EX-99.1 2 d741187dex991.htm EX-99.1 EX-99.1
Table of Contents

ARAUCO AND CONSTITUTION PULP INC

TABLE OF CONTENTS

 

Item         Page  

1.

   Ratio Analysis of the Consolidated Financial Statement      1   

2.

   Unaudited Consolidated Financial Statement      7   

3.

   Unaudited Consolidated Financial Income Statement      9   

4.

   Unaudited Consolidated Statement of Changes in Net Equity      11   

5.

   Unaudited Consolidated Statement of Cash Flow      12   

6.

   Unaudited Notes to the Consolidated Financial Statement      13   

7.

   Annex: Press Release   


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

1. ANALYSIS OF FINANCIAL POSITION

 

a) Statement of Financial Position

The principal components of assets and liabilities are at year end, as follows:

 

Assets

   03-31-2014
ThU.S.$
     12-31-2013
ThU.S.$
 

Current assets

     2,836,395         2,808,321   

Non-current assets

     11,735,280         11,685,074   
  

 

 

    

 

 

 

Total assets

     14,571,675         14,493,395   
  

 

 

    

 

 

 

Liabilities

   03-31-2014
ThU.S.$
     12-31-2013
ThU.S.$
 

Current liabilities

     1,674,719         1,682,016   

Non-current liabilities

     5,730,396         5,766,839   

Non –parent participation

     54,750         52,242   

Net equity attributable to parent company

     7,111,810         6,992,298   
  

 

 

    

 

 

 

Total net equity and liabilities

     14,571,675         14,493,395   
  

 

 

    

 

 

 

As of March 31, 2014, total assets increased US$78 million compared to December 31, 2013, equivalent to 0.54% of variation. This deviation is mainly attributable to an increase in the balance of trade receivables, inventories and property, plant and equipment, partially offset by a decrease in cash and cash equivalents.

Moreover, current liabilities decreased US$44 million mainly attributable to a decrease in financial liabilities due to payment of bond obligations offset by an increase in non-financial liabilities by increasing the provision of minimum dividend.

The main financial and operating indicators relating to balance are as follows:

 

Liquidity ratios

   03-31-2014      12-31-2013  

Current Liquidity (current assets / current liabilities )

     1.69         1.67   

Acid ratio (( current assets-inventories, biological assets) / Current liabilities )

     0.94         0.98   

Debt indicators

   03-31-2014      12-31-2013  

Debt to equity ratio (total liabilities / equity)

     1.03         1.06   

Short-term debt to total debt (current liabilities / total liabilities)

     0.23         0.23   

Long-term debt to total debt (non-current liabilities / total liabilities)

     0.77         0.77   
     03-31-2014      12-31-2013  

Financial expenses coverage ratio (earnings before Taxes + interest expense / interest expense)

     3.88         2.94   

 

1


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Activity ratio

   03-31-2014      12-31-2013  

Inventory turnover-times (cost of sales / inventories + current biological assets))

     2.63         3.17   

Inventory turnover-time (excluding biological assets) (Cost of sales /inventory)

     3.41         4.13   

Inventory permanence-days ( Inventories + biological assets)) /cost of sales)

     136.83         113.47   

Inventory permanence (excluding biological assets) (inventory / cost of sales)

     105.67         87.18   

As of March 31, 2014, the short-term debt represented 23% of total liabilities (23% as of December 31, 2013).

The ratio of financial expenses covered represents an increase of 2.94 to 3.88. This increase is mainly attributable to a greater proportional result for the 2014 period, compared to the same period of 2013.

 

b) Statements of income

Profit before Income Tax

Profit before Income Tax registered a profit of US$153 million compared to a profit of US$109 million in the same period of the previous year, positive variation of US$44 million. The effect is explained by the factors described in the following table:

 

Item

   Million
U.S.$
 

Gross margin

     91   

Other expenses by function

     (36

Other item

     (11
  

 

 

 

Net change in income before income tax

     44   
  

 

 

 

Gross Margin represents a profit of U.S.$427 million, U.S.$91 million higher compared to the previous period (U.S.$336 million) caused by a proportional increase in sales volumes and a net increase in sales prices.

 

2


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

ANALYSIS OF FINANCIAL POSITION, continued

The main indicators related to result accounts and the details of revenues and operation costs are as follows:

 

Revenues

   03-31-2014
ThU.S$
    03-31-2013
ThU.S$
 

Pulp

     548,471        501,315   

Sawn timber

     190,387        186,822   

Panels

     441,411        449,897   

Forestry

     35,821        41,737   

Other

     8,527        7,145   
  

 

 

   

 

 

 

Total revenues

     1,224,617        1,186,916   
  

 

 

   

 

 

 

Sales costs

   03-31-2014
ThU.S$
    03-31-2013
ThU.S$
 

Wood

     193,212        211,052   

Forestry work

     141,019        152,793   

Depreciation

     66,257        64,864   

Other costs

     397,390        422,280   
  

 

 

   

 

 

 

Total sales costs

     797,878        850,989   
  

 

 

   

 

 

 

Profitability index

   03-31-2014     03-31-2013  

Profitability on equity

     5.94        5.98   

Profitability on assets

     2.90        2.91   

Return on operating assets

     5.26        3.90   

Profitability ratios

   03-31-2014     03-31-2013  

Income per share (U.S.$) (1)

     0.92        0.79   

Income after tax (ThU.S.$) (2)

     104,242        89,222   

Gross margin (ThU.S.$)

     426,739        335,927   

Financial costs (ThU.S.$)

     (53,223     (56,405

 

(1) Earnings per share refer to the profit to net equity to parent company.
(2) Includes interest.

 

EBITDA

   03-31-2014
MThU.S.$
    03-31-2013
MThU.S.$
 

Gain (loss)

     105.5        93.5   

Finance cost

     53.2        56.4   

Financial Income

     (3.6     (6.2

Expenses for income tax

     47.6        15.9   

EBIT

     202.8        159.7   

Depreciation and amortization

     102.7        69.8   

EBITDA

     305.5        229.5   

Cost at fair value of the harvest

     69.0        72.5   

Gain from changes in fair value of biological assets

     (66.6     (67.6

Exchange difference

     (4.9     2.1   

Adjusted EBITDA

     303.0        236.5   

 

* 2014: Forest loss provision

2. MAIN SOURCES OF FINANCING

Arauco’s financing needs are mainly covered through the capital markets, with bond issuances and credits with banks and financial institutions serving as the main sources of financing. For short-term borrowing, Arauco is regulated by its liquidity policy which indicates the amounts and institutions from which it can borrow according to several conditions defined in the policy. In the case of long-term debt, corporate bond issuances in the local market and also in international markets are used as sources of new resources. Another source of long-term financing to credit corresponds mainly with banks and financial institutions around the world.

 

3


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

3. DIFFERENCE BETWEEN ECONOMIC VALUES AND BOOK ASSETS

Assets and liabilities are presented in the Financial Statements according to International Financial Reporting Standards and instructions issued by the Chilean Securities Commission.

We believe that there are no substantial differences between the economic value of our assets and the value reflected in these Financial Statements.

4. MARKET SITUATION

Pulp Division

The first quarter of 2014 followed the same path of the fourth quarter of 2013, with a good demand, that translated into steady prices. Long fiber showed an increase in prices during all the quarter and short fiber prices were steady or with small decreases during the same period, mainly explained by an increase in supply and not by a reduction of demand. World inventory levels rose during the first quarter of 2014, and short fiber increased 7 days from December 2013 to February 2014, while long fiber increased 2 days in the same period. The main reason for this was the startup of a pulp mill in Brazil.

In Asia there was an oversupply of short fiber pulp. Along with this oversupply, the paper market still has not reached demand levels that would allow increases in paper prices or increases in operating levels. This has stopped any possibility of an increase in short fiber prices. Short fiber prices decreased between 0% and 1.5%, depending on the Asian market and the supplier. On the other hand long fiber prices increased approximately 4.0% during this quarter, generating an even higher price spread between short and long fiber of U.S.$150/ton, which is an incentive to paper manufacturers to maximize the use of short fiber in their mixes.

The European paper market was stable, without major changes. There still was oversupply, low margins and producers trying to weather the storm, especially producers of printing and writing paper. This has resulted in more pressure for discounts in contracts from the beginning of year 2014. Usually discount increases are compensated by increases in list prices every January, but this year the increase in list prices was not possible in Europe, and there was a drop in net prices. Drops in short fiber prices during the first quarter of 2014 were between 1.0% and 2.0%, while long fiber prices were steady and in some cases there were small increases between 1.0% and 1.5%.

North American pulp demand increased with a better economy. Tissue and absorbent products were the main drivers of pulp demand which lead to small increases in prices. Another factor that should be considered was an issue in production due to bad weather and heavy snow storms, which impacted the movement of raw materials and made interruptions in some productive centers. The market for fluff pulp benefited from this situation. Latin America was steady with good demand and the highest prices worldwide.

 

4


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

During the first quarter production was at normal levels, with the exception of the Alto Paraná mill, in Argentina, which had some reductions in January due to some technical issues that have already been fixed.

Sawn Timber Division

The real-estate and construction markets in the United States were affected by a cold winter during the first quarter of 2014, closing the period with nearly 910,000 Housing Starts, which represented a drop of 5.0% when compared with the previous year. When compared with the last ten years average, the actual construction levels are still low. During the first quarter of this year molding prices were steady in the United States in comparison with the previous quarter.

On average all markets had a positive behavior during this first quarter, with higher demand and prices.

Sales from our Chilean operations were impacted by the port stoppage that affected the country during January of 2014.

Panels Division

Sales volume increased 1.8% in the first quarter of 2014 when compared with the first quarter of 2013, mainly explained by an increase in sales volume in the United States and Brazil, especially in the MDF market. When compared with the fourth quarter of 2013, sales volume decreased 2.7%, mostly explained by the port stoppages in Chile in the beginning of 2014.

Plywood products were the most affected by the port stoppages. Sales volume dropped 22.7% when compared to the first quarter of 2013 and decreased 7.8% when compared with the fourth quarter of 2013.

Sales volume of MDF increased 7.7%, when compared with the first quarter of 2013; mainly explained by higher sales volume in Brazil and the United States. When compared with the fourth quarter of 2013, sales volume remained steady.

Sales volume of PBO during the first quarter of 2014 remained steady when compared with the first quarter of 2013. Meanwhile, when compared with the fourth quarter of 2013, sales volume decreased 6.0%, mainly explained by the maintenance of the Teno mill, in Chile and lower sales volume in Brazil and Argentina.

 

5


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

5. ANALYSIS OF CASH FLOW

The main components of net cash flow in each period are as follows:

 

     03-31-2014
ThU.S.$
    12-31-2013
ThU.S.$
 

Positive (negative) Cash flow

    

Cash flow from operating activities

     102,097        150,311   

Cash flow from financing activities:

    

Loan and bond payments

     (80,524     (45,587

Dividend payments

     (66     (6,224

Cash flow from investment activities:

    

Incorporation and sale of property, plant and equipment

     (132,989     (139,337

Incorporation and sale of biological assets

     (52,568     (35,995

Dividends received

     —          10,162   

Others

     (202     (1,052
  

 

 

   

 

 

 

Positive Net cash flow (negative)

     (164,252     (67,722
  

 

 

   

 

 

 

The operating cash flow has a negative balance of U.S.$81 million in the current year, with differences with respect to the previous year (U.S. $52 million). Mainly due to higher borrowings in 2013 supplemented by lower payments in the same period 2013.

The flow of investment at the end of the current period had a greater negative balance of U.S.$ 186 million as compared to U.S.$ 166 million in 2013 mainly due to lower income from sales of property, plant and equipment, higher outlays for purchases of forests and plantations in the period of 2014 supplemented with dividend income in the period 2013, offset by lower disbursements for purchases of property, plant and equipment in 2014.

6. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of March 31, 2014, a ratio of fixed rate debt to total consolidated debt of approximately 78%, which it believes is consistent with industry standards. The Company does not engage in futures against variations in the selling prices of pulp and forest products because it believes that risks resulting from price variations are limited, in large part because the Company maintains one of the lowest cost structures in the industry.

The Company and most of its subsidiaries maintain their accounting records and prepare their financial statements in U.S. dollars. Both the accounts receivable and most financial liabilities are denominated in U.S. dollars or are covered by an exchange rate swap, as well as most of their revenues. As a result, exposure to changes in the exchange rate has decreased significantly.

In the report to the Interim Consolidated Financial Statements March 31, 2014, Note 23, a detailed analysis of the risks associated with the business of Arauco is available.

 

6


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

     Note      03-31-2014
ThU.S.$
     12-31-2013
ThU.S.$
 

Assets

        

Current Assets

        

Cash and cash equivalents

     5         505,471         667,212   

Other current financial assets

     23         2,028         3,089   

Other current non-financial assets

     25         204,508         188,964   

Trade and other current receivables

     23         794,299         711,678   

Accounts receivable from related companies

     13         8,513         8,243   

Current Inventories

     4         973,015         900,590   

Current biological assets

     20         295,479         256,957   

Current tax assets

        44,067         61,174   

Total Current Assets other than assets or disposal groups classified as held for sale

        2,827,380         2,797,907   

Non-Current Assets or disposal groups classified as held for sale

     22         9,015         10,414   

Total Current Assets

        2,836,395         2,808,321   

Non-Current Assets

        

Other non-current financial assets

     23         31,481         48,778   

Other non-current non-financial assets

     25         125,929         125,052   

Trade and other non-current receivables

     23         38,533         40,729   

Investments accounted for using equity method

     15-16         356,458         349,412   

Intangible assets other than goodwill

     19         96,708         99,651   

Goodwill

     17         89,596         88,141   

Property, plant and equipment

     7         7,235,772         7,137,467   

Non-current biological assets

     20         3,605,917         3,635,246   

Deferred tax assets

     6         154,886         160,598   

Total non-Current Assets

        11,735,280         11,685,074   

Total Assets

        14,571,675         14,493,395   

The accompanying notes are an integral part of these consolidated financial statements.

 

7


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

 

     Note      03-31-2014
ThU.S.$
    12-31-2013
ThU.S.$
 

Equity and liabilities

       

Liabilities

       

Current Liabilities

       

Other current financial liabilities

     23         850,378        893,605   

Trade and other current payables

     23         631,423        630,980   

Accounts payable to related companies

     13         12,505        14,406   

Other current provisions

     18         8,655        9,696   

Current tax liabilities

        3,182        4,472   

Current provisions for employee benefits

     10         3,685        3,814   

Other current non-financial liabilities

     25         164,891        125,043   

Total Current Liabilities

        1,674,719        1,682,016   

Non-Current Liabilities

       

Other non-current financial liabilities

     23         4,093,151        4,156,992   

Non-current Payables

        565        361   

Other non-current provisions

     18         27,424        24,167   

Deferred tax liabilities

     6         1,486,276        1,462,295   

Non-current provisions for employee benefits

     10         40,772        42,170   

Other non-current non-financial liabilities

     25         82,208        80,854   

Total non - current liabilities

        5,730,396        5,766,839   

Total liabilities

        7,405,115        7,448,855   

Equity

       

Issued capital

        353,618        353,618   

Retained earnings

        7,072,935        7,004,640   

Other reserves

        (314,743     (365,960

Equity attributable to parent company

        7,111,810        6,992,298   

Non-controlling interests

        54,750        52,242   

Total equity

        7,166,560        7,044,540   

Total equity and liabilities

        14,571,675        14,493,395   

The accompanying notes are an integral part of these consolidated financial statements.

 

8


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

CONSOLIDATED STATEMENTS OF INCOME

 

     Note      January-March  
        2014
ThU.S.$
    2013
ThU.S.$
 

Income Statement

       

Revenue

     9         1,224,617        1,186,916   

Cost of sales

     3         (797,878     (850,989

Gross profit

        426,739        335,927   

Other income

     3         77,697        84,777   

Distribution costs

     3         (116,685     (107,471

Administrative expenses

     3         (131,053     (131,635

Other expense

     3         (58,000     (21,373

Profit (loss) from operating activities

        198,698        160,225   

Finance income

     3         3,570        6,153   

Finance costs

     3         (53,223     (56,405

Share of profit (loss) of associates and joint ventures accounted for using equity method

     15         (879     1,494   

Exchange rate differences

        4,933        (2,063

Income before income tax

        153,099        109,404   

Income Tax

     6         (47,599     (15,889

Income from continuing operations

        105,500        93,515   

Profit (loss) from discontinued operations

       

Net Income

        105,500        93,515   

Net income attributable to

       

Net income attributable to parent company

        104,242        89,222   

Income attributable to non-controlling interests

        1,258        4,293   

Profit (loss)

        105,500        93,515   

Basic earnings per share

       

Earnings per share from continuing operations

        0.0009212        0.0007885   

Basic earnings per share

        0.0009212        0.0007885   

Earnings per diluted shares

       

Earnings per diluted share from continuing operations

        0.0009212        0.0007885   

Basic earnings per diluted share

        0.0009212        0.0007885   

The accompanying notes are an integral part of these consolidated financial statements.

 

9


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

     Note      January-March  
        2014
ThU.S.$
    2013
ThU.S.$
 

Profit (loss)

        105,500        93,515   

Components of other comprehensive income that will not be reclassified to profit or loss before tax:

       

Share of other comprehensive income of associates and joint ventures accounted for using equity method that will not be reclassified to profit or loss before tax

        (84     124   

Other Comprehensive Income that will not be reclassified to profit or loss before tax

        (84     124   

Components of other comprehensive income that will be reclassified to profit or loss before tax:

       

Exchange differences on translation

       

Gains (losses) on exchange differences on translation, before tax

     11         34,613        16,489   

Other Comprehensive Income before tax exchange differences on translation

        34,613        16,489   

Cash flow hedges

       

Gains (losses) on cash flow hedges, before tax

     23         22,597        2,202   

Other Comprehensive Income before tax Cash flow hedges

        22,597        2,202   

Other Comprehensive income that will be reclassified to profit or loss before tax

        57,210        18,691   

Income tax relating to cash flow hedges of other comprehensive income

     6-23         (4,616     (572

Other comprehensive income

        52,510        18,243   

Comprehensive income

        158,010        111,758   

Comprehensive Income attributable to

       

Comprehensive income, attributable to owners of parent company

        155,459        106,902   

Comprehensive income, attributable to non-controlling interests

        2,551        4,856   

Total comprehensive income

        158,010        111,758   

The accompanying notes are an integral part of these consolidated financial statements.

 

10


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

03-31-2014

   Issue
Capital
ThU.S.$
     Reserve of
exchange
differences
on
translation
ThU.S.$
    Reserve
of cash
flow
hedges
ThU.S.$
    Reserve
of
actuarial
gains or
losses
on
defined
benefit
plans
ThU.S.$
    Several
Other
Reserves
ThU.S.$
    Other
Reserves
ThU.S.$
    Retained
Earnings
ThU.S.$
    Equity
attributable
to owners
of parent
T.hU.S.$
    Non -
controlling
interests
ThU.S.$
    Total
Equity
ThU.S.$
 

Opening balance at 01/01/2014

     353,618         (339,105     (21,507     (6,384     1,036        (365,960     7,004,640        6,992,298        52,242        7,044,540   

Changes in Equity:

                     

Net income

                  104,242        104,242        1,258        105,500   

Other comprehensive income, net of tax

        33,320        17,981        —          (84     51,217          51,217        1,293        52,510   

Comprehensive income

     —           33,320        17,981        —          (84     51,217        104,242        155,459        2,551        158,010   

Dividends

                  (35,947     (35,947     (43     (35,990

Changes in equity

     —           33,320        17,981        —          (84     51,217        68,295        119,512        2,508        122,020   

Closing balance at 03/31/2014

     353,618         (305,785     (3,526     (6,384     952        (314,743     7,072,935        7,111,810        54,750        7,166,560   

12-31-2013

   Issue
Capital
ThU.S.$
     Conversion
Reserves
ThU.S.$
    Hedge
Reserves
ThU.S.$
    Reserve
of
actuarial
gains or
losses
on
defined
benefit
plans
ThU.S.$
    Several
Other
Reserves
ThU.S.$
    Other
Reserves
ThU.S.$
    Retained
Earnings
ThU.S.$
    Equity
attributable
to owners
of parent
T.hU.S.$
    Non -
controlling
interests
ThU.S.$
    Total
Equity
ThU.S.$
 

Opening balance at 01/01/2013

     353,176         (169,377     (45,110     —          (2,092     (216,579     6,754,725        6,891,322        74,437        6,965,759   

Increase (decrease) through Changes in Accounting policies

          (906     (3,070     906        (3,070     3,070        —            —     

Opening balance restated

     353,176         (169,377     (46,016     (3,070     (1,186     (219,649     6,757,795        6,891,322        74,437        6,965,759   

Changes in Equity:

                     

Comprehensive income

                     

Net income

                  89,222        89,222        4,293        93,515   

Other comprehensive income, net of tax

        15,926        1,630        —          124        17,680          17,680        563        18,243   

Comprehensive income

     —           15,926        1,630        —          124        17,680        89,222        106,902        4,856        111,758   

Dividends

                —          (29,206     (29,206     —          (29,206

Increase (decrease) for transfer and other changes

                —            —          (6,264     (6,264

Changes in equity

     —           15,926        1,630        —          124        17,680        60,016        77,696        (1,408     76,288   

Closing balance at 03/31/2013

     353,176         (153,451     (44,386     (3,070     (1,062     (201,969     6,817,811        6,969,018        73,029        7,042,047   

The accompanying notes are an integral part of these consolidated financial statements.

 

11


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     03-31-2014
ThU.S.$
    03-31-2013
ThU.S.$
 

STATEMENTS OF CASH FLOWS

    

Cash Flows from (used in) Operating Activities

    

Classes of cash receipts from operating activities

    

Receipts from sales of goods and rendering of services

     1,176,525        1,332,185   

Receipts from premiums and claims, annuities and other policy benefits

     0        29,819   

Other cash receipts from operating activities

     93,842        171,190   

Classes of cash payments

    

Payments to suppliers for goods and services

     (977,641     (1,127,742

Payments to and on behalf of employees

     (110,045     (127,638

Other cash payments from operating activities

     (20,980     (48,585

Interest paid

     (52,147     (65,214

Interest received

     4,320        6,013   

Income taxes refund (paid)

     (13,021     (19,359

Other (outflows) inflows of cash, net

     1,244        (358

Net Cash flows from Operating Activities

     102,097        150,311   

Cash flows (used in) investing activities

    

Proceeds from sale of property, plant and equipment

     11,206        27,898   

Purchase of property, plant and equipment

     (144,195     (167,235

Purchase of intangible assets

     (2,054     (1,049

Proceeds from sale of other long-term assets

     0        810   

Purchase of biological assets

     (52,568     (36,805

Dividends received

     0        10,162   

Other outflows of cash, net

     1,852        (3

Cash flows used in Investing Activities

     (185,759     (166,222

Cash flows from (used in) Financing Activities

    

Total loans obtained

     246,844        276,106   

Proceeds from short-term borrowings

     84,089        0   

Loans obtained in long term

     162,755        276,106   

Repayments of borrowings

     (327,368     (321,693

Dividends paid by the parent company

     (66     (6,224

Cash flows from (used in) Financing Activities

     (80,590     (51,811

Net increase (decrease) in Cash and Cash Equivalents before effect of exchange rate changes

     (164,252     (67,722

Effect of exchange rate changes on cash and cash equivalents

     2,511        (963

Net increase (decrease) of Cash and Cash equivalents

     (161,741     (68,685

Cash and cash equivalents, at the beginning of the period

     667,212        488,498   

Cash and cash equivalents, at the end of the period

     505,471        419,813   

The accompanying notes are an integral part of these consolidated financial statements.

 

12


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. PRESENTATION OF FINANCIAL STATEMENTS

Entity Information

Name of Reporting Entity

Celulosa Arauco y Constitución S.A. (the “Company” and together with its subsidiaries, “Arauco” or the “Company”), tax identification number 93,458,000-1, is a closely held corporation, that was registered in the Securities Registry (the “Registry”) of the Superintendency of Securities and Insurance (the “Superintendency”) under No. 042 on June 14, 1982. Forestal Cholguán S.A., subsidiary of Arauco, is also registered in the Registry under No. 030. Additionally, the Company is registered as a non-accelerated filer with the Securities and Exchange Commission of the United States.

The Company’s head office address is El Golf Avenue 150, floor 14 th, Las Condes, Santiago, Chile.

Arauco is principally engaged in the production and sale of forestry and timber products. Its main operations are focused on the following business areas: Pulp, Plywood and Fiberboard Panels, Sawn Timber and Forestry.

Arauco is controlled by Empresas Copec S.A., which owns 99.9779% of Arauco, and is registered in the Registry as No. 0028. Each of the above companies is subject to the oversight of the Superintendency.

The ultimate shareholders of Arauco are Mrs. Maria Noseda Zambra de Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi through the entity Inversiones Angelini y Cia. Ltda., which owns 63.4015% of the shares of AntarChile S.A., the controlling shareholder of our parent company Empresas Copec S.A.

Arauco’s Interim Consolidated Financial Statements were prepared on a going concern basis.

Presentation of Financial Statements

The Financial Statements presented by Arauco as of March 31, 2014 are:

 

    Consolidated Balance Sheets for the period between January 1 and March 31, 2014 and for the period ended December 31, 2013

 

    Consolidated Statements of Income for the periods between January 1 and March 31, 2014 and 2013.

 

    Consolidated Statements of Comprehensive Income for the periods between January 1 and March 31, 2014 and 2013.

 

    Consolidated Statements of Changes in Equity for the periods between January 1 and March 31, 2014 and 2013.

 

    Consolidated Statements of Cash Flows for the periods between January 1 and March 31, 2014 and 2013.

 

    Notes to the consolidated financial statements.

 

13


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Period covered by the Financial Statements

Period between January 1 and March 31, 2014.

Date of Approval of Financial Statements

These interim consolidated financial statements for the period between January 1 and March 31, 2014 were authorized and approved for issuance by the Board of Directors of the Company (the “Board”) at the Extraordinary Session N° 506 held on May 15, 2014.

Initials used in this report:

IFRS – International Financial Reporting Standards

IASB – International Accounting Standards Board

IAS – International Accounting Standards

IFRIC – International Financial Reporting Standards Interpretations Committee

ThUS$ – Thousands of U.S. dollars

UF – Inflation index-linked units of account

EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization

ICMS – Tax movement of inventories and services (Brazil)

Functional and Presentation Currency

Arauco and most of its subsidiaries has determined the United States (“U.S.”) Dollar as its functional currency since majority of its revenues from sales of its products are from exports denominated in U.S. Dollars, while its costs of sales are to a large extent related or indexed to the U.S. Dollar.

For the pulp operating segment, most of the sales are exports denominated in U.S. Dollars, and the costs are related mainly to plantation costs which are settled in U.S. Dollars.

For the sawmill, panel and forestry operating segments, although total sales include a mix of domestic and exports sales, the prices for the products are established in U.S. Dollars, as is also the case for the cost structure of the related raw materials.

In relation to cost of sales, although the costs of labor and services are generally billed and paid in local currency, these costs are not as significant as the costs of raw materials, which are driven mainly by global markets and therefore, influenced mostly by the U.S. Dollar.

The presentation currency of the consolidated financial statements is the U.S. Dollar.

Figures on these consolidated financial statements are presented in thousands of U.S. Dollar (ThUS$).

In these consolidated financial statements all relevant information required by IFRS has been presented.

 

14


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Additional Information Relevant to the Understanding of the Financial Statements

Up until September 2013 Arauco consolidated Fondo de Inversión Bío Bío and its subsidiary Forestal Río Grande S.A. into its financial statements because up until September 2013 these entities had been controlled by Arauco, as evidenced by these companies exclusive contracts with Arauco for timber supply, future purchases of land, and forest management.

Compliance and adoption of IFRS

The accompanying consolidated financial statements of Arauco present in all material respects its financial position, its results of operations and its cash flows in accordance with IFRS as issued by the IASB.

This presentation is required to give a faithful representation of the effects of transactions, as well as other events and conditions, according to the definitions and criteria established within the conceptual framework of IFRS for the recognition of assets, liabilities, income and expenses.

Summary of significant accounting policies

The accompanying interim consolidated financial statements as of March 31, 2014 were prepared in accordance with Arauco’s accounting policies, which have been consistently applied to all periods presented in these interim consolidated financial statements.

 

a) Basis for presentation of financial statements

The accompanying interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and they represent the integral, explicit and unreserved adoption of IFRS.

The interim consolidated financial statements have been prepared on the historical cost basis, except for biological assets and certain financial instruments which are measured at revalued amounts or at fair value at the end of each period as explained in the following significant accounting policies. Generally, historical cost is based on the fair value of the consideration given in exchange for goods and services.

 

b) Critical accounting estimates and judgments

The preparation of these consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the carrying amounts reported. These estimates are based on historical experience and various other assumptions that are considered to be reasonable. Actual results may differ from these estimates. Management believes that the accounting policies below are the critical judgments that have the most significant effect on the amounts recognized in the consolidated financial statements.

 

15


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

-Property, Plant and Equipment

In an asset acquisition, management values the acquired property, plant and equipment and their useful lives in consultation with third party experts.

The carrying amounts of property, plant and equipment are reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may be impaired. The recoverable amount of an asset is the higher of fair value less costs to sell and its value in use, with an impairment loss recognized whenever the carrying amount exceeds the recoverable amount. The value in use is calculated using a discounted cash flow model, which is most sensitive to the discount rate as well as the expected future cash inflows.

-Fair Value of Financial Instruments

The fair value of financial instruments that are not traded in an active market is determined by using internal valuation techniques. Arauco uses its judgment to select a variety of methods and makes assumptions that are mainly based on market conditions existing at each reporting date.

Detailed financial information about the fair value of financial instruments and sensitivity analysis are presented in Note 23.

-Biological Assets

The recovery of forest plantations is based on discounted cash flow models which mean that the fair value of biological assets is calculated using cash flows from continuing operations on a discounted basis, based on our sustainable forest management plans and the estimated growth of forests.

These discounted cash flows require estimates in growth, harvest, sales prices and costs. It is therefore important that management make appropriate estimates of future levels and trends for sales and costs, as well as conduct regular surveys of the forests to establish the volumes of wood available for harvesting and their current growth rates. The main considerations used to measure forest plantations are presented in Note 20, including a sensitivity analysis.

-Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. Arauco estimates the value either based on appraisals and/or the future cash flows expected to arise from the cash-generating unit and suitable discount rate in order to calculate present value.

-Employee benefits

The cost of defined employee benefits for termination of employment, as well as the present value of the obligation is determined using actuarial valuations. The actuarial valuations involve making assumptions about discount rates, staff turnover, future salary increases and mortality rates.

 

16


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

-Litigation and Contingencies

Arauco and its subsidiaries are subject to certain litigation proceedings. Future effects on Arauco’s financial condition resulting from such litigation are estimated by management, in collaboration with its legal advisors. Arauco recognizes provisions on each statement of financial position date and/or upon each substantial modification to an underlying claim of any such litigation. For a description of current litigations see Note 18.

 

c) Consolidation

The interim consolidated financial statements include all entities over which Arauco has the power to direct the relevant financial and operating activities, which is presumed to exist when Arauco holds more than one half of the voting rights of an entity so as to obtain benefits from its activities. Subsidiaries (including special purpose entities) are consolidated from the date on which control is obtained and up to the date that control ceases.

Specifically, a company controls an investee if, and only if, they have all of the following:

(a) power over the investee, i.e. the investor has existing rights which give it the ability to direct the relevant activities (the activities that significantly affect the investee’s returns)

(b) exposure, or rights, to variable returns from involvement with the investee; and

(c) the ability to use power over the investee to affect the amount of the investor’s returns.

IFRS sets out requirements on how to apply the control principle:

(a) in circumstances when voting rights or similar rights give an investor power, including situations where the investor holds less than a majority of voting rights and in circumstances involving potential voting rights.

(b) in circumstances when an investee is designed so that voting rights are not the dominant factor in deciding who controls the investee, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.

(c) in circumstances involving agency relationships.

(d) in circumstances when the investor has control over specified assets of an investee.

IFRS requires an investor to reassess whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

When preparing consolidated financial statements, an entity must use uniform accounting policies for reporting like transactions and other events in similar circumstances. Intragroup balances and transactions must be eliminated. Non-controlling interests in subsidiaries must be presented in the consolidated statement of financial position within equity, separately from the equity attributable to owners of the parent company.

The profit or loss of each component of other comprehensive income is attributed to owners of the parent company and the non-controlling interest, as appropriate. Total comprehensive income is attributed to the owners of the parent company and non-controlling interests even if the results of the non-controlling interest have a deficit balance.

 

17


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

If a subsidiary uses accounting policies different than those adopted in the consolidated financial statements for transactions and other events in similar circumstances, appropriate adjustments are made in the financial statements of subsidiaries to prepare consolidated financial statements to ensure compliance with Arauco’s accounting policies.

All intercompany transactions and unrealized gains and losses from subsidiaries have been fully eliminated from consolidated financial statements and non-controlling interests is presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent company.

The interim consolidated financial statements at the end of this period include the assets, liabilities, income and expenses of the subsidiaries shown in Note 13.

Certain consolidated subsidiaries have Brazilian Reales and Chilean Pesos as their functional currencies. For consolidation purposes, the financial statements of those subsidiaries have been prepared in accordance with IFRS and translated into the presentation currency as indicated in Note 1 (e) (ii).

 

d) Segments

Arauco has defined its operating segments according to its business areas, based on the products and services sold to its customers. This definition is consistent with the management, resource allocation and performance assessment made by key personnel responsible for making relevant decisions related to the Company’s operation. The Chief Operating Decision Maker (CODM) is the Chief Executive Officer who is responsible for making these decisions and it is supported by the Corporate Managing Directors of each segment.

Based on the aforementioned process, the Company has established operating segments according to the following business units:

 

    Pulp

 

    Panels

 

    Sawn Timber

 

    Forestry

Refer to Note 24 for detailed financial information by operating segment.

 

e) Functional currency

(i) Functional currency

All items in the financial statements of Arauco and each of its subsidiaries, associates and jointly controlled entities are measured using the currency of the primary economic environment in which each entity operates (the functional currency). The consolidated financial statements are presented in U.S. dollars, which is Arauco’s functional and presentation currency.

 

18


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

(ii) Translation to the presentation currency of Arauco

For the purposes of presenting consolidated financial statements, the assets and liabilities of Arauco’s operations in functional currencies different from Arauco’s are translated into U.S. dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange rate differences are recognized in other comprehensive income and accumulated in Other reserves within—equity.

(iii) Foreign Currency Transactions

Transactions in currencies other than the functional currency are recognized at the exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.

Profit or loss on transactions in currencies other than the functional currency resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognized in the statement of income, except those which are recorded in other comprehensive income and accumulated in equity such as cash flows hedging derivatives.

 

f) Cash and cash equivalents

Cash and cash equivalents include cash-in-hand, deposits held on demand at banks and other short term highly liquid investments with an original maturity of three months or less and which are subject to an insignificant risk of changes in value.

 

g) Financial Instruments

Financial assets

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

(i) Financial assets and liabilities measured at fair value through profit or loss

Financial assets measured at fair value through profit or loss are financial assets held for trading, or those designated as FVTPL. A financial asset is classified in this category if it is acquired principally for the purpose of selling it in the short term.

 

19


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

A financial asset is classified as held for trading if:

 

    it has been acquired principally for the purpose of selling it in the near term; or

 

    on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

 

    it is a derivative that is not designated and effective as a hedging instrument

 

    A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

 

    such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

 

    the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

 

    it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as at FVTPL.

Derivatives are also classified as held for trading unless they are designated and effective as hedging instruments. Assets in this category are classified as current assets and the obligation for these instruments is presented under other financial liabilities within the statement of financial position.

Regular purchases and sales of financial assets are recognized on the trade date, which is the date on which Arauco commits itself to purchase or sell the asset.

The financial assets at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the statement of income. They are subsequently measured at fair value with any gains or losses from changes in fair value recognized in profit or loss.

Interest Rate and Currency Swaps: Swaps are measured using the discounted cash flow method at a discount rate consistent with the risk of the operation.

Foreign Exchange and Interest Rate Forwards: These instruments are initially recognized at fair value at the date on which the contract is entered into and are subsequently remeasured at fair value at each reporting date. Forwards are recognized as assets when fair value is positive and, as liabilities when fair value is negative.

The fair value of foreign exchange forward contracts is calculated by reference to current forward exchange rates for contracts with similar maturities.

The fair value of interest rate forward contracts is calculated by reference to the difference of the existing interest rates between the interest rate contractually agreed and the market interest rate at the end of each reporting period.

 

20


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Mutual Funds: They are highly liquid instruments that are sold in the short term and are carried at their net asset value at the end of each period.

(ii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the intent and ability to hold to maturity. They are initially recorded at fair value and after initial recognition, held-to- maturity investments are measured at amortized cost using the effective interest method less any impairment

(iii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are classified as current assets, except for those with maturities more than 12 months after the reporting period, which are classified as non-current assets. Loans and receivables include trade and other receivables.

Loans and receivables are initially recognized at fair value and subsequently are measured at amortized cost using the effective interest rate method, less any impairment.

Repurchase Agreements: These are recognized at their initial investment cost plus accrued interest at the end of each reporting period. These contracts have maturities of less than 30 days.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’ and are initially recorded at fair value.

(i) Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.

A financial liability is classified as held for trading if:

 

    it has been incurred principally for the purpose of repurchasing it in the near term; or

 

    on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

 

    it is a derivative that is not designated and effective as a hedging instrument.

 

21


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

 

    such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

 

    the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

 

    it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the Finance income or Finance costs line item in the consolidated statements of income.

(ii) Other financial liabilities

Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments (including all fees and amounts paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

 

h) Derivative financial instruments

(i) Financial Derivatives—The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts, interest rate swaps and cross currency swaps. The group’s policy is that all derivative contracts are hedging contracts.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re measured at fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss unless the derivative is designated and effective as a hedging instrument under IAS 39, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

(ii) Embedded derivatives—The Company assesses the existence of embedded derivatives in financial instrument contracts. Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at FVTPL. Arauco has determined that no embedded derivatives currently exist.

(iii) Hedge accounting—The Group designates certain hedging instruments as either fair value hedges or cash flow hedges.

 

22


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, under IAS 39.

-Fair Value Hedges under IAS 39—Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged Item attributable to the hedged risk are recognized in profit or loss in the line item relating to the hedged item.

-Cash flow hedges under IAS 39—The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, and is included in the Finance costs line item in the consolidated statement of income. Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognized hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognized in other comprehensive income and accumulated In equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income and accumulated in equity at that time remains in equity and is recognized when the forecasted transaction is ultimately recognized in profit or loss. When a forecasted transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

 

i) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average cost method.

The cost of finished goods and works in process includes the cost of raw materials, direct labor, other direct costs and general overhead expenses, excluding interest expenses.

Initial costs of harvested wood are determined at fair value less cost of sale at the point of harvest.

Biological assets are transferred to inventories when forests are harvested.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

 

23


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

When market conditions result in the production costs of a product exceeding its net realizable value, the inventories are written-down to their net realizable value. This write-down also includes obsolescence amounts resulting from slow moving inventories and technical obsolescence.

Spare parts that will be consumed in a period of less than twelve months are presented in inventories and recognized as an expense when they are consumed.

 

j) Non-current assets held for sale

The Group classifies property, plant and equipment, intangible assets, investments in associates and groups subject to expropriation (groups of assets to be sold together with their directly associated liabilities) as non-current assets held for sale which as of the closing date of the statement of financial position are the subject of active sale efforts and for which the completion is estimated to be highly probable.

These assets or groups subject to expropriation are valued at the lower of the carrying amount or the estimated retail value less the costs to carry out the sale, and are no longer amortized from the time they are classified as non-current assets held for sale.

 

k) Business Combinations

Arauco applies the acquisition method to account for a business combination. This method requires the identification of the acquirer, determination of the acquisition date, recognition and measurement of the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; and recognition and measurement of goodwill or a gain from a bargain purchase. Identifiable assets acquired and liabilities assumed and any contingent liabilities in a business combination are initially measured at fair value at the acquisition date, except:

-deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12 Income Taxes and IAS 19 respectively;

-liabilities or equity instruments related to share-based payment arrangements of the acquire or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquire are measured in accordance with IFRS 2 at the acquisition date (see note 3.16.2); and

-assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with such standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the statement of income.

 

24


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For purposes of impairment testing, goodwill in a business combination is allocated as of the acquisition date to the cash generating unit of the group or groups of cash generating units expected to benefit from the synergies of the combination irrespective of whether other assets or liabilities of the acquire are allocated to those units or groups of units.

Acquisition-related costs are accounted for as expenses when they are incurred, except for costs to issue debt or equity securities which are recognized in accordance with IAS 32 and IAS 39.

A parent will present non-controlling interests in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent company.

Changes in the ownership interest of a parent in its subsidiary that do not result in a loss of control are treated as equity transactions. Any difference between the amount which non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the parent company. No adjustment is made to the carrying amount of goodwill, neither gains or losses are recognized in the income statement.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may initially be measured either at fair value or at the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. The choice is made on a transaction-by-transaction basis.

Arauco measures the fair value of the acquired company in the business combination on a step by step basis, recognizing the effects of change in participation of the profit or loss in the statement of income.

If the initial accounting for a business combination is not completed by the end of the reporting period in which the combination occurs, Arauco reports preliminary amounts for the items for which the accounting is incomplete. During the measurement period (no more than one year), these preliminary amounts are retrospectively adjusted, or additional assets or liabilities are recognized to reflect new information about facts and circumstances that existed at the acquisition date, if known, would have affected the amounts recognized at that date.

Business combinations that are common control transactions are accounted using as reference the pooling of interest. Under this method, assets and liabilities related to the transaction carries over the previous carrying values. Any difference between assets and liabilities included in the consolidation and the consideration transferred, is accounted in equity.

 

l) Investments in associates and joint arrangements

Associates are entities over which Arauco exercises significant influence, but not control. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

 

25


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Joint arrangement is defined as an entity over which there is joint control, which exists only when the decisions about strategic of activities, both financial and operational, require the unanimous consent of the parties sharing control.

Investments in joint arrangements are classified as a joint venture or as a joint operation. A joint operation is a joint arrangement in which the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement in which the parties that have joint control of the arrangement (i.e., participants in a joint venture) have rights to the net assets of the arrangement.

Investments in associates and joint ventures are accounted for using the equity method and are initially recognized at cost. Their carrying amount is increased or decreased to recognize Arauco’s share of the profit or loss and other comprehensive income (exchange rate differences on translation to the presentation currency) of the associate or joint venture. Dividends received are recognized by deducting the amount received from the carrying amount of the investment. Arauco’s investment in associates includes goodwill.

The investments in joint operations recognize the assets, liabilities and results of operations in relation to Arauco’s ownership percentage.

If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the income statement.

Investments in associates and joint ventures are presented in the consolidated statement of financial position in the line item “Investments accounted for using equity method”.

If Arauco’s share of losses of an associate or joint venture equals or exceeds its interest in the associate or joint venture, Arauco discontinues recognizing its share of further losses. After Arauco’s carrying value in the investee is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that Arauco has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or joint venture subsequently reports profits, Arauco resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized.

 

m) Intangible assets

After initial recognition, intangible assets with finite useful lives are carried at cost less any accumulated amortization and impairment losses.

Amortization of an intangible asset with a finite useful life is allocated over the asset’s useful life. Amortization begins when the asset is available for use, i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

(i) Computer Software

Computer software licenses are capitalized in terms of the costs incurred to acquire and make them compatible with existing software. These costs are amortized over the estimated useful lives of the software.

 

26


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

(ii) Water Rights, Easements and Other Rights

This item includes water rights, easements and other acquired rights recognized at historical cost which have indefinite useful lives as there is no foreseeable limit to the period over which these assets are expected to generate future cash flows. These rights are not amortized, but are tested for impairment at least annually, or when there is any indication that the assets might be impaired.

(iii) Customers and trade relations with customers

Correspond to the valuation over the time of the established relationship with customers, from the sale of products and services through its sales team. These relations will materialize in sales orders, which generate revenue and cost of sales. The useful life has been determined to be 15 years.

 

n) Goodwill

Goodwill generated in the acquisition of an entity is measured as the excess of the sum of the consideration paid, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is not amortized but is tested for impairment on annual basis.

The goodwill generated on acquisitions of foreign companies, is controlled in the functional currency of such foreign company.

Goodwill recognized for the acquisition of the subsidiary Arauco do Brasil S.A. whose functional currency is the Brazilian Real, is translated into U.S. Dollars at the closing exchange rate. At the date of these financial statements, the only change in the carrying amount of goodwill in Brazil is related to the net exchange rate differences on translation.

 

o) Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost includes expenditures that are directly attributable to the acquisition of the assets.

Subsequent costs, such as improvements and replacement of components, are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Arauco and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized from property, plant and equipment. All other repairs and maintenance costs are expensed in the period in which they are incurred.

Arauco capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets as part of the cost of those assets, until the assets are ready for their intended use (see Note 12).

Depreciation is calculated by components using the straight-line method.

 

27


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

The useful lives of the items of property, plant and equipment is estimated according to the expected use of the assets.

The residual values and useful lives of assets are reviewed and adjusted, if appropriate, annually.

 

p) Leases

Arauco applies IFRIC 4 to assess whether an arrangement is, or contains, a lease. Leases of assets in which Arauco substantially holds all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.

Finance leases are initially recognized at the lower of the fair value at the inception of the lease of the leased property and the present value of the minimum lease payments.

When assets are leased under a finance lease, the present value of lease payments are recognized as financial account receivables. Finance income, which is the difference between the gross receivable and the present value of such amount, is recognized as the interest rate of return.

Leases in which substantially all risks and rewards are not transferred to the lessee are classified as operating leases. Payments under operating leases (net of any incentives received from the lessor) are recognized as an expense on a straight-line basis over the lease term.

 

q) Biological Assets

IAS 41 requires that biological assets, such as standing trees, are measured at fair value in the statement of financial position. Forestry plantations are accounted for at fair value less costs to sell, based on the presumption that fair values of these assets can be measured reliably.

The measurement of forestry plantations is based on discounted cash flow models whereby the fair value of the biological assets is determined using estimated future cash flows from continuing operations calculated using our sustainable forest management plans and including the estimated growth of the forests. This valuation is performed on the basis of each identifiable farm block and for each type of tree.

The measurement of new forestry plantations made during the current year, is made at cost, which corresponds to the fair value at that date. After twelve months, the valuation methodology used is that explained in the preceding paragraph.

Biological assets shown as current assets correspond to those forestry plantations that will be harvested in the short term.

Biological growth and changes in fair value of forestry plantations are recognized in the line item Other income in the consolidated statement of income.

The Company holds fire insurance policies for its forestry plantations which, together with company resources and efficient protection measures for these plantation assets allow financial and operational risks to be minimized.

 

28


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

r) Income tax expense and deferred income tax assets and liabilities.

The tax liabilities are recognized in the financial statements based on the determination of taxable income for the year and calculated using the tax rates in force in the countries where Arauco operates.

Deferred income tax is recognized using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and that are expected to apply when the related deferred tax asset is realized or the deferred income tax liability is settled.

The goodwill arising on business combinations does not give rise to deferred tax.

The deferred tax assets and tax credits are generally recognized for all deductible temporary differences to the extent that it is probable that future taxable profit will be available against which those deductible temporary differences can be utilized.

 

s) Provisions

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period.

 

t) Revenue recognition

Revenues are recognized when Arauco has transferred the risks and rewards of ownership to the buyer and Arauco retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. This means that generally revenues are recorded upon delivery of goods to customers in accordance with the agreed terms of delivery.

(i) Revenue recognition from the Sale of Goods

Revenue from the sale of goods is recognized when Arauco has transferred to the buyer the significant risks and rewards of ownership of the goods, when the amount of revenue can be reliably measured, when Arauco does not retain any managerial involvement over the goods sold and when it is probable that the economic benefits associated with the transaction will flow to Arauco and the costs incurred in respect of the transaction can be measured reliably.

Sales are recognized in terms of the price agreed to in the sales contract, less any volume discounts and estimated product returns at the date of the sale. Volume discounts are evaluated in terms of estimated annual purchases. There is no significant financing component given that receivables from sales are collected within a short period, which is in line with market practices.

 

29


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

(ii) Revenue recognition from Rendering of Services

When the outcome of a transaction involving the rendering of services can be reliably estimated, revenue is recognized by reference to the stage of completion of the transaction at the date of the reporting period, and when it is probable that the economic benefits associated with the transaction will flow to the Arauco.

Arauco mainly provides power supply services which are transacted principally in the spot market of the Sistema Interconectado Central (Central Interconnected System). According to current regulations, the prices on that market called “Marginal Costs” are calculated by the Centro de Despacho Económico de Carga del Sistema Interconectado Central (CDEC – SIC) (Economic Load Dispatch Center of the Central Interconnected System) and are generally recognized in the period in which the services are rendered.

Electrical power is generated as a by-product of the pulp and wood process and is a complementary business to it, which is initially supplied to the group’s subsidiaries and any surplus is sold to the CDEC-SIC.

Arauco provides other non-core services such as port services and pest control whose revenues are derived from fixed price service contracts, generally recognized during the period of the service contract on a straight-line basis over the term of the contract.

Revenues from operating segments mentioned in Note 24 are measured in accordance with the policies indicated in the preceding paragraphs.

Revenues from inter-segment sales (which are made at market prices) are eliminated in the consolidated financial statements.

 

u) Minimum dividend

Article No. 79 of the Chilean Corporations Law states that, unless otherwise unanimously agreed by the shareholders, corporations must distribute annually at least 30% of net income for the current year as cash dividend to shareholders determined in proportion to their shares or in the proportion established in the by-laws for preferred shares, if any, except where necessary to absorb accumulated losses from prior years.

The General Shareholders’ Meeting of Arauco agreed to distribute annual dividends at 40% of net distributable income, including an interim dividend to be distributed at year end. Dividends payable are recognized as a liability in the financial statements in the period when they are declared and approved by the Arauco’s shareholders or when arises the corresponding present obligation based on existing legislation or distribution policies established by the Shareholders’ Meeting.

The interim and final dividends are recorded in equity upon their approval by the Company’s Board of Directors and the shareholders.

Dividends payable are presented in the line item “Other current non financial liabilities” in the consolidated statement of financial position.

Dividends paid are not deductible for income tax purposes.

 

30


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

v) Earning per share

Basic earnings per share are calculated by dividing the net income for the period attributable to the parent company by the weighted average number of ordinary shares outstanding during the period, excluding the average number of shares in the Company held by a subsidiary, if such circumstance exists.

Arauco has not performed any type of transaction with a potential dilutive effect that would cause diluted earnings per share to be different from basic earnings per share.

 

w) Impairment

Non-financial Assets

The recoverable amount of property, plant and equipment and other assets with finite useful lives are measured whenever there is any indication that the assets have suffered an impairment loss. Among the indications to consider as evidence of impairment are significant declines in the assets’ market value, significant adverse changes in the technological environment, obsolescence or physical damages of assets and changes in the manner in which the asset is used or expected to be used). Arauco evaluates at the end of each reporting period whether there is any evidence of the indications above mentioned.

For this evaluation, assets are grouped at the lowest level of group of assets that generates cash flows independently.

Goodwill and intangible assets with indefinite useful life are tested annually for impairment or whenever circumstances indicate it. The recoverable amount of an intangible asset is the higher of its fair value less costs of disposal and its value in use. An impairment loss is recognized whenever the carrying amount exceeds the recoverable amount.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

Except for goodwill, a previously recognized impairment loss is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. Impairment losses are reversed so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. An impairment loss recognized for goodwill is not reversed in subsequent periods.

For the purposes of assessing impairment losses, assets are grouped at the lowest level for which there is identifiable cash flows separately for each cash-generating unit. Non-financial assets, other than goodwill, which had suffered an impairment loss, are reviewed at the end of each reporting period whether there is any indication that an impairment loss previously recognized may no longer exists or has decreased.

 

31


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

“Cash-generating units” are the smallest identifiable groups of those cash inflows that are largely independent of the cash inflow from other assets or groups of assets.

Goodwill is allocated to cash-generating units for impairment testing purposes. The allocation is made between cash-generating units or groups of cash generating units expected to benefit from the synergies of the combination.

Financial Assets

At the end of each reporting period, an evaluation is performed in order to identify whether there is any objective evidence that a financial asset or a group of financial assets may have been impaired. Financial assets are impaired only when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of a financial asset, the estimated future cash flows of the financial asset have been affected. Impairment losses are recognized in the consolidated statement of income.

The allowance for doubtful accounts is established when there is objective evidence that Arauco will not receive payments under the original sale terms. An allowance is made when the customer is a party to a bankruptcy court agreement or cessation of payments, and is written-off when Arauco has exhausted all levels of recovery of the receivable in a reasonable time.

The allowance for doubtful accounts is measured as the difference between the carrying amount of receivables and the present value of estimated future cash flows. The carrying amount of the receivable is reduced through the use of the allowance. If the impairment loss decreases in later periods, it is reversed either directly or by adjusting the provision for doubtful accounts, with effect in profit or loss.

 

x) Employee Benefits

Arauco has severance payment obligations arising from voluntary termination of employment. These are paid to certain employees that have been employed by the Company for more than five years in accordance with conditions established within collective or individual employment contracts.

This is an estimate of the years of service-based severance payments to be recognized as a future termination payment liability, in accordance with contracts between Arauco and its employees and pursuant to actuarial valuation criteria for this type of liability. These obligations are considered a defined benefit plan.

The main factors considered for calculating the actuarial value of severance payments obligation for years of service are employee turnover, salary increases and life expectancy of the workers included in this benefit.

Actuarial gains and losses are recognized in other comprehensive income in the year they are incurred.

These obligations are treated as post-employment benefits.

 

32


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

y) Employee Vacations

Arauco recognizes the expense for employee vacation according to labor legislation in each country on an accrual basis.

This obligation is presented in the line item “Trade and Other payables” in the consolidated statement of financial position.

 

z) Recent accounting pronouncements

At the date of issuance of these interim consolidated financial statements, the following accounting pronouncements were issued by the IASB:

 

Amendments and

improvements

  

Contents

  

Mandatory application
for annual periods
beginning on or

IFRS 9   

Financial Instruments

 

Issued in December 2009, amending the classification and measurement of financial assets.

 

In November 2010 it was also amended to include treatment and classification of liabilities. Early adoption is permitted.

 

Levies

   January 1, 2015
IFRIC 21    Guides about when to recognize a liability for a government imposed levy whether for those recorded in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and for those liens whose existence and amount is certain.    January 1, 2014
IAS 19   

Employee Benefits

 

Clarifies the requirements related to the way in which contributions from employees or others which are linked to the service must be attributed to periods of service.

   July 1, 2014
IAS 32   

Offsetting of financial assets and liabilities

 

The amendments clarify the requirements for offsetting financial assets and financial liabilities in order to eliminate inconsistencies in the implementation of the current offsetting criteria in IAS 32. The Standard is applicable for annual periods beginning on or after January 1, 2014 and early adoption is permitted.

   January 1, 2014
Amendments to IFRS 12, IFRS 10, IAS 27    Investment Entities Consolidated Financial Statements, Disclosure of Interests in Other Entities and Separate Financial Statements.    January 1, 2014
IAS 36    Impairment of Assets, Disclosures of the recoverable amount for nonfinancial assets    January 1, 2014
IAS 39    Financial Instruments: Recognition and Measurement-Novation of derivatives and continuation hedge accounting    January 1, 2014
Annual improvements 2010-2012-Amendments to IFRS 7    IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 38, IAS 24    July 1, 2014
Annual Improvement 2011-2013-Amendments to IFRS 4    IFRS 1, IFRS 3, IFRS 13, IAS 40    July 1, 2014

 

33


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Arauco believes that the adoption of these standards, amendments and interpretations will have no significant impact on its consolidated financial statements of the Company in the period of initial application. We are in the process of assessing the impact on the valuation and disclosures associated with these modifications.

NOTE 2. ACCOUNTING POLICIES AND CHANGES IN ACCOUNTING ESTIMATES

 

1) Changes in Accounting Policies

The accounting policies have been developed in accordance with the effective IFRS as of March 31, 2014 and have been consistently applied to all periods presented in these interim consolidated financial statements.

 

2) Changes in the Estimates

There have been no changes in the treatment of accounting policies for the same period last year.

 

34


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 3. DISCLOSURE OF OTHER INFORMATION

 

a) Disclosure of Information on Issued Capital

At the date of these financial statements the share capital of Arauco is ThUS$ 353,618.

In 2013, as a result of the merger of Celulosa Arauco y Constitución S.A. and Forestal Viñales S.A as part of the reorganization of the forestry companies in Chile, a capital increase of ThUS$442 was realized (Note 14).

 

     03-31-2014    12-31-2013

Description of Ordinary Capital Share Types

   100% of Capital corresponds to
ordinary shares

Number of Authorized Shares by Type of Capital in Ordinary Shares

   113,159,655

Nominal Value of Shares by Type of Capital in Ordinary Shares

   ThU.S.$0.0031210 per share

Amount of Capital in Shares by Type of Ordinary Shares that Constitute Capital

   ThU.S.$353,618

Number of Shares Issued and Fully Paid by Type of Capital in Ordinary Shares

   113,159,655

 

b) Dividends paid

The interim dividend paid each year is equivalent to 20% of the distributable net income calculated as of the end of September of each year and is presented in the consolidated statement of changes in equity.

The final dividend paid each year corresponds to the difference between the 40% of prior year distributable net income and the amount of the interim dividend paid at the end of the immediately preceding fiscal year.

The minimum dividend provision corresponding to the year 2014 in an amount of ThU.S.$35,947 (ThU.S.$29,206 as of March 31, 2013) is presented in the consolidated statement of changes in equity.

As of March 31, 2014 there was no dividend payment.

The following are the dividends paid and per share amounts during the years 2013:

 

Detail of Dividend Paid, Ordinary Shares   
Dividend Paid    Interim Dividend
Type of Shares for which there is a Dividend Paid    Ordinary Shares

Date of Dividend Paid

   12-10-2013

Amount of Dividend

   ThU.S.$ 63,388

Number of Shares for which Dividends are Paid

   113,159,655

Dividend per Share

   U.S.$0.56016
Detail of Dividend Paid, Ordinary Shares   
Dividend Paid    Final Dividend
Type of Shares for which there is a Dividend Paid    Ordinary Shares

Date of Dividend Paid

   05-08-2013

Amount of Dividend

   ThU.S.$ 47,017

Number of Shares for which Dividends are Paid

   113,152,446

Dividend per Share

   U.S.$0.41552

 

35


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

c) Disclosure of Information on Reserves

Other Reserves

Other reserves consist of reserves of exchange differences on translation, reserves of cash flow hedges and other reserves.

Arauco does not have any restrictions associated with these reserves.

Reserves of exchange differences on translation

Reserves of exchange differences on translation correspond to exchange differences relating to the translation of the results and net assets of Arauco’s subsidiaries whose functional currency is other than Arauco’s presentation currency.

Reserves of cash flow hedges

Reserves of cash flow hedges correspond to the portion of mark to market adjustments of outstanding cash flow hedges at the end of each reporting period.

Reserve of Actuarial Profits or Losses in Defined Benefit Plans

This corresponds to changes in the present value of the obligation for defined benefits resulting from experience adjustments (the effect of the differences between the previous actuarial assumptions and the events that occurred within the context of the plan) and the effects of the changes in the actuarial assumptions.

Other reserves

This mainly corresponds to the share of other comprehensive income of investments in associates and joint ventures.

 

36


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

d) Disclosures of other information

The table below sets forth other income, other expenses, finance income, finance costs and share of profit (loss) of associates and joint ventures as of March 31, 2014 and 2013:

 

     January - March  
     2014     2013  
     ThU.S.$     ThU.S.$  

Classes of Other Income

    

Other Income, Total

     77,697        84,777   

Gain from changes in fair value of biological assets (See note 20)

     66,613        67,609   

Net income from insurance compensation

     —          1,486   

Revenue from export promotion

     979        1,110   

Leases received

     423        141   

Gain on sales of assets

     6,063        778   

Gain on sales of assets classified as held for sale

     —          8,967   

Other operating results (sale materials and waste, rent of easements, income tax recovery)

     3,619        4,686   

Classes of Other Expenses by activity

    

Total of other expenses by activity

     (58,000     (21,373

Depreciation

     (369     (153

Expenses judgment

     (1,035     (1,163

Impairment provision properties, plants and equipment and others

     (3,750     (2,212

Plants stoppage operating expenses

     (535     (3,391

Expenses projects

     (8,334     (2,581

Loss of assets

     (15     (1,975

Loss of forest due to fires

     (30,178     (72

Other Taxes

     (1,516     (1,843

Research and development expenses

     (811     (565

Compensation and eviction

     (2,117     (518

Fines, readjustments and interest

     (100     (100

Other expenses (cost of projects and studies, donations, fines, readjustments, repayments insurance )

     (9,240     (6,800

Classes of financing income

    

Financing income, total

     3,570        6,153   

Financial income from mutual funds—deposits

     2,254        1,725   

Financial income resulting from swap—forward

     190        2,792   

Other financial income

     1,126        1,636   

Classes of financing costs

    

Financing costs, Total

     (53,223     (56,405

Interest expense, Loans banks

     (6,000     (6,555

Interest expense, Bonds

     (39,319     (44,034

Interest expense, financial instruments

     (3,715     (2,602

Other financial costs

     (4,189     (3,214

Classes of Participation in Income (Loss) of associates and joint ventures accounted for using the Equity Method

    

Total

     (879     1,494   

Investments in associates

     (1,404     1,393   

Joint ventures

     525        101   

 

37


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Below is the Balance of Expenses by nature:

 

     January - March  
     2014      2013  

Cost of sales

   ThU.S.$      ThU.S.$  

Timber

     193,212         211,052   

Forestry labor costs

     141,019         152,793   

Depreciation

     66,257         64,864   

Maintenance costs

     61,956         52,553   

Chemical costs

     121,733         121,116   

Sawmill Services

     28,510         44,237   

Others Raw Materials

     19,232         24,829   

Indirect costs

     35,526         54,134   

Energy and fuel

     42,970         45,561   

Cost of electricity

     25,884         21,597   

Wage and salaries

     61,579         58,253   

Total

     797,878         850,989   

 

     January - March  
     2014      2013  

Distribution cost

   ThU.S.$      ThU.S.$  

Salling costs

     8,178         8,769   

Commissions

     3,791         3,865   

Insurance

     1,134         1,527   

Provision for doubtful accounts receivable

     65         (18

Other selling costs

     3,188         3,395   

Shipping and freight costs

     108,507         98,702   

Port services

     6,165         6,028   

Freights

     88,560         81,836   

Other shipping and freight costs

     13,782         10,838   

Total

     116,685         107,471   
     January - March  
     2014      2013  

Administrative expenses

   ThU.S.$      ThU.S.$  

Wage and salaries

     52,516         59,253   

Marketing, advertising, promotion and publications expenses

     2,435         2,077   

Insurance

     8,203         10,451   

Depreciation and amortization

     5,500         3,558   

Computer services

     6,703         3,680   

Lease rentals (offices, warehouses and machinery)

     2,108         4,175   

Donations, contributions, scholarships

     1,940         2,146   

Fees (legal and technical advisories)

     11,448         11,494   

Property taxes, patents and municipality rights

     5,730         3,856   

Other administration expenses (travel within and outside the country, cleaning services, security, basic services)

     34,470         30,945   

Total

     131,053         131,635   

 

            January - March  
            2014      2013  

Expenses for

   Note      ThU.S.$      ThU.S.$  

Depreciations

     7         69,023         68,968   

Employee benefits

     10         143,130         125,042   

Amortization

     19         3,543         867   

 

38


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

e) Auditor Fees and Number of Employees (Not audited)

At the end of this period, the auditor fees and number of employees are follows:

 

     03-31-2014  

Auditors fees

   ThU.S.$  

Audit services

     699   

Other services

  

Tax services

     214   

Others

     141   

TOTAL

     1,054   
Number of employees    No.  
     14,161   

NOTE 4. INVENTORIES

 

     03-31-2014      12-31-2013  

Components of Inventory

   ThU.S.$      ThU.S.$  

Raw materials

     99,384         93,895   

Production supplies

     108,300         103,698   

Works in progress

     100,875         107,180   

Finished goods

     520,666         453,762   

Spare Parts

     143,790         142,055   

Total Inventories

     973,015         900,590   

Inventories recognized as cost of sales at March 31, 2014 were ThU.S.$796,325 (ThU.S.$848,917 at March 31, 2013).

In order to have the inventories recorded at net realizable value at March 31, 2014, there has been a net increase of inventories associated with lower provision for obsolescence of ThU.S.$413 (increased provision ThU.S.$ 224 at March 31, 2013).

At March 31, 2014 there were penalties of inventory of ThU.S.$136. At March 31, 2013 there were no penalties of inventory to report.

The allowance of obsolescence is calculated based on the conditions of sale of products and age of inventory (inventory turnover).

No inventories have been pledged as security for liabilities at the end of each reporting period.

Agricultural Products

Agricultural Products are mainly forestry products that are intended for sale in the normal course of our operations and are measured at fair value less costs to sell at the point of harvest at the end of each reporting period Agricultural products are classified as raw materials within the line item inventories.

 

39


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 5. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, bank checking account balances, time deposits, repurchase agreements and mutual funds. They are short-term highly liquid investments that are readily convertible to known amounts of cash, and are subject to an insignificant risk of changes in value.

The investment objective of time deposits and repurchase agreements is to maximize in the short-term the amounts of cash surpluses. These instruments are permitted under Arauco’s Investment Policy which allows investing in fixed income securities. These instruments have a maturity of less than three months from the date of acquisition.

Arauco invests in local and international mutual funds in order to maximize the returns of cash surpluses denominated in Chilean Pesos or in foreign currencies such as U.S. Dollars or Euros. These instruments are permitted under Arauco’s Investment Policy.

As of the date of these consolidated financial statements, there are no amounts of cash and cash equivalents with restrictions on use.

 

     03-31-2014      12-31-13  

Components of Cash and Cash Equivalents

   ThU.S.$      MUS$  

Cash on hand

     442         330   

Bank checking account balances

     165,390         155,208   

Time deposits

     231,361         391,588   

Mutual funds

     108,278         111,435   

Other cash and cash equivalents (*)

     —           8,651   

Total

     505,471         667,212   

 

(*) Applies to contracts investments under resale agreements

 

40


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 6. INCOME TAXES

The tax rates applicable in the countries in which Arauco operates are 20% in Chile, 35% in Argentina, 34% in Brazil, 25% in Uruguay and 34% in the United States (federal tax).

Deferred Tax Assets

The following table sets forth the deferred tax assets as of March 31, 2014 and December 31, 2013:

 

     03-31-2014      12-31-2013  

Deferred Tax Assets

   ThU.S.$      ThU.S.$  

Deferred tax Assets relating to Provisions

     11,819         12,016   

Deferred tax Assets relating to Accrued Liabilities

     6,319         7,367   

Deferred tax Assets relating to Post-Employment benefits

     8,672         9,012   

Deferred tax Assets relating to Property, Plant and equipment

     7,422         8,842   

Deferred tax Assets relating to Financial Instruments

     —           343   

Deferred tax Assets relating to Tax Losses Carryforwards

     54,044         56,333   

Deferred tax Assets relating to Biological Assets

     6,524         73   

Deferred tax Assets relating to Inventories

     5,142         4,910   

Deferred tax Assets relating to Provisions for Income

     3,120         3,678   

Deferred tax Assets relating to provision for Doubtful Accounts

     3,356         3,104   

Deferred tax Assets relating to Other Deductible Temporary
Differences(*)

     48,468         54,920   

Total Deferred Tax Assets

     154,886         160,598   

 

(*) In the period 2013 there MUS $ 19,887 deferred tax relating to tax goodwill produced by fusion of Chilean forestry companies

Certain subsidiaries of Arauco, to the date of these financial statements, present tax losses for which it is considered that given the projection of future profits, allowing the recovery of these assets. The total amount of these tax losses is ThU.S.$178,442 (ThU.S.$ 165,393 at December 31, 2013), which are mainly originated by operational and financial losses.

In addition, as of the closing of these financial statements there are ThU.S.$109,048 of unused tax losses from companies in Uruguay based on to the participation of Arauco which have not been recognized as deferred tax assets.

Deferred Tax Liabilities

The following table sets forth the deferred tax liabilities as of March 31, 2014 and December 31, 2013:

 

     03-31-2014      12-31-2013  

Deferred Tax Liabilities

   ThU.S.$      ThU.S.$  

Deferred tax Liabilities relating to Property, plant and equipment

     780,611         781,777   

Deferred tax Liabilities relating to Financial Instruments

     5,282         10,060   

Deferred tax Liabilities relating to Biological Assets

     573,990         534,161   

Deferred tax Liabilities relating to Inventory

     20,541         15,422   

Deferred tax Liabilities due to Prepaid Expenses

     38,189         56,558   

Deferred tax Liabilities due to Intangible

     24,873         25,597   

Deferred tax Liabilities relating to Other Taxable Temporary Differences

     42,790         38,720   

Total Deferred Tax Liabilities

     1,486,276         1,462,295   

The effect of changes in deferred tax liabilities related to cash flow hedges corresponds to a charge of ThU.S.$4,616 as of March 31, 2014 (credit of ThU.S.$572 as of March 31, 2013), which is presented in Reserves for cash flow hedges in the consolidated statement of changes in equity.

 

41


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

The deferred tax assets and liabilities expected to be recovered and settled in less than twelve months amounts to ThU.S.$17,867 and ThU.S.$116,655, respectively.

Arauco does not offset deferred tax assets and deferred tax liabilities since there is no legal enforceable right to offset amounts recognized in these items that relate to different tax jurisdictions.

Reconciliation of the asset and deferred tax liability

 

Deferred Tax Assets

   Opening Balance
01-01-2014

ThU.S.$
     Expenses
(Income)
for deferred tax
recognized as a

result
ThU.S.$
    Deferred tax
of
items
directly
credited
to equity
ThU.S.$
    Increase
(decrease)
Net
exchange
differences
ThU.S.$
    Closing balance
03/31/2014
ThU.S.$
 

Deferred tax Assets relating to Provisions

     12,016         (290     —          93        11,819   

Deferred tax Assets relating to accrued liabilities

     7,367         (1,040     —          (8     6,319   

Deferred tax Assets relating to Post-Employment benefits

     9,012         (353     —          13        8,672   

Deferred tax Assets relating to Property, Plant and equipment

     8,842         (1,422     —          2        7,422   

Deferred tax Assets relating to Financial Instruments

     343         (343     —          —          —     

Deferred tax Assets relating to tax losses carryforwards

     56,333         (2,950     —          540        53,923   

Deferred tax assets relating to biological assets

     73         6,450        —          1        6,524   

Deferred tax assets relating to provisions for income

     4,910         204        —          28        5,142   

Deferred tax assets relating to provisions for income

     3,678         (555     —          (3     3,120   

Deferred tax assets relating to provision for doubtful accounts

     3,104         247        —          5        3,356   

Deferred tax assets relating to other deductible temporary differences

     54,920         (5,910     —          (421     48,589   

Total deferred tax assets

     160,598         (5,962     —          250        154,886   

Deferred Tax Liabilities

   Opening Balance
01-01-2014
ThU.S.$
     Expenses
(Income)
for deferred tax
recognized as a
result
ThU.S.$
    Deferred tax
of
items
directly
credited
to equity
ThU.S.$
    Increase
(decrease)
Net exchange
differences
ThU.S.$
    Closing balance
03/31/2014
ThU.S.$
 

Deferred tax liabilities relating to property, Plant and equipment

     781,777         (3,057     —          1,891        780,611   

Deferred tax liabilities relating to financial instruments

     10,060         (1     (4,777     —          5,282   

Deferred tax liabilities relating to biological assets

     534,161         38,020        —          1,809        573,990   

Deferred tax liabilities relating to inventory

     15,422         5,119        —          —          20,541   

Deferred tax liabilities due to prepaid expenses

     56,558         (18,369     —          —          38,189   

Deferred tax liabilities due to intangible

     25,597         (724     —          —          24,873   

Deferred tax liabilities relating to other taxable temporary differences

     38,720         3,478        —          592        42,790   

Total deferred tax liabilities

     1,462,295         24,466        (4,777     4,292        1,486,276   

 

42


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:

 

     03-31-2014      12-31-2013  
     Deductible      Taxable      Deductible      Taxable  

Detail of classes of Deferred Tax Temporary Differences

   Difference
ThU.S.$
     Difference
ThU.S.$
     Difference
ThU.S.$
     Difference
ThU.S.$
 

Deferred Tax Assets

     100,842            104,265      

Deferred Tax Assets—Tax losses

     54,044            56,333      

Deferred Tax Liabilities

        1,486,276            1,462,295   

Total

     154,886         1,486,276         160,598         1,462,295   

 

     January - March  
     2014     2013  

Detail of Temporary Difference Income and Loss Amounts

   ThU.S.$     ThU.S.$  

Deferred Tax Assets

     (7,940     (2,519

Deferred Tax Assets—Tax losses

     1,978        1,749   

Deferred Tax Liabilities

     (24,466     (7,079

Total

     (30,428     (7,849

Income Tax Expense

Income tax expense consists of the following:

 

     January -March  
     2014     2013  

Income Tax composition

   ThU.S.$     ThU.S.$  

Current income tax expense

     (21,551     (9,159

Tax benefit arising from unrecognized tax assets previously used to reduce tax expense

     58        924   

Previous period current tax adjustments

     2,313        (78

Other current tax expenses

     2,009        273   

Current Tax Expense, Net

     (17,171     (8,040

Deferred tax income (expense) relating to origination and reversal of temporary differences

     (32,406     (9,598

Tax benefit arising from previously unrecognized tax assets used to reduce deferred expense from taxes

     1,978        1,749   

Total deferred Tax Expense, Net

     (30,428     (7,849

Income Tax Expense, Total

     (47,599     (15,889

The following table sets forth current income tax expense detailed by foreign and domestic companies at March 31, 2014 and 2013:

 

     January - March  
     2014     2013  
     ThU.S.$     ThU.S.$  

Foreign current income tax expense

     (2,493     (4,660

Domestic current income tax expense

     (14,678     (3,380

Total current income tax expense

     (17,171     (8,040

Foreign deferred tax expense

     (14,293     (1,244

Domestic deferred tax expense

     (16,135     (6,605

Total deferred tax expense

     (30,428     (7,849

Total tax income (expense)

     (47,599     (15,889

 

43


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Reconciliation of income tax expense from statutory tax rate to the effective tax rate.

The reconciliation of income tax expense is as follows:

 

     January - March  
     2014     2013  

Reconciliation of Income tax from Statutory Rate to Effective Tax Rate

   ThU.S.$     ThU.S.$  

Tax Expense at applicable tax rate

     (36,081     (23,048

Tax effect of foreign tax rates

     (1,038     (4,245

Tax effect of revenues exempt from taxation

     (2,223     7,605   

Tax effect of expense mot deductible in determining taxable profit (tax loss)

     (7,273     1,539   

Tax rate effect of tax losses

     —          (19

Tax rate effect of adjustments for current tax of prior periods

     1,115        (78

Other tax rate effects

     (2,099     2,357   

Total adjustments to tax expense at applicable tax rate

     (11,518     7,159   

Tax expense at effective tax rate

     (47,599     (15,889

 

44


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

 

     03-31-2014     12-31-2013  
     ThU.S.$     ThU.S.$  

Property, Plant and Equipment, Net

    

Construction in progress

     1,565,017        1,542,739   

Land

     981,050        974,408   

Buildings

     1,734,429        1,694,924   

Plant and equipment

     2,795,533        2,774,551   

Information technology equipment

     29,852        25,575   

Fixtures and fittings

     7,299        7,627   

Motor vehicles

     13,338        13,597   

Other property, plant and equipment

     109,254        104,046   

Total Net

     7,235,772        7,137,467   

Property, Plant and Equipment, Gross

    

Construction in progress

     1,565,017        1,542,739   

Land

     981,050        974,408   

Buildings

     3,090,013        3,010,996   

Plant and equipment

     5,019,310        4,954,621   

Information technology equipment

     69,915        64,352   

Fixtures and fittings

     33,550        33,015   

Motor vehicles

     41,113        40,789   

Other property, plant and equipment

     126,203        120,810   

Total Gross

     10,926,171        10,741,730   

Accumulated depreciation and impairment

    

Buildings

     (1,355,584     (1,316,072

Plant and equipment

     (2,223,777     (2,180,070

Information technology equipment

     (40,063     (38,777

Fixtures and fittings

     (26,251     (25,388

Motor vehicles

     (27,775     (27,192

Other property, plant and equipment

     (16,949     (16,764

Total

     (3,690,399     (3,604,263

Description of Property, Plant and Equipment Pledged as Security for Liabilities

To date there are no assets pledged as collateral in these interim consolidated financial statements.

Commitments for project disbursements or for the acquisition of property, plant and equipment

 

     03-31-2014      12-31-2013  
     ThU.S.$      ThU.S.$  

Amount committed for the acquisition of property, plant and equipment

     211,009         310,087   
     03-31-2014      12-31-2013  
     ThU.S.$      ThU.S.$  

Disbursements for property, plant and equipment under construction

     136,537         671,128   

 

45


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Movement on Property, Plant and Equipment

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment as of March 31, 2014 and December 31, 2013:

 

Movement of Property, Plant and
Equipment

  Construction
in progress
ThU.S.$
    Land
ThU.S.$
    Buildings
ThU.S.$
    Plant and
equipments
ThU.S.$
    IT
Equipment
ThU.S.$
    Fixtures and
fittings
ThU.S.$
    Motor vehicles
ThU.S.$
    Other
Property,
Plant and
Equipment
ThU.S.$
    TOTAL
ThU.S.$
 

Opening Balance 01-01-2014

    1,542,739        974,408        1,694,924        2,774,551        25,575        7,627        13,597        104,046        7,137,467   

Changes

                 

Additions

    136,537        439        184        22,846        27        174        584        5,193        165,984   

Disposals

    (2,460     —          —          (124     —          (29     (111     (65     (2,789

Retirements

    (705     (9     (429     (6,928     —          —          (23     (91     (8,185

Depreciation

    —          —          (23,494     (51,826     (1,180     (789     (854     (1,124     (79,267

Increase (decrease) through net exchange differences

    847        6,117        (10,872     24,100        27        11        22        2,310        22,562   

Increase (decrease) through transfers from construction in progress

    (111,941     95        74,116        32,914        5,403        305        123        (1,015     —     

Total changes

    22,278        6,642        39,505        20,982        4,277        (328     (259     5,208        98,305   

Closing balance 03-31-2014

    1,565,017        981,050        1,734,429        2,795,533        29,852        7,299        13,338        109,254        7,235,772   

Movement of Property, Plant and
Equipment

  Construction
in progress
ThU.S.$
    Land
ThU.S.$
    Buildings
ThU.S.$
    Plant and
equipments
ThU.S.$
    IT
Equipment
ThU.S.$
    Fixtures and
fittings
ThU.S.$
    Motor vehicles
ThU.S.$
    Other
Property,
Plant and
Equipment
ThU.S.$
    TOTAL
ThU.S.$
 

Opening Balance 01-01-2013

    1,291,259        986,033        1,654,955        2,731,233        26,094        13,396        11,094        102,679        6,816,742   

Changes

                 

Additions

    671,128        13,385        20,359        64,952        1,297        912        2,987        6,160        781,179   

Disposals

    —          (801     (1,747     (606     (11     (3,934     (74     (344     (7,516

Retirements

    (4,297     (317     (2,901     (15,299     (32     (179     (8     (361     (23,394

Depreciation

    —          —          (87,728     (220,452     (3,528     (2,734     (3,223     (1,187     (318,852

Impairment loss recognized in profit or loss

    —          —          (314     (874     (2     —          —          —          (1,190

Increase (decrease) through net exchange differences

    (12,053     (28,100     (19,597     (46,907     28        288        (259     (2,902     (109,502

Increase (decrease) through transfers from construction in progress

    (403,298     4,208        131,897        262,505        1,728        (122     3,081        1        —     

Total changes

    251,480        (11,625     39,970        43,319        (519     (5,769     2,504        1,367        320,726   

Closing balance 12-31-2013

    1,542,739        974,408        1,694,924        2,774,551        25,575        7,627        13,597        104,046        7,137,467   

 

46


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

The depreciation expense for the period ending March 31, 2014 and 2013 is as follows:

 

     January-March  

Depreciation for the year

   2014
ThU.S.$
     2013
ThU.S.$
 

Cost of sales

     64,165         63,998   

Administrative expenses

     4,056         3,557   

Other expenses

     802         1,413   

Total

     69,023         68,968   

The useful lives of property, plant and equipment estimated based on the expected use of the assets are as follows:

 

          Minimum      Maximum      Average  

Buildings

   Useful Life in Years      16         89         39   

Plant and equipment

   Useful Life in Years      8         67         29   

Information technology equipment

   Useful Life in Years      6         18         5   

Fixtures and fittings

   Useful Life in Years      6         12         10   

Motor vehicles

   Useful Life in Years      6         26         13   

Other property, plant and equipment

   Useful Life in Years      5         27         16   

A significant portion of items of property, plant and equipment do not have significant differences between the fair value and the cost of these assets.

See Note 12 for details of capitalized borrowing costs.

 

47


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 8. LEASES

Arauco acting as lessee

 

     03-31-2014
ThU.S.$
     12-31-2013
ThU.S.$
 

Property, Plant and Equipment under finance leases

     108,928         90,467   

Plant and equipment

     108,928         90,467   

Reconciliation of Financial Lease Minimum Payments:

 

     03-31-2014  
     Present Value  

Periods

   ThU.S.$  

Less than one year

     30,751   

Between one and five years

     77,137   

More than five years

     —     

Total

     107,888   
     12-31-2013  
     Present Value  

Periods

   ThU.S.$  

Less than one year

     26,949   

Between one and five years

     62,491   

More than five years

     —     

Total

     89,440   

Lease obligations are presented in the consolidated statement of financial position in line items “Other current financial liabilities” and “Other non-current financial liabilities” depending on their respective maturities as stated above.

Arauco acting as lessor

Reconciliation of Financial Lease Minimum Payments:

 

     03-31-2014  
     Gross      Interest      Present Value  

Periods

   ThU.S.$      ThU.S.$      ThU.S.$  

Less than one year

     813         56         757   

Between one and five years

     51         2         49   

More than five years

     —           —           —     

Total

     864         58         806   
     12-31-2013  
     Gross      Interest      Present Value  

Periods

   ThU.S.$      ThU.S.$      ThU.S.$  

Less than one year

     980         11         969   

Between one and five years

     131         1         130   

More than five years

     —           —           —     

Total

     1,111         12         1,099   

 

48


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Finance lease receivables are presented in the consolidated statement of financial position in line items “Trade and other current receivable” and “Trade and other non-current receivable” depending on their maturities stated above.

Arauco accounts for its lease contracts as finance leases. These lease contracts are for a term of less than five-years at market interest rates and leased assets are forestry machinery and equipment. They also include an early termination option, under general and special conditions stipulated in each contract.

There are no contingent rents payable or restrictions imposed by any lease arrangements.

NOTE 9. REVENUE

 

     January - March  
     2014      2013  

Classes of revenue

   ThU.S.$      ThU.S.$  

Revenue from sales of goods

     1,176,252         1,146,539   

Revenue from rendering of services

     48,365         40,377   

Total

     1,224,617         1,186,916   

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

 

     January - March  
     2014      2013  
     ThU.S.$      ThU.S.$  

Employee expenses

     143,130         125,042   

Wages and salaries

     139,798         122,650   

Severance indemnities

     3,332         2,392   

The main actuarial assumptions used by Arauco in the calculation of the severance indemnities obligation as of March 31, 2014 and 2013 are as follows:

 

Discount rate

   3.50%

Inflation

   3.00%

Mortality rate

   RV-2009

 

49


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

The following tables set forth the balances and the reconciliation of the present value of severance indemnities obligation as of March 31, 2014 and December 31, 2013:

 

     03-31-2014     12-31-2013  
     ThU.S.$     ThU.S.$  

Current

     3,685        3,814   

Non-current

     40,772        42,170   

Total

     44,457        45,984   
     03-31-2014     12-31-2013  

Reconciliation of the present value of severance indemnities obligation

   ThU.S.$     ThU.S.$  

Opening balance

     45,984        47,436   

Current service cost

     428        3,241   

Interest cost

     1,465        1,510   

Actuarial gains

     1,180        4,143   

Benefits paid

     (1,662     (6,628

Increase (decrease) for foreign currency exchange rates changes

     (2,938     (3,718

Closing balance

     44,457        45,984   

 

50


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 11. EFFECT OF FOREIGN CURRENCY EXCHANGE RATE VARIATIONS

Local and foreign currency

Assets and liabilities by class of currency as of March 31, 2014 and December 31, 2013 are as follows:

 

     03-31-2014      12-31-2013  
     ThU.S.$      ThU.S.$  

Total Current Assets

     2,836,395         2,808,321   

Cash and Cash Equivalents

     505,471         667,212   

U.S Dollar

     391,065         534,575   

Euro

     5,091         4,681   

Brazilian Real

     64,564         68,658   

Argentine pesos

     9,136         13,942   

Other currencies

     2,812         3,473   

Chilean Pesos

     32,803         41,883   

Other current financial assets

     2,028         3,089   

U.S Dollar

     2,028         3,089   

Other current non-financial assets

     204,508         188,964   

U.S Dollar

     95,162         82,175   

Euros

     150         126   

Brazilian Real

     19,348         13,395   

Argentine pesos

     8,989         10,079   

Other currencies

     6,397         7,746   

Chilean Pesos

     74,462         75,443   

Trade and other current receivables

     794,299         711,678   

U.S Dollar

     519,863         446,386   

Euro

     18,860         33,072   

Brazilian Real

     81,663         55,756   

Argentine pesos

     24,410         33,130   

Other currencies

     18,880         24,513   

Chilean Pesos

     128,301         117,827   

U.F.

     2,322         994   

Accounts receivable from related companies

     8,513         8,243   

U.S Dollar

     27         135   

Brazilian Real

     4,772         3,654   

Chilean Pesos

     3,714         4,454   

Current Inventories

     973,015         900,590   

U.S Dollar

     860,571         791,271   

Brazilian Real

     91,676         87,638   

Chilean Pesos

     20,768         21,681   

Current biological assets

     295,479         256,957   

U.S Dollar

     262,502         256,957   

Brazilian Real

     32,977         —     

Current tax assets

     44,067         61,174   

U.S Dollar

     4,073         2,861   

Euros

     30         14   

Brazilian Real

     2,317         2,475   

Argentine pesos

     4,156         5,888   

Other currencies

     1,525         1,337   

Chilean Pesos

     31,966         48,599   

Non-current assets or disposal groups classified as held for sale or as held for distribution to owners

     9,015         10,414   

U.S Dollar

     9,015         10,414   

 

51


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

     03-31-2014      12-31-2013  
     ThU.S.$      ThU.S.$  

Total Non Current Assets

     11,735,280         11,685,074   

Other non-current financial assets

     31,481         48,778   

U.S Dollar

     30,856         48,011   

Argentine pesos

     625         767   

Other non-current non-financial assets

     125,929         125,052   

U.S Dollar

     113,862         113,224   

Brazilian Real

     8,232         8,707   

Argentine pesos

     1,532         748   

Other currencies

     636         643   

Chilean Pesos

     1,667         1,730   

Trade and other non-current receivables

     38,533         40,729   

U.S Dollar

     35,067         35,743   

Chilean Pesos

     3,416         3,226   

U.F.

     50         1,760   

Investments accounted for using equity method

     356,458         349,412   

U.S Dollar

     124,752         126,564   

Brazilian Real

     231,706         222,848   

Intangible assets other than goodwill

     96,708         99,651   

U.S Dollar

     94,036         95,338   

Brazilian Real

     2,608         4,241   

Chilean Pesos

     64         72   

Goodwill

     89,596         88,141   

U.S Dollar

     42,956         43,086   

Brazilian Real

     46,640         45,055   

Property, plant and equipment

     7,235,772         7,137,467   

U.S Dollar

     6,529,643         6,457,882   

Brazilian Real

     697,681         670,269   

Chilean Pesos

     8,448         9,316   

Non-current biological assets

     3,605,917         3,635,246   

U.S Dollar

     3,261,749         3,277,093   

Brazilian Real

     344,168         358,153   

Deferred tax assets

     154,886         160,598   

U.S Dollar

     125,542         138,486   

Brazilian Real

     28,662         21,321   

Other currencies

     225         223   

Chilean Pesos

     457         568   

 

52


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

     03-31-2014      12-31-2013  
     Up to 90 days      From 91 days to
1 year
     Total      Up to 90 days      From 91 days
to 1 year
     Total  
     ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$  

Total Liabilities, current

     1,177,072         497,647         1,674,719         1,105,432         576,584         1,682,016   

Other current financial liabilities

     355,679         494,699         850,378         399,036         494,569         893,605   

U.S Dollar

     324,584         439,315         763,899         260,159         446,893         707,052   

Brazilian Real

     7,423         24,638         32,061         11,750         9,332         21,082   

Argentine pesos

     42         300         342         28,252         504         28,756   

Chilean Pesos

     957         3,778         4,735         168         886         1,054   

U.F.

     22,673         26,668         49,341         98,707         36,954         135,661   

Bank Loans

     316,830         448,360         765,190         262,010         451,282         713,292   

U.S Dollar

     309,365         423,422         732,787         222,008         441,446         663,454   

Brazilian Real

     7,423         24,638         32,061         11,750         9,332         21,082   

Argentine pesos

     42         300         342         28,252         504         28,756   

Financial Leases

     7,891         22,860         30,751         7,108         19,841         26,949   

U.S Dollar

     —           34         34         —           62         62   

Chilean Pesos

     957         3,778         4,735         168         886         1,054   

U.F.

     6,934         19,048         25,982         6,940         18,893         25,833   

Other Loans

     30,958         23,479         54,437         129,918         23,446         153,364   

U.S Dollar

     15,219         15,859         31,078         38,151         5,385         43,536   

U.F.

     15,739         7,620         23,359         91,767         18,061         109,828   

Trade and other current payables

     631,411         12         631,423         628,662         2,318         630,980   

U.S Dollar

     241,971         —           241,971         229,260         —           229,260   

Euros

     7,787         —           7,787         7,434         —           7,434   

Brazilian Real

     35,985         —           35,985         30,963         —           30,963   

Argentine pesos

     24,798         —           24,798         29,102         —           29,102   

Other currencies

     2,974         —           2,974         3,435         —           3,435   

Chilean Pesos

     313,564         12         313,576         328,358         12         328,370   

U.F.

     4,332         —           4,332         110         2,306         2,416   

Accounts payable to related companies

     12,505         —           12,505         14,406         —           14,406   

U.S Dollar

     2,051         —           2,051         2,889         —           2,889   

Chilean Pesos

     10,454         —           10,454         11,517         —           11,517   

Other current provisions

     8,655         —           8,655         9,696         —           9,696   

U.S Dollar

     810         —           810         830         —           830   

Argentine pesos

     7,845         —           7,845         8,866         —           8,866   

Current tax liabilities

     3,110         72         3,182         3,929         543         4,472   

U.S Dollar

     701         —           701         424         355         779   

Euros

     —           —           —           63         —           63   

Brazilian Real

     1,113         —           1,113         2,581         —           2,581   

Argentine pesos

     42         —           42         42         —           42   

Other currencies

     78         —           78         231         —           231   

Chilean Pesos

     1,176         72         1,248         588         188         776   

Current provisions for employee benefits

     1,215         2,470         3,685         806         3,008         3,814   

Chilean Pesos

     1,215         2,470         3,685         806         3,008         3,814   

Other current non-financial liabilities

     164,497         394         164,891         48,897         76,146         125,043   

U.S Dollar

     116,699         171         116,870         8,800         74,325         83,125   

Brazilian Real

     26,838         —           26,838         24,007         —           24,007   

Argentine pesos

     5,190         —           5,190         5,507         205         5,712   

Other currencies

     3,439         —           3,439         4,460         —           4,460   

Chilean Pesos

     12,221         223         12,444         6,002         2         6,004   

U.F.

     110         —           110         121         1,614         1,735   

 

53


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

     03-31-2014      12-31-2013  
     From 13
months to 5
years
     More than 5
years
     Total      From 13
months to 5
years
     More than 5
years
     Total  
     ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$  

Total non-current liabilities

     3,154,462         2,575,934         5,730,396         3,089,250         2,677,589         5,766,839   

Other non-current financial liabilities

     1,696,641         2,396,510         4,093,151         1,675,194         2,481,798         4,156,992   

U.S Dollar

     1,581,350         1,655,431         3,236,781         1,575,701         1,714,459         3,290,160   

Brazilian Real

     37,162         23,674         60,836         35,901         22,870         58,771   

Argentine pesos

     992         —           992         1,106         —           1,106   

Chilean Pesos

     13,542         —           13,542         3,300         —           3,300   

U.F.

     63,595         717,405         781,000         59,186         744,469         803,655   

Bank Loans

     830,840         299,334         1,130,174         822,461         358,301         1,180,762   

U.S Dollar

     792,686         275,660         1,068,346         785,454         335,431         1,120,885   

Brazilian Real

     37,162         23,674         60,836         35,901         22,870         58,771   

Argentine pesos

     992         —           992         1,106         —           1,106   

Financial Leases

     77,137         —           77,137         62,491         —           62,491   

U.S Dollar

     —           —           —           5         —           5   

Chilean Pesos

     13,542         —           13,542         3,300         —           3,300   

U.F.

     63,595         —           63,595         59,186         —           59,186   

Other Loans

     788,664         2,097,176         2,885,840         790,242         2,123,497         2,913,739   

U.S Dollar

     788,664         1,379,771         2,168,435         790,242         1,379,028         2,169,270   

U.F.

     —           717,405         717,405         —           744,469         744,469   

Other non current payables

     565         —           565         361         —           361   

U.S Dollar

     565         —           565         361         —           361   

Other non-current provisions

     27,424         —           27,424         24,167         —           24,167   

U.S Dollar

     86         —           86         4         —           4   

Brazilian Real

     27,207         —           27,207         24,163         —           24,163   

Chileans $

     131         —           131         —           —           —     

Deferred tax liabilities

     1,312,129         174,147         1,486,276         1,272,326         189,969         1,462,295   

U.S Dollar

     1,236,936         101,341         1,338,277         1,272,037         170,265         1,442,302   

Brazilian Real

     74,933         72,806         147,739         —           19,704         19,704   

Other currencies

     1         —           1         1         —           1   

Chilean Pesos

     259         —           259         288         —           288   

Non-current provisions for employee benefits

     35,495         5,277         40,772         36,685         5,485         42,170   

Other currencies

     184         —           184         177         —           177   

Chilean Pesos

     35,311         5,277         40,588         36,508         5,485         41,993   

Other non-current non-financial liabilities

     82,208         —           82,208         80,517         337         80,854   

U.S Dollar

     5         —           5         5         —           5   

Brazilian Real

     80,435         —           80,435         78,672         —           78,672   

Argentine pesos

     1,486         —           1,486         1,561         337         1,898   

Chilean Pesos

     277         —           277         274         —           274   

U.F.

     5         —           5         5         —           5   

 

54


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

The table below sets forth the subsidiaries that have determined a functional currency other than the U.S. Dollar as follows:

 

Subsidiary

  

Country

  

Functional Currency

Arauco do Brasil S.A.

   Brazil    Brazilian Real

Arauco Forest Brasil S.A.

   Brazil    Brazilian Real

Arauco Florestal Arapoti S.A.

   Brazil    Brazilian Real

Empreendimentos Florestais Santa Cruz Ltda.

   Brazil    Brazilian Real

Mahal Empreendimentos e Participacoes S.A.

   Brazil    Brazilian Real

Arauco Distribución S.A.

   Chile    Chilean Pesos

Investigaciones Forestales Bioforest S.A.

   Chile    Chilean Pesos

Controladora de Plagas Forestales S.A.

   Chile    Chilean Pesos

Flakeboard Company Limited

   Canada    Canadian Dollar

The table below shows a detail per company of the effect in the period of the Reserve for Exchange Differences resulting from conversion of currencies:

 

     03/31/2014
ThU.S.$
    03/31/2013
ThU.S.$
 

Arauco Do Brasil S.A.

     18,251        8,007   

Arauco Forest Brasil S.A.

     13,935        6,619   

Arauco Florestal Arapoti S.A.

     5,222        2,226   

Arauco Distribución S.A.

     (1,199     339   

Alto Paraná S.A.

     560        454   

Flakeboard Company Limited

     (3,295     (1,681

Others

     (154     (38
  

 

 

   

 

 

 

Total reserve of exhange differences on translation

     33,320        15,926   
  

 

 

   

 

 

 

Effect of foreign exchange rates changes

 

     January-March  
     2014
ThU.S.$
     2013
ThU.S.$
 

Exchange differences recognized in profit or loss, except for those arising on financial instruments measured at fair value through profit or loss

     5,666         (4,083

Reserve of exchange differences on translation (with Non-controlling interests)

     34,613         16,489   

 

55


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 12. BORROWING COSTS

Arauco estimates the average rate of borrowings to finance its investment projects, which to the closing date corresponds to the construction of pulp production plant of latest generation in Uruguay, improvements and expansions mainly in Chile, Brazil and Uruguay, in order to determine the amount of borrowing costs to be capitalized as part of property, plant and equipment.

 

     January - March  
     2014
ThU.S.$
    2013
ThU.S.$
 

Property, plant and equipment capitalized cost

    

Property, plant and equipment capitalized interest cost rate

     4.77     5.03

Amount of the capitalized interest cost, property, presented as plant and equipment

     7,672        6,241   

 

56


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 13. RELATED PARTIES

Related Party Disclosures

Related parties are those entities defined in IAS 24 and under the rules of the Chilean Superintendency of Securities and Insurance and the Chilean Corporations Law.

The receivable and payable amounts among related parties at the end of each period correspond to commercial and financing transactions denominated in Chilean Pesos, U.S. dollars and Euros, where collection or payment deadlines are shown in the following tables and in general do not bear interest, except for financing transactions.

As of the date of these consolidated financial statements, the main transactions with related parties related to fuel purchases with Compañía de Petróleos de Chile S.A.

There is neither a provision for doubtful accounts nor any guarantees granted or received related to the balances with related parties.

Name of Group’s Main Shareholders

The ultimate shareholders of Arauco are Mrs. Maria Noseda Zambra de Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi through Inversiones Angelini y Cia. Ltda.

Name of the Intermediate Controlling Entity that Prepares Financial Statements for Public Use

Empresas Copec S.A.

Compensation to Key Management Personnel

Compensation to key management personnel, including directors, managers and deputy managers, consist of a fixed monthly salary and an annual bonus subject to the results of the Company and the fulfillment of goals of the business as well as individual performance.

Pricing Strategy Terms and Conditions Corresponding to Transactions with Related Parties

Related party transactions were made on terms of those prevailing under market conditions, with mutual independence of the parties.

 

57


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

The table below sets forth information about the Relationship between the Parent Company and its Subsidiaries

 

ID N°

  

Company Name

   Country    Functional
Currency
   % Ownership interest
03-31-2014
     % Ownership interest
12-31-2013
 
                    Direct      Indirect      Total      Direct      Indirect      Total  

   Agenciamiento y Servicios Profesionales S.A.    Mexico    U.S. Dollar      0.0020         99.9970         99.9990         0.0020         99.9970         99.9990   

   Alto Paraná S.A.    Argentina    U.S. Dollar      9.9753         90.0048         99.9801         9.9753         90.0048         99.9801   

   Arauco Australia Pty Ltd.    Australia    U.S. Dollar      —           99.9990         99.9990         —           99.9990         99.9990   

96547510-9

   Arauco Bioenergía S.A.    Chile    U.S. Dollar      98.0000         1.9999         99.9999         98.0000         1.9999         99.9999   

   Arauco Colombia S.A.    Colombia    U.S. Dollar      1.5000         98.4983         99.9983         1.5000         98.4983         99.9983   

96765270-9

   Arauco Distribución S.A.    Chile    Chilean Pesos      —           99.9996         99.9996         —           99.9996         99.9996   

   Arauco do Brasil S.A.    Brazil    Brazilian Real      1.4319         98.5671         99.9990         1.4319         98.5671         99.9990   

   Arauco Florestal Arapoti S.A.    Brazil    Brazilian Real      —           79.9992         79.9992         —           79.9992         79.9992   

   Arauco Forest Brasil S.A.    Brazil    Brazilian Real      12.8141         87.1849         99.9990         12.8141         87.1849         99.9990   

   Arauco Forest Products B.V.    Holland    U.S. Dollar      —           99.9990         99.9990         —           99.9990         99.9990   

   Arauco Holanda Cooperatief U.A.    Holland    U.S. Dollar      —           99.9990         99.9990         —           99.9990         99.9990   

   Arauco Panels USA, LLC    USA    U.S. Dollar      —           99.9990         99.9990         —           99.9990         99.9990   

   Arauco Perú S.A.    Peru    U.S. Dollar      0.0013         99.9977         99.9990         0.0013         99.9977         99.9990   

   Arauco Wood Products, Inc.    USA    U.S. Dollar      0.0004         99.9986         99.9990         0.0004         99.9986         99.9990   

   Araucomex S.A. de C.V.    Mexico    U.S. Dollar      0.0005         99.9985         99.9990         0.0005         99.9985         99.9990   

96565750-9

   Aserraderos Arauco S.A.    Chile    U.S. Dollar      99.0000         0.9995         99.9995         99.0000         0.9995         99.9995   

96657900-5

   Controladora de Plagas Forestales S.A.    Chile    Chilean Pesos      —           57.9502         57.9502         —           57.9502         57.9502   

   Empreendimentos Florestais Santa Cruz Ltda.    Brazil    Brazilian Real      —           99.9789         99.9789         —           99.9789         99.9789   

   Flakeboard America Limited    USA    U.S. Dollar      —           99.9990         99.9990         —           99.9990         99.9990   

   Flakeboard Company Ltd.    Canada    Canadian Dollar      —           99.9990         99.9990         —           99.9990         99.9990   

85805200-9

   Forestal Celco S.A.    Chile    U.S. Dollar      99.9484         —           99.9484         99.9484         —           99.9484   

93838000-7

   Forestal Cholguán S.A.    Chile    U.S. Dollar      —           98.1796         98.1796         —           98.1796         98.1796   

   Forestal Concepción S.A.    Panama    U.S. Dollar      0.0050         99.9940         99.9990         0.0050         99.9940         99.9990   

78049140-K

   Forestal Los Lagos S.A.    Chile    U.S. Dollar      —           79.9587         79.9587         —           79.9587         79.9587   

   Forestal Nuestra Señora del Carmen S.A.    Argentina    U.S. Dollar      —           99.9805         99.9805         —           99.9805         99.9805   

   Forestal Talavera S.A.    Argentina    U.S. Dollar      —           99.9942         99.9942         —           99.9942         99.9942   

   Greenagro S.A.    Argentina    U.S. Dollar      —           97.9805         97.9805         —           97.9805         97.9805   

96563550-5

   Inversiones Arauco Internacional Ltda.    Chile    U.S. Dollar      98.0186         1.9804         99.9990         98.0186         1.9804         99.9990   

79990550-7

   Investigaciones Forestales Bioforest S.A.    Chile    Chilean Pesos      1.0000         98.9489         99.9489         1.0000         98.9489         99.9489   

   Leasing Forestal S.A.    Argentina    U.S. Dollar      —           99.9801         99.9801         —           99.9801         99.9801   

   Mahal Empreendimentos e Participacoes S.A.    Brazil    Brazilian Real      —           99.9934         99.9934         —           99.9934         99.9934   

96510970-6

   Paneles Arauco S.A.    Chile    U.S. Dollar      99.0000         0.9995         99.9995         99.0000         0.9995         99.9995   

   Savitar S.A.    Argentina    U.S. Dollar      —           99.9841         99.9841         —           99.9841         99.9841   

76375371-9

   Servicios Aéreos Forestales Ltda.    Chile    Chilean Pesos      0.0100         99.9890         99.9990         —           —           —     

96637330-K

   Servicios Logísticos Arauco S.A.    Chile    U.S. Dollar      45.0000         54.9997         99.9997         45.0000         54.9997         99.9997   

The companies in the table below are classified as joint operations in accordance with IFRS 11. The assets, liabilities, income and expenses are recorded in relation to the Company’s ownership percentage in accordance with accounting standards applicable in each case.

 

ID N°

  

Company Name

   Country      Functional
Currency
 

   Euforest S.A.      Uruguay         U.S. Dollar   

   Celulosa y Energía Punta Pereira S.A.      Uruguay         U.S. Dollar   

   Zona Franca Punta Pereira S.A.      Uruguay         U.S. Dollar   

   Forestal Cono Sur S.A.      Uruguay         U.S. Dollar   

   Stora Enso Uruguay S.A.      Uruguay         U.S. Dollar   

   El Esparragal Asociación Agraria de R.L.      Uruguay         U.S. Dollar   

   Ongar S.A.      Uruguay         U.S. Dollar   

   Terminal Logística e Industrial M’Bopicua S.A.      Uruguay         U.S. Dollar   

There are no significant restrictions on the ability of subsidiaries to transfer funds to Arauco, in the form of cash dividends or repayment of loans and/or advances.

 

58


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Employee Benefits for Key Management Personnel

 

     January - March  
     2014
ThU.S.$
     2013
ThU.S.$
 

Salaries and bonuses

     27,355         22,902   

Per diem compensation to members of the Board of Directors

     338         474   

Termination benefits

     1,430         1,017   

Total

     29,123         24,393   

Accounts Receivable from Related Parties

 

Name of Related Party

   Tax ID No.   

Nature of
Relationship

   Country    Currency    Maturity      03-31-2014
ThU.S.$
     12-31-2013
ThU.S.$
 

Forestal Mininco S.A

   91.440.000-7    Common director    Chile    Chilean pesos      30 days         50         —     

Eka Chile S.A

   99.500.140-3    Joint Venture    Chile    Chilean pesos      30 days         2,620         3,008   

Forestal del Sur S.A

   79.825.060-4    Common director    Chile    Chilean pesos      30 days         757         —     

Stora Enso Arapoti Industria del Papel S.A

      Associates    Brazil    Brazilian Real      30 days         611         629   

Empresa Electrica Guacolda S.A.

   96.635.700-2    Controlling Parent’s Associate    Chile    Chilean pesos              —           240   

Unilin Arauco Pisos Ltda.

      Joint Venture    Brazil    Brazilian Real      30 days         4,178         3,006   

Unilin Flooring Ltda.

      Common director    EEUU    U.S. Dollar      30 days         10         135   

Colbún S.A.

   96.505.760-9    Common director    Chile    Chilean pesos              —           1,201   

CMPC Maderas S.A.

   95.304.000-K    Common director    Chile    Chilean pesos              —           5   

Vale Do Corisco S.A.

      Associates    Brazil    Real              —           16   

Novo Oeste Gestao de Ativo Florestais S.A.

      Associates    Brazil    Real              —           3   

Fundación Educacional Arauco

   71.625.000-8    Common director    Chile    Chilean pesos      30 days         287         —     

TOTAL

                    8,513         8,243   

Accounts Payable to Related Parties

 

Name of Related party

   Tax ID No.   

Nature of

Relationship

   Country    Currency    Maturity      03-31-2014
ThU.S.$
     12-31-2013
ThU.S.$
 

Compañía de Petróleos de Chile S.A.

   99.520.000-7    Controlling Parent’s Subsidiary    Chile    Chilean pesos      30 days         10,111         9,964   

Abastible S.A.

   91.806.000-6    Controlling Parent’s Subsidiary    Chile    Chilean pesos      30 days         330         716   

Fundación Educacional Arauco

   71.625.000-8    Common director    Chile    Chilean pesos              —           661   

Sigma S.A.

   86.370.800-1    Common director    Chile    Chilean pesos      30 days         7         10   

Forestal del Sur S.A

   79.825.060-4    Common director    Chile    Chilean pesos              —           37   

Portaluppi, Guzman y Bezanilla Abogados

   78.096.080-9    Common director    Chile    Chilean pesos              —           119   

Empresa Nacional de Telecomunicaciones S.A.

   92.580.000-7    Common director    Chile    Chilean pesos      30 days         3         2   

Servicios Corporativos Sercor S.A.

   96.925.430-1    Associate    Chile    U.S. Dollar              —           4   

Puerto Lirquén S.A.

   96.959.030-1    Associated subsidiary    Chile    U.S. Dollar      30 days         1,316         2,041   

Compañía Puerto de Coronel S.A.

   79.895.330-3    Associated subsidiary    Chile    U.S. Dollar      30 days         730         845   

Stora Enso AB

      Joint Operations    Finland    U.S. Dollar      30 days         4         4   

Stora Enso Portugal

      Joint Operations    Portugal    U.S. Dollar              —           3   

Empresa Electrica Guacolda S.A.

   96.635.700-2    Controlling Parent’s Associate    Chile    Chilean pesos      30 days         1         —     

Colbún S.A.

   96.505.760-9    Common director    Chile    Chilean pesos      30 days         3         —     

TOTAL

                    12,505         14,406   

Related party transactions

 

Purchases                                       

Name of Related Party

   Tax ID No.   

Nature of

Relationship

   Country    Currency    Transaction
Descriptions
   03-31-2014
ThU.S.$
     12-31-2013
ThU.S.$
 

Abastible S.A.

   91.806.000-6    Controlling Parent’s Subsidiary    Chile    Chilean pesos    Fuel      1,070         5,928   

Empresas Copec S.A

   90.690.000-9    Controlling Parent    Chile    Chilean pesos    Management service      69         306   

Compañía de Petróleos de Chile S.A.

   99.520.000-7    Controlling Parent’s Subsidiary    Chile    Chilean pesos    Fuel      24,840         101,547   

Compañía Puerto de Coronel S.A.

   79.895.330-3    Associated subsidiary    Chile    Chilean pesos    Transport and
stowage
     1,759         7,966   

Puerto Lirquén S.A.

   96.959.030-1    Associated subsidiary    Chile    Chilean pesos    Port services      1,930         10,012   

EKA Chile S.A.

   99.500.140-3    Joint Venture    Chile    Chilean pesos    Sodium chlorate      10,726         56,134   

Forestal del Sur S.A.

   79.825.060-4    Common director    Chile    Chilean pesos    Wood and ships      —           294   

Portaluppi, Guzman y Bezanilla Abogados

   78.096.080-9    Common director    Chile    Chilean pesos    Legal services      341         1,684   

Puertos y Logística S.A.

   82.777.100-7    Associates    Chile    Chilean pesos    Port services      0         339   

Empresa Nacional de Telecomunicaciones S.A.

   92.580.000-7    Common director    Chile    Chilean pesos    Telephone services      83         387   

CMPC Maderas S.A.

   95.304.000-K    Common director    Chile    Chilean pesos    Wood and logs      133         349   

Forestal Mininco S.A.

   91.440.000-7    Common director    Chile    Chilean pesos    Wood and logs      —           258   

CMPC Celulosa S.A.

   96.532.330-9    Common director    Chile    Chilean pesos    Others purchases      722         1,633   

 

Sales                                       

Name of Related Party

   Tax ID No.   

Nature of

Relationship

   Country    Currency    Transaction
Descriptions
   03-31-2014
ThU.S.$
     12-31-2013
ThU.S.$
 

Colbún S.A.

   96.505.760-9    Common director    Chile    Chilean pesos    Electrical Power      758         39,379   

EKA Chile S.A.

   99.500.140-3    Joint venture    Chile    Chilean pesos    Electrical Power      6,785         24,990   

Stora Enso Arapoti Industria de Papel S.A.

      Associates    Brazil    Brazilian Real    Wood      1,876         8,503   

Forestal del Sur S.A.

   79.825.060-4    Common director    Chile    Chilean pesos    Wood and chips      7,709         20,796   

CMPC Celulosa S.A.

   96.532.330-9    Common director    Chile    Chilean pesos    Wood      237         239   

Empresa Eléctrica Guacolda S.A.

   96.635.700-2    Controlling Parent´s Associate    Chile    Chilean pesos    Electrical Power      1,264         3,783   

Unilin Arauco Pisos Ltda.

      Joint venture    Brazil    Brazilian Real    Wood      3,583         11,425   

 

59


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 14. CONSOLIDATED FINANCIAL STATEMENTS

Subsidiaries

Merger of forest companies

For the purpose of continuing to optimize processes and adopt the best practices within the Forestry Business’ operations, companies were integrated through a gradual process of mergers. Said task began with the integration of companies Bosques Arauco S.A. and Forestal Valdivia S.A. which with the prior approval of their respective shareholders, merged as of July 1, 2013, operating under the name Forestal Valdivia S.A.

On that same date, Forestal Arauco S.A. was split-off, creating a new entity called Forestal Viñales S.A., to which shares in Forestal Celco S.A. were contributed.

As of September 1, 2013, Forestal Arauco S.A. merged and absorbed Forestal Valdivia S.A., a transaction which generated a tax gain (Income Tax Act, Article 31, No. 9), of ThU.S.$99,437, and resulted in a deferred tax asset of ThU.S.$ 19,887 (See Note 6).

On November 1, 2013, Celulosa Arauco y Constitución S.A. absorbed Forestal Viñales S.A., generating, as a result of the transaction, a capital increase of MUS$442 equal to 7,209 shares, corresponding to Empresas Copec S.A.’s participation.

On December 1 of 2013, the new Forestal Arauco S.A. was merged with Forestal Celco S.A., thus resulting in most of Arauco’s foresty assets to be grouped under a single entity. With this merger the unification process for Chile’s main forestry companies was concluded.

This restructuring has been registered as an under common control transaction. (See Note 1K)

Investments

On March 27, 2014 the company Servicios Aereos Forestales Ltda was established with contributions to pay Inversiones Arauco Internacional Ltda ThUS$25,997.4 and Celulosa Arauco y Constitución S.A. ThUS$2.6. This company’s main objective is the provision of air transportation services for passengers and cargo, forest patrol, photography, advertising, magnetic survey, all by own and others aircraft and perform maintenance of aeronautical products.

On January 1, 2013, the company Arauco Panels Canada ULC merged with its subsidiary Flakeboard Company Ltd., existing no effect on results due to this operation.

Arauco carried out the initial recording of the acquisition of Flakeboard Company Limited in 2012 based on the information that was available as of that date and performing a preliminary determination of the allocation of the fair value in this Company’s acquisition. As of the closing of September 2013, the determination of the fair values of the assets acquired and liabilities assumed was concluded and resulted in the final allocation being retroactively applied in the consolidated financial statements as of December 31, 2012, in accordance with the requirements of IFRS 3. See Note 2 for the effects of this change.

 

60


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

The detail of the recorded valuation is the following:

 

     Th.U.S$  

Fair value of net assets acquired, determined at the date of acquisition

     242,502   

Value of the consideration given at the beginning

     242,502   

Proportional goodwill determined at December 31, 2012

     0   

Adjustment to the amounts of fair value of net assets acquired

     40,477   

Goodwill at the end of the measurement period

     40,477   

The following tables exposed the fair values at the date of acquisition of the assets and liabilities acquired in 2012 whose final fair value was determined in 2013:

 

ARAUCO PANELS CANADA ULC

   09-24-2012
ThU.S.$
 

Cash

     52,427   

Trade and other receivables

     38,089   

Inventories

     44,444   

Property, plant and equipment

     222,083   

Intangible assets other than goodwill

     84,300   

Goodwill

     40,477   

Other assets

     8,527   

Total Assets

     490,347   

Deferred taxes

     11,282   

Financial liabilities, current and non-current

     189,129   

Trade payables

     47,434   

Total Liabilities

     247,845   

The following table sets forth the amounts of revenue and profits or losses recognized from the date of acquisition by investment in Arauco Panels Canada ULC (now Flakeboard Company Ltd.)

 

Arauco Panels Canada ULC

   09-24-2012 to 12-31-2012
ThU.S.$
 

Revenue

     131,094   

Profit/(Loss)

     (5,558

The following table sets forth the revenue and recognized results as if the acquisition date had been as of the beginning of the annual investment in Arauco Panels Canada ULC (now Flakeboard Company Ltd.):

 

Arauco Panels Canada ULC

   January-December 2012
ThU.S.$
 

Revenue

     518,071   

Profit/(Loss)

     4,711   

The details of the subsidiaries included in the consolidation of Arauco are disclosed in Note 13.

 

61


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 15. INVESTMENTS IN ASSOCIATES

At March 31, 2014, there are no new investments in associates to report.

The following tables set forth information about Investments in associates as of March 31, 2014 and December 31, 2013, respectively:

 

Name

   Puertos y Logística S.A.

Country

   Chile

Functional Currency

   U.S. Dollar

Corporate purpose

   Docking and warehousing operations for proprietary and third party use, cargo of all classes of goods, as well, as warehousing and transport operations.

Ownership interest (%)

   20.2767%
   03-31-2014    12-31-2013

Carrying amount

   ThU.S.$ 63,773    ThU.S.$ 64,285

Name

   Inversiones Puerto Coronel S.A.

Country

   Chile

Functional Currency

   U.S. Dollar

Corporate purpose

   Investments in movables and real estate, acquisition of companies, securities and investment instruments, investment management and development and/or participation in all kind of businesses and companies related to industrial, shipping, forestry and commercial activities.

Ownership interest (%)

   50.0000%
   03-31-2014    12-31-2013

Carrying amount

   ThU.S.$ 37,384    ThU.S.$ 38,522

Name

   Servicios Corporativos Sercor S.A.

Country

   Chile

Functional Currency

   Chilean Pesos

Corporate purpose

   Consulting services related to business management to Boards of Directors and Senior Management of all Arauco’s entities.

Ownership interest (%)

   20.0000%
   03-31-2014    12-31-2013

Carrying amount

   ThU.S.$ (213)    ThU.S.$ 324

Name

   Stora Enso Arapoti Industria de Papel S.A.

Country

   Brazil

Functional Currency

   Brazilian Real

Corporate purpose

   Industrialization and commercialization of paper and cellulose, raw materials and by-products

Ownership interest (%)

   20.0000%
   03-31-2014    12-31-2013

Carrying amount

   ThU.S.$ 33,298    ThU.S.$ 31,753

 

62


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Name

   Genómica Forestal S.A.

Country

   Chile

Functional Currency

   Chilean Pesos

Corporate purpose

   Developing forestry genomics, through the use of biotechnological, molecular and bioinformatics tools with the purpose of strengthening genetic programs so as to improve the competitive position of the Chilean forestry industry for priority tree species.

Ownership interest (%)

   25.0000%
   03-31-2014    12-31-2013

Carrying amount

   ThU.S.$ 113    ThU.S.$ 113

Name

   Consorcio Tecnológico Bioenercel S.A.

Country

   Chile

Functional Currency

   Chilean Pesos

Corporate purpose

   Developing of technologies which will promote the development of a biofuels industry in Chile, obtained from lingo-cellulosic materials. The future execution of this sustainable project is financed by the Innova Chile Committee.

Ownership interest (%)

   20.0000%
   03-31-2014    12-31-2013

Carrying amount

   ThU.S.$ 183    ThU.S.$ 345

Name

   Novo Oeste Gestao de Ativos Florestais S.A.

Country

   Brazil

Functional Currency

   Real

Corporate purpose

   Management of forestry activities and commercialization of wood and other products.

Ownership interest (%)

   48.9912%
   03-31-2014    12-31-2013

Carrying amount

   ThU.S.$ (18,580)    (ThU.S.$ 15,453)

Name

   Vale do Corisco S.A.

Country

   Brazil

Functional Currency

   Brazilian Real

Corporate purpose

   Management of forestry activities.

Ownership interest (%)

   49.0000 %    43.0500%
   03-31-2014    12-31-2013

Carrying amount

   ThU.S.$ 193,571    ThU.S.$ 186,628

 

63


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Summarized Financial Information of Associates

 

03-31-2014                                                       
     Assets  
     Puertos y
Logística
S.A.
ThU.S.$
    Inversiones
Puerto

Coronel
S.A.

ThU.S.$
    Serv.Corporativos
Sercor S.A.
ThU.S.$
    Stora
Enso
Arapoti

Ind.de
Papel
S.A.

ThU.S.$
    Novo Oeste Gestao de
Ativos Florestais S.A.
ThU.S.$
    Vale do
Corisco
S.A.
ThU.S.$
    Consorcio
Tecnológico

Bioenercel
S.A.

ThU.S.$
    Genómica
Forestal
S.A.

ThU.S.$
    Total
ThU.S.$
 

Current

     69,328        17        2,269        115,767        9,527        16,438        1,802        1,156        216,304   

Non-current

     321,402        74,850        1,449        57,757        136,905        503,140        2,020        684        1,098,207   

Total

     390,730        74,867        3,718        173,524        146,432        519,578        3,822        1,840        1,314,511   
     Liabilities  
     Puertos y
Logística
S.A.
ThU.S.$
    Inversiones
Puerto
Coronel
S.A.
ThU.S.$
    Serv.Corporativos
Sercor S.A.
ThU.S.$
    Stora
Enso
Arapoti
Ind.de
Papel
S.A.
ThU.S.$
    Novo Oeste Gestao de
Ativos Florestais S.A.
ThU.S.$
    Vale do
Corisco
S.A.
ThU.S.$
    Consorcio
Tecnológico
Bioenercel
S.A.
ThU.S.$
    Genómica
Forestal
S.A.
ThU.S.$
    Total
ThU.S.$
 

Current

     9,824        83        3,086        32,655        164,466        9,769        2,223        1,387        223,493   

Non-current

     66,392        15        1,699        0        19,885        114,766        684        0        203,441   

Equity

     314,514        74,769        (1,067     140,869        (37,919     395,043        915        453        887,577   

Total

     390,730        74,867        3,718        173,524        146,432        519,578        3,822        1,840        1,314,511   

Revenues

     18,231        —          1,057        43,652        70        12,387        2        —          75,399   

Expenses

     (20,102     (2,373     (946     (41,614     (5,118     (7,792     (238     —          (78,183

Profit or loss

     (1,871     (2,373     111        2,038        (5,048     4,595        (236     —          (2,784
12-31-2013                                                       
     Assets  
     Puertos y
Logística
S.A.
ThU.S.$
    Inversiones
Puerto
Coronel
S.A.
ThU.S.$
    Serv.Corporativos
Sercor S.A.
ThU.S.$
    Stora
Enso
Arapoti
Ind.de
Papel
S.A.
ThU.S.$
    Novo Oeste Gestao de
Ativos Florestais S.A.
ThU.S.$
    Vale do
Corisco
S.A.
ThU.S.$
    Consorcio
Tecnológico
Bioenercel
S.A.
ThU.S.$
    Genómica
Forestal
S.A.
ThU.S.$
    Total
ThU.S.$
 

Current

     65,928        17        1,120        103,480        10,319        14,335        5,053        1,156        201,408   

Non-current

     324,605        77,120        4,310        58,464        131,689        484,619        1,363        684        1,082,854   

Total

     390,533        77,137        5,430        161,944        142,008        498,954        6,416        1,840        1,284,262   
     Liabilities  
     Puertos y
Logística
S.A.
ThU.S.$
    Inversiones
Puerto
Coronel
S.A.
ThU.S.$
    Serv.Corporativos
Sercor S.A.
ThU.S.$
    Stora
Enso
Arapoti
Ind.de
Papel
S.A.
ThU.S.$
    Novo Oeste Gestao de
Ativos Florestais S.A.
ThU.S.$
    Vale do
Corisco
S.A.
ThU.S.$
    Consorcio
Tecnológico
Bioenercel
S.A.
ThU.S.$
    Genómica
Forestal
S.A.
ThU.S.$
    Total
ThU.S.$
 

Current

     18,842        83        2,109        27,928        152,200        7,450        228        1,387        210,227   

Non-current

     54,654        11        1,699        —          21,344        110,631        4,464        —          192,803   

Equity

     317,037        77,043        1,622        134,016        (31,536     380,873        1,724        453        881,232   

Total

     390,533        77,137        5,430        161,944        142,008        498,954        6,416        1,840        1,284,262   
03-31-2013                                                       

Revenues

     22,272        —          1,036        40,849        3,646        4,363        1,233        56        73,455   

Expenses

     (16,224     (625     (1,118     (38,896     (25     (518     (1,375     (56     (58,837

Profit or loss

     6,048        (625     (82     1,953        3,621        3,845        (142     —          14,618   

 

64


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

Movement in Investment in Associates and Joint Ventures

 

     03-31-2014
ThU.S.$
    12-31-2013
ThU.S.$
 

Opening balance as of January 1

     349,412        382,427   

Changes

    

Investments in associates, Additions

     —          334   

Share of profit (loss) in investment in associates

     (1,404     5,657   

Share of profit (loss) in investment in joint ventures

     525        603   

Dividends Received, Investments in Associates

     —          (17,074

Increase (Decrease) in foreign exchange currency on translation of Associates and Joint Ventures

     5,969        (32,060

Other increase (decrease) in investment and associates and joint ventures

     1,956        9,525   

Total changes

     7,046        (33,015

Ending balance

     356,458        349,412   
     03-31-2014
ThU.S.$
    12-31-2013
ThU.S.$
 

Carrying amount of associates accounted for using equity method

     328,322        321,970   

Carrying amount of joint ventures accounted for using equity method

     28,136        27,442   

Total investment accounted for using equity method

     356,458        349,412   

 

65


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

NOTE 16. INTERESTS IN JOINT ARRANGEMENTS

Investments and contributions made

As of March 31, 2014, Arauco, through its subsidiary Arauco Holanda Cooperatief U.A, made capital contributions for a total of ThU.S.$18,386 (ThU.S.$103,196 as of December 31, 2013) to two Uruguayan joint arrangements in order to maintain its 50% of ownership in Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A. This transaction had no effect on the consolidated statement of income.

Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A. are both involved in the project known as “Montes del Plata”, the purpose of which is to build a cutting edge cellulose production plant, with a capacity of 1.3 million tons per year, a port and an energy generation unit utilizing renewable resources, which is located at the town of Punta Pereira, Province of Colonia, Uruguay.

As of the closing of these financial statements, Arauco has committed to “Montes del Plata” in capital contributions 10.9 million Euros (equivalent to U.S.$15 million) and U.S.$24 million in loans.

Investments in Uruguay are joint operations because of existing contracts that stipulate that both Arauco and Stora Enso maintain joint control of such investments, and since there is a contractual commitment for the sale of the entire pulp production to be generated from the future plant to Arauco and Stora Enso in the proportion each entity’s 50% ownership interest. Arauco has recognized the assets, liabilities, income and expenses relating to its ownership percentage from January 1, 2012, in accordance with IFRS11.

Furthermore, Arauco holds a 50% in Eka Chile S.A. (“Eka”), a company that sells sodium chlorate to cellulose plants in Chile. A contractual agreement in effect between Arauco and Eka has permitted Arauco and Eka to initiate certain joint venture activities.

 

66


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2014

Amounts in thousands of U.S. dollars, except as indicated

 

The following tables set forth summarized financial information of the more significant interests in joint arrangements, which qualify as joint operations:

 

Celulosa y Energía Punta Pereira S.A.

(Uruguay)

   03-31-2014      12-31-2013  
   Assets
ThU.S.$
     Liabilities
ThU.S.$
     Assets
ThU.S.$
     Liabilities
ThU.S.$
 

Current

     74,488         414,787         63,009         292,869   

Non-current

     2,076,013         1,053,482         2,003,894         1,109,329   

Equity

        682,232