access and affordability

Labor Relations & Practices 3

Energy Management





General Issues

Waste & Hazardous Materials

Management; Ecological Impacts

Exposure to Environmental Impacts

4

Overall ESG Scale

3

4

3

E ScaleReferenceSector-Specific Issues


Financial Flexibility4

3

5

4

Empresas CMPC S.A. has exposure to emissions regulatory risk but this has very low impact on the rating.

1

Empresas CMPC S.A.

3

2

Empresas CMPC S.A. has exposure to waste & impact management risk and supply chain management but this has very low impact on the rating.

Empresas CMPC S.A. has exposure to customer accountability risk or product quality/ethical marketing risk but this has very low impact on the rating.

Empresas CMPC S.A. has exposure to energy productivity risk which, in combination with other factors, impacts the rating.

Empresas CMPC S.A. has 2 ESG rating drivers and 10 ESG potential rating drivers

Empresas CMPC S.A. has exposure to labor relations & practices risk or supply chain management risk but this has very low impact on the rating.

Corporates


Empresas CMPC S.A.


Simplified Group Structure Diagram

Organizational Structure — Empresas CMPC S.A.(As of June 30, 2019)

IDR – Issuer Default Rating.


Empresas CMPC S.A.IDR — BBB/Stable

Inversiones CMPCIDR — BBB/Stable

Forestal Mininco

S.A.

CMPC Celulosa S.A. CMPC Papeles S.A. CMPC Tissue S.A.

100.00%

100.00% 100.00%

100.00%

CMPC Maderas S.A.

100.00%

Papeles Cordillera

S.A.

Cartulinas CMPC

S.A.

Chimolsa S.A. Edipac S.A.

Envases Impresos

Roble Alto S.A.

Forsac Argentina

Sorepa S.A.

Forsac Chile

Papelera del Plata

S.A.

Forestal Bosques

del Plata S.A.

Protisa Peru

Ipusa

Dypers Andina

Absormex

Melhoramentos

Protisa Ecuador

Forsac Peru S.A.

Forsac Mexico

Rio Grandense

100.00%

100.00% 100.00%

100.00% 50.00%

100.00%

100.00%

100.00%

100.00%

100.00%

50.00%

99.90%

100.00%

100.00%

99.61%

100.00%

100.00%

100.00%

100.00%

Chile

Argentina

Peru

Uruguay

Colombia

Mexico

Brazil

100.00%

Matte Group Chilean and Foreign Investors Chilean Pension Funds

56.00% 10.00%34.00%

Ecuador

Corporates


Empresas CMPC S.A.


Peer Financial Summary

Company Issuer Default Rating

Financial Statement Date

Operating EBITDA (Before

Income from Associates)

(USD Mil.)

Readily Available Cash and

Equivalents (USD Mil.)

Total Adjusted Debt with

Equity Credit (USD Mil)

Cash Flow from

Operations (USD Mil.)

Total Adjusted Net Debt/

Operating EBITDAR (x)

Empresas CMPC S.A. BBB

BBB 2018 1,816 968 3,960 1,117 1.6

BBB 2017 1,078 683 4,318 721 3.4

BBB+ 2016 970 596 4,315 505 3.8

Celulosa Arauco y Constitucion S.A.

BBB

BBB 2018 1,828 1,076 4,582 1,350 1.9

BBB 2017 1,302 590 4,337 1,067 2.9

BBB 2016 1,027 592 4,614 732 3.9

Masisa S.A. B

B+ 2018 82 104 550 80 5.4

B+ 2017 133 42 600 6 4.2

B+ 2016 119 64 731 52 5.6

Suzano S.A. BBB–

BBB– 2018 1,867 6,578 9,583 1,445 1.7

BBB– 2017 1,397 819 3,977 949 2.3

BB+ 2016 1,061 1,134 4,618 895 3.1

Klabin S.A. BB+

BB+ 2018 1,101 1,819 5,019 716 3.1

BB+ 2017 842 2,501 6,053 656 4.4

BBB– 2016 642 1,984 5,804 225 5.6

Eldorado Brasil Celulose S.A. BB–

B 2018 743 214 1,895 599 2.4

B 2017 540 180 2,444 283 4.3

B+ 2016 365 370 2,794 192 6.2


Corporates


Empresas CMPC S.A.


Reconciliation of Key Financial Metrics

(USD 000) 31 Dec 2018

Income Statement Summary

Operating EBITDA 1,816,183

+ Recurring Dividends Paid to Non-controlling Interest 0

+ Recurring Dividends Received from Associates 0

+ Additional Analyst Adjustment for Recurring I/S Minorities and Associates 0

= Operating EBITDA After Associates and Minorities (k) 1,816,183

+ Operating Lease Expense Treated as Capitalised (h) 0

= Operating EBITDAR after Associates and Minorities (j) 1,816,183

Debt & Cash Summary

Total Debt w ith Equity Credit (l) 3,959,886

+ Lease-Equivalent Debt 0

+ Other Off-Balance-Sheet Debt 0

= Total Adjusted Debt w ith Equity Credit (a) 3,959,886

Readily Available Cash [Fitch-Defined] 967,504

+ Readily Available Marketable Securities [Fitch-Defined] 0

= Readily Available Cash & Equivalents (o) 967,504

Total Adjusted Net Debt (b) 2,992,382

Cash-Flow Summary

Preferred Dividends (Paid) (f) 0

Interest Received 20,616

+ Interest (Paid) (d) (185,779)

= Net Finance Charge (e) (165,163)

Funds From Operations [FFO] ( c) 1,217,761

+ Change in Working Capital [Fitch-Defined] (100,949)

= Cash Flow from Operations [CFO] (n) 1,116,812

Capital Expenditures (m) (379,505)

Multiple applied to Capitalised Leases 0.0

Gross Leverage

Total Adjusted Debt / Op. EBITDAR* [x] (a/j) 2.2

FFO Adjusted Gross Leverage [x] (a/(c-e+h-f)) 2.9

Total Adjusted Debt/(FFO - Net Finance Charge + Capitalised Leases - Pref. Div. Paid)

Total Debt With Equity Credit / Op. EBITDA* [x] (l/k) 2.2

Net Leverage

Total Adjusted Net Debt / Op. EBITDAR* [x] (b/j) 1.6

FFO Adjusted Net Leverage [x] (b/(c-e+h-f)) 2.2

Total Adjusted Net Debt/(FFO - Net Finance Charge + Capitalised Leases - Pref. Div. Paid)

Total Net Debt / (CFO - Capex) [x] ((l-o)/(n+m)) 4.1

Coverage

Op. EBITDAR / (Interest Paid + Lease Expense)* [x] (j/-d+h) 9.8

Op. EBITDA / Interest Paid* [x] (k/(-d)) 9.8

FFO Fixed Charge Cover [x] ((c+e+h-f)/(-d+h-f)) 7.4

(FFO + Net Finance Charge + Capit. Leases - Pref. Div Paid) / (Gross Int. Paid + Capit. Leases - Pref. Div. Paid)

FFO Gross Interest Coverage [x] ((c+e-f)/(-d-f)) 7.4

(FFO + Net Finance Charge - Pref. Div Paid) / (Gross Int. Paid - Pref. Div. Paid)

* EBITDA/R after Dividends to Associates and M inorities

Source: Fitch Ratings, Fitch Solutions, Empresas CM PC S.A.

Corporates


Empresas CMPC S.A.


Fitch Adjustment Reconciliation

Reported

Values

Sum of Fitch

Adjustments

- CORP -

Factoring

Other

Adjustment

Adjusted

Values

(USD 000) 31 Dec 18

Income Statement Summary

Revenue 6,274,472 0 6,274,472

Operating EBITDAR 1,486,255 329,928 329,928 1,816,183

Operating EBITDAR after Associates and Minorities 1,486,255 329,928 329,928 1,816,183

Operating Lease Expense 0 0 0

Operating EBITDA 1,486,255 329,928 329,928 1,816,183

Operating EBITDA after Associates and Minorities 1,486,255 329,928 329,928 1,816,183

Operating EBIT 1,027,042 329,928 329,928 1,356,970

Debt & Cash Summary

Total Debt With Equity Credit 3,875,230 84,656 84,656 3,959,886

Total Adjusted Debt With Equity Credit 3,875,230 84,656 84,656 3,959,886

Lease-Equivalent Debt 0 0 0

Other Off-Balance Sheet Debt 0 0 0

Readily Available Cash & Equivalents 967,504 0 967,504

Not Readily Available Cash & Equivalents 0 0 0

Cash-Flow Summary

Preferred Dividends (Paid) 0 0 0

Interest Received 20,616 0 20,616

Interest (Paid) (185,779) 0 (185,779)

Funds From Operations [FFO] 1,059,438 158,323 158,323 1,217,761

Change in Working Capital [Fitch-Defined] (218,293) 117,344 117,344 (100,949)

Cash Flow from Operations [CFO] 841,145 275,667 117,344 158,323 1,116,812

Non-Operating/Non-Recurring Cash Flow 0 0 0

Capital (Expenditures) (379,505) 0 (379,505)

Common Dividends (Paid) (118,966) 0 (118,966)

Free Cash Flow [FCF] 342,674 275,667 117,344 158,323 618,341

Gross Leverage

Total Adjusted Debt / Op. EBITDAR* [x] 2.6 2.2

FFO Adjusted Leverage [x] 3.2 2.9

Total Debt With Equity Credit / Op. EBITDA* [x] 2.6 2.2

Net Leverage

Total Adjusted Net Debt / Op. EBITDAR* [x] 2.0 1.6

FFO Adjusted Net Leverage [x] 2.4 2.2

Total Net Debt / (CFO - Capex) [x] 6.3 4.1

Coverage

Op. EBITDAR / (Interest Paid + Lease Expense)* [x] 8.0 9.8

Op. EBITDA / Interest Paid* [x] 8.0 9.8

FFO Fixed Charge Coverage [x] 6.6 7.4

FFO Interest Coverage [x] 6.6 7.4

*EBITDA/R after Dividends to Associates and M inorities

Source: Fitch Ratings, Fitch Solutions, Empresas CM PC S.A.

Corporates


Empresas CMPC S.A.


FX Screener

About 52% of CMPC’s revenues are denominated in U.S. dollars and 29% in Chilean pesos and Brazilian reals, while

45% of costs are denominated in U.S. dollars and 40% in Chilean pesos and Brazilian reals. Depreciation of local

currencies positively affects the company’s margins and leverage.

Related Research and Criteria

Corporate Rating Criteria (February 2019)

Equity Rating Criteria in Chile (August 2018)

National Scale Ratings Criteria (July 2018)

Parent and Subsidiary Rating Linkage (July 2018)

Analysts

Fernanda Rezende

+55 21 4503-2619

[email protected]

Rodolfo Schmauk

+56 2 2499-3341

[email protected]

3,262,7252,006,230

1,256,495

471,297

435,377

35,920

3,092,6013,092,601

3,011,7472,452,059

559,688

52,366

532,127

0343,622

-136,139

-20%

0%

20%

40%

60%

80%

100%

Revenue* Costs* EBITDA Total debt* Total cash* Net debt*

Reported currency (ST) Reported currency (LT)

Foreign currency (ST) Foreign currency (LT)

Fitch FX Screener

Source: Fitch

(Empresas CMPC S.A. — BBB/Stable, Dec-18, USDth)

*Post hedge, absolute figures displayed are Fitch’s analytical estimates, based on publicly available information

https://www.fitchratings.com/site/re/10062582




mailto:%[email protected]

mailto:%[email protected]

Corporates


Empresas CMPC S.A.


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