6-K 1 d388165d6k.htm FORM 6-K Form 6-K
Table of Contents

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of August 2022

Commission File Number 33-99720

ARAUCO AND CONSTITUTION PULP INC.

(Translation of registrant’s name into English)

El Golf 150

Fourteenth Floor

Santiago, Chile

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☑            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ☐            No  ☑

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________

 


Table of Contents

ARAUCO AND CONSTITUTION PULP INC

TABLE OF CONTENTS

 

Item         Page  

1.

   Ratio analysis of the interim consolidated financial statements      1  

2.

   Interim consolidated statements of financial position      7  

3.

   Interim consolidated statements of profit or loss      9  

4.

   Interim consolidated statements of comprehensive income      10  

5.

   Interim consolidated statements of changes in equity      11  

6.

   Interim consolidated statements of cash flow      12  

7.

   Notes to the interim interim consolidated financial statements      13  
   Annex: Press Release   

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

RATIO ANALYSIS OF THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. ANALYSIS OF FINANCIAL POSITION

 

  a)

Interim statement of financial position

The principal components of assets and liabilities at the end of each period are as follows:

 

Assets

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
     Variation
ThU.S.$
 

Current assets

     3,863,498        3,919,325        (55,827

Non-current assets

     13,217,574        12,741,985        475,589  
  

 

 

    

 

 

    

 

 

 

Total assets

     17,081,072        16,661,310        2.52
  

 

 

    

 

 

    

 

 

 

 

Liabilities

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
     Variation
ThU.S.$
 

Current liabilities

     1,468,863        1,429,642        39,221  

Non-current liabilities

     7,342,826        7,413,164        (70,338

Non–controlling interests

     7,197        7,771        (574

Equity attributable to parent company

     8,262,186        7,810,733        451,453  
  

 

 

    

 

 

    

 

 

 

Total net equity and liabilities

     17,081,072        16,661,310        2.52
  

 

 

    

 

 

    

 

 

 

As of June 30, 2022, total assets increased MU.S.$ 420 compared to December 31, 2021, equivalent to a 2.52% variation. This variation was driven mainly by an increase in property, plants & equipment, right of use assets and inventories.

In turn, total liabilities decreased by MU.S.$ 31 principally due to lower balances of bank loans and hedging liabilities that are offset by an increase in determination and registration of dividend provisions (see Note 26).

The main financial and operational indicators related to the statement of financial position as of the dates and for the periods indicated below are as follows:

 

Liquidity ratios

   06-30-2022      12-31-2021  

Current liquidity (current assets / current liabilities)

     2.63        2.74  

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

     1.46        1.69  

 

Debt indicators

   06-30-2022      12-31-2021  

Debt to equity ratio (total liabilities / equity)

     1.07        1.13  

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

     0.17        0.16  

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

     0.83        0.84  
     06-30-2022      06-30-2021  

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

     9.42        4.98  

 

Activity ratio

   06-30-2022      12-31-2021  

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

     2.60        2.68  

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

     3.32        3.49  

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

     138.24        134.10  

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

     108.50        103.18  

As of June 30, 2022, the short-term debt to total debt ratio represented 17% of total liabilities (16% as of December 31, 2021).

Our financial expenses coverage ratio increased from 4.98 to 9.42, mainly due to the profits before taxes generated for the period ended June 30, 2022, compared to lower profits before taxes generated in the same period of 2021.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

  b)

Interim statement of profit or loss

Profit before income tax

We recorded a profit before income tax of approximately MU.S.$ 784 compared to a profit of approximately MU.S.$ 470 in the same period of 2021. The variation of MU.S.$ 314 is explained by the factors described in the following table:

 

Item

   MU.S.$  

Gross profit

     412  

Distribution and administrative expenses

     (198

Other income and expenses

     35  

Others

     65  
  

 

 

 

Net change in profit (loss) before income tax

     314  
  

 

 

 

The main indicators related to the accounts in our statements of profit or loss and the details of revenues and operation costs are as follows:

 

Revenues

   06-30-2022
ThU.S.$
     06-30-2021
ThU.S.$
 

Pulp

     1,501,352        1,287,128  

Wood

     2,126,968        1,614,979  

Other

     377        174  
  

 

 

    

 

 

 

Total revenues

     3,628,697        2,902,281  
  

 

 

    

 

 

 

On January 1, 2021 we discontinued the reporting of our forestry operations as a business segment, and included those operations as part of the pulp segment. This is in line with Arauco´s current reality and with the way in which the management views the progress of business.

The new segments reported are pulp and wood products, consistent with Arauco´s focus on end customers. For more information, see Notes 2 and 24 to the interim consolidated financial statements report as of June 30, 2022.

 

Sales costs

   06-30-2022
ThU.S.$
     06-30-2021
ThU.S.$
 

Wood

     369,620        410,047  

Forestry work and other services

     298,075        256,172  

Depreciation and amortization

     236,960        226,164  

Other operating costs

     1,194,310        892,574  
  

 

 

    

 

 

 

Total sales costs

     2,098,965        1,784,957  
  

 

 

    

 

 

 

 

Profitability index

   06-30-2022      12-31-2021  

Profitability on equity

     15.74        13.54  

Profitability on assets

     7.50        6.31  

Return on operating assets

     9.11        8.95  

 

Profitability ratios

   06-30-2022      06-30-2021  

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

     5.2532        2.5597  

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

     632,910        303,787  

Gross profit (ThU.S.$)

     1,529,732        1,117,324  

Finance costs (ThU.S.$)

     (93,210      (118,180

 

(1)

Average earnings per share refer to the profit to net equity to parent company.

(2)

Includes non-controlling interest.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

EBITDA

   06-30-2022
ThU.S.$
     06-30-2021
ThU.S.$
 

Profit (loss)

     632,910        303,787  

Finance costs

     93,210        118,180  

Finance income

     (28,794      (14,434

Income tax expense

     151,542        166,006  

EBIT

     848,868        573,539  

Depreciation and amortization

     261,853        249,102  

EBITDA

     1,110,721        822,641  

Cost at fair value of the harvest

     200,816        148,021  

Gain from changes in fair value of biological assets

     (130,564      (83,080

Gains (losses) on exchange difference on translation

     21,409        13,696  

Others*

     23,793        28,813  

Adjusted EBITDA

     1,226,174        930,091  
*

Considers loss of forest due to fires and theft and impairment provision for industrial property, plant and equipment.

2. MAIN SOURCES OF FINANCING

Arauco’s financing needs are mainly covered through the capital markets, with bond issuances and credits obtained from banks and financial institutions serving as the main sources of financing.

For short-term borrowing, Arauco follows a 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 the international markets are used as sources of new resources.

Another source of long-term financing corresponds to borrowings from banks and financial institutions around the world.

3. MARKET SITUATION

In the second quarter of 2022, billing was 6.2% higher than in the same period of 2021. This increase is mainly due to an increase in the sale price, but also to a 2.3% decrease in sales volume. In the annual accumulated, billing increased a 16,5% and sales volume did not reflect significant variation. While almost all grades of pulp experienced an increase in sale price and billing,textile grade of pulp decreased in billing during the second quarter of 2022.

The second quarter of 2022 remained stable for the markets in some areas and very active in others. Even though the serious logistics problems experienced at the end of 2021 and the first quarter of 2022 tended to decrease, they continued to be a significant challenge. Notwithstanding the above, the volumes of unavailable inventory in such logistic chain did not noticeably decrease or impact markets.

During this quarter, there was a lack of supply of short fiber due to the common problems of production loss, which represent a longer logistics chain. However, two very relevant factors of production loss were added. First, a delay in the departure of new lines, specifically MAPA. Second, the ban of using Russian raw material in Finland pupl mills, which affected the production of short fiber. As a consequence, these mills in Finland started to consume Birch’s inventory and soon about 70% of that capacity will have to be switched to long fiber production.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

In China, the market for pulp was affected by the new mobility restrictions due to COVID-19 outbreaks, the COVID “0” policy implemented by the authorities, confinements in cities and port areas, etc., leading to a reduction of activity. Despite these facts, prices of short and long fiber pulp rose significantly due to supply shortages. The increases were approximately 14% in long fiber and 24% in short fiber. In the coming months, it will be possible to know if these rises will be absorbed by the paper market by increasing paper prices (2 to 3 months). However, greater economic activity will be necessary.

In Europe, unlike the Chinese market, there was a very strong demand in every type of fiber leading to higher prices and allowing the hike in costs to be transferred to the final products. Paper producers received orders for several months, which resulted in a good year in margins. Although the strike of paper and pulp producers in Finland ended at the beginning of the second quarter, the consequences of the lack of paper are still palpable. This has also contributed to the rise in paper prices in a strong market. However, there is still a lot of uncertainty about the coming months due to the high current inflation and the general economic outlook.

Moreover, the textile pulp market remained stable during this quarter. However, prices rose by about 20%, which is mainly due to supply restrictions rather than strong demand.

Production for the second quarter of 2022 was affected by the scheduled annual maintenance shutdown of the Nueva Aldea plant and by the shutdown of the Valdivia plant at the end of May due to the fire that affected this plant.

Wood Products Business

Sawn timber

During the second quarter of 2022, demand continued at high levels, resulting in maintaining the good prices of the previous quarter. For the coming months, we expect markets to become instable, mainly due to the lower activity in China, war in Europe and a scenario of high inflation and higher interest rates.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

In Remanufacturing, positive results continued in the U.S., supported by the retail sector that remained strong and by positive rates of home construction, repair and remodeling of home rate that continued to be strong. In the inflationary scenario, higher interest rates and greater supply from Asia and Latin America could affect results in the last months of the year.

Plywood

During the second quarter of 2022, demand continued at high levels for Plywood in the markets, mainly by higher demand in markets such as Europe, Oceania and the U.S.

Prices remained stable, in addition to continuing solid demand. There was also the effect of lost supply from Russia and Belarus, which regularly supply Europe and the U.S. The second half of the year is expected to be more uncertain, affected by the fall in the European economy and oversupply in the U.S. and South America.

Panels (MDF, PB, Melamine)

During the second quarter of 2022, although volumes and prices continued at good levels, they were affected by the increase in exports from Brazil to the rest of the region. For the coming months, this increased supply is expected to continue, to which is added the impact of high inflation in South America, higher interest rates, currency devaluation against the U.S. dollar and political uncertainty in some countries. Panel consumption remained solid in North America.

4. ANALYSIS OF CASH FLOW

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

 

     06-30-2022
ThU.S.$
     06-30-2021
ThU.S.$
 

Positive (negative) Cash flow

     

Net cash flows from (used in) operating activities

     945,753        852,217  

Cash flows from (used in) financing activities:

     

Issuing shares

     —          200,000  

Obtaining and paying borrowings and bonds

     (93,836      (267,643

Payments of lease liabilities

     (32,251      (36,238

Dividends paid

     (192,334      (167

Others

     (378      457  

Cash flows from (used in) investment activities:

     

Purchase and sale of property, plant and equipment

     (639,464      (595,793

Purchase and sale of biological assets

     (104,493      (127,534

Purchase and sale of intangible assets

     (1,916      (2,471

Additions (disposals), investments in subsidiaries, joint ventures and associates

     (118      45,804  

Dividends received

     24,768        1,454  

Others

     (2,372      (429
  

 

 

    

 

 

 

Positive (negative) net cash flow

     (96,641      69,657  
  

 

 

    

 

 

 

Our cash flow from operating activities increased to MU.S.$ 946 for the current period (compared to the positive balance of MU.S.$ 852 for the same period in 2021), resulting mainly from higher revenue from customer collections in the current period, which was partially offseted by an increase in suppliers payments.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

The cash flow from financing activities shows a negative balance of MU.S.$ 319 for the current period (compared to the negative balance of MU.S.$ 104 for the same period in 2021). Resulting mainly from dividends paid in the current year and an increase in financial debts payments in the previous year.

Regarding the cash flow from investment activities, the balance decreased to MU.S.$ 724 (compared to a negative balance of MU.S.$ 679 for the same period of 2021), mainly due to an increase in disbursements for the purchase of property, plant and equipment.

5. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of June 30, 2022, a ratio of fixed rate debt to total consolidated debt of approximately 94.5%, which we belive is consistent with industry standards.

Regarding variations in prices of pulp and forestry products, the Company does not participate in futures trading, which allows it to maintain one of the lowest cost structures in the industry and have these risks bounded.

The Company and most of its subsidiaries maintain their accounting records and prepare their financial statements in U.S. dollars. Most of their revenues (and accordingly accounts receivable) are denominated in U.S. dollars, and most financial liabilities are either denominated in U.S. dollars or are covered by exchange rate swaps. As a result, exposure to exchange rate fluctuations has decreased significantly.

The interim consolidated financial statements as of June 30, 2022, include a detailed analysis of the risks associated with the business of Arauco (see Note 23).

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

            06-30-2022      12-31-2021  
     Note      ThU.S.$      ThU.S.$  

Assets

        

Current assets

        

Cash and cash equivalents

     5-23        901,707        1,011,100  

Other current financial assets

     23        20,529        5,865  

Other current non-financial assets

     25        210,064        167,890  

Trade and other current receivables

     23        874,609        979,923  

Accounts receivable from related companies

     13        6,877        5,559  

Current inventories

     4        1,358,314        1,172,179  

Current biological assets

     20        364,043        329,586  

Current tax assets

     6        125,057        233,065  

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

        3,861,200        3,905,167  

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

     22        2,298        14,158  

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

        2,298        14,158  

Total current assets

        3,863,498        3,919,325  

Non-current assets

        

Other non-current financial assets

     23        15,793        10,525  

Other non-current non-financial assets

     25        92,654        88,549  

Non-current receivables

     23        22,739        14,338  

Investments accounted for using equity method

     15-16        337,563        336,642  

Intangible assets other than goodwill

     19        78,531        84,210  

Goodwill

     17        58,775        57,697  

Property, plant and equipment

     7        9,333,778        8,953,384  

Right of use assets

     8        261,245        180,106  

Non-current biological assets

     20        3,008,550        3,008,897  

Deferred tax assets

     6        7,946        7,637  

Total non-current assets

        13,217,574        12,741,985  

Total assets

        17,081,072        16,661,310  
     

 

 

    

 

 

 

 

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

 

          06-30-2022     12-31-2021  
     Note    ThU.S.$     ThU.S.$  

Equity and liabilities

       

Liabilities

       

Current liabilities

       

Other current financial liabilities

   23      340,310       339,441  

Current lease liabilities

   8-23      43,371       49,603  

Trade and other current payables

   23      713,825       731,456  

Accounts payable to related companies

   13      3,369       2,577  

Other short-term provisions

   18      6,336       337  

Current tax liabilities

   6      44,296       127,981  

Current provisions for employee benefits

   10      5,796       4,593  

Other current non-financial liabilities

   25      311,560       173,654  

Total current liabilities other than liabilities included in disposal groups classified as held for sale

        1,468,863       1,429,642  

Total current liabilities

        1,468,863       1,429,642  

Non-current liabilities

       

Other non-current financial liabilities

   23      5,143,919       5,374,864  

Non-current lease liabilities

   8-23      180,976       113,701  

Non-current payables

   23      2,446       2,272  

Other long-term provisions

   18      30,525       29,549  

Deferred tax liabilities

   6      1,839,619       1,747,805  

Non-current provisions for employee benefits

   10      66,448       67,967  

Other non-current non-financial liabilities

   25      78,893       77,006  

Total non-current liabilities

        7,342,826       7,413,164  

Total liabilities

        8,811,689       8,842,806  

Equity

       

Issued capital

   3      803,618       803,618  

Retained earnings

        8,542,129       8,248,185  

Other reserves

        (1,083,561     (1,241,070

Equity attributable to parent company

        8,262,186       7,810,733  

Non-controlling interests

        7,197       7,771  

Total equity

        8,269,383       7,818,504  

Total equity and liabilities

        17,081,072       16,661,310  
     

 

 

   

 

 

 

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

 

            January - June     April - June  
            2022     2021     2022     2021  
     Note      ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$  

Statements of profit or loss

           

Revenue

     9        3,628,697       2,902,281       1,867,073       1,555,578  

Cost of sales

     3        (2,098,965     (1,784,957     (1,095,815     (887,183

Gross profit

        1,529,732       1,117,324       771,258       668,395  

Other income

     3        171,816       120,376       89,053       45,379  

Distribution costs

     3        (489,581     (304,070     (255,605     (159,276

Administrative expenses

     3        (299,150     (287,155     (158,383     (150,653

Other expense by function

     3        (86,711     (70,456     (58,863     (32,978

Profit from operating activities

        826,106       576,019       387,460       370,867  

Finance income

     3        28,794       14,434       15,463       7,600  

Finance costs

     3        (93,210     (118,180     (46,191     (57,187

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

     3-15        44,171       11,216       24,459       8,718  

Gains (losses) on exchange differences on translation

        (21,409     (13,696     (2,429     (5,217

Profit before income tax

        784,452       469,793       378,762       324,781  

Income tax expense

     6        (151,542     (166,006     (74,912     (123,362

Net profit

        632,910       303,787       303,850       201,419  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net profit attributable to

           

Net profit attributable to parent company

        632,877       302,912       303,827       201,004  

Net profit attributable to non-controlling interests

        33       875       23       415  

Net profit

        632,910       303,787       303,850       201,419  
     

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted earnings per share (in U.S.$ per share)

           

Basic and diluted earnings per share from continuing operations

        5.2532095       2.5597414       2.5219227       1.6724083  
     

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted earnings per share

        5.2532095       2.5597414       2.5219227       1.6724083  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

            January - June     April - June  
            2022     2021     2022     2021  
     Note      ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$  

Net profit

        632,910       303,787       303,850       201,419  

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

           

Other comprehensive income before tax gains losses on remeasurements of defined benefit plans

     10        (4,422     1,229       (3,893     (1,172

Other comprehensive income that will not be reclassified to profit or loss before tax

        (4,422     1,229       (3,893     (1,172

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        38,181       24,736       (91,729     106,553  

Other comprehensive income before tax exchange differences on translation

        38,181       24,736       (91,729     106,553  

Cash flow hedges

           

Gains (losses) on cash flow hedges, before tax

     23        156,807       (49,740     49,486       (82,658

Reclassification adjustments on cash flow hedges before tax

     23        (5,080     (10,137     (5,080     (9,862

Other comprehensive income before tax cash flow hedges

        151,727       (59,877     44,406       (92,520

Share of other comprehensive income of associates and joint ventures accounted for using equity method that will be reclassified to profit or loss before tax

        2,352       2,187       (1,598     752  

Share of other comprehensive income of associates and joint ventures accounted for using equity method that will be reclassified to profit or loss before tax

        2,352       2,187       (1,598     752  

Share of other comprehensive income of associates and joint ventures accounted for using equity method that will be reclassified to profit or loss before tax

        192,260       (32,954     (48,921     14,785  

Income tax relating to components of other comprehensive income that will not be reclassified to profit or loss before tax

           

Income tax relating to remeasurements of defined benefit plans of other comprehensive income

        1,194       (293     1,124       316  

Income tax relating to components of other comprehensive income that will not be reclassified to profit or loss before tax

        1,194       (293     1,124       316  

Income tax relating to components of other comprehensive income that will be reclassified to profit or loss before tax

           

Income tax relating to cash flow hedges of other comprehensive income

     6        (41,248     17,132       (17,851     24,184  

Income tax relating to share of other comprehensive income of associates and joint ventures accounted for using equity method that will be reclassified to profit or loss

        (495     (470     334       (162

Income tax relating to components of other comprehensive income that will be reclassified to profit or loss

        (41,743     16,662       (17,517     24,022  

Other comprehensive income (loss)

        147,289       (15,356     (69,207     37,951  

Total comprehensive income (loss)

        780,199       288,431       234,643       239,370  
     

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to

           

Comprehensive income (loss), attributable to owners of parent company

        780,187       292,338       234,681       236,633  

Comprehensive income (loss), attributable to non-controlling interests

        12       (3,907     (38     2,737  

Total comprehensive income (loss)

        780,199       288,431       234,643       239,370  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

06-30-2022

  Issued
capital
ThU.S.$
    Reserve of
exchange
differences
on
translation
ThU.S.$
    Reserve of
cash flow
hedges
ThU.S.$
    Reserve of
actuarial
losses on
defined
benefit
plans
ThU.S.$
    Other
reserves
ThU.S.$
    Total other
reserves
ThU.S.$
    Retained
earnings
ThU.S.$
    Equity
attributable
to owners of
parent

ThU.S.$
    Non-
controlling
interests
ThU.S.$
    Total
equity
ThU.S.$
 

Opening balance at 01-01-2022

    803,618       (1,155,195     (136,859     (20,766     71,750       (1,241,070     8,248,185       7,810,733       7,771       7,818,504  

Changes in Equity:

                   

Comprehensive income

                   

Net profit

    —         —         —         —         —         —         632,877       632,877       33       632,910  

Other comprehensive income, net of tax

    —         38,202       110,479       (3,228     1,857       147,310       —         147,310       (21     147,289  

Comprehensive income

    —         38,202       110,479       (3,228     1,857       147,310       632,877       780,137       12       780,199  

Dividends

    —         —         —         —         —         —         (328,734     (328,734     (586     (329,320

Increase (decrease) through transfers and other changes equity

    —         —         —         —         10,199       10,199       (10,199     —         —         —    

Changes in equity

    —         38,202       110,479       (3,228     12,056       157,509       293,944       451,453       (574     450,879  

Closing balance at 06-30-2022

    803,618       (1,116,993     (26,380     (23,994     83,806       (1,083,561     8,542,129       8,262,186       7,197       8,269,383  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

06-30-2021

  Issued
capital
ThU.S.$
    Reserve of
exchange
differences
on
translation
ThU.S.$
    Reserve of
cash flow
hedges
ThU.S.$
    Reserve of
actuarial
losses on
defined
benefit
plans
ThU.S.$
    Other
reserves
ThU.S.$
    Total other
reserves
ThU.S.$
    Retained
earnings
ThU.S.$
    Equity
attributable
to owners of
parent

ThU.S.$
    Non-
controlling
interests
ThU.S.$
    Total
equity
ThU.S.$
 

Opening balance at 01-01-2021

    603,618       (1,081,320     (37,007     (19,725     29,255       (1,108,797     7,889,901       7,384,722       30,913       7,415,635  

Changes in Equity:

                   

Comprehensive income

                   

Net profit

    —         —         —         —         —         —         302,912       302,912       875       303,787  

Other comprehensive income, net of tax

    —         29,518       (42,745     936       1,717       (10,574     —         (10,574     (4,782     (15,356

Comprehensive income

    —         29,518       (42,745     936       1,717       (10,574     302,912       292,338       (3,907     288,431  

Issue of equity

    200,000       —         —         —         —         —         —         200,000       —         200,000  

Dividends

    —         —         —         —         —         —         —         —         (80     (80

Increase (decrease) through transfers and other changes equity

    —         —         —         —         369       369       (513     (144     —         (144

Changes in equity

    200,000       29,518       (42,745     936       2,086       (10,205     302,399       492,194       (3,987     488,207  

Closing balance at 06-30-2021

    803,618       (1,051,802     (79,752     (18,789     31,341       (1,119,002     8,192,300       7,876,916       26,926       7,903,842  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     January - June  
     2022     2021  
     ThU.S.$     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

     3,865,770       2,829,062  

Receipts from rents and subsequent sales of such assets

     1,917       707  

Other cash receipts from operating activities

     273,147       260,189  

Classes of cash payments

    

Payments to suppliers for goods and services

     (2,577,925     (1,883,458

Payments to and on behalf of employees

     (347,853     (322,118

Payments to manufacture or acquire assets held for rental to others and subsequently held for sale

     (12,609     —    

Other cash payments from operating activities

     (89,086     (49,133

Interest paid

     (130,125     (125,848

Interest received

     23,604       13,784  

Income taxes paid (refund)

     (62,819     129,033  

Other inflows (outflows) of cash, net

     1,732       (1

Net cash flow from (used in) operating activities

     945,753       852,217  
  

 

 

   

 

 

 

Cash flows from (used in) investing activities

    

Cash flow from losing control of subsidiaries and other businesses

     —         47,988  

Cash flow used in the purchase of non-controlling interests

     —         (5

Other cash receipts from sales of interests in joint ventures

     —         2,621  

Other cash payments to acquire interests in joint ventures

     (118     (4,800

Loans to related entities

     (2,475     (427

Proceeds from sales of property, plant and equipment

     28,139       7,330  

Purchase of property, plant and equipment

     (667,603     (603,123

Proceeds from sales of intangible assets

     311       —    

Purchase of intangible assets

     (2,227     (2,471

Proceeds from other long-term assets

     45,919       3,805  

Purchase of other long-term assets

     (150,412     (131,339

Dividends received

     24,768       1,454  

Other inflows (outflows) of cash, net

     103       (2

Cash flows from (used in) investing activities

     (723,595     (678,969
  

 

 

   

 

 

 

Cash flows from (used in) financing activities

    

Proceeds from issuing shares

     —         200,000  

Total proceeds from borrowings

     167,450       5,000  

Proceeds from long-term borrowings

     9,960       —    

Proceeds from short-term borrowings

     157,500       5,000  

Repayments of borrowings

     (261,296     (272,643

Payments of lease liabilities

     (32,251     (36,238

Dividends paid

     (192,334     (167

Other inflows (outflows) of cash, net

     (378     457  

Cash flows from (used in) financing activities

     (318,799     (103,591
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents before effect of exchange rate changes

     (96,641     69,657  

Effect of exchange rate changes on cash and cash equivalents

     (12,752     (642
  

 

 

   

 

 

 

Net increase (decrease) of cash and cash equivalents

     (109,393     69,015  

Cash and cash equivalents, at the beginning of the period

     1,011,100       1,064,714  

Cash and cash equivalents, at the end of the period

     901,707       1,133,729  
  

 

 

   

 

 

 

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2022, AND DECEMBER 31, 2021

NOTE 1. PRESENTATION OF INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Entity Information

Celulosa Arauco y Constitución S.A. and subsidiaries, (hereafter “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 Chilean Commission for the Financial Market (“CMF”) as No. 042 on June 14, 1982. Additionally, the Company is registered as a non-accelerated filer in the Securities and Exchange Commission (SEC) of the United States of America.

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

Arauco is principally engaged in the production and sale of products related to the forestry and timber industries. Its main operations are focused on business areas of pulp and wood products.

As of June 30, 2022, Arauco is controlled by Empresas Copec S.A., tax identification number 90.690.000-9, which owns 99.999916% of Arauco, and is registered in the Securities Registry as No. 0028. Each of the above mentioned companies is subject to the oversight of the CMF.

Moreover, Empresas Copec S.A. is controlled by the public corporation AntarChile S.A., tax identification number 96.556.310-5, which owns 60,8208% of Empresas Copec S.A. Furthermore, the ultimate shareholders of AntarChile S.A. and, consequently, of Empresas Copec S.A., are Mr. Roberto Angelini Rossi, tax identification number 5.625.652-0, and Mrs. Patricia Angelini Rossi, tax identification number 5.765.170-9.

Arauco’s interim consolidated financial statements were prepared on a going concern basis.

Presentation of interim consolidated financial statements

The interim consolidated financial statements presented by Arauco are comprised by the following:

 

   

Interim consolidated statements of financial position as of June 30, 2022, and as of December 31,2021.

 

   

Interim consolidated statements of profit or loss for the periods ended June 30, 2022, and June 30, 2021.

 

   

Interim consolidated statements of comprehensive income for the periods ended June 30, 2022, and June 30, 2021.

 

   

Interim consolidated statements of changes in equity for the periods ended June 30, 2022, and June 30, 2021.

 

   

Interim consolidated statements of cash flows for the periods ended June 30, 2022, and June 30, 2021.

 

   

Explanatory disclosures (notes).

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Period Covered by the interim consolidated financial statements

Periods ended June 30, 2022, and December 31, 2021.

Date of Approval of the interim consolidated financial statements

These interim consolidated financial statements were approved by the Board of Directors of the Company (the “Board”) at the Extraordinary Meeting No. 674 on August 10, 2022.

Abbreviations 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

MU.S.$ - Millions of U.S. dollars

ThU.S.$ - Thousands of U.S. dollars

U.F. - Inflation index-linked units of account

UTA - Annual Tax Unit

ICMS - Tax movement of inventories and services (Brazil)

ThCLP$ - Thousands of Chilean pesos

ThR$ - Thousands of Brazilian real

Functional and Presentation Currency

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

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

For the wood reportable segment, although total sales include a mix of domestic and exports sales, prices of the products are established in U.S. dollars, which is also the case for the cost structure of the related raw materials.

In relation to the cost of sales, although labor and services costs 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 currency used to finance operations is mainly the U.S. dollar.

The presentation currency of the interim consolidated financial statements is the U.S. dollar. Figures on these interim consolidated financial statements are presented in thousands of U.S. dollar (ThU.S.$).

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Summary of significant accounting policies

a) Basis for preparation of the consolidated financial statements

These 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 explicit and unreserved adoption of IFRS.

The consolidated financial statements have been prepared on a historical cost basis, except for biological assets and certain derivative financial instruments which are measured at revalued amounts or fair value at the end of each period as explained in the following significant accounting policies.

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.

- Biological Assets

The recovery of forest plantations is based on discounted cash flow models which means 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.

The measurement of the fair value of the biological assets is determined using a discounted cash flow model. Our cash flow projections include significant judgments and assumptions relating to discount rates, estimated growth of the forests and sales margins. This valuation is performed on the basis of each identifiable farm block and for each type of tree. The main considerations used to calculate the valuation of forest plantations and a sensitivity analysis are presented in Note 20.

- Litigation and Contingencies

Arauco and its subsidiaries are subject to certain litigation proceedings. Future impact on Arauco’s financial condition derived from such litigations is estimated by management, in collaboration with its legal advisors. Arauco applies judgment when interpreting the reports of its legal advisors who provide updated estimates of the legal contingencies at each reporting period and/or at each time a modification is determined to be necessary. For a description of current litigations see Note 18.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

c) Consolidation

The consolidated financial statements include all entities over which Arauco has the power to direct the relevant financial and operating activities. Subsidiaries are consolidated from the date on which control is obtained and up to the date that control ceases.

Specifically, a company controls an investee or subsidiary 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.

When Arauco holds less than the majority of the voting rights in a company in which it participates, it nonetheless has the power over said company - when these voting rights are enough - to grant it in practice the ability to unilaterally direct said company’s relevant activities. Arauco takes into account all facts and circumstances in order to assess if the voting rights in a company in which it participates are enough for granting it the power, including:

a) the size of the investor’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

b) potential voting rights held by the investor, other vote holders or other parties;

c) rights arising from other contractual arrangements; and

d) any additional facts and circumstances that indicate the investor has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

The Company will reevaluate whether or not it holds control of a company in which participates if the facts and circumstances indicate that changes have occurred in one or more of the three elements of control mentioned above.

Consolidation of an investee shall begin from the date the investor obtains control of the investee and cease when the investor loses control of the investee. An entity includes the income and expenses of an acquired or sold subsidiary in the consolidated financial statements from the date it gains control until the date when the entity ceases to control the subsidiary.

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.

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

All intercompany transactions and unrealized gains and losses from subsidiaries have been fully eliminated from these consolidated financial statements and non-controlling interest is presented in the consolidated statement of financial position within equity.

The 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 real, Mexican pesos, Canadian dollars, Chilean pesos and Argentine pesos as their functional currencies. For consolidation purposes, the financial statements of those subsidiaries have been prepared in accordance with IFRS and translated as indicated in Note 1 (e) (ii).

A parent company 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.

d) Segments

Arauco has defined its reportable 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 personnel responsible for making such decisions are the Executive Vice-president and the Chief Executive Officer who are the highest authorities for making decisions and are supported by the Vice-presidents of each segment.

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

 

   

Pulp

 

   

Wood products

Refer to Note 24 for detailed financial information by reportable 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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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, assets and liabilities of Arauco’s operations in a functional currency 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. 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 consolidated statements of profit or loss, 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-on-hand, deposits held on demand at financial entities 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

Initial classification

Arauco classifies its financial assets into the following categories: fair value through profit or loss and amortized cost.

Arauco does not have financial assets at fair value through other comprehensive income.

The classification is based on the business model used to manage the assets and the characteristics of their contractual cash flows.

Management determines the classification of its financial assets at the time of their initial recognition.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

(a) Financial assets at fair value through profit or loss: these instruments are initially measured at fair value. Net income and losses, including any income from interest or dividends, are registered in the profit or loss of the period. Financial assets are classified in the category of financial assets at fair value through profit or loss when they are maintained for negotiation or designated in their initial registration as assets at fair value through profit or loss. A financial asset can be classified in this category if it is acquired mainly for the purposes of being sold in the short-term. Gain or losses of assets held for negotiations are registered in the consolidated statements of profit or loss, and the related interest is registered independently as financial income. Derivatives are classified as acquired for negotiation also unless they are designated as hedging instruments.

(b) Assets measured at amortized cost: they are initially registered at the fair value of the transaction, adding or subtracting the transaction costs that are directly attributable to the issuance of the financial asset or financial liability. The financial asset is maintained within a business model, the objective of which is to maintain financial assets to obtain contractual cash flows and the contractual conditions of the asset give rise, on specified dates, to cash flows that are solely payments of principal and interests (“SPPI”) over the amount of the outstanding principal.

Subsequent measurement

Financial instruments are subsequently measured at fair value through profit or loss or amortized cost.

The classification is based on two criteria: i) the Company’s business model for the management of financial instruments, and ii) whether the contractual cash flows related to the financial instruments represent “Solely Payments of Principal and Interests”.

a) Financial assets at fair value through profit or loss: these instruments are subsequently measured at fair value. Net earnings and losses, including income from interests and dividends, are registered as profits or losses for the period. These instruments are held for negotiation, and they are mainly acquired to be sold in the short-term. Derivatives are also classified as held for negotiation, unless they are registered as hedging instruments. Financial instruments of this type are classified as other current and non-current financial assets. They are subsequently valuated by determining their fair value, registering changes in value in the consolidated statements of profit or loss, in the items of financial income or financial costs.

b) Financial assets measured at amortized cost: These instruments are subsequently measured at amortized cost minus accumulated amortizations, using the effective interest method and adjusted by loss allowance and volume discounts, in the case of financial assets. Financial income and expenses, foreign exchange income and losses, and impairment are registered in results. Any earnings or losses due to initial or subsequent reductions of the value of the asset are registered in the statement of profit or loss of the period. Borrowings and receivables are non-derivative financial instruments with fixed or determinable payments not traded in any active market. They are registered at amortized cost, registering accrued conditions directly in profit or loss.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Arauco measures accumulated losses in a quantity equivalent to expected credit losses during the lifelong commitment. Expected credit losses are based on contractual cash flow differences based on the allowance of each contract and the cash flows that Arauco expects. The difference is then discounted based on an approximation of the asset’s original effective interest rate. The asset’s carrying value is reduced as the allowance is used, and the loss is recognized in sales expenses in the consolidated statements of profit or loss. When an account receivable cannot be collected, it is regularized against the allowance account for receivables. Subsequent recoveries of previously impaired amounts are recognized as a debit in distribution cost.

Derivative financial instruments are explained in Note 1 h).

Financial liabilities

Arauco classifies its financial liabilities as follows: fair value through profit or loss, derivatives designated as effective hedging instruments and amortized costs.

Management determines the classification of its financial liabilities upon initial recognition. Financial liabilities are derecognized when the obligation is cancelled, settled or expired. When an existing financial liability is replaced with another of the same provider under substantially different terms, or where the terms of an existing liability are substantially amended, such exchange or modification is treated as a write-off of the original liability, with a new liability being recognized, and the difference between the respective carrying amounts is recognized in the consolidated statement of profit or loss.

Financial liabilities are initially recognized at fair value, and in the case of borrowings, they include the costs directly attributable to the transaction. The subsequent measurement of the financial liabilities depends on their classification:

Financial liabilities at fair value through profit or loss

Financial liabilities are included in the category of financial liabilities at fair value through profit or loss when they are held for trading or originally designated at fair value through profit or loss. Income and losses from liabilities held for trading are recognized in profit or loss. This category includes non-designated derivatives for hedging accounting.

Financial liabilities at amortized cost

Other financial liabilities are subsequently valued at their amortized cost based on the effective interest rate method. The amortized cost is calculated taking into account any premium or acquisition discount and includes the costs of transactions that are an integral part of the effective interest rate. This category includes commercial accounts payable and other accounts payable, lease liabilities, as well as the borrowings included in other current and non-current financial liabilities.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

h)

Derivative financial instruments

(i) Derivative financial instruments - The Company 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, currency swaps and zero cost collar contracts. The Company’s policy is to enter into derivatives contracts only for economic hedging purposes and there are no instruments with speculation objectives.

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 as a hedging instrument and complies with hedge accounting requirements, 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 as a whole. Arauco has determined that no embedded derivatives currently exist.

 

(iii)

Hedge accounting

The Company designates certain hedging instruments as either fair value hedges or cash flow hedges.

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, Arauco 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.

-Fair Value Hedges

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.

-Cash flow hedges

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 profit or loss. Amounts previously recognized in other comprehensive income 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.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

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 measured at the lower of cost or net realizable value. Cost is determined using the weighted average cost method.

The cost of finished and in process products includes the cost of raw materials, direct labor, other direct costs and manufacturing overhead 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.

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

Arauco classifies certain property, plant and equipment, intangible assets, investments in associates and disposal groups (groups of assets to be sold together with their directly associated liabilities) as non-current assets held for sale which as of the date of the consolidated statements of financial position are the subject of active sale efforts which are estimated to be highly probable.

These assets or disposal groups are measured at the lower of the carrying amount or the fair value less the costs to sell, and are no longer depreciated or amortized from the time they are classified as non-current assets held for sale.

 

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June 30, 2022

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

 

 

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 acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 3 at the acquisition date; 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.

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 IFRS 9.

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 by 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 nor losses are recognized in the statement of profit or loss.

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 of non-controlling interests, in the recognized amounts of the acquirer’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 achieved in each stage (“step acquisition”), recognizing the effects of remeasurement of previously held equity in the acquiree in the consolidated statements of profit or loss.

 

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June 30, 2022

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

 

 

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 under common control transactions are accounted using as a reference the pooling of interest. Under this method, assets and liabilities related to the transaction carry 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.

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 the portion corresponding to the statement of profit or loss or to the statement of comprehensive income. Dividends received are recognized by deducting the amount received from the carrying amount of the investment. Arauco’s investment in associates includes goodwill (both net of any accumulated impairment loss).

The investments in joint operations are recognized through consolidation of assets, liabilities and results of operations in relation to Arauco’s ownership percentage.

If the acquisition cost is lower than the fair value of the net assets of the associate acquired, the difference is recognized directly in statement of profit or loss in line other gains (losses).

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”.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

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 other than goodwill

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.

 

(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 is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquired company, and the fair value of the acquirer’s previously held equity interest in the acquired company (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 statements of profit or loss.

Goodwill is not amortized but tested for impairment on annual basis.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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 or a group of cash generating units expected to benefit from the synergies of the combination irrespective of whether other assets or liabilities of the acquired company are allocated to those units or group of units.

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

Goodwill recognized in subsidiaries Arauco Canada Ltd. and Arauco do Brasil S.A., generated on subsidiaries acquisitions whose functional currency is different from the functional currency of the parent company and presentation of these financial statements, are translated into U.S. dollars at the closing exchange rate.

 

o)

Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment. 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.

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 IFRS 16 for recognizing leases in a manner consistent with contracts with similar features and akin circumstances.

At the beginning of a contract, Arauco assesses whether the contract is, or if it contains, a lease. A contract is, or contains, a lease if it transfers the right to control the use of a given asset for a certain period of time, in exchange for consideration.

As of the initial date for recording a lease, Arauco, as lessee, recognizes an asset by the right of use at cost.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

The cost of the asset for right of use comprises:

 

  -

The amount of the initial measurement of the lease liability. This measurement is at present value of the payments for leases that have not been disbursed as of that date. Payments for leases are discounted using the incremental interest rate for financial borrowings;

 

  -

Payments for leases performed prior to or as of the initiation date, minus the lease incentives that have been received;

 

  -

The initial direct costs incurred by the lessee; and

 

  -

An estimation of the costs to be incurred by the lessee when dismantling and eliminating the underlying asset, restoring the location where the same is located, or restoring the underlying asset to the condition required under the terms and conditions of the lease, unless such costs are incurred in order to produce inventories. The lessee assumes obligations stemming from such costs either at the commencement date, or as a result of having used the underlying asset during a specific period.

After the initial recognition date, Arauco, as lessee, recognizes its asset for right of use by applying the cost model, minus the accumulated depreciation and impairment losses, and adjusted for remeasurement of the liability for lease.

At the beginning, Arauco in the capacity of lessee, recognizes the lease liability at present value of the lease payments that have not been disbursed as of that date. Lease payments are discounted using the incremental interest rate for financial borrowings.

After the initial recognition date, Arauco, as lessee, recognizes a liability for leases by increasing the book value, so as to reflect the interest over the liability for lease, reducing the amount in order to reflect the payments for leases that have been performed and once again recognizing the book value, so as to reflect the remeasurement and also to reflect the essential fixed payments for leases that have been revised.

Arauco presents the assets by right of use in the consolidated statement of financial position and are further disclosed in Note 8. Likewise, lease liabilities are presented in the consolidated statement of financial position and further disclosed in Note 23.

IFRS 16 maintains substantially the accounting requirements of the lessor from IAS 17. Therefore, Arauco has continued to classify its leases as operational or financial, as the case may be.

Income from operating leases in which Arauco is the lessor are recognized on a straight-line basis during the term of the lease. Initial direct costs are added to the book value of the underlying asset and are recognized as expenses during the term of the lease on the same basis as the lease income. Leased assets are included within the statement of financial position, in property, plant and equipment. Arauco did not make adjustments with respect to assets that maintains as a lessor, as a result of IFRS 16 adoption.

When assets are leased under a financial lease, the present value of lease payments are recognized as financial accounts receivable. The difference between the gross receivable and the present value of such amount, is recognized as financial return on capital.

 

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June 30, 2022

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

 

 

Arauco evaluates the economic nature of the contracts that grant the right to use certain assets, for the purposes of determining the existence of implied leases. In these cases, the Company separates, at the beginning of the contract and based on its relative reasonable values, payments and considerations associated with the lease, from the rest of the elements incorporated into the contract.

 

q)

Biological Assets

IAS 41 requires that biological assets, such as standing trees, are measured at fair value less cost to sell 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 the fair value of the biological assets is determined using a discounted cash flow model. Our cash flow projections include significant judgments and assumptions relating to discount rates, estimated growth of the forests and sales margins. 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 statements of profit or loss.

 

r)

Income taxes

The tax liabilities are recognized in the consolidated 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 liability method, on the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated annual accounts. Deferred income tax is determined using tax rates contained in laws adopted as of the date of the financial statements and that are expected to be applicable when the related deferred tax asset is realized, or the deferred income tax liability is settled.

Deferred taxes are recognized in accordance with the standards established in IAS 12 - Income Tax.

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.

 

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June 30, 2022

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

 

 

s)

Provisions

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of past events, under which, it is probable that an outflow of resources will be required to settle the obligation; and when 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 valued at fair value of the consideration received or to be received, derived from them. Arauco analyses and takes under consideration all relevant facts and circumstances to apply the five-step model established under IFRS 15 to customer contracts: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price, and (v) recognise revenue. Additionally, Arauco evaluates the incremental costs of obtaining a contract and the costs incurred to comply with a contract. Arauco recognizes revenues when the steps established in IFRS have been satisfactorily complied with.

Accounts receivable are recognized when control over goods or services has been transferred to the customer, because at this point of the time collection is unconditional and the passage of time is only needed to receive payment.

 

(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 committed 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. Revenue from the sale of goods are recognized when there is no obligation unsatisfied that could affect the customer’s acceptance of the product. The delivery is effective when the products are sent to the specific location, the risks of obsolescence and loss have been transferred to the customer and when Arauco has objective evidence that all acceptance criteria have been satisfied.

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. There is no significant financing component given that receivables from sales are collected within a short period, which is in line with market practices.

The structure for recognizing revenue from export sales is based on the 2010 Incoterms, which are the official rules for the interpretation of commercial terms issued by the International Chamber of Commerce.

The main Incoterms used by Arauco are the following:

“CFR (Cost and freight)”, where the company bears all costs including main transportation, until the products arrives at its port of destination. The risk is transferred to the purchaser once the products have been loaded onto the vessel, in the country of origin.

 

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June 30, 2022

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

 

 

“CIF (Cost Insurance & Freight)”, where the Company organizes and pays for external freight services and some other expenses. Arauco is no longer responsible for the products once they have been delivered to the ocean carrier company.

(ii) Revenue recognition from Rendering of Services

Revenue from the rendering of services is recognized as long as the performance obligation have been satisfied.

Revenue is recognized considering the stage of completion of the transaction at the date of the reporting period, when Arauco has the enforceable right of payment from the rendering of the services.

There is no significant financing component, given that sales are made with a reduced average collection period, which is in line with market practice.

Arauco mainly provides power supply services which are transacted principally in the spot market of the Sistema Eléctrico Nacional (SEN) (“National Electrical System”). According to current regulations, the prices on that market called “Marginal Costs” are calculated by the Coordinador Eléctrico Nacional (CEN) (“National Electrical Coordinator”) 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 SEN.

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

Revenues from reportable 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.

 

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June

30, 2022

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

 

 

On April 8, 2022, our Board of Directors approved an amendment to the abovementioned dividend policy in respect of net income obtained in fiscal year 2021, in order to include in the calculation of the distributable net income for such fiscal year the extraordinary profits obtained by the Company for the sale of real estate by the subsidiary Forestal Arauco S.A. to Vista Hermosa Inversiones Forestales SpA. The amendment to the dividend policy is based upon the very positive financial results obtained by Arauco during fiscal year 2021, already informed to the market, and its current cash availability.

The aforementioned modification to the Company’s dividend policy only applies for fiscal year 2021. For the eventual profits of the current fiscal year 2022 and for subsequent fiscal years, an amount equivalent to the 40% of the distributable net income for each fiscal year will be distributed as dividends. Nevertheless, the Board of Directors may decide to distribute and pay interim dividends to the shareholders, to the extent that it expects the year to finalize with positive results and that the Company’s liquidity allows such distribution and payment.

 

v)

Earning per share

Basic earnings per share are calculated by dividing the net profit 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 long-term assets with finite useful lives are measured whenever there are any circumstances indicating that the assets have to recognize an impairment loss. Among the circumstances 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.

A previously recognized impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount however a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

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 recognized an impairment loss, are reviewed at the end of each reporting period whether there are any circumstances indicating that an impairment loss previously recognized may no longer exists or has decreased.

 

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June

30, 2022

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

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 to sell and its value in use. An impairment loss is recognized whenever the carrying amount exceeds the recoverable amount.

A cash-generating unit, for which goodwill has been allocated, is tested for impairment annually or more frequently when there are circumstances indicating 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 other assets pro rata based on the carrying amount of each asset in the unit. Any impairment loss of goodwill is recognized directly in the consolidated statement of profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

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 assessment 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.

An allowance for doubtful accounts is established based on a measurement of expected losses using a simplified approach.

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 constitutes labor obligations for severance payable in all circumstances for certain of its employees with at least 5 years of work in the Company, based on the terms of the staff’s collective and individual bargaining agreements.

The related provision is an estimate of the years of service to be recognized as a future labor obligation liability, in accordance with contracts between Arauco and its employees and pursuant to actuarial valuation criteria for this type of liability. This post-employment benefit is considered a defined benefit plan.

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June

30, 2022

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

 

 

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

These obligations are related to post-employee benefits in accordance with current standards.

 

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 line item “Trade and other current payables” in the consolidated statements of financial position.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

z)

Recent accounting pronouncements

a) Standards, interpretations and amendments that are mandatory for the first time for annual periods beginning on January 1, 2022:

 

Amendments and

improvements

  

Content

  

Mandatory application
for annual periods
beginning on or after

Reference to the Conceptual Framework - Amendments to IFRS 3

  

Business combinations.

Update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations.

   January 1, 2022

IAS 16

Amendment

  

Properties, plant and equipments

Prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss.

   January 1, 2022

IAS 37

Amendment

  

Provisions, contingent liabilities and contingent

Specify which costs a company includes when assessing whether a contract will be loss-making.

   January 1, 2022
Annual Improvements to IFRS Standards 2018–2020   

IFRS 9 Financial Instruments Addresses which fees should be included in the 10% test for derecognition of financial liabilities.

 

IFRS 16 Leases Amendment to example 13 to remove the illustration of the lessor’s payments for lease improvements.

 

IAS 41 Agriculture Elimination of the requirement for entities to exclude tax cash flows when measuring fair value under IAS 41.

   January 1, 2022

The adoption of the standards, amendments and interpretations described in the table above do not have a significant impact on Arauco interim consolidated financial statements during its initial application period.

 

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Unaudited interim consolidated financial statements

June

30, 2022

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

 

 

b) Standards, interpretations and amendments, the application of which is not yet mandatory, which have not been adopted in advance:

 

Amendments and

improvements

  

Content

  

Mandatory application
for annual periods
beginning on or after

IAS 1   

Presentation of Financial Statements

Clarifies that liabilities will be classified as current or non-current depending on the rights at the end of the reporting period. The amendment also clarifies what IAS 1 means when it refers to the ‘settlement’ of a liability.

   January 1, 2024
IAS 1 and IAS 8    To IAS 1, Practice statement 2 and IAS 8, aim to improve accounting policy disclosures and to help users of the financial statements to distinguish between changes in accounting estimates and changes in accounting policies.    January 1, 2023
IAS 12   

Deferred tax related to assets and liabilities arising from a single transaction

Require companies to recognise deferred tax on transactions that, on initial recognition give rise to equal amounts of taxable and deduct able temporary differences.

   January 1, 2023

Arauco estimates that the adoption of the standards, amendments and interpretations described in the table above will not have a significant impact on Arauco’s interim consolidated financial statements during its initial application period.

NOTE 2. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES

Changes to accounting policies

On January 1, 2021, we discontinued the reporting of our forestry operations as a reportable segment, and included those operations as part of the pulp segment. This is in line with Arauco’s current reality and with the way in which the management views and evaluates the progress of the business. The remaining segments are: pulp and wood products, which demonstrates Arauco’s focus on its end customers.

The comparative information in the tables in Note 24 Reportable segments has been restated as of December 31, 2020 due to the merger of the pulp and forestry businesses. This reformulation of the Company’s segments did not produce changes in Arauco’s consolidated financial statements (statement of financial position, statement of profit or loss, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes to the financial statements, except for the Note 24).

Changes to accounting estimates

As of June 30, 2022, there have been no changes in the methodologies for calculating the accounting estimates with respect to the 2021 financial year.

 

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Unaudited interim consolidated financial statements

June

30, 2022

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

 

 

NOTE 3. DISCLOSURE OF OTHER INFORMATION

 

a)

Disclosure of information on Issued Capital

Between April and May of 2021, a capital increase of ThU.S.$ 200,000 which amounts to 3,250,975 shares was wholly subscribed and paid-in by the shareholders.

As of September 24, 2020, a capital increase of ThU.S.$ 250,000 which amounts to 4,063,720 shares was wholly subscribed and paid-in by the shareholders.

As of December 14, 2021, the controlling shareholder, who is Empresas Copec S.A. acquired a total of 26,346 shares from 2 minority shareholders, so following this capital increase as of June 30, 2022, the shareholders composition according to the amount of shares owned is as follows:

 

Shareholders

   Shares      %  

Empresas Copec S.A.

     120,474,249        99.99991616

AntarChile S.A.

     101        0.00008384
     120,474,350        100.00000000

At the date of these interim consolidated financial statements the share capital of Arauco is ThU.S.$ 803,618.

100% of Capital corresponds to ordinary shares.

 

     06-30-2022    12-31-2021

Description of shares by type of capital in ordinary shares

   100% of Capital corresponds to
ordinary shares

Number of authorized shares by type of capital in ordinary Shares

   120,474,350    124,474,350

Nominal value of shares by type of capital in ordinary shares

   U.S.$ 6.6704
per share
   U.S.$ 6.6704
per share

Amount of capital in shares by type of ordinary shares that constitute capital

   ThU.S.$ 803,618    ThU.S.$
803,618
     06-30-2022    12-31-2021

Number of shares issued and fully paid by type of capital in ordinary shares

   120,474,350    120,474,350

 

b)

Dividends paid

In May 2022 a dividend of ThU.S.$ 192,132 was paid with a charge to the profits of the year 2021. In November 2021 a provisional dividend of ThU.S.$ 271,000 was paid with a charge to the profits of the same year.

In October 2021 a dividend of ThU.S.$ 200,000 was paid.

The amount of ThU.S.$ 328,734 presented in the interim consolidated statement of changes in equity contains the minimum dividend provision for ThU.S.$ 261,613 corresponding to the period 2022. The remaining ThU.S.$ 67,121 correspond to the determination of the differential dividend distributed by the profits of the year 2021 and generated by the change in the dividend policy approved in April 2022.

See Note 26 for details.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June

30, 2022

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

 

 

In the interim consolidated statements of cash flows, an amount of ThU.S.$ 192,334 as of June 30, 2022 (ThU.S.$ 167 as of June 30, 2021) is presented in the line dividends paid, of which ThU.S.$ 192,132 (ThU.S.$ 0 as of June 30, 2021) correspond to the payment of dividends to the parent company.

 

Dividends paid detail, ordinary shares   
Dividends paid    Definitive dividend
Classes of shares for which there are dividends paid    Ordinary shares without series
Date of dividends paid    05-10-2022
Amount of dividends    ThU.S.$ 192,132
Number of shares on which pay dividends    120,474,350
Dividend per shares    U.S.$ 1.594799

 

Dividends paid detail, ordinary shares   
Dividends paid    Interim dividend
Classes of shares for which there are dividends paid    Ordinary shares without series
Date of dividends paid    11-03-2021
Amount of dividends    ThU.S.$ 271,000
Number of shares on which pay dividends    120,474,350
Dividend per shares    U.S.$ 2.249441

 

c)

Disclosure of Information on Reserves

Other reserves comprise 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

The hedging reserve includes the cash flow hedge reserve and the costs of hedging reserve. The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives that are designated and qualify as cash flow hedges.

 

Reserve

of Actuarial 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.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

d)

Other items in the interim consolidated statements of profit or loss

The table below sets forth other income, other expenses, finance income, finance costs and share of profit (loss) of associates and joint ventures for the periods ended June 30, 2022 and 2021 are as follows:

 

     January - June      April - June  
     2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Classes of Other Income

           

Total Other Income

     171,816        120,376        89,053        45,379  

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

     130,564        83,080        76,860        41,771  

Net income from insurance compensation

     323        606        147        598  

Revenue from export promotion

     622        742        293        367  

Lease income

     1,162        725        635        191  

Gain on sales of assets

     29,558        3,648        3,750        1,675  

Access easement

     —          161        —          158  

Recovery of tax credits

     —          6        —          6  

Compensations received

     —          7,018        —          3  

Gain on sales of permanent investments

     —          20,381        —          —    

Other operating results

     9,587        4,009        7,368        610  

Classes of Other Expenses by function

           

Total Other Expenses by function

     (86,711      (70,456      (58,863      (32,978

Provision legal expenses

     (4,028      (6,172      (2,409      (4,708

Impairmert provision for property, plant and equipment, provision for inventory obsolescence, withdrawals and others

     (6,090      (11,832      (3,565      (7,876

Operating expenses related to staff restructuring or from plants stoppage or closed

     (21,445      (3,613      (19,515      (2,091

Expenses related to projects

     (10,553      (11,397      (6,419      (6,139

Loss of asset sales

     (4,816      (3,202      (3,116      (1,153

Loss and repair of assets

     (10,553      (494      (10,535      (171

Loss of forest due to fires

     (12,696      (17,503      (2,341      (605

Other taxes

     (8,834      (10,011      (5,542      (6,757

Research and development expenses

     (2,912      (2,037      (1,890      (1,708

Fines, readjustments and interests

     (117      (93      (79      (75

Loss on sale of permanent investments

     —          (431      —          —    

Loss of tax credits

     (167      (255      71        (154

Other expenses

     (4,920      (3,416      (3,523      (1,541

Classes of Finance Income

           

Total Finance Income

     28,794        14,434        15,463        7,600  

Finance income by mutual funds - term deposits

     26,215        13,205        13,868        6,963  

Finance income resulting from derivatives

     39        39        —          —    

Other finance income

     2,540        1,190        1,595        637  

Classes of Finance Costs

           

Total Finance Costs

     (93,210      (118,180      (46,191      (57,187

Interest expense, Bank borrowings

     (7,899      (7,831      (4,300      (3,673

Interest expense, Bonds

     (52,491      (76,378      (24,196      (37,387

Interest expense resulting from derivatives

     (9,458      (10,963      (4,926      (4,509

Interest expence for right-of-use

     (5,026      (4,412      (2,504      (1,753

Other financial costs

     (18,336      (18,596      (10,265      (9,865

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

           

Total

     44,171        11,216        24,459        8,718  

Investments in associates

     4,777        139        2,345        233  

Investments in joint ventures

     39,394        11,077        22,114        8,485  

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

The analysis of expenses by nature contained in these interim consolidated financial statements is presented below:

 

     January - June      April - June  

Cost of sales (*)

   2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Timber

     147,801        410,047        221,819        181,030  

Forestry labor costs and other services

     140,212        256,172        157,863        136,547  

Depreciation and amortization

     110,732        204,257        105,319        100,306  

Depreciation for right of use

     10,483        21,907        10,426        10,221  

Maintenance costs

     81,717        127,669        78,209        63,190  

Chemical costs

     178,007        245,488        188,548        130,520  

Sawmill costs

     28,628        53,657        35,009        28,114  

Other raw materials

     74,943        109,581        77,657        55,214  

Other indirect costs

     53,587        58,546        38,800        31,419  

Energy and fuel

     60,634        85,692        62,857        42,830  

Cost of electricity

     9,687        22,082        11,411        12,462  

Staff expenses

     106,719        189,859        107,897        95,330  

Total

     1,003,150        1,784,957        1,95,815        887,183  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Total amount is comprised of the cost of inventory sales for ThU.S.$ 2,049,304 (ThU.S.$ 1,745,306 as of June 30, 2021) and the cost of rendering services for ThU.S.$ 49,661 (ThU.S.$ 39,651 as of June 30, 2021).

 

     January – June      April – June  

Distribution costs

   2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Selling costs

     20,677        17,655        10,562        8,929  

Commissions

     7,002        7,197        3,281        3,603  

Insurance

     3,360        1,974        1,896        850  

Provision for doubtful accounts

     (22      300        174        339  

Other selling costs

     10,337        8,184        5,211        4,137  

Shipping and freight costs

     468,904        286,415        245,043        150,347  

Port services

     35,906        23,547        20,657        11,839  

Freights

     401,358        241,332        207,018        128,235  

Depreciation for right of use

     883        1,211        352        639  

Other shipping and freight costs (internment, warehousing, stowage, customs and other costs)

     30,757        20,325        17,016        9,634  

Total

     489,581        304,070        255,605        159,276  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     January – June      April – June  

Administrative expenses

   2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Wages and salaries

     125,055        122,862        62,643        62,694  

Marketing, advertising, promotion and publications expenses

     8,464        5,972        4,603        3,339  

Insurances

     12,747        11,804        6,336        5,990  

Depreciation and amortization

     16,845        18,037        8,380        9,428  

Depreciation for right of use

     3,273        3,471        1,371        1,658  

Computer services

     21,923        18,300        16,325        9,648  

Lease of offices, other property and vehicles

     2,501        3,226        980        1,591  

Donations, contributions, scholarships

     4,083        3,063        1,985        1,174  

Fees (legal and technical advisors)

     17,782        18,216        9,122        9,327  

Property taxes, city permits and rights

     14,681        12,713        8,772        8,236  

Cleaning services, security services and transportation

     14,375        16,977        7,110        8,931  

Third-party variable services (maneuvers, logistics)

     23,800        21,927        10,962        11,585  

Basic services (electricity, telephone, water)

     3,036        2,377        1,316        961  

General and other minor expenses (mainly PCR)

     3,866        9,182        2,182        5,507  

Maintenance and repair

     4,254        3,714        2,217        2,097  

Seminars, courses, training materials

     2,348        1,084        1,285        575  

Travels, clothing and safety equipment, environmental expenses, audits and others

     20,117        14,230        12,794        7,912  

Total

     299,150        287,155        158,383        150,653  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 4. INVENTORIES

 

     06-30-2022      12-31-2021  

Components of inventory

   ThU.S.$      ThU.S.$  

Raw materials

     172,751        79,288  

Production supplies

     186,718        158,382  

Work in progress

     75,682        56,187  

Finished goods

     722,896        689,168  

Spare parts

     200,267        189,154  

Total inventories

     1,358,314        1,172,179  
  

 

 

    

 

 

 

Inventories recognized as cost of sales as of June 30, 2022 were ThU.S.$ 2,049,304 (ThU.S.$ 1,745,306 as of June 30, 2021).

In order to have inventories recorded at net realizable value as of June 30, 2022, a net decrease of inventories was recognized associated with a higher obsolescence provision of ThU.S.$ 5,618 (ThU.S.$ 395 as of June 30, 2021). As of June 30, 2022, the amount of obsolescence provision is ThU.S.$ 71,108 (ThU.S.$ 65,490 as of December 31, 2021).

As of June 30, 2022, there were inventory write-offs of ThU.S.$ 737 (ThU.S.$ 355 as of June 30, 2021) which are presented in the interim consolidated statements of profit or loss within Cost of sales.

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

As of the date of these interim consolidated financial statements, no inventories were pledged as security.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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 and mutual funds. These 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 is to maximize the amounts of cash surpluses in the short-term. 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 interim consolidated financial statements, there are no amounts of cash and cash equivalents with restrictions on use.

 

Components of cash and cash equivalents

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Cash on hand

     81        91  

Balances with banks

     472,821        528,985  

Short-term deposits

     175,566        251,956  

Mutual funds

     253,239        230,068  

Total

     901,707        1,011,100  
  

 

 

    

 

 

 

The risk classification of the Company’s mutual funds as of June 30, 2022 and as of December 31, 2021 is shown below.    

 

     06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

AAAfm

     172,076        134,314  

No classification

     81,163        95,754  

Total Mutual Funds

     253,239        230,068  
  

 

 

    

 

 

 

Changes in Financial Liabilities

 

     06-30-2022  
     Bank
borrowings
     Hedging
liabilities
     Bonds and
promissory notes
     Other financial
liabilities, Total
 
     ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$  

Opening balance January 1

     991,956        296,316        4,426,033        5,714,305  
Cash flows    (+) Borrowings obtained      167,460        —          —          167,460  
  

(-) Borrowings paid

     (235,703      (5,080      (20,513      (261,296
  

(-) Commissions paid

     (378      —          —          (378
  

(-) Interest paid

     (9,088      (18,273      (97,408      (124,769

(+) Accrued interest

     9,670        18,164        97,203        125,037  

(+/-) Inflation adjustment

     (39,855      —          (33,054      (72,909

(+/-) Changes in fair value

     —          (70,839      —          (70,839

(+/-) Other movements

     3,727        (15      3,906        7,618  

Closing balance

     887,789        220,273        4,376,167        5,484,229  
     

 

 

    

 

 

    

 

 

    

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

     12-31-2021  
     Bank
borrowings
    Hedging
liabilities
    Bonds and
promissory notes
    Other financial
liabilities, Total
 
     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$  

Opening balance January 1

     1,274,260       39,660       4,707,944       6,021,864  
Cash flows    (+) Borrowings obtained      167,962       —         —         167,962  
  

(-) Borrowings paid

     (405,567     (25,316     (165,607     (596,490
  

(-) Commissions paid

     (2,328     —         —         (2,328
  

(-) Interest paid

     (18,084     (30,034     (204,465     (252,583

(+) Accrued interest

     16,961       29,032       200,843       246,836  

(+/-) Inflation adjustment

     (45,891     —         (120,785     (166,676

(+/-) Changes in fair value

     —         283,261       —         283,261  

(+/-) Other movements

     4,643       (287     8,103       12,459  

Closing balance

     991,956       296,316       4,426,033       5,714,305  
     

 

 

   

 

 

   

 

 

   

 

 

 

 

     Lease liabilities  
     06-30-2022      12-31-2021  
     ThU.S.$      ThU.S.$  

Opening balance January 1

     163,304        211,755  
Cash flows    (-) Borrowings paid      (32,251      (67,895
  

(-) Interest paid

     (5,356      (7,811

(+) Accrued interest

     5,670        8,363  

(+/-) Inflation adjustment

     (2,460      (13,540

(+) Increase due to new leases liabilities

     96,863        35,186  

(+/-) Other movements

     (1,423      (2,754

Closing balance

     224,347        163,304  
     

 

 

    

 

 

 

NOTE 6. INCOME TAXES

The tax rates applicable in the countries in which Arauco operates are 27% in Chile, 35% in Argentina and Mexico, 34% in Brazil, 25% in Uruguay and 21% in the United States (federal tax).

In 2021, Argentinian Republic published in the Official Gazette of Argentina the law No. 27,630, which replaced the fixed rate paid by Argentine companies on their corporate income tax periods starting in 2021. It provides a progressive scale of rates, where a 25% rate will be applied to companies with a nex taxable income of up to 5,000,000 Argentine pesos (AR$) (approximately ThU.S.$ 40 as of June 30, 2022), a 30% rate will be applied to companies with a nex taxable income ranging between AR$ 5,000,000 and AR$ 50,000,000 (approximately ThU.S.$ 399 as of June 30, 2022), and a 35% rate will be applied to companies with a nex taxable incomes surpassing AR$ 50,000,000. This new regulation generated a loss of ThU.S.$ 49,000 in Arauco Argentina S.A. in income tax in 2021.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Deferred Tax Assets

The following table sets forth the deferred tax assets as of the dates indicated:

 

     06-30-2022      12-31-2021  

Deferred tax assets

   ThU.S.$      ThU.S.$  

Deferred tax assets relating to provisions

     6,064        5,730  

Deferred tax assets relating to accrued liabilities

     7,732        8,257  

Deferred tax assets relating to post-employment benefits

     19,655        19,738  

Deferred tax assets relating to property, plant and equipment

     44,023        32,480  

Deferred tax assets relating to impairment provision

     8,349        8,564  

Deferred tax assets relating to financial instruments

     81,400        108,910  

Deferred tax assets relating to tax loss carryforward

     54,414        24,972  

Deferred tax assets relating to inventories

     18,734        18,793  

Deferred tax assets relating to provisions for income

     23,946        19,323  

Deferred tax assets relating to allowance for doubtful accounts

     2,645        4,625  

Deferred tax assets relating to intangible revaluation

     1,944        2,301  

Deferred tax assets relating to tax credits

     —          8,996  

Deferred tax assets relating to other deductible temporary differences

     30,439        24,328  

Total deferred tax assets

     299,345        287,017  
  

 

 

    

 

 

 

Offsetting presentation

     (291,399      (279,380
  

 

 

    

 

 

 

Net effect

     7,946        7,637  
  

 

 

    

 

 

 

Certain subsidiaries of Arauco mainly in Chile, Brazil, Argentina and USA, as of the date of these interim consolidated financial statements, present tax losses for which we estimate that, given the projection of future profits, will allow the recovery of the deferred tax assets recorded. The total amount of these tax losses is ThU.S.$ 267,175 (ThU.S.$ 335,872 at December 31, 2021), which are mainly originated by operational and financial losses.

In addition, as of the closing date of these interim consolidated financial statements there are ThU.S.$ 125,061 (ThU.S.$ 126,746 at December 31, 2021) of non-recoverable tax losses from subsidiaries in USA and from joint operations in Uruguay, for which deferred tax assets have not been recognized. The estimated recovery period exceeds the expiry date of such tax losses.

Deferred Tax Liabilities

The following table sets forth the deferred tax liabilities as of the dates indicated:

 

     06-30-2022      12-31-2021  

Deferred tax liabilities

   ThU.S.$      ThU.S.$  

Deferred tax liabilities relating to property, plant and equipment

     1,382,174        1,281,546  

Deferred tax liabilities relating to financial instruments

     28,746        25,334  

Deferred tax liabilities relating to biological assets

     601,089        605,166  

Deferred tax liabilities relating to inventory

     44,052        46,336  

Deferred tax liabilities relating to prepaid expenses

     40,201        38,088  

Deferred tax liabilities relating to intangible

     12,219        12,511  

Deferred tax liabilities relating to other taxable temporary differences

     22,537        18,204  

Total deferred tax liabilities

     2,131,018        2,027,185  
  

 

 

    

 

 

 

Offsetting presentation

     (291,399      (279,380
  

 

 

    

 

 

 

Net effect

     1,839,619        1,747,805  
  

 

 

    

 

 

 

The effect of this period in current and deferred tax liabilities related to financial hedging instruments corresponds to a debit of ThU.S.$ 41,248 as of June 30, 2022 (credit of ThU.S.$ 17,132 as of June 30, 2021), which is presented net in reserves for cash flow hedges in the consolidated statement of changes in equity.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Reconciliation of deferred tax assets and liabilities

 

     Opening
balance
01-01-2022
     Deferred tax
income
(expenses)
    Deferred tax of
items charged
to equity
    Increase
(decrease)
net exchange
differences
     Closing
balance
06-30-2022
 

Deferred tax assets

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

Deferred tax Assets relating to provisions

     5,730        228       —         106        6,064  

Deferred tax Assets relating to accrued liabilities

     8,257        (534     —         9        7,732  

Deferred tax Assets relating to post-employment benefits

     19,738        (1,294     1,194       17        19,655  

Deferred tax Assets relating to property, plant and equipment

     32,480        11,543       —         —          44,023  

Deferred tax Assets relating to impairment provision

     8,564        (483     —         268        8,349  

Deferred tax Assets relating to financial instruments

     108,910        11,665       (39,582     407        81,400  

Deferred tax Assets relating to tax loss carryforward

     24,972        27,962       —         1,480        54,414  

Deferred tax Assets relating to inventories

     18,793        (86     —         27        18,734  

Deferred tax Assets relating to provisions for income

     19,323        4,597       —         26        23,946  

Deferred tax Assets relating to allowance for doubtful accounts

     4,625        (1,982     —         2        2,645  

Deferred tax Assets relating to intangible revaluation

     2,301        (530     —         173        1,944  

Deferred tax Assets relating to tax credits

     8,996        (8,996     —         —          —    

Deferred tax Assets relating to other deductible temporary differences

     24,328        5,334       —         777        30,439  

Total deferred tax assets

     287,017        47,424       (38,388     3,292        299,345  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
     Opening
balance
01-01-2021
     Deferred tax
(income)
expenses
    Deferred tax of
items charged
to equity
   

Increase

(decrease)
net exchange
differences

     Closing
balance
06-30-2022
 

Deferred tax liabilities

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

Deferred tax liabilities relating to property, plant and equipment

     1,281,546        97,429       —         3,199        1,382,174  

Deferred tax liabilities relating to financial instruments

     25,334        1,746       1,666       —          28,746  

Deferred tax liabilities relating to biological assets

     605,166        (7,499     —         3,422        601,089  

Deferred tax liabilities relating to inventory

     46,336        (2,286     —         2        44,052  

Deferred tax liabilities relating to prepaid expenses

     38,088        2,105       —         8        40,201  

Deferred tax liabilities relating to intangible

     12,511        (718     —         426        12,219  

Deferred tax liabilities relating to other taxable temporary differences

     18,204        3,864       —         469        22,537  

Total deferred tax liabilities

     2,027,185        94,641       1,666       7,526        2,131,018  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

     Opening
balance
01-01-2021
     Deferred tax
income
(expenses)
    Deferred tax of
items charged
to other
comprehensive
income
     Decrease
through loss
of control in
subsidiary
    Increase
(decrease)
net exchange
differences
    Closing
balance
12-31-2021
 

Deferred tax assets

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

Deferred tax assets relating to provisions

     5,042        745       —          —         (57     5,730  

Deferred tax assets relating to accrued liabilities

     8,107        179       —          (24     (5     8,257  

Deferred tax assets relating to post-employment benefits

     22,026        (2,667     438        (56     (3     19,738  

Deferred tax assets relating to property, plant and equipment

     24,397        8,083       —          —         —         32,480  

Deferred tax assets relating to impairment provision

     14,193        (5,193     —          —         (436     8,564  

Deferred tax assets relating to financial instruments

     79,765        (1,572     31,062        —         (345     108,910  

Deferred tax assets relating to tax loss carryforward

     126,405        (99,915     —          (207     (1,311     24,972  

Deferred tax assets relating to inventories

     7,964        10,854       —          —         (25     18,793  

Deferred tax assets relating to provisions for income

     7,905        11,427       —          —         (9     19,323  

Deferred tax assets relating to allowance for doubtful accounts

     2,427        2,213       —          —         (15     4,625  

Deferred tax assets relating to intangible revaluation

     3,713        (1,207     —          —         (205     2,301  

Deferred tax assets relating to tax credits

     20,898        (11,902     —          —         —         8,996  

Deferred tax assets relating to other deductible temporary differences

     20,018        4,823       —          4       (517     24,328  

Total deferred tax assets

     342,860        (84,132     31,500        (283     (2,928     287,017  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     Opening
balance
01-01-2021
     Deferred tax
(income)
expenses
    Deferred tax of
items charged
to other
comprehensive
income
     Decrease
through loss
of control in
subsidiary
   

Increase

(decrease)
net exchange
differences

    Closing
balance
12-31-2021
 

Deferred tax liabilities

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

Deferred tax liabilities relating to property, plant and equipment

     1,020,282        264,397       —          (121     (3,012     1,281,546  

Deferred tax liabilities relating to financial instruments

     26,755        (2,030     609        —         —         25,334  

Deferred tax liabilities relating to biological assets

     644,348        (31,706     —          (2,946     (4,530     605,166  

Deferred tax liabilities relating to inventory

     32,567        15,131       —          (1,395     33       46,336  

Deferred tax liabilities relating to prepaid expenses

     42,319        (4,227     —          —         (4     38,088  

Deferred tax liabilities relating to intangible

     14,826        (1,908     —          —         (407     12,511  

Deferred tax liabilities relating to other taxable temporary differences

     19,608        (1,173     —          (179     (52     18,204  

Total deferred tax liabilities

     1,800,705        238,484       609        (4,641     (7,972     2,027,185  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:

 

     06-30-2022      12-31-2021  

Detail of classes of deferred tax temporary differences

   Deductible
difference
ThU.S.$
     Taxable
difference
ThU.S.$
     Deductible
difference
ThU.S.$
     Taxable
difference
ThU.S.$
 

Deferred tax assets

     244,931        —          262,045        —    

Deferred tax assets - tax loss carryforward

     54,414        —          24,972        —    

Deferred tax liabilities

     —          2,131,018        —          2,027,185  

Total

     299,345        2,131,018        287,017        2,027,185  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     January - June      April - June  

Detail of temporary difference income and loss amounts

   2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Deferred tax assets

     19,462        3,764        (616      (10,717

Deferred tax assets - tax loss carryforward

     27,962        97,941        (15,056      44,871  

Deferred tax liabilities

     (94,641      (165,240      (37,470      (96,202

Total

     (47,217      (63,535      (53,142      (62,048
  

 

 

    

 

 

    

 

 

    

 

 

 

Income Tax Expense

Income tax expense consists of the following:

 

     January - June      April - June  

Income tax composition

   2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Current income tax expense

     (188,418      (101,556      (109,562      (61,140

Tax benefit arising from tax credit used to reduce current tax expense

     53,978        5,026        53,978        5,026  

Prior period current income tax adjustments

     4,967        (2,729      7,911        (2,513

Other current benefit tax (expenses)

     25,148        (3,212      25,903        (2,687

Current tax expense, net

     (104,325      (102,471      (21,770      (61,314

Deferred tax expense relating to origination and reversal of temporary differences

     (75,179      (161,476      (38,086      (106,919

Tax benefit arising from tax credits used to reduce deferred tax expense

     27,962        97,941        (15,056      44,871  

Total deferred tax benefit (expense), net

     (47,217      (63,535      (53,142      (62,048

Total income tax benefit (expense)

     (151,542      (166,006      (74,912      (123,362
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the current income tax expense detailed by foreign and domestic (Chile) companies at June 30, 2022 and 2021:

 

     January - June      April - June  
     2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Foreign current income tax expense

     (52,429      (53,280      (23,668      (33,423

Domestic current income tax expense

     (51,896      (49,191      1,898        (27,891

Total current income tax expense

     (104,325      (102,471      (21,770      (61,314

Foreign deferred tax benefit (expense)

     6,962        (49,988      615        (44,805

Domestic deferred tax benefit (expense)

     (54,179      (13,547      (53,757      (17,243

Total deferred tax benefit (expense)

     (47,217      (63,535      (53,142      (62,048

Total income tax benefit (expense)

     (151,542      (166,006      (74,912      (123,362
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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 - June     April - June  

Reconciliation of income tax from statutory rate to effective tax rate

   2022
ThU.S.$
    2022
ThU.S.$
    2022
ThU.S.$
    2021
ThU.S.$
 

Statutory domestic (Chile) income tax rate

     27.0     27.0     27.0     27.0

Tax expense at statutory tax rate

     (211,802     (126,844     (102,266     (87,691

Tax effect of foreign tax rates

     (3,573     (3,646     (152     (843

Tax effect of revenues exempt from taxation

     40,840       25,938       11,854       18,092  

Tax effect of not deductible expenses

     (6,163     (14,938     (3,386     (5,576

Tax rate effect of previously unrecognized tax loss

     —         —         —         —    

Tax effect of a new evaluation of deferred tax assets

     7,604       4,454       2,983       3,301  

Tax effect of change in tax rates

     —         (45,094     —         (45,094

Tax effect of tax provided in excess in prior periods

     4,967       (2,729     7,911       (2,513

Other tax rate effects

     16,585       (3,147     8,144       (3,038

Total adjustments to tax expense at applicable tax rate

     60,260       (39,162     27,354       (35,671

Tax benefit (expense) at effective tax rate

     (151,542     (166,006     (74,912     (123,362
  

 

 

   

 

 

   

 

 

   

 

 

 

Current tax assets and liabilities

The current tax assets and liabilities balances are as follow:

 

Current tax assets

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Monthly Provisional Payments (MPP)

     11,795        800  

Income tax receivable

     107,268        218,298  

Provision tax income

     (35,945      (22,727

Other tax receivables

     41,939        36,694  

Total

     125,057        233,065  
  

 

 

    

 

 

 

Current tax liabilities

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Provision tax income (First category)

     130,512        209,357  

Monthly Provisional Payments (MPP)

     (89,442      (91,361

Other tax payables

     3,226        9,985  

Total

     44,296        127,981  
  

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

 

     06-30-2022      12-31-2021  

Property, plant and equipment, net

   ThU.S.$      ThU.S.$  

Construction work in progress

     3,309,646        2,820,592  

Land

     893,046        888,465  

Buildings

     2,125,142        2,165,318  

Plant and equipment

     2,837,404        2,915,611  

Information technology equipment

     22,206        23,516  

Fixtures and fittings

     12,414        13,563  

Motor vehicles

     12,856        13,678  

Other property, plant and equipment

     121,064        112,641  

Total net

     9,333,778        8,953,384  
  

 

 

    

 

 

 

Property, plant and equipment, gross

     

Construction work in progress

     3,309,646        2,820,592  

Land

     893,046        888,465  

Buildings

     4,490,363        4,463,660  

Plant and equipment

     7,156,303        7,079,150  

Information technology equipment

     106,361        104,522  

Fixtures and fittings

     49,789        49,302  

Motor vehicles

     59,374        59,351  

Other property, plant and equipment

     137,639        129,669  

Total gross

     16,202,521        15,594,711  
  

 

 

    

 

 

 

Accumulated depreciation and impairment

     

Buildings

     (2,365,221      (2,298,342

Plant and equipment

     (4,318,899      (4,163,539

Information technology equipment

     (84,155      (81,006

Fixtures and fittings

     (37,375      (35,739

Motor vehicles

     (46,518      (45,673

Other property, plant and equipment

     (16,575      (17,028

Total

     (6,868,743      (6,641,327
  

 

 

    

 

 

 

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

As of June 30, 2022, there are no significant assets pledged as collateral to be disclosed in these interim consolidated financial statements.

Disbursements commitments for the acquisition of property, plant and equipment and disbursements for property, plant and equipment under construction.

 

     06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Amount committed for the acquisition of property, plant and equipment

     356,138        347,839  

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Reconciliation of Property, Plant and Equipment

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment as of June 30, 2022 and as of December 31, 2021:

 

Reconciliation of Property, Plant
and Equipment

   Construction
work in
progress
    Land     Buildings     Plant and
equipment
    IT
equipment
    Fixtures
and
fittings
    Motor
vehicles
    Other
property,
plant and
equipment
    Total  
   ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$  

Opening balance 01-01-2022

     2,820,592       888,465       2,165,318       2,915,611       23,516       13,563       13,678       112,641       8,953,384  

Changes

                  

Additions

     560,482       1,986       2,012       7,574       407       277       161       8,732       581,631  

Disposals

     —         (1,573     (92     (591     (125     (45     (12     (153     (2,591

Withdrawals

     (508     (381     (16     (2,354     (3     —         (83     (357     (3,702

Depreciation

     —         —         (66,885     (151,921     (3,131     (1,537     (1,523     (481     (225,478

Impairment loss recognized in profit or loss

     —         —         (20     (8,473     —         —         —         —         (8,493

Increase (decrease) through net exchange differences

     (996     6,213       7,816       21,384       128       60       240       657       35,502  

Reclassification of assets held for sale

     —         1,915       —         —         —         —         —         —         1,915  

Increase (decrease) through transfers from construction in progress

     (69,924     (3,579     17,009       54,686       1,414       96       273       25       —    

Reclassification from lease to property, plant and equipment

     —         —         —         1,488       —         —         122       —         1,610  

Total changes

     489,054       4,581       (40,176     (78,207     (1,310     (1,149     (822     8,423       380,394  

Closing balance 06-30-2022

     3,309,646       893,046       2,125,142       2,837,404       22,206       12,414       12,856       121,064       9,333,778  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Property, Plant
and Equipment

   Construction
work in
progress
    Land     Buildings     Plant and
equipment
    IT
Equipment
    Fixtures
and
fittings
    Motor
vehicles
    Other
property,
plant and
equipment
    Total  
   ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$  

Opening balance 01-01-2021

     1,944,578       930,372       2,248,784       3,026,136       26,166       16,627       15,055       117,586       8,325,304  

Changes

                  

Additions

     1,124,868       6,647       8,440       22,372       1,277       566       470       6,234       1,170,874  

Disposals

     (215     (25,285     (953     (10,839     (170     (4     (371     (205     (38,042

Withdrawals

     (2,105     (697     (2,572     (6,011     (42     —         (31     (4,188     (15,646

Depreciation

     —         —         (136,490     (288,723     (6,424     (3,163     (3,278     (1,065     (439,143

Impairment loss recognized in profit or loss

     —         —         (14,669     (95     (454     (9     (95     —         (15,322

Increase (decrease) through net exchange differences

     (1,151     (7,181     (4,359     (12,084     (80     170       (219     (815     (25,719

Reclassification of assets held for sale

     —         107       949       206       —         —         —         —         1,262  

Increase (decrease) through transfers from construction in progress

     (245,383     822       66,235       178,611       3,243       (617     1,995       (4,906     —    

Reclassification from lease to property, plant and equipment

     —         —         —         7,251       —         —         152       —         7,403  

Decrease due to loss of control in subsidiary

     —         (16,320     (47     (1,213     —         (7     —         —         (17,587

Total changes

     876,014       (41,907     (83,466     (110,525     (2,650     (3,064     (1,377     (4,945     628,080  

Closing balance 12-31-2021

     2,820,592       888,465       2,165,318       2,915,611       23,516       13,563       13,678       112,641       8,953,384  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

The depreciation expense for the period ending June 30, 2022 and 2021 is as follows:

 

     January - June      April - June  

Depreciation for the year

   2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Cost of sales

     216,051        204,257        105,319        100,306  

Administrative expenses

     9,295        9,205        4,704        4,621  

Other expenses

     3,892        219        3,326        120  

Total

     229,238        213,681        113,349        105,047  
  

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation charged to profit or loss statement differs from the movement of the period for Property, Plant and Equipment. This is mainly due to the periodic cost processes in which a portion of the depreciation charge remains in Inventories. Furthermore, this deviation is also affected by the conversion differences corresponding to companies that use a functional currency other than U.S. dollars.

The useful lives of property, plant and equipment are estimated based on the expected use of the assets. The average useful lives by asset class are as follow:

 

     Years of Useful Life
(Average)
 

Buildings

     58  

Plant and equipment

     30  

Information technology equipment

     8  

Fixtures and fittings

     28  

Motor vehicles

     7  

Other property, plant and equipment

     14  

See Note 12 for details of capitalized borrowing costs.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 8. LEASES

Arauco acting as lessee

In the application of IFRS 16, Arauco chose not to apply the requirements to recognize a liability and an asset for right of use for leases which term ends within 12 months from January 1, 2019 and for leases in which the underlying asset is of low value ThU.S.$ 5.

Lease liabilities and their maturity are presented in Notes 11 and 23.

Right of Use Assets

 

     06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Property, plant and equipment by right of use, net

     

Land

     120,980        72,384  

Buildings

     19,832        20,682  

Plant and equipment

     69,375        17,198  

Information technology equipment

     165        224  

Fixtures and fittings

     —          218  

Motor vehicles

     38,595        55,093  

Other property, plant and equipment

     12,298        14,307  

Total net

     261,245        180,106  
  

 

 

    

 

 

 

Property, plant and equipment by right of use, gross

     

Land

     149,869        94,283  

Buildings

     33,987        32,625  

Plant and equipment

     86,446        31,235  

Information technology equipment

     740        652  

Fixtures and fittings

     —          1,512  

Motor vehicles

     170,641        168,682  

Other property, plant and equipment

     16,362        20,142  

Total gross

     458,045        349,131  
  

 

 

    

 

 

 

Accumulated depreciation and impairment by right of use

     

Land

     (28,889      (21,899

Buildings

     (14,155      (11,943

Plant and equipment

     (17,071      (14,037

Information technology equipment

     (575      (428

Fixtures and fittings

     —          (1,294

Motor vehicles

     (132,046      (113,589

Other property, plant and equipment

     (4,064      (5,835

Total

     (196,800      (169,025
  

 

 

    

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Reconciliation of Property, Plant and Equipment by Right of Use

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment by right of use as of June 30, 2022 and as of December 31, 2021:

 

Reconciliation of property, plant and equipment by
right of use

   Land
ThU.S.$
    Buildings
ThU.S.$
    Plant and
equipment
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 01-01-2022

     72,384       20,682       17,198       224       218       55,093       14,307       180,106  

Changes

                

Additions

     56,237       1,729       56,013       62       —         1,943       202       116,186  

Withdrawals

     —         (55     (15     —         (202     (1     —         (273

Depreciation

     (6,709     (2,592     (3,698     (132     (16     (18,396     (831     (32,374

Increase (decrease) through net exchange differences

     (595     49       —         10       —         (29     —         (565

Reclassification from lease to Property, plant and equipment

     —         —         —         —         —         —         (1,610     (1,610

Increase (decrease) through others

     (337     19       (123     1       —         (15     230       (225

Total changes

     48,596       (850     52,177       (59     (218     (16,498     (2,009     81,139  

Closing balance 06-30-2022

     120,980       19,832       69,375       165       —         38,595       12,298       261,245  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of property, plant and equipment by
right of use

   Land
ThU.S.$
    Buildings
ThU.S.$
    Plant and
equipment
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 01-01-2021

     60,761       19,954       24,035       380       698       92,951       20,355       219,134  

Changes

                

Additions

     21,391       11,557       1,617       127       —         495       —         35,187  

Withdrawals

     (16     (2,976     —         —         —         (226     (98     (3,316

Depreciation

     (9,108     (5,386     (7,315     (255     (356     (38,090     (2,071     (62,581

Revaluation

     —         (7     —         —           (31     —         (38

Increase (decrease) through net exchange differences

     (644     (6     (275     (6     —         21       —         (910

Reclassification from lease to Property, plant and equipment

     —         —         —         —         —         —         (7,403     (7,403

Increase (decrease) through others

     —         (2,454     (864     (22     (124     (27     3,524       33  

Total changes

     11,623       728       (6,837     (156     (480     (37,858     (6,048     (39,028

Closing balance 12-31-2021

     72,384       20,682       17,198       224       218       55,093       14,307       180,106  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The depreciation expense for the period ending June 30, 2022 and 2021 recognised in property, plant and equipment by right of use is as follows:

 

     January - June      April - June  

Depreciation for the period

   2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Cost of sales

     20,909        21,907        10,426        10,221  

Distribution costs

     883        1,211        352        639  

Administrative expenses

     3,273        3,471        1,371        1,658  

Total

     25,065        26,589        12,149        12,518  
  

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation charged to profit or loss statement differs from the movement of the period for Right of use assets. This is mainly due to the periodic cost processes in which a portion of the depreciation charge remains activated. Furthermore, this deviation is also affected by the conversion differences corresponding to companies that use a functional currency other than U.S. dollars.

Additionally, Arauco has recognized directly in the interim consolidated statement of profit or loss, the following leases excluded from right of use assets:

 

     January – June      April – June  
     2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Expenses from payments of variable leases

     92,436        73,813        56,900        37,438  

Expenses from low value leases

     2,787        1,546        2,253        694  

Expenses from short-term leases

     28,445        15,382        16,485        7,079  

Total

     123,668        90,741        75,638        45,211  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Arauco acting as lessor

IFRS 16 substantially maintains the accounting requirements of the lessor of IAS 17. Consequently, Arauco has continued to classify its leases as operating or financial.

Reconciliation of financial lease minimum payments:

 

     06-30-2022  

Periods

   Gross
ThU.S.$
     Interest
ThU.S.$
     Present
value
ThU.S.$
 

Less than one year

     1,901        —          1,901  

Between one and five years

     9,764        743        9,021  

More than five years

     —          —          —    

Total

     11,665        743        10,922  
  

 

 

    

 

 

    

 

 

 

 

     12-31-2021  

Periods

   Gross
ThU.S.$
     Interest
ThU.S.$
     Present
value
ThU.S.$
 

Less than one year

     27        —          27  

Between one and five years

     —          —          —    

More than five years

     —          —          —    

Total

     27        —          27  
  

 

 

    

 

 

    

 

 

 

Financial lease receivables are presented in the interim consolidated statements 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 financial leases. These lease contracts are for a term of less than six-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.

Arauco holds leases as lessee and lessor, described in the previous tables, for which there are no impairment contingent payments or restrictions to report.

NOTE 9. REVENUE

 

     January - June      April - June  

Classes of revenue

   2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Revenue from sales of goods

     3,572,958        2,855,885        1,841,879        1,531,919  

Revenue from rendering of services

     55,739        46,396        25,194        23,659  

Total

     3,628,697        2,902,281        1,867,073        1,555,578  
  

 

 

    

 

 

    

 

 

    

 

 

 

The reportable segments revenues by business area and by geographical area are presented in Note 24.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

 

     January - June      April - June  
     2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Employee expenses

     349,594        331,039        174,759        166,005  

Wages and salaries

     342,047        320,506        170,724        160,896  

Severance indemnities

     7,547        10,533        4,035        5,109  

 

     06-30-2022     12-31-2021  

Discount rate

     2.56     2.56

Inflation

     3.20     3.20

Annual rate of wage growth

     5.22     5.22

Mortality rate

     RV-2014       RV-2014  

 

Sensitivities to assumptions

   ThU.S.$  

Discount rate

  

Increase in 100 bps

     (6,067

Decrease in 100 bps

     6,426  
  

 

 

 

Wage growth rates

  

Increase in 100 bps

     6,047  

Decrease in 100 bps

     (5,310
  

 

 

 

The following tables set forth the balances and the reconciliation of the present value of severance indemnities obligations as of June 30, 2022 and as of December 31, 2021:

 

     06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Current

     5,796        4,593  

Non-current

     66,448        67,967  

Total

     72,244        72,560  
  

 

 

    

 

 

 

Reconciliation of the present value of severance indemnities obligations

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Opening balance

     72,560        81,395  

Current service cost

     2,732        4,064  

Interest cost

     1,912        3,271  

(Gains) losses from changes in actuarial assumptions

     668        (5,784

Actuarial gains and losses arising from experience

     3,755        7,409  

Benefits paid

     (2,226      (3,936

Decrease due to sale of subsidiary

     —          (393

Increase (decrease) for foreign currency exchange rates changes

     (7,157      (13,466

Closing balance

     72,244        72,560  
  

 

 

    

 

 

 

The average staffing as of June 30, 2022 was 18,151 people.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 11. BALANCES IN FOREIGN CURRENCY AND FOREIGN CURRENCY EXCHANGE RATE IMPACT IN PROFIT OR LOSS.

 

June 30, 2022

   U.S. dollar
ThU.S.$
     Euros
ThU.S.$
     Brazilian
real
ThU.S.$
     Argentine
pesos
ThU.S.$
     Mexican
pesos
ThU.S.$
     Other
currencies
ThU.S.$
     Chilean
pesos
ThU.S.$
     U.F.
ThU.S.$
     Total
ThU.S.$
 

Assets

                          

Current assets

                          

Cash and cash equivalents

     659,686        8,228        44,431        93,611        28,242        8,652        58,857        —          901,707  

Other current financial assets

     20,259        —          —          —          —          —          —          —          20,529  

Other current non-financial assets

     28,662        7,681        135,492        10,129        8,482        8,236        11,382        —          210,064  

Trade and other current receivables

     682,254        16,901        39,523        25,896        34,84        1,758        71,213        2,224        874,609  

Accounts receivable due from related companies

     —          —          —          —          —          —          6,877        —          6,877  

Current inventories

     1,165,626        —          146,704        —          44,484        —          1,5        —          1,358,314  

Current biological assets

     285,663        —          78,38        —          —          —          —          —          364,043  

Current tax assets

     3        —          2,446        39        3,429        1,572        117,568        —          125,057  

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

     2,842,423        32,81        446,976        129,675        119,477        20,218        267,397        2,224        3,861,200  

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

     2,236        —          15        —          47        —          —          —          2,298  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

     2,844,659        32,81        446,991        129,675        119,524        20,218        267,397        2,224        3,863,498  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-Current assets

                          

Other non-current financial assets

     15,793        —          —          —          —          —          —          —          15,793  

Other non-current non-financial assets

     2,924        —          13,348        46        744        8        75,584        —          92,654  

Trade and other non-current receivables

     11,23        —          —          —          —          —          3,105        8,404        22,739  

Investments accounted for using equity method

     82,299        194,267        30,464        —          —          —          30,533        —          337,563  

Intangible assets other than goodwill

     76,293        —          1,851        —          387        —          —          —          78,531  

Goodwill

     41,555        —          17,22        —          —          —          —          —          58,775  

Property, plant and equipment

     8,826,574        —          383,029        —          123,255        —          920        —          9,333,778  

Right of use assets

     183,426        —          76,88        —          939        —          —          —          261,245  

Non-current biological assets

     2,761,275        —          247,275        —          —          —          —          —          3,008,550  

Deferred tax assets

     4,256        —          2,846        —          844        —          —          —          7,946  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non-current assets

     12,005,635        194,267        772,913        46        126,169        8        110,1427        8,404        13,217,574  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     14,850,284        241,574        1,219,904        129,721        245,693        20,226        377,539        10,628        17,081,072  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

54


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

June 30, 2022

   U.S. dollar
ThU.S.$
     Euros
ThU.S.$
     Brazilian
real
ThU.S.$
     Argentine
pesos
ThU.S.$
     Mexican
pesos
ThU.S.$
     Other
currencies
ThU.S.$
     Chilean
pesos
ThU.S.$
     U.F.
ThU.S.$
     Total
ThU.S.$
 

Liabilities

                          

Current liabilities

                          

Other current financial liabilities

     226,165        68,627        916        10        —          —          —          44,592        340,310  

Current lease liabilities

     9,298        90        8,470        —          1,408        4        19,109        4,992        43,371  

Trade and other current payables

     241,362        12,985        95,978        12,555        24,203        9,021        284,326        33,395        713,825  

Accounts payable to related companies

     67        —          —          —          —          —          3,302        —          3,369  

Other short-term provisions

     6,336        —          —          —          —          —          —          —          6,336  

Current tax liabilities

     9,221        2,766        2,308        —          50        —          29,951        —          44,296  

Current provisions for employee benefits

     —          —          —          —          —          —          5,796        —          5,796  

Other current non-financial liabilities

     267,881        48        25,869        3,852        7,945        78        5,887        —          311,560  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current liabilities

     760,330        84,516        133,541        16,417        33,606        9,103        348,371        82,979        1,468,863  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-current liabilities

                          

Other non-current financial liabilities

     3,800,512        377,886        28,637        —          —          —          —          936,884        5,143,919  

Non-current lease liabilities

     123,451        147        41,694        —          2,113        56        3,396        10,119        180,976  

Other long-term provisions

     —          —          4,745        25,780        —          —          —          —          30,525  

Deferred tax liabilities

     1,740,829        —          92,713        —          6,077        —          —          —          1,839,619  

Non-current provisions for employee benefits

     —          —          —          —          925        —          65,523        —          66,448  

Other non-current non-financial liabilities

     —          —          78,875        12        —          —          6        —          78,893  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non-current liabilities

     5,664,792        378,033        249,110        25,792        9,115        56        68,925        947,003        7,342,826  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     6,425,122        462,549        382,651        42,209        42,721        9,159        417,296        1,029,982        8,811,689  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

55


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

December 31, 2021

   U.S. dollar
ThU.S.$
     Euros
ThU.S.$
     Brazilian
real
ThU.S.$
     Argentine
pesos
ThU.S.$
     Mexican
pesos
ThU.S.$
     Other
currencies
ThU.S.$
     Chilean
pesos
ThU.S.$
     U.F.
ThU.S.$
     Total
ThU.S.$
 

Assets

                          

Current assets

                          

Cash and cash equivalents

     703,232        5,755        160,896        112,234        20,467        4,311        4,205        —          1,011,100  

Other current financial assets

     5,865        —          —          —          —          —          —          —          5,865  

Other current non-financial assets

     25,774        166        18,209        5,900        3,717        6,165        107,959        —          167,890  

Trade and other current receivables

     789,236        21,884        39,142        22,721        31,288        5,023        70,127        502        979,923  

Accounts receivable due from related companies

     —          —          —          —          —          —          5,559        —          5,559  

Current inventories

     1,047,428        —          89,521        —          32,947        —          2,283        —          1,172,179  

Current biological assets

     269,769        —          59,817        —          —          —          —          —          329,586  

Current tax assets

     32        —          3,047        —          452        1,288        228,246        —          233,065  

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

     2,841,336        27,805        370,632        140,855        88,871        16,787        418,379        502        3,905,167  

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

     14,098        —          14        —          46        —          —          —          14,158  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

     2,855,434        27,805        370,646        140,855        88,917        16,787        418,379        502        3,919,325  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets

                          

Other non-current financial assets

     10,525        —          —          —          —          —          —          —          10,525  

Other non-current non-financial assets

     1,639        —          12,244        56        740        8        73,862        —          88,549  

Trade and other non-current receivables

     11,806        —          —          —          —          —          2,492        40        14,338  

Investments accounted for using equity method

     78,216        203,505        26,823        —          —          —          28,098        —          336,642  

Intangible assets other than goodwill

     82,370        —          1,675        —          165        —          —          —          84,210  

Goodwill

     41,534        —          16,163        —          —          —          —          —          57,697  

Property, plant and equipment

     8,487,221        —          340,314        —          124,984        —          865        —          8,953,384  

Right of use assets

     150,220        —          29,886        —          —          —          —          —          180,106  

Non-current biological assets

     2,782,660        —          226,237        —          —          —          —          —          3,008,897  

Deferred tax assets

     3,968        —          2,768        —          901        —          —          —          7,637  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non-current assets

     11,650,159        203,505        656,110        56        126,790        8        105,317        40        12,741,985  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     14,505,593        231,310        1,026,756        140,911        215,707        16,795        523,696        542        16,661,310  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2021

   U.S. dollar
ThU.S.$
     Euros
ThU.S.$
     Brazilian
real
ThU.S.$
     Argentine
pesos
ThU.S.$
     Mexican
pesos
ThU.S.$
     Other
currencies
ThU.S.$
     Chilean
pesos
ThU.S.$
     U.F.
ThU.S.$
     Total
ThU.S.$
 

Liabilities

                          

Current liabilities

                          

Other current financial liabilities

     225,502        66,707        884        133        —          —          —          46,215        339,441  

Current lease liabilities

     9,140        107        4,208        —          1,391        63        26,944        7,750        49,603  

Trade and other current payables

     284,690        10,834        79,653        16,616        27,889        8,363        268,624        34,787        731,456  

Accounts payable to related companies

     230        —          —          —          —          —          2,347        —          2,577  

Other short-term provisions

     337        —          —          —          —          —          —          —          337  

Current tax liabilities

     7,201        7,655        4,339        44,856        11,803        —          52,127        —          127,981  

Current provisions for employee benefits

     —          —          —          —          —          —          4,593        —          4,593  

Other current non-financial liabilities

     131,214        73        24,680        4,679        7,195        739        5,074        —          173,654  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current liabilities

     658,314        85,376        113,764        66,284        48,278        9,165        359,709        88,752        1,429,642  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-current liabilities

                          

Other non-current financial liabilities

     3,917,343        442,833        26,880        —          —          —          —          987,808        5,374,864  

Non-current lease liabilities

     69,905        159        17,694        —          2,377        107        11,334        12,125        113,701  

Non-current payables

     —          —          2,272        —          —          —          —          —          2,272  

Other long-term provisions

     —          —          3,489        26,060        —          —          —          —          29,549  

Deferred tax liabilities

     1,664,506        —          77,637        —          5,662        —          —          —          1,747,805  

Non-current provisions for employee benefits

     —          —          —          —          842        —          67,125        —          67,967  

Other non-current non-financial liabilities

     —          —          76,982        14        —          —          10        —          77,006  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non-current liabilities

     5,651,754        442,992        204,954        26,074        8,881        107        78,469        999,933        7,413,164  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     6,310,068        528,368        318,718        92,358        57,159        9,272        438,178        1,088,685        8,842,806  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

56


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

     06-30-2022      12-31-2021  
     Up to 90
days
ThU.S.$
     From 91
days

to 1 year
ThU.S.$
     Total
ThU.S.$
     Up to 90
days
ThU.S.$
     From 91
days

to 1 year
ThU.S.$
     Total
ThU.S.$
 

Total current liabilities

     1,127,018        341,845        1,468,863        1,104,150        325,492        1,429,642  

Other current financial liabilities

     59,082        281,228        340,310        59,007        280,434        339,441  

U.S. dollar

     58,546        167,619        226,165        58,794        166,708        225,502  

Euros

     —          68,627        68,627        —          66,707        66,707  

Brazilian real

     526        390        916        80        804        884  

Argentine pesos

     10        —          10        133        —          133  

U.F.

     —          44,592        44,592        —          46,215        46,215  

Bank borrowings

     29,939        221,594        251,533        29,658        219,177        248,835  

U.S. dollar

     29,413        152,577        181,990        29,578        151,666        181,244  

Euros

     —          68,627        68,627        —          66,707        66,707  

Brazilian real

     526        390        916        80        804        884  

Other borrowings

     29,143        59,634        88,777        29,349        61,257        90,606  

U.S. dollar

     29,133        15,042        44,175        29,216        15,042        44,258  

Argentine pesos

     10        —          10        133        —          133  

U.F.

     —          44,592        44,592        —          46,215        46,215  

Current lease liabilities

     13,359        30,012        43,371        13,204        36,399        49,603  

U.S. dollar

     2,496        6,802        9,298        2,418        6,722        9,140  

Euros

     22        68        90        40        67        107  

Brazilian real

     2,363        6,107        8,470        1,111        3,097        4,208  

Mexican pesos

     347        1,061        1,408        337        1,054        1,391  

Other currencies

     1        3        4        22        41        63  

Chilean pesos

     6,251        12,858        19,109        6,768        20,176        26,944  

U.F.

     1,879        3,113        4,992        2,508        5,242        7,750  

Trade and other current payables

     687,513        26,312        713,825        725,188        6,268        731,456  

U.S. dollar

     240,509        853        241,362        284,625        65        284,690  

Euros

     12,985        —          12,985        10,824        10        10,834  

Brazilian real

     70,829        25,149        95,978        73,635        6,018        79,653  

Argentine pesos

     12,555        —          12,555        16,616        —          16,616  

Mexican pesos

     23,893        310        24,203        27,714        175        27,889  

Other currencies

     9,021        —          9,021        8,363        —          8,363  

Chilean pesos

     284,326        —          284,326        268,624        —          268,624  

U.F.

     33,395        —          33,395        34,787        —          34,787  

Accounts payable to related companies

     3,369        —          3,369        2,577        —          2,577  

U.S. dollar

     67        —          67        230        —          230  

Chilean pesos

     3,302        —          3,302        2,347        —          2,347  

Other short-term provisions

     6,336        —          6,336        337        —          337  

U.S. dollar

     6,336        —          6,336        337        —          337  

Current tax liabilities

     41,548        2,748        44,296        126,059        1,922        127,981  

U.S. dollar

     9,221        —          9,221        7,201        —          7,201  

Euro

     2,766        —          2,766        7,655        —          7,655  

Brazilian real

     —          2,308        2,308        2,529        1,810        4,339  

Argentine pesos

     —          —          —          44,856        —          44,856  

Mexican pesos

     50        —          50        11,803        —          11,803  

Chilean pesos

     29,511        440        29,951        52,015        112        52,127  

Current provisions for employee benefits

     5,196        600        5,796        4,124        469        4,593  

Chilean pesos

     5,196        600        5,796        4,124        469        4,593  

Other current non-financial liabilities

     310,615        945        311,560        173,654        —          173,654  

U.S. dollar

     267,881        —          267,881        131,214        —          131,214  

Euros

     48        —          48        73        —          73  

Brazilian peal

     25,869        —          25,869        24,680        —          24,680  

Argentine pesos

     3,852        —          3,852        4,679        —          4,679  

Mexican pesos

     7,945        —          7,945        7,195        —          7,195  

Other currencies

     78        —          78        739        —          739  

Chilean pesos

     4,942        945        5,887        5,074        —          5,074  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

     06-30-2022      12-31-2021  
     From 13
months to
3 years
ThU.S.$
     From 3
years to
5 years
ThU.S.$
     More than
5 years
ThU.S.$
     Total
ThU.S.$
     From 13
months to
3 years
ThU.S.$
     From 3
years to
5 years
ThU.S.$
     More than
5 years
ThU.S.$
     Total
ThU.S.$
 

Total non-current liabilities

     2,476,936        556,313        4,309,577        7,342,826        2,342,748        661,414        4,409,002        7,413,164  

Other non-current financial liabilities

     1,151,565        380,743        3,611,611        5,143,919        1,097,939        582,606        3,694,319        5,374,864  

U.S. dollar

     947,462        —          2,853,050        3,800,512        886,371        180,000        2,850,972        3,917,343  

Euros

     114,407        117,145        146,334        377,886        124,640        127,324        190,869        442,833  

Brazilian real

     14,319        14,318        —          28,637        8,960        17,920        —          26,880  

U.F.

     75,377        249,280        612,227        936,884        77,968        257,362        652,478        987,808  

Bank borrowings

     358,459        131,463        146,334        636,256        227,008        325,244        190,869        743,121  

U.S. dollar

     229,733        —          —          229,733        93,408        180,000        —          273,408  

Euros

     114,407        117,145        146,334        377,886        124,640        127,324        190,869        442,833  

Brazilian real

     14,319        14,318        —          28,637        8,960        17,920        —          26,880  

Other borrowings

     793,106        249,280        3,465,277        4,507,663        870,931        257,362        3,503,450        4,631,743  

U.S. dollar

     717,729        —          2,853,050        3,570,779        792,963        —          2,850,972        3,643,935  

U.F.

     75,377        249,280        612,227        936,884        77,968        257,362        652,478        987,808  

Non-current lease liabilities

     48,940        39,315        92,721        180,976        44,459        26,083        43,159        113,701  

U.S. dollar

     23,753        18,465        81,233        123,451        18,691        13,708        37,506        69,905  

Euros

     143        4        —          147        156        3        —          159  

Brazilian real

     15,723        16,628        9,343        41,694        7,288        7,688        2,718        17,694  

Mexican pesos

     2,062        51        —          2,113        2,338        39        —          2,377  

Other currencies

     56        —          —          56        107        —          —          107  

Chilean pesos

     3,026        370        —          3,396        10,875        459        —          11,334  

U.F.

     4,177        3,797        2,145        10,119        5,004        4,186        2,935        12,125  

Non-current payable

     2,446        —          —          2,446        2,272        —          —          2,272  

Brazilian real

     2,446        —          —          2,446        2,272        —          —          2,272  

Other long-term provisions

     30,5        —          —          30,525        29,549        —          —          29,549  

Brazilian real

     4,745        —          —          4,745        3,489        —          —          3,489  

Argentine pesos

     25,780        —          —          25,780        26,060        —          —          26,060  

Deferred tax liabilities

     1,135,143        103,715        600,761        1,839,619        1,067,067        23,521        657,217        1,747,805  

U.S. dollar

     1,079,340        95,393        566,096        1,740,829        1,007,289        —          657,217        1,664,506  

Brazilian real

     49,726        8,322        34,665        92,713        54,116        23,521        —          77,637  

Mexican pesos

     6,077        —          —          6,077        5,662        —          —          5,662  

Non-current provisions for employee benefits

     59,629        6,819        —          66,448        67,951        —          16        67,967  

Mexican pesos

     925        —          —          925        826        —          16        842  

Chilean pesos

     58,704        6,819        —          65,523        67,125        —          —          67,125  

Other non-current non-financial liabilities

     48,688        25,721        4,484        78,893        33,511        29,204        14,291        77,006  

Brazilian real

     48,670        25,721        4,484        78,875        33,487        29,204        14,291        76,982  

Argentine pesos

     12        —          —          12        14        —          —          14  

Chilean pesos

     6        —          —          6        10        —          —          10  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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 Canada Ltd.    Canada    Canadian dollar
Arauco do Brasil S.A.    Brazil    Brazilian real
Arauco Florestal Arapoti S.A.    Brazil    Brazilian real
Arauco Forest Brasil S.A.    Brazil    Brazilian real
Arauco Industria de Mexico, S.A. de C.V.    Mexico    Mexican pesos
Arauco Industria de Paineis S.A.    Brazil    Brazilian real
Araucomex Servicios, S.A. de C.V.    Mexico    Mexican pesos
Consorcio Protección Fitosanitaria Forestal S.A.    Chile    Chilean pesos
Empreendimentos Florestais Santa Cruz Ltda.    Brazil    Brazilian real
Leasing Forestal S.A.    Argentina    Argentine pesos
Mahal Empreendimentos e Participações S.A.    Brazil    Brazilian real
Novo Oeste Gestao de Ativos Florestais S.A.    Brazil    Brazilian real
ODD Industries SpA    Chile    Chilean pesos
Arauco Participações Florestais Ltda.    Brazil    Brazilian real

The table below shows a detail per company of the effect in the period of the reserve of exchange differences on translation:

 

     January – June      April – June  
     2022
ThU.S.$
     2021
ThU.S.$
     2022
ThU.S.$
     2021
ThU.S.$
 

Arauco do Brasil S.A.

     35,476        14,720        (28,639      45,050  

Arauco Forest Brasil S.A.

     13,450        12,340        (34,712      39,613  

Sonae Arauco S.A.

     (15,736      (6,649      (11,547      1,486  

Arauco Florestal Arapoti S.A.

     3,651        2,813        (8,045      8,809  

Arauco Industria México S.A. de C.V.

     2,175        1,694        (3,556      6,733  

Arauco Canada Ltd.

     (361      4,543        (1,580      1,896  

Others

     (453      57        (3,589      644  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total reserve of exchange differences on translation

     38,202        29,518        (91,668      104,231  
  

 

 

    

 

 

    

 

 

    

 

 

 

Effect of foreign exchange rates changes

 

     January – June      April – June  
     2022      2021      2022      2021  
     ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$  

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

     2,156        (5,288      11,838        (2,709
  

 

 

    

 

 

    

 

 

    

 

 

 

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

     38,180        24,736        (91,730      106,553  
  

 

 

    

 

 

    

 

 

    

 

 

 

NOTE 12. BORROWING COSTS

Arauco capitalizes interest at effective rate on current investment projects.

At the date of issuance of these interim consolidated financial statements, Arauco has capitalized financial interest related to the modernization and expansion of Planta Arauco (MAPA).

 

     January – June     April – June  
     2022     2021     2022     2021  
     ThU.S.$     ThU.S.$     ThU.S.$     ThU.S.$  

Interest cost capitalized, property, plant and equipment

        

Capitalization rate of interest cost capitalized, property, plant and equipment

     4.33     4.49     4.32     4.42

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

     57,560       32,267       29,673       17,300  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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 Commission for the Financial Market 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 Brazilian real, 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 interim consolidated financial statements, the main transactions with related parties are related to fuel purchases with Compañía de Petróleos de Chile S.A. and sodium chlorate purchases at EKA Chile S.A.

As of the date of these interim consolidated financial statements, there are neither provisions for accounts of doubtful collection nor any guarantees granted or received related to the balances with related parties.

Name of Group’s Main Shareholders

The ultimate shareholders of Arauco, direct and indirectly, are Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi.

Name of the Intermediate Controlling Entity that Produces interim consolidated financial Statements for Public Use

Empresas Copec S.A.

Key Management Personnel Compensation

Compensation to key management personnel, including directors, managers and deputy managers, consist of a fixed monthly salary, and managers and deputy managers also receive 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

Transactions carried out with related parties are intended to contribute to the corporate interest, are adjusted in price, terms and conditions to those prevailing in the market at the time of approval, and meet the requirements and procedures set forth in the law.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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
06-30-2022
     % Ownership interest
12-31-2021
 
   Direct      Indirect      Total      Direct      Indirect      Total  
-    Arauco Argentina S.A.    Argentina    U.S. dollar      9.9707        90.0093        99.9800        9.9707        90.0093        99.9800  
-    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        1.9990        99.9990        98.0000        1.9990        99.9990  
-    Arauco Canada Ltd.    Canada    Canadian dollar      —          99.9993        99.9993        —          99.9990        99.9990  
-    Arauco Colombia S.A.    Colombia    U.S. dollar      1.4778        98.5203        99.9981        1.4778        98.5204        99.9982  
-    Arauco do Brasil S.A.    Brazil    Brazilian real      1.0681        98.9309        99.9990        1.0681        98.9309        99.9990  
-    Arauco Europe Cooperatief U.A.    Holanda    U.S. dollar      0.5215        99.4775        99.9990        0.5215        99.4775        99.9990  
-    Arauco Florestal Arapoti S.A.    Brazil    Brazilian real      —          99.9990        99.9990        —          99.9990        99.9990  
-    Arauco Forest Brasil S.A.    Brazil    Brazilian real      8.6379        91.3612        99.9991        10.0809        89.9182        99.9991  
-    Arauco Participações Florestais Ltda.    Brazil    Brazilian real      —          99.9991        99.9991        —          99.9991        99.9991  
-    Arauco Industria de México, S.A.de C.V.    Mexico    Mexican pesos      —          99.9993        99.9993        —          99.9990        99.9990  
-    Arauco Industria de Paineis S.A.    Brazil    Brazilian real      —          99.9990        99.9990        —          99.9990        99.9990  
-    Arauco Middle East DMCC    Dubai    U.S. dollar      —          99.9990        99.9990        —          99.9990        99.9990  
-    Arauco North America, Inc.    United
States
   U.S. dollar      0.0001        99.9992        99.9993        0.0001        99.9989        99.9990  
-    Arauco Perú S.A.    Peru    U.S. dollar      0.0013        99.9977        99.9990        0.0013        99.9977        99.9990  
-    Arauco Wood (China) Company Limited    China    U.S. dollar      —          99.9990        99.9990        —          99.9990        99.9990  
-    Arauco Wood Limited (1)    United
Kingdom
   U.S. dollar      31.2261        68.7739        100.0000        —          —          —    
-    Araucomex S.A. de C.V.    Mexico    U.S. dollar      0.0005        99.9988        99.9993        0.0005        99.9985        99.9990  
-    Araucomex Servicios, S.A. de C.V.    Mexico    Mexican pesos      0.3333        99.6660        99.9993        0.3333        99.6657        99.9990  
96657900-5    Consorcio Protección Fitosanitaria Forestal S.A.    Chile    Chilean pesos      —          56.8281        56.8281        —          56.4481        56.4481  
-    Empreendimentos Florestais Santa Cruz Ltda.    Brazil    Brazilian real      —          99.9986        99.9986        —          99.9985        99.9985  
85805200-9    Forestal Arauco S.A.    Chile    U.S. dollar      99.9484        —          99.9484        99.9484        —          99.9484  
93838000-7    Forestal Cholguán S.A.    Chile    U.S. dollar      —          98.5858        98.5858        —          98.5814        98.5814  
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    U.S. dollar      1.0000        98.9489        99.9489        1.0000        98.9489        99.9489  
-    Leasing Forestal S.A.    Argentina    Argentine pesos      —          99.9800        99.9800        —          99.9800        99.9800  
-    Maderas Arauco Costa Rica S.A.    Costa
Rica
   U.S. dollar      —          99.9990        99.9990        —          99.9990        99.9990  
96510970-6    Maderas Arauco S.A.    Chile    U.S. dollar      98.9993        0.9995        99.9988        99.0000        0.9995        99.9995  
-    Mahal Empreendimentos e Participações S.A.    Brazil    Brazilian real      —          99.9990        99.9990        —          99.9990        99.9990  
-    Novo Oeste Gestao de Ativos Florestais S.A.    Brazil    Brazilian real      —          99.9991        99.9991        —          99.9990        99.9990  
76860724-9    ODD Industries SpA    Chile    Chilean pesos      —          86.6144        86.6144        —          86.6151        86.6151  
76375371-9    Servicios Aéreos Forestales Ltda.    Chile    U.S. dollar      0.0100        99.9890        99.9990        0.0100        99.9890        99.9990  
96637330-K    Servicios Logísticos Arauco S.A.    Chile    U.S. dollar      45.0000        54.9993        99.9993        45.0000        54.9997        99.9997  
-      Woodaffix, LLC.    United
States
   U.S. dollar      —          99.9993        99.9993        —          —          —    
  

 

  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

This company was created on May 23, 2022. See note 24.

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.

 

Company Name

  

Country

  

Functional
currency

Eufores 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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

According to significant restrictions on the ability of subsidiaries to transfer funds to Arauco, in the form of cash dividends or repayment of borrowings and/or advances, we state the following:

Long-term debt with related entities - Mutual Agreement with Arauco Argentina S.A.

On June 5, 2017, Arauco signed a mutual agreement with its subsidiary Arauco Argentina S.A., pursuant to which this subsidiary received an amount of U.S.$ 250,000,000, which accrues an interest at the LIBOR interest rate for 180 days plus a fixed spread of 5.20%, with payments every six months on June 1 and December 1 of each year.

Since 2020, the Central Bank of the Argentine Republic (BCRA) established certain foreign exchange controls, preventing Arauco Argentina S.A. from repaying the amount of ThU.S.$ 160,000 owed under the mutual agreement described above which matured on June 1, 2022.

On July 14, 2022, Arauco Argentina S.A. paid ThU.S.$ 6,000 of the amount owed under the mutual agreement described above, remaining to pay ThU.S.$ 154,000 as of the date of these financial statements.

Key Management Personnel Compensation and Redundancy Benefits

 

     January - June      April - June  
     2022      2021      2022      2021  
     ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$  

Salaries and bonuses

     42,877        39,700        18,643        22,493  

Per diem compensation to members of the Board of Directors

     1,189        1,242        588        625  

Termination benefits

     993        1,995        602        1,420  

Total

     45,059        42,937        19,833        24,538  
  

 

 

    

 

 

    

 

 

    

 

 

 

Related Party Receivables, Current

 

Name of related party

   Tax ID No.     

Nature of relationship

  

Country

  

Currency

  

Maturity

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Forestal Mininco S.A.

     91.440.000-7      Common stockholder    Chile    Chilean pesos    30 days      63        12  

Eka Chile S.A.

     99.500.140-3      Joint venture    Chile    Chilean pesos    30 days      2,021        2,510  

Colbún S.A.

     96.505.760-9      Common stockholder    Chile    Chilean pesos    30 days      19        72  

CMPC Pulp S.A.

     96.532.330-9      Common stockholder    Chile    Chilean pesos    30 days      92        651  

CMPC Tissue S.A.

     96.529.310-8      Common stockholder    Chile    Chilean pesos    30 days      —          383  

Fundación Educacional Arauco

     71.625.000-8      Parent company is founder and contributor    Chile    Chilean pesos    30 days      447        —    

Fundación Acerca Redes

     65.097.218-K      Parent company is founder and contributor    Chile    Chilean pesos    30 days      357        165  

Parque Eólico Ovejera Sur SpA.

     76.839.949-2      Joint venture    Chile    Chilean pesos    30 days      46        —    

E2E S.A.

     76.879.577-0      Joint venture    Chile    Chilean pesos    May-10-21      339        402  

E2E S.A.

     76.879.577-0      Joint venture    Chile    Chilean pesos    Apr-27-21      338        382  

E2E S.A.

     76.879.577-0      Joint venture    Chile    Chilean pesos    Oct-28-21      233        252  

E2E S.A.

     76.879.577-0      Joint venture    Chile    Chilean pesos    Jul-31-23      558        570  

E2E S.A.

     76.879.577-0      Joint venture    Chile    Chilean pesos    Feb-15-23      1,061        —    

E2E S.A.

     76.879.577-0      Joint venture    Chile    Chilean pesos    Jun-15-23      1,188        —    

E2E S.A.

     76.218.856-2      Joint venture    Chile    Chilean pesos    30 days      115        160  
  

 

 

    

 

  

 

  

 

  

 

  

 

 

    

 

 

 

TOTAL

                    6,877        5,559  
  

 

 

    

 

  

 

  

 

  

 

  

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Related Party Payables, Current

 

Name of related party

   Tax ID No.      Nature of relationship      Country      Currency      Maturity      06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Compañía de Petróleos de Chile S.A.

     99.520.000-7        Common controlling parent        Chile        Chilean pesos        30 days        2,899        1,682  

Abastible S.A.

     91.806.000-6        Common controlling parent        Chile        Chilean pesos        30 days        399        181  

Fundación Educacional Arauco

     71.625.000-8       
Parent company is founder
and contributor
 
 
     Chile        Chilean pesos        —          —          465  

Empresa Nacional de Telecomunicaciones S.A.

     92.580.000-7        Common stockholder        Chile        Chilean pesos        30 days        3        4  

Servicios Corporativos Sercor S.A.

     96.925.430-1        Associate        Chile        Chilean pesos        —          —          12  

Compañía Puerto de Coronel S.A.

     79.895.330-3        Subsidiary of an associate        Chile        U.S. dollar        30 days        67        229  

Vía Limpia SpA.

     79.874.200-0        Common controlling parent        Chile        Chilean pesos        30 days        1        —    

Air BP Copec S.A.

     96.942.120-8       
Joint venture of controlling
parent
 
 
     Chile        Chilean pesos        —          —          3  

Sonae Arauco Portugal S.A.

     —          Subsidiary of joint venture        Portugal        U.S. dollar        —          —          1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

                    3,369        2,577  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Related Party Transactions

Purchases

 

Name of related party

   Tax ID No.    Nature of relationship    Country    Currency    Transaction
descriptions
   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Abastible S.A.

   91.806.000-6    Common controlling parent    Chile    Chilean pesos    Fuel      1,560        2,644  

Compañía de Petróleos de Chile S.A.

   99.520.000-7    Common controlling parent    Chile    Chilean pesos    Fuel and
other
     42,986        75,166  

Compañía Puerto de Coronel S.A.

   79.895.330-3    Subsidiary of an associate    Chile    U.S. dollar    Transport,
stowage and
port services
     2,604        8,518  

EKA Chile S.A.

   99.500.140-3    Joint venture    Chile    Chilean pesos    Sodium
chlorate
     19,534        42,318  

Forestal del Sur S.A.

   79.825.060-4    Associate of a subsidiary’s
minority shareholder
   Chile    Chilean pesos    Wood and
chips
     —          433  

Portaluppi, Guzman y Bezanilla Abogados Ltda.

   78.096.080-9    Common director    Chile    Chilean pesos    Legal
services
     406        778  

Empresa Nacional de Telecomunicaciones S.A.

   92.580.000-7    Common stockholder    Chile    Chilean pesos    Telephone
services
     78        214  

Colbún S.A.

   96.505.760-9    Common stockholder    Chile    Chilean pesos    Electrical
Power
     193        386  

Colbún Transmisión S.A.

   76.218.856-2    Common stockholder    Chile    Chilean pesos    Electrical
Power
     77        514  

Woodtech S.A.

   76.724.000-7    Indirect associate of
controlling parent
   Chile    Chilean pesos    Wood
volumen
measurement
services
     546        1,238  

Servicios Corporativos Sercor S.A.

   96.925.430-1    Associate    Chile    Chilean pesos    Other
purchases
     88        222  
  

 

  

 

  

 

  

 

  

 

  

 

 

    

 

 

 

Sales and other transactions

 

Name of related party

   Tax ID No.    Nature of relationship    Country    Currency    Transaction
descriptions
   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Colbún S.A.

   96.505.760-9    Common stockholder    Chile    Chilean pesos    Electrical
power
     67        256  

EKA Chile S.A.

   99.500.140-3    Joint venture    Chile    Chilean pesos    Electrical
power
     11,844        21,891  

Forestal del Sur S.A.

   79.825.060-4    Associate of a
subsidiary’s minority
shareholder
   Chile    Chilean pesos    Harvesting
services,
wood and
chips
     —          7,329  

CMPC Pulp S.A.

   96.532.330-9    Common stockholder    Chile    Chilean pesos    Wood and
chips
     523        9,027  

CMPC Tissue S.A.

   96.529.310-8    Common stockholder    Chile    Chilean pesos    Pulp      —          1,127  

Compañía Puerto de Coronel S.A.

   79.895.330-3    Subsidiary of an
associate
   Chile    U.S. dollar    Other
sales
     270        56  

E2E S.A.

   76.879.577-0    Joint venture    Chile    Chilean pesos    Borrowing      2,538        1,125  

E2E S.A.

   76.879.577-0    Joint venture    Chile    Chilean pesos    Wood,
plywood
and boards
     149        355  
  

 

  

 

  

 

  

 

  

 

  

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 14. INVESTMENTS IN SUBSIDIARIES

Arauco determined it necessary to reorganize its activity in the wood product segment by centralizing its investments in the wood market in an entity that allows a common direction and control. This is the reason why, on May 23, 2022, the company Arauco Wood Limited was created. Such international parent entity was incorporated in the United Kingdom, a country which is considered and valued as one of the main investment platforms and center global financial system, and known for its institutional stability.

On June 20, 2022, Arauco, through its subsidiary Inversiones Arauco International Ltda. and the parent of the group, Celulosa Arauco y Constitución S.A., contributed their subsidiaries from the wood segment to the new company Arauco Wood Limited. These contributions were for a total amount of ThU.S.$ 1,895,877. this operation did not generate an effect for income purposes.

With this reorganization, Arauco intends to achieve a more efficient international structure in a first-class financial center, thus generating an attractive investment focus for potential new investors or other market players. This centralization of the wood product segment will also allow a better and more efficient management, enhancing its investments with a solid structure and greater projections of profitability, growth and sustainability.

In October 2021, Arauco Participações Florestais Ltda. was incorporated in Brazil with a capital of MR$ 1.

In October 2021, Woodaffix, LLC. was incorporated in United States for the commercialization of a specific TFL/Edgebanding.

On December 2, 2021, Arauco through its subsidiary Arauco Forest Brasil S.A. acquired all participation of Stora Enso Amsterdam B.V. for ThR$ 294,549 (equivalents to ThU.S.$ 52,516), it owned 20% of the total shares of Arauco Forestal Arapoti S.A., leaving Arauco with a total participation of 100%. Following IFRS 10, as Arauco previously had control over this investment and this operation is an acquisition from a minority shareholder, the difference resulting from the book values and the fair value of the paid was recognized directly in equity. This amount in equity at the end of 2021 was ThU.S.$ 35,880.

On March 10, 2021, Arauco through the subsidiary Forestal Arauco S.A. sold its total participation in the company Forestal Los Lagos SpA (ex S.A.) for ThU.S.$ 48,000. This operation generated a profit of ThU.S.$ 20,381 that is presented in other income.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 15. INVESTMENTS IN ASSOCIATES

As of June 30, 2022 and as of December 31, 2021, there were no new investments in associates to report.

The following tables set forth information about investments in associates.

 

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%
   06-30-2022    12-31-2021

Carrying amount accounted for using equity method

   ThU.S.$ 58,538    ThU.S.$
55,873

 

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%
   06-30-2022    12-31-2021

Carrying amount accounted for using equity method

   ThU.S.$ 245    ThU.S.$
220

 

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%
   06-30-2022    12-31-2021

Carrying amount accounted for using equity method

   ThU.S.$ 7    ThU.S.$ 7

 

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%
   06-30-2022    12-31-2021

Carrying amount accounted for using equity method

   ThU.S.$ 1    ThU.S.$ 1

 

Name    Florestal Vale do Corisco S.A.
Country    Brazil
Functional currency    Brazilian real

Corporate purpose

   Management of forestry activities.

Ownership interest (%)

   49.0000%
   06-30-2022    12-31-2021

Carrying amount accounted for using equity method

   ThU.S.$ 30,464    ThU.S.$
26,823

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Summarized Financial Information of Associates

 

     Assets  

06-30-2022

   Inversiones
Puerto
Coronel S.A.
ThU.S.$
     Serv.Corporativos
Sercor S.A.
ThU.S.$
    Florestal
Vale do
Corisco S.A.
ThU.S.$
    Consorcio
Tecnológico
Bioenercel S.A.
ThU.S.$
    Genómica
Forestal S.A.
ThU.S.$
     Total
ThU.S.$
 

Current

     1        4,812       8,861       1       12        13,687  

Non-current

     118,894        2,339       73,643       4       52        194,932  

Total of associates

     118,895        7,151       82,504       5       64        208,619  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
     Liabilities and Equity  
     Inversiones
Puerto
Coronel S.A.
ThU.S.$
     Serv.Corporativos
Sercor S.A.
ThU.S.$
    Florestal
Vale do
Corisco S.A.
ThU.S.$
    Consorcio
Tecnológico
Bioenercel S.A.
ThU.S.$
    Genómica
Forestal S.A.
ThU.S.$
     Total
ThU.S.$
 

Current

     55        3,939       932       —         7        4,933  

Non-current

     —          1,989       19,400       4       28        21,421  

Equity

     118,840        1,223       62,172       1       29        182,265  

Total of associates

     118,895        7,151       82,504       5       64        208,619  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
06-30-2022                                       

Income

     —          2,103       7,932       —         —          10,035  

Other income / expenses

     5,314        (1,876     (3,699     (1     —          (262

Net profit or loss (continuing operations) of associates

     5,314        227       4,233       (1     —          9,773  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Other comprehensive income

     —          —         —         —         —          —    

Comprehensive income

     5,314        227       4,233       (1     —          9,773  

Dividends received

     —          —         102       —         —          102  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

     Assets  

12-31-2021

   Inversiones
Puerto
Coronel S.A.
ThU.S.$
    Serv.Corporativos
Sercor S.A.
ThU.S.$
    Florestal
Vale do
Corisco S.A.
ThU.S.$
    Consorcio
Tecnológico
Bioenercel S.A.
ThU.S.$
     Genómica
Forestal S.A.
ThU.S.$
    Total
ThU.S.$
 

Current

     1       4,761       4,638       —          12       9,412  

Non-current

     113,580       2,773       69,602       6        52       186,013  

Total of associates

     113,581       7,534       74,240       6        64       195,425  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     Liabilities and Equity  
     Inversiones
Puerto
Coronel S.A.
ThU.S.$
    Serv.Corporativos
Sercor S.A.
ThU.S.$
    Florestal
Vale do
Corisco S.A.
ThU.S.$
    Consorcio
Tecnológico
Bioenercel S.A.
ThU.S.$
     Genómica
Forestal S.A.
ThU.S.$
    Total
ThU.S.$
 

Current

     55       4,297       1,292       —          7       5,651  

Non-current

     —         2,138       18,208       4        28       20,378  

Equity

     113,526       1,099       54,740       2        29       169,396  

Total of associates

     113,581       7,534       74,240       6        64       195,425  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
06-30-2021                                      

Income

     —         2,607       3,532       —          —         6,139  

Other income / expenses

     (1,520     (2,345     (4,503     —          (2     (8,370

Net profit or loss (continuing operations) of associates

     (1,520     262       (971     —          (2     (2,231
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive income

     —         —         —         —          —         —    

Comprehensive income

     (1,520     262       (971     —          (2     (2,231

Dividends received

     —         —         573       —          —         573  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Reconciliation of Investment in Associates and Joint Ventures

 

     06-30-2022      12-31-2021  
     ThU.S.$      ThU.S.$  

Opening balance as of January 1

     336,642        316,939  

Changes

     

Investment in joint ventures, additions (*)

     4,718        16,429  

Disposals, investment in associates and joint ventures (**)

     —          (3,197

Share of profit (loss) in investment in associates

     4,777        330  

Share of profit (loss) in investment in joint ventures

     39,394        31,056  

Dividends received, Investments in associates

     (33,278      (3,288

Increase (decrease) in foreign exchange currency on translation of associates and joint ventures

     (15,162      (20,167

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

     472        (1,460

Total changes

     921        19,703  

Closing balance

     337,563        336,642  
  

 

 

    

 

 

 

 

(*)

During the year 2022

-Arauco Bioenergía S.A. made a capital contribution to Parque Eólico Ovejera Sur SpA., on April 27, 2022, for ThCLP$ 100,000 for 100 shares, equivalent to ThU.S.$ 118.

-Forestal Arauco S.A. made a capital contribution in assets as non-monetary assets to Agrícola Fresno in April and June 2022, for ThU.S.$ 4,600 for 1,839,900 shares.

During the year 2021

-Maderas Arauco S.A. made capital contribution to E2E S.A., the first one was on January 8, 2021, for ThCLP$ 1,600,000 for 160 shares, the second was made on June 22, 2021 in the amount of ThCLP$ 1,900,000 for 190 shares, and the last one was on November 26, 2021 for ThCLP$ 2,425,000 for 250 shares, wich in total are equivalents to ThU.S.$ 7,759.

-Arauco Bioenergía made a capital contribution to Parque Eólico Ovejera Sur SpA for ThCLP$ 100,000 on November 03, 2021, for 100 shares to ThU.S.$ 123.

-Forestal Arauco S.A. made a capital contribution in assets as non-monetary assets to Agrícola Fresno for ThU.S.$ 7,452 in November 2021 for 1,490,400 shares.

-Forestal Arauco S.A. made a capital contribution in assets as non-monetary assets to Agrícola El Paque for ThU.S.$ 873,978 on November 10, 2021, for 997,473 shares to ThU.S.$ 1,095.

(**) ThU.S.$ 3,197 account for the carrying amount of investment in Unilin Arauco Pisos Ltda., which was sold on January 12, 2021.    

 

     06-30-2022      12-31-2021  
     ThU.S.$      ThU.S.$  

Carrying amount of investments in associates accounted for using equity method

     89,254        82,924  

Carrying amount of investments in joint ventures accounted for using equity method

     248,309        253,718  

Total investment accounted for using equity method

     337,563        336,642  
  

 

 

    

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 16. INTERESTS IN JOINT ARRANGEMENTS

Investments and contributions made

On April 27, 2022, Arauco, through its subsidiary Arauco Bioenergía S.A. made a capital contribution to Parque Eólico Ovejera Sur SpA for ThCLP$ 100,000 (equivalent to ThU.S.$ 118).

On October 13, 2021, Arauco, through its subsidiary Forestal Arauco S.A. created Agrícola Fresno SpA with the purpose of developing agricultural projects. It was incorporated with a capital of ThU.S.$ 1,000, Forestal Arauco S.A. contributed the equivalent of 50% of the shares of the new subsidiary. On November 17, 2021, it was agreed to increase the capital to ThU.S.$ 23,884 (100%), wich was agreed to be paid within two years. In November 2021, April 2022 and June 2022, Forestal Arauco S.A. contributed all of the committed capital (50%) through the contribution of non-monetary assets.

On December 31, 2021, Arauco, through its subsidiary Forestal Arauco S.A., contributed property to Agrícola El Paque SpA for ThU.S.$ 931,460 (equivalent to ThU.S.$ 1,095) maintaining its participation of 50% of the total shares.

Between January and December of 2021, Arauco through its subsidiary Maderas Arauco S.A., contributed to E2E the amount of ThCLP$ 5,925,000 (equivalent to ThU.S.$ 7,759).

On January 12, 2021, Arauco, through its subsidiary Arauco do Brasil S.A., sold its total 50% participation in Unilin Arauco Pisos Ltda. This transaction generated a loss before taxes of ThU.S.$ 431.

As of June 30, 2022 and as of December 31, 2021, Arauco has not made contributions to Uruguayan companies Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A.

The investments in Uruguay qualify as a joint operation. In relation to “other rights and contractual conditions”, the joint operation has the primary objective of providing the parties an output. As established in the “Pulp Supply Agreement”, both Arauco and its partner have the obligation to acquire 100% of the yearly pulp produced by the joint operation. Arauco has recognized the assets, liabilities, income and expenses associated with its interest ownership, as of January 1, 2013, pursuant to IFRS 11.

Arauco holds a 50% interest in Sonae Arauco, which subsidiary produces and commercializes wood panels, of the type of MDF, PB and OSB, and sawn timber, through the operation of 2 panel plants and one sawmill in Spain; 2 panel plants and one resin plant in Portugal; 4 panel plants in Germany and 2 panel plants in South Africa.

Furthermore, Arauco holds a 50% ownership in Eka Chile S.A. (“Eka”), a company that sells sodium chlorate to pulp plants in Chile. There is a contractual agreement with this company whereby Arauco has engaged in an economic activity subject to common control, which is classified as a joint venture.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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:

 

     06-30-2022      12-31-2021  

Celulosa y Energía Punta Pereira S.A. (Uruguay)

   Assets
ThU.S.$
     Liabilities
ThU.S.$
     Assets
ThU.S.$
     Liabilities
ThU.S.$
 

Current

     537,935        184,464        384,960        162,106  

Non-current

     2,009,942        151,886        2,036,696        210,981  

Equity

     —          2,211,527        —          2,048,569  

Total joint arrangement

     2,547,877        2,547,877        2,421,656        2,421,656  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     1,105,764           1,024,285     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     451,710        401,669  

Expenses

     (295,384      (288,512

Joint arrangement net income (loss)

     156,326        113,157  
  

 

 

    

 

 

 

 

     06-30-2022      12-31-2021  

Forestal Cono Sur S.A. (consolidated)

   Assets
ThU.S.$
     Liabilities
ThU.S.$
     Assets
ThU.S.$
     Liabilities
ThU.S.$
 

Current

     37,487        2,061        23,068        2,502  

Non-current

     152,090        5,857        167,159        10,618  

Equity

     —          181,659        —          177,107  

Total joint arrangement

     189,577        189,577        190,227        190,227  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     90,830           88,554     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     2,127        10,112  

Expenses

     2,425        (8,505

Joint arrangement net income (loss)

     4,552        1,607  
  

 

 

    

 

 

 

 

     06-30-2022      12-31-2021  

Eufores S.A. (consolidated)

   Assets
ThU.S.$
     Liabilities
ThU.S.$
     Assets
ThU.S.$
     Liabilities
ThU.S.$
 

Current

     136,198        220,960        133,384        189,643  

Non-current

     924,526        123,169        892,020        147,006  

Equity

     —          716,595        —          688,755  

Total joint arrangement

     1,060,724        1,060,724        1,025,404        1,025,404  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     358,298           344,378     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     115,555        114,241  

Expenses

     (89,428      (101,145

Joint arrangement net income (loss)

     26,127        13,096  
  

 

 

    

 

 

 

 

     06-30-2022      12-31-2021  

Zona Franca Punta Pereira S.A. (Uruguay)

   Assets
ThU.S.$
     Liabilities
ThU.S.$
     Assets
ThU.S.$
     Liabilities
ThU.S.$
 

Current

     27,158        118,763        6,712        101,698  

Non-current

     437,234        2,085        442,624        13,014  

Equity

     —          343,544        —          334,624  

Total joint arrangement

     464,392        464,392        449,336        449,336  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     171,772           167,312     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     10,551        9,093  

Expenses

     (1,632      (8,582

Joint arrangement net income (loss)

     8,919        511  
  

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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 ventures accounted in for equity method:

 

     06-30-2022      12-31-2021  
     Assets      Liabilities      Assets      Liabilities  

Eka Chile S.A.

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

Current

     17,808        4,539        16,083        4,980  

Non-current

     38,576        4,812        38,056        4,913  

Equity

     —          47,033        —          44,246  

Total joint arrangement

     56,384        56,384        54,139        54,139  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     23,517           22,123     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     23,281        20,376  

Expenses

     (20,494      (18,747

Joint arrangement net income (loss)

     2,787        1,629  
  

 

 

    

 

 

 

Other comprehensive income

             

Comprehensive income

     2,787        1,629  

Dividends

     —          594  
  

 

 

    

 

 

 

 

     06-30-2022      12-31-2021  
     Assets      Liabilities      Assets      Liabilities  

Sonae Arauco S.A.

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

Current

     334,167        303,981        288,650        334,620  

Non-current

     656,550        298,203        699,984        247,006  

Equity

     —          388,533        —          407,008  

Total joint arrangement

     990,717        990,717        988,634        988,634  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net assets

     170,788           176,864     

Net asset adjustment (goodwill)

     23,479           26,640     

Investment

     194,267           203,504     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     717,298        538,966  

Expenses

     (640,471      (513,749

Joint arrangement net income (loss)

     76,827        25,217  
  

 

 

    

 

 

 

Other comprehensive income

     —          —    

Comprehensive income

     76,827        25,217  

Dividends

     33,176        —    
  

 

 

    

 

 

 

 

     06-30-2022      12-31-2021  
     Assets      Liabilities      Assets      Liabilities  

Agrícola El Paque SpA.

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

Current

     569        1,183        1,493        201  

Non-current

     15,034        3,206        15,455        4,162  

Equity

     —          11,214        —          12,585  

Total joint arrangement

     15,603        15,603        16,948        16,948  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     5,607           6,293     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     —          —    

Expenses

     194        120  

Joint arrangement net income (loss)

     194        120  
  

 

 

    

 

 

 

Other comprehensive income

     —          —    

Comprehensive income

     194        120  

Dividends

     —          —    
  

 

 

    

 

 

 

 

     06-30-2022      12-31-2021  
     Assets      Liabilities      Assets      Liabilities  

Parque Eólico Ovejera del Sur SpA.

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

Current

     94        172        157        86  

Non-current

     2,274        —          2,298        —    

Equity

     —          2,196        —          2,369  

Total joint arrangement

     2,368        2,368        2,455        2,455  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     1,098           1,185     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     —          64  

Expenses

     (5      (152

Joint arrangement net income (loss)

     (5      (88
  

 

 

    

 

 

 

Other comprehensive income

     —          —    

Comprehensive income

     (5      (88

Dividends

     —          —    
  

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

     06-30-2022      12-31-2021  
     Assets      Liabilities      Assets      Liabilities  

E2E S.A.

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

Current

     8,299        1,064        8,138        1,094  

Non-current

     32,570        7,231        28,357        3,078  

Equity

     —          32,574        —          32,323  

Total joint arrangement

     40,869        40,869        36,495        36,495  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     16,287           16,162     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     1,176        386  

Expenses

     (2,354      (4,774

Joint arrangement net income (loss)

     (1,178      (4,388
  

 

 

    

 

 

 

Other comprehensive income

     —          —    

Comprehensive income

     (1,178      (4,388

Dividends

     —          —    
  

 

 

    

 

 

 

 

     06-30-2022      12-31-2021  
     Assets      Liabilities      Assets      Liabilities  

Agrícola San Gerardo SpA.

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

Current

     427        32        765        61  

Non-current

     4,808        1,981        4,929        2,125  

Equity

     —          3,222        —          3,508  

Total joint arrangement

     5,235        5,235        5,694        5,694  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     1,611           1,754     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     —          —    

Expenses

     43        (79

Joint arrangement net income (loss)

     43        (79
  

 

 

    

 

 

 

Other comprehensive income

     —          —    

Comprehensive income

     43        (79

Dividends

     —          —    
  

 

 

    

 

 

 

 

     06-30-2022      12-31-2021  
     Assets      Liabilities      Assets      Liabilities  

Agrícola Fresno SpA

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

Current

     4,144        328        15,663        88  

Non-current

     25,061        4,802        10,485        2,225  

Equity

     —          24,075        —          23,835  

Total joint arrangement

     29,205        29,205        26,148        26,148  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment

     12,038           11,918     
  

 

 

       

 

 

    

 

     06-30-2022      06-30-2021  
     ThU.S.$      ThU.S.$  

Income

     —          —    

Expenses

     48        —    

Joint arrangement net income (loss)

     48        —    
  

 

 

    

 

 

 

Other comprehensive income

     —          —    

Comprehensive income

     48        —    

Dividends

     —          —    
  

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 17. IMPAIRMENT OF ASSETS

In 2022, as a result of loss of dryer, an impairment provision was made for ThU.S.$ 10,500 in Valdivia plant. In the United States, impairment provisions associated with assets sold and recovered from Property, plant and equipment were reversed for a total of ThU.S.$ 6,332 (equivalent to ThU.S.$ 10,716 in the 2021 period).

In addition, due to the modernization and expansion project of the Arauco mill (Proyecto de Modernización y Ampliación de la Planta Arauco, or MAPA Project), as of June 30, 2022, we recorded an impairment provision due to a reduction in the useful lives for the CGU Line 1 of Arauco mill (pulp segment) in an amount of ThU.S.$ 101,069 (was the same amount as of December 31, 2021). For this calculation, we used a discount rate of 6.1%. The Line 1 of the Arauco mill was closed in January 2022 and the MAPA Project is expected to start in the first semester of 2022.

Both impairment provision charges are presented in the interim consolidated statement of profit or loss under other expenses and they constitue the main changes in the total impairment provision as shown below:

 

Changes in CGU impairment provision

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Opening balance

     214,042        218,764  

Impairment loss recognized in profit or loss

     10,533        21,275  

Reversal of impairment loss recognized in profit or loss

     (7,567      (21,858

Increase (decrease) in foreign exchange

     3,120        (4,139

Closing balance

     220,128        214,042  
  

 

 

    

 

 

 

Changes in provisions for impairment of property, plant and equipment due to technical obsolescence are shown below:

 

Changes in impairment provision from impaired assets

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Opening balance

     11,798        8,088  

Impairment loss recognized in profit or loss

     839        5,649  

Reverse of impairment recognized loss in profit or loss

     (4,820      (2,112

Increase (decrease) in foreign exchange

     76        173  

Closing balance

     7,893        11,798  
  

 

 

    

 

 

 

Goodwill

Goodwill is allocated to the groups of cash-generating units that are expected to benefit from the synergies of the combination.

At the date of these interim consolidated financial statements, the balance of goodwill is ThU.S.$ 58,775 (ThU.S.$ 57,697 on December 31, 2021), as shown below:

 

Goodwill

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Arauco Canada Ltd. (Flakeboard Company Ltd)

     40,823        40,802  

Arauco do Brasil S.A. (Pien mill)

     17,220        16,163  

Arauco North America, Inc. (Prime-Line, Inc.)

     732        732  
  

 

 

    

 

 

 

Closing balance

     58,775        57,697  
  

 

 

    

 

 

 

 

Goodwill movement

   06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Opening balance at January 1

     57,697        59,567  

Increase (decrease) due to business combination

     —          (685

Increase (decrease) in foreign exchange

     1,078        (1,185

Closing balance

     58,775        57,697  
  

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Of the total of goodwill, ThU.S.$ 40,823 (ThU.S.$ 40,802 as of December 31, 2021) were generated by the acquisition of “Flakeboard” (currently Arauco Canada Ltd.), a company that, directly and/or through its subsidiaries, possesses and operates 7 panel plants, for which Arauco acquired and paid, on September 24, 2012, the price of ThU.S.$ 242,502 for the 100% interest ownership. The remaining balance of ThU.S.$ 732 corresponds to the acquisition of Prime-Line Inc, on September 1, 2019, for which Arauco North America Inc, a subsidiary of Arauco Canada Ltd. paid ThU.S.$ 18,880 for all the shares of said company.

The recoverable amount for Flakeboard’s cash generating unit was determined based on the calculations of its value in use, and this calculation was made using cash flow projections covering a 7-year term, a period time, which is considered to represent the cyclicality of the business performance, applying a nominal discount rate of 7% which reflects current market assessments for the wood products segment in North America.

The investment in the panel plant in Pien, Brazil generated a goodwill of ThU.S.$ 17,220 (ThU.S.$ 16,163 as of December 31, 2021).

The recoverable amount for the Pien plant’s cash generating unit was determined based on the calculations of its value in use, and this calculation was made using cash flow projections covering a 5-year term based on the operational plan approved by the Administration, applying a 7.4% nominal discount rate that reflects current evaluations for the panel segment in Brazil.

As of June 30, 2022 and 2021, the carrying value of the goodwill of the plants did not exceed their recoverable value, and therefore there was no need to recognize impairment losses.

Sensitivity analysis on discount rate was made and no impairment provision was determined.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 18. PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES

The contingent liabilities for outstanding litigations are as follows:

Celulosa Arauco y Constitución S.A.

1. On August 25, 2005, the Chilean Servicio de Impuestos Internos (the “Chilean IRS”) issued tax resolutions No. 184 and No. 185 of 2005, and objected certain income tax returns made by Arauco on April 16, 2001 and October 31, 2001, and furthermore, requested the reimbursement of the amounts returned in connection with tax losses, along with the amendment of the FUT (Tax Profits Fund) Registry balance. In consideration to the foregoing, the above mentioned tax resolutions ordered the restitution of the historical amount as of October 31, 2002 of $4,571,664,617 Chilean pesos (equal to ThU.S.$ 4,905 as of June 30, 2022). On November 7, 2005, the Company requested a Review of the Supervision Action (Revisión de la Actuación Fiscalizadora, or “RAF”), which is an administrative review of the tax action brought by the Chilean IRS, and filed a claim disputing the above mentioned tax resolutions No. 184 and 185 of 2005. The RAF was resolved on January 9, 2009 by the Chilean IRS, partially sustaining the Company’s request, granting a discount to the total amount of $1,209,399,164 Chilean pesos (equal to ThU.S.$ 1,297 as of June 30, 2022), resulting in a total disputed amount as of October of 2002 of $3,362,265,453 Chilean pesos (equal to ThU.S.$ 3,607 as of as of June 30, 2022) plus fines and interests. On February 19, 2010, the Court acknowledged receipt of the Company’s request.

On September 26, 2014, Arauco requested the submission of this claim to the competent jurisdiction of the new Tax and Customs Courts. On October 10, 2014, Arauco’s request was granted. Currently the action is being considered by these new Courts under the Docket No. RUC 14-9-0002087-3. On September 20, 2017, the Court issued its first instance decision confirming the liquidations.

On October 12, 2017, Arauco challenged the decision through an appeal, requesting the Court of Appeals of Santiago to revoke the first instance decision and uphold Arauco’s claim instead. On June 29, 2018, the Court of Appeals of Santiago issued a ruling on appeal, confirming the first instance decision. On July 19, 2018, Arauco lodged a cassation appeal based on formal and substantial flaws before the Supreme Court. (case file 24,758-2018).

On June 21, 2019, Celulosa Arauco y Constitución S.A. filed a claim before the Constitutional Court to declare the legal provision contemplated under section 53, paragraph 3 of the Tax Code unconstitutional and, as a consequence, inapplicable.

On October 29, 2019 the Constitutional Court accepted the claim filed by Celulosa Arauco y Constitución S.A., finding unconstitutional and declaring the inapplicability of section 53, paragraph 3 of the Tax Code in the context of the proceeding “Celulosa Arauco y Constitución S.A. with SII Large taxpayers”, which is in the Supreme Court docket as a result of a cassation appeal (based on form and content) under case file 24,758-2018.

Currently, the case is pending in the Supreme Court.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore as of as of June 30, 2022, Arauco has not made any provision whatsoever in connection with this contingency.

 

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June 30, 2022

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

 

 

2. Through Res. Ex. N° 1 issued by the Superintendence of the Environment (“SMA”) on January 8, 2016, notified on January 14, 2016, the SMA formulated 11 charges against the Company, due to alleged breaches of certain Environmental Qualification Resolutions for the Valdivia Plant and of DS No. 90/2000. The 11 charges were classified as follows by the SMA: 1 critical, 5 severe and 5 minor.

On February 12, 2016, the Company submitted its defenses.

On December 15, 2017, the Superintendence of the Environment issued Exempted Resolution No. 1,487, closing the punitive administrative proceeding, absolving the company with regards to one of the charges and convicting for other 10 charges, applying a fine of 7,777 UTA (equal to ThU.S.$ 5,763 as of June 30, 2022). On December 22, 2017, the Company submitted a motion for reconsideration regarding Exempted Resolution No. 1,487, before the SMA, requesting that we be absolved of all infringements, with the exception of the charge specified under number 7 (late submission of the water quality report regarding the Cruces river). On March 23, 2018, the reconsideration appeal lodged by the company was rejected. On April 5, 2018, a judicial claim was submitted before the Third Environmental Court. On November 12, 2018, the case was in agreement, and the Minister Ms. Sibel Villalobos Volpi was appointed to draft the ruling.

On February 11, 2020 the judgment of the Third Environmental Court was notified, which partially accepted the legal claim of the Company, only as to the inadequate severity qualification of one of the charges. On February 28, 2020, both the Company and the SMA submitted cassation appeals based on form and content, to be heard and resolved by the Supreme Court.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company, and therefore as of June 30, 2022, Arauco has not made any provision whatsoever in connection with this contingency.

Celulosa Arauco y Constitución S.A., Forestal Arauco S.A., Maderas Arauco S.A. and Servicios Logísticos Arauco S.A.

1. On August 13, 2018, Asociación Gremial de Dueños de Camiones de Constitución (ASODUCAM) filed a complaint seeking the performance of a contract and claiming compensation for damages against Celulosa Arauco y Constitución S.A. before the Civil Court of Constitución (C-757-2018), Forestal Arauco S.A., Maderas Arauco S.A. and Servicios Logísticos Arauco S.A., The complaint is based on alleged breaches of some agreements for the allocation, distribution and supply of cargo volumes for the years 2001 and 2005, initially executed by associates of ASODUCAM with Forestal Arauco S.A., and then, allegedly, with Servicios Logísticos Arauco S.A., in favor of the other two defendants, Celulosa Arauco and Constitución S.A. and Maderas Arauco S.A. The complaint seeks to enforce the contract, plus $575,000,000 Chilean pesos (equal to ThU.S.$ 617 as of June 30, 2022) in compensation for damages. In the alternative, it claims (a) $11,189,270,050 Chilean pesos (equivalent to ThU.S.$ 12,005 as of June 30, 2022), for actual damages; (b) $ 11,189,270,050 monthly during the entire course of the trial, until the termination of the contract is declared in the final ruling, for loss of profits, and (c) $5,000,000,000 Chilean pesos (equivalent to ThU.S.$ 5,364 as of June 30, 2022) for moral damages.

On August 28, 2018 the claim was served upon Celulosa Arauco y Constitución S.A., Forestal Arauco S.A. and Maderas Arauco S.A., but notification for Servicios Logísticos Arauco S.A. is pending.

 

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June 30, 2022

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

 

 

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and, therefore, as of June 30, 2022, Arauco has not made any provision whatsoever in connection with this contingency.

Forestal Arauco S.A.

1. On July 7, 2015 Inversiones Forestales Los Alpes Limitada and Forestal Neltume-Carrasco S.A. filed a claim against Forestal Arauco S.A. before the Civil Court of Angol (C-502-2015), in which they request that Forestal Arauco S.A. restitute the material possession of 1,855.9 hectares, which would be part of their property “Resto del Fundo Los Alpes”, which would have an area of approximately 2,700 hectares. Likewise, they requested that it be declared that the property is the exclusive domain of the actors, the restitution of the civil and natural fruits, in addition to the deteriorations that the property would have experienced, with litigation costs.

On May 29, 2019, the lawsuit was answered, and the counterclaim of the acquisitive prescription was filed.

On September 1, 2020, the court received the trial case.

Through the resolution dated as of March 29, 2022, the court determined to reactivate the production of evidence, the resolutuion must be notified to both parties, together with the resolution that receives the case for evidence, which is pending.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2022, Arauco has not made any provision whatsoever in connection with this contingency.

2. On August 2, 2019, the company was notified of a lawsuit for termination of contract and compensation for damages filed by “Sociedad Recuperadora de Fibra S.A.” before the First Court of Valdivia (Case C-2215-2019). In the lawsuit, the plaintiff questions the anticipated termination of a contract by Forestal Arauco. It also claims that the company would have breached various contractual obligations regarding to 2 groups of contracts:

A. (i) Aggregates Transport Contract and (ii) Production, Cargo, Storage and Construction Management Contract for Platforms and flooring.

B. (i) Contract for the Production of Aggregates, (ii) Contract for Long Freight Services for Aggregates and (iii) Contract for Construction Services for Granular floor and Short Freight for Aggregates.

Based on the foregoing, it requests payment of compensation for an amount of $3,486,187,431 Chilean pesos (equivalent to ThU.S.$ 3,740 as of June 30, 2022).

 

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June 30, 2022

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

 

 

On September 17, 2019, Forestal Arauco S.A. answered the claim and filed a counterclaim for compensation of damages which is in the process of a conciliation hearing, requesting that the main claimant be ordered to pay $421,723,281 Chilean pesos (equivalent to ThU.S.$ 452 as of June 30, 2022).

Through the resolution dated as of January 9, 2020, the court received the case to commence the production of evidence and the notification of such resolution was delivered to both parties.

Currently, while the discovery period is over, certain discovery proceedings remain pending.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2022, Arauco has not made any provision whatsoever in connection with this contingency.

3. On April 15, 2020, Forestal Arauco S.A. was notified of a civil claim for recovery (demanda reivindicatoria de cuota) filed by the company “Agrícola, Forestal, Transportes e Inversiones El Quillay SpA” before the Court of Constitución (Case C-298-2020). The plaintiff sues Forestal Arauco S.A. for the restitution of 3,424.59 hectares that it would be occupying, with respect to the following properties: (i) “Predio que formaba parte de la Hijuela Sur Poniente, de la Hijuela Sur del Fundo Quivolgo”, (ii) “Lomas de Quivolgo” and, (iii) “Hijuela Astillero”. It is the opinion of the plaintiff that the aforementioned piece of land would be part of the property called “Bodega de subdelegation de Quivolgo”, in respect of which the plaintiff would have rights and shares corresponding to 4.17% of said property. Likewise, the plaintiff requests to cancel the registration of the above-mentioned properties of Forestal Arauco S.A., deeming it as a bad-faith holder.

Currently, the discovery period is suspended due to the health contingency.

On June 7, 2022, the procedure was declared abandoned. The plaintiff filed an appeal against such resolution, which is pending to be heard and ruled in the Court of Appeals of Talca.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2022, Arauco has not made any provision whatsoever in connection with this contingency.

4. Forestal Arauco S.A. filed before the Court of Constitución (Case C-353-2019) a claim seeking compensation on the basis of non-contractual civil liability against Ricardo Guzmán Reyes, for damages caused as a result of illegal logging inside the land of Forestal Arauco called “Parte Sur-Poniente de la Hijuela Sur de la Hacienda Quivolgo” and “Lomas de Quivolgo”. Said damages are valued in $ 100,000,000 Chilean pesos (equivalent to ThU.S.$ 107 as of June 30, 2022).

On May 2, 2020, Mr. Ricardo Guzmán answered the lawsuit and filed a counterclaim for recovery in which he requests to Forestal Arauco S.A. the restitution of 3,424.59 hectares that it would be occupying, corresponding to the following properties owned by the latter: (i) “Predio que formaba parte de la Hijuela Sur Poniente, de la Hijuela Sur del Fundo Quivolgo”, (ii) “Lomas de Quivolgo” and, (iii) “Hijuela Astillero”. It is the opinion of the plaintiff that the aforementioned piece of land would be part of the property called “Bodega de subdelegation de Quivolgo”, from which would have rights and shares corresponding to 2.38% of said property. Likelywise, the plaintiff requests to cancel the registration of the properties before mentioned of Forestal Arauco S.A., deeming it as a bad-faith holder.

 

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June 30, 2022

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

 

 

Through a resolution dated November 11, 2020, the court received the trial case, and both parties were notified.

On July 1, 2022, the parties were summoned to hear the sentence, and its issuance is pending.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2022, Arauco has not made any provision whatsoever in connection with this contingency.

5. On May 11, 2020, Forestal Arauco S.A. was notified of a lawsuit of declaration of mere certainty filed against it by the company “Agrícola, Forestal, Transportes y Inversiones El Quillay SpA”, before the Court of Constitución (Case C-323-2020), in which the plaintiff claims that the property called “Predio que formaba parte de la Hijuela Sur Poniente, de la Hijuela Sur del Fundo Quivolgo” owned by Forestal Arauco S.A. would actually have an area of 498 hectares, and, consequently, that the defendant lacks the right of ownership over a portion of land corresponding to 1,768.20 hectares of said property. Based on the foregoing, the plaintiff requests the court to declare mere legal certainty regarding the foregoing and also to declare that said area is part of the property called “La Bodega de la Subdelegación de Quivolgo”, owned by the succession of Mr. José Arcos González in which it would have rights.

On June 17, 2022, the procedure was declared abandoned. The plaintiff filed an appeal against such resolution, which is pending to be heard and ruled in the Court of Appeals of Talca.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2022, Arauco has not made any provision whatsoever in connection with this contingency.

Arauco Argentina S.A.

Pursuant to law No. 25,080, the former Secretary of Agriculture, Livestock, Fishing and Foodstuffs, the enforcement agency referred to in the law approved, by Res. No. 952/2000, the forestry and industrial-forestry projects submitted by Arauco Argentina S.A. In the context of these projects, the Company afforested: 1) 4,777 hectares during 2000, in observance of its committed yearly plan; and 2) 23,012 hectares between 2000 and 2006 as a part of the multi-year afforestation plan. Likewise, a sawmill was built with installed capacity to produce 250,000 m3 of sawn timber per year.

On January 11, 2001, Arauco Argentina S.A. submitted an expansion for the approved industrial-forestry project. The expansion was approved via Res. No. 84/03 issued by the former Secretary of Agriculture, Livestock, Fishing and Foodstuffs. In accordance with the assumed obligations, the Company built a MDF board (panels) plant and afforested 8,089 hectares between 2001 and 2006.

Additionally, the Company has filed yearly forestry plans between years 2007 and 2020 for its local operations in the provinces of Misiones and Buenos Aires.

 

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June 30, 2022

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

 

 

On March 25, 2019, the Secretary of Agriculture, Livestock and Fishing approved the resolution No. 2019-55-APN-SECAGYP#MPYT, approving the annual forestry plan for 2007. In addition, said organism through the resolution No. 2019-114-APN-SECAGYP#MPYT approved the annual forestry plan for 2009 on June 12, 2019, and through the resolution No. 2019-228-APN-SECAGYP#MPYT approved the annual forestry plan for 2008 on November 29, 2019. For this reason, Arauco Argentina S.A. may compute the exemption in the income tax related to the forest appraisal on the plantations to be harvested from the lands included in those plans as from the 2019 period.

In March 2005, Note No. 145/05 of the Subsecretary of Agriculture, Livestock and Afforestation suspended the benefit that exempted Arauco Argentina S.A. from paying export duties under Law No. 25,080. This measure is currently under discussion by the Company. On November 8, 2006, the V Chamber of the National Appeals Court for Adversarial Administrative and Federal Matters issued a ruling ordering Arauco Argentina S.A. to continue to enjoy an exemption from paying the exportation duties, in the same manner and scope it had prior to the suspension ordered by Note No. 145/05, if the clearance of merchandise is performed pursuant to the guarantee regime established in article 453, subsection a) of the Customs Code, for the exempted tax obligation. The judicial measure became effective beginning on March of 2007 by collateralization through the granting of bond (caution) policies for each shipment permits exempted from payment of export duty. The company maintains an assignment of funds equivalent to $ 2,940,618,000 Argentine pesos (ThU.S.$ 23,485 as of June 30, 2022) for guaranteed export duties between 2007-2015, which appears under long-term provisions. Additionally, the Company filed a restitution claim for a total amount of ThU.S.$ 6,555, plus interests accrued from the service of the claim, corresponding to export duties between March 2005 and March 2007, as a result of the application of Note 145/05 issued by the Undersecretary of Agriculture, Livestock and Afforestation. The Company’s claim is being heard under case file No. 21830/2006 before the Federal Contentious Administrative Court No. 4. On October 28, 2019, a judgment of first instance was issued in said case, rejecting the claim and imposing the litigation costs on Arauco. Against that judgment, the Company filed an appeal and expressed the corresponding arguments in December 2019. On November 5, 2020, the Chamber of Appeals considered the arguments made by Arauco and determined that a final ruling will be issued in the case.

On the other hand, Arauco Argentina S.A. currently has a guarantee at an amount of $435,952,315 Argentine pesos (ThU.S.$ 3,482 as of June 30, 2022) in favor of the Secretary of Agriculture, Livestock and Fishing.

Arauco Argentina S.A. believes that it has complied with all of the obligations imposed upon it by the system set forth under Law No. 25.080.

Arauco do Brasil S.A.

1) The Federal Reserve of Brazil contested the amortization of goodwill resulting from acquisitions of Placas do Paraná, Tafibrás, Tafisa (now, Arauco do Brasil S.A.) y Dynea.

On July 20, 2015, Arauco do Brasil was notified of the first-level administrative ruling which partially upheld the infringement. Against this ruling, a Voluntary Appeal was filed seeking to revoke the Infringement Notice before the Brazilian Administrative Tax Council (Conselho Administrativo de Recursos Fiscais de Brasil or “CARF”), which is the second administrative level.

 

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June 30, 2022

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

 

 

The CARF’s decision was issued on May 16, 2017 and took into consideration certain arguments presented by the Company regarding the premium but preserving other charges. On September 27, 2018, Arauco do Brasil was notified of the CARF’s decision, for which Arauco do Brasil S.A. filed an appeal for declaration embargoes, to elicit clarifications from the CARF regarding certain points of the decision. On January 25, 2019, the CARF ruled that there were no clarifications or omissions to be made and, consequently, granted a term for filing the last remedy within the administrative realm (“Special Remedy”). This Special Remedy was submitted before the Upper Chamber of Fiscal Remedies of the CARF (CSRF) on February 11, 2019, reiterating the Company’s defense allegations regarding the matters and charges that remained in such process.

On August 28, 2020, the Company was served with an intermediate decision in Grievance of Instrument, issued by CARF that divided the claim into two parts:

One part that remains awaiting the administrative decision in Special Remedy to the CSRF (the issue of the isolated fine of 50% and interests) with the estimated amount of R$ 29,250,417 (equivalent to ThU.S.$ 5,625 as of June 30, 2022) and that amount will be added interests and readjustments as of January 31, 2019 until the administrative discussion is finished.

Second part that closes the administrative discussion (Comment of the contractual expenses deducted in the purchase of Tafisa; Comment of interests and legal expenses on debts paid in the amnesty program; payment of IRPJ and lower CSLL in the second part of 2010). Regarding this second part, the amount of R$ 31,774,176 (equivalent to ThU.S.$ 6,110 as of June 30, 2022) and to this amount interests and readjustments will be added as of August 28, 2020 until the final decision of the discussion court initiated on September 23, 2019, to continue answering that part of the claim. We enter with a Tax Debt Cancellation Action and we are introducing a guarantee for the suspension of any collection an to obtain the Certificates of Tax Compliance until the final decision of the trial. Currently we are starting to produce expert evidence in the case.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2022, Arauco has not made any provision whatsoever in connection with this contingency.

2) In 2013, a service provider instituted a civil lawsuit against us seeking compensation for damages allegedly caused by Arauco’s unilateral termination of its contract in connection with the implementation of the MDF 2 line of the Jaguariaiva mill. On November 01, 2021, the Civil Court of Curitiba issued its ruling, ordering Arauco to pay to the service provider an amount of ThR$ 84,000 (ThU.S.$ 16,154 as of June 30, 2022) in consideration of the alleged damages borne by the service provider during the course of the services contracts and as a result of its early termination by Arauco. Arauco appealed this ruling before the Court of Justice of the State. As of the date of this annual report a decision on such appeal remains pending.

After the ruling, we were summoned and on March 2, 2022 we filed an appeal, and the other part was summoned to rule on our appeal and filed a request on April 11, 2022.

The next procedure is for the appeal to be sent the Court, for distribution and follow up.

 

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June 30, 2022

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

 

 

At the closing date, there are no other contingencies in which the Companies act as obligor, that may significantly affect their financial, economic or operational conditions.

Provisions recorded as of June 30, 2022 as of December 31, 2021 are as follows:

 

     06-30-2022      12-31-2021  

Classes of Provisions

   ThU.S.$      ThU.S.$  

Short-term provisions

     6,336        337  

Provisions for litigations

     336        337  

Other short-term provisions

     6,000        —    

Long-term provisions, non-Current

     30,525        29,549  

Provisions for litigations

     30,525        29,549  
  

 

 

    

 

 

 

Total provisions

     36,861        29,886  
  

 

 

    

 

 

 

 

     06-30-2022  

Movements in Provisions

   Litigations (*)
ThU.S.$
     Other Provisions
(**)

ThU.S.$
     Total
ThU.S.$
 

Opening balance

     29,886        —          29,886  

Changes in provisions

        

Additional provisions

     6,095        6,000        12,095  

Used provisions

     (4,865      —          (4,865

Increase (decrease) in foreign exchange

     (443      —          (443

Other increases (decreases)

     188        —          188  

Total changes

     975        6,000        6,975  

Closing balance

     30,861        6,000        36,861  
  

 

 

    

 

 

    

 

 

 

 

(*)

The increase in litigations is mainly made up of ThU.S.$ 6,078 (subsidiaries in Brazil) for civil and labor lawsuits.

(**)

The increase in Other Provisions corresponds to the dismantling L1.

 

     12-31-2021  

Movements in Provisions

   Litigations (*)
ThU.S.$
     Other Provisions
ThU.S.$
     Total
ThU.S.$
 

Opening balance

     30,836        —          30,836  

Changes in provisions

        

Increase in existing provisions

     8,592        —          8,592  

Used provisions

     (5,349      —          (5,349

Increase (decrease) in foreign exchange

     (4,505      —          (4,505

Other increases (decreases)

     312        —          312  

Total changes

     (950      —          (950

Closing balance

     29,886        —          29,886  
  

 

 

    

 

 

    

 

 

 

 

(*)

The increase in litigations is mainly made up of ThU.S.$ 8,543 (subsidiaries in Brazil) and ThU.S.$ 44 (Argentina) for civil and labor lawsuits. and ThU.S.$ 5 of CEPP and ZFPP in Uruguay for a lawsuit they maintain with suppliers.

Provisions for litigations are related to labor and tax claims whose payment period is uncertain. Other provisions mainly include constitution of provision for the lawsuit of export duties (see Arauco Argentina’s contingent liability set forth in this note).

 

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June 30, 2022

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

 

 

NOTE 19. INTANGIBLE ASSETS

 

     06-30-2022      12-31-2021  

Classes of intangible assets, net

   ThU.S.$      ThU.S.$  

Intangible assets, net

     78,531        84,210  

Intangible assets under development (IT programs)

     4,433        4,881  

Computer software

     24,604        27,268  

Water rights

     5,684        5,684  

Customer

     26,844        29,218  

Other identifiable intangible assets

     16,966        17,159  
  

 

 

    

 

 

 

Classes of intangible assets, gross

     225,765        223,654  

Intangible assets under development (IT programs)

     4,433        4,881  

Computer software

     117,141        114,602  

Water rights

     5,684        5,684  

Customer

     76,266        75,726  

Other identifiable intangible assets

     22,241        22,761  
  

 

 

    

 

 

 

Classes of accumulated amortization and impairment

     

Total accumulated amortization and impairment

     (147,234      (139,444

Accumulated amortization and impairment, intangible assets

     (147,234      (139,444

Computer software

     (92,537      (87,334

Customer

     (49,422      (46,508

Other identifiable intangible assets

     (5,275      (5,602
  

 

 

    

 

 

 

Reconciliation of the carrying amount of intangible assets at the beginning and end of each reporting period balances

 

     06-30-2022  
     Intangible
assets under
development
    Computer
software
    Water
rights
     Customer     Others     Total  

Reconciliation of intangible assets

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

Opening balance

     4,881       27,268       5,684        29,218       17,159       84,210  

Changes

             

Additions

     842       1,594       —          —         56       2,492  

Disposals

     (790     —         —          —         (108     (898

Amortization

     —         (5,003     —          (2,381     (166     (7,550

Increase (decrease) in foreign exchange

     —         210       —          7       25       242  

Other increases (decreases)

     (500     535       —          —         —         35  

Changes total

     (448     (2,664     —          (2,374     (193     (5,679

Closing balance

     4,433       24,604       5,684        26,844       16,966       78,531  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

     12-31-2021  
     Intangible
assets under
development
    Computer
software
    Water
rights
     Customer     Others     Total  

Reconciliation of intangible assets

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

Opening balance

     2,665       31,877       5,684        35,092       26,772       102,090  

Changes

             

Additions

     2,929       3,265       —          —         557       6,751  

Disposals

     (1,121     (647     —          —         —         (1,768

Amortization

     —         (12,284     —          (5,940     (263     (18,487

Increase (decrease) in foreign exchange

     —         451       —          65       (16     500  

Other increases (decreases)

     408       4,606       —          1       (9,891     (4,876

Changes total

     2,216       (4,609     —          (5,874     (9,613     (17,880

Closing balance

     4,881       27,268       5,684        29,218       17,159       84,210  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

     Years of useful life
(average)
 

Computer software

     5  

Customer

     15  

Brands

     7  

The amortization of customer and computer software is presented in the interim consolidated statements of profit or loss under the administrative expenses line item.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 20. BIOLOGICAL ASSETS

Biological assets comprise forestry plantations, mainly radiata and taeda pine, and to a lesser extent eucalyptus. The plantations are located in Chile, Argentina, Brazil and Uruguay.

As of June 30, 2022 Arauco has a total surface of 1.6 million hectares of which 927 thousand hectares are used for forestry planting, 485 thousand hectares are native forest, 109 thousand hectares are used for other purposes and 101 thousand hectares not yet planted. Lands correspondening to native forest, lands used for other purposes and lands not yet planted are presented in Property, Plants & Equipments, Forest plantations are presented in Biological Assets.

For the period ended June 30, 2022, the production volume of logs totaled 10.8 million m3 (9.9 million m3 as of June 30, 2021).

Measurements of fair value of Arauco’s biological assets are classified as Level 3, due to the fact that inputs are not observable. However, this information reflects the assumptions that market participants would use in pricing the asset, including assumptions about risk.

These unobservable inputs were developed using the best information available and includes internal data from Arauco. These unobservable inputs can be adjusted if the available information indicates that other market participants would use different information or there is something specific in Arauco that is not available to other market participants.

The main considerations in determining the fair value of biological assets include the following:

 

 

Arauco uses discounted expected future cash flows of its forest plantations, which are based on a harvest projection date for all existing plantations.

 

 

Current forestry plantations are projected based on a net volume that will not decrease, with a minimum growth equivalent to the current supply demand.

 

 

Future plantations are not considered.

 

 

The harvest of forestry plantations supplies raw materials for all other products that Arauco produces and trades. By directly controlling the development of forests that will be processed, Arauco ensures high quality timber for each of its products.

 

 

Expected cash flows are determined in terms of harvest and expected sale of forestry products, associated with the demand from the Company’s own industrial centers and sales to third parties at market prices. Sales margin of the different products that are harvested in the forest is also considered in the valuation. The changes in the value of the plantations pursuant to the criteria defined above are accounted for in the results for the period, as established in IAS 41. These changes are presented in the interim consolidated statements of profit or loss under the line item other income per function, which as of June 30, 2022 amounted to ThU.S.$ 130,564 (ThU.S.$ 83,080 as of June 30, 2021). The appraisal of biological assets resulted in a greater cost of the lumber sold in comparison to the real incurred cost, which is presented included in the cost of sales which as of June 30, 2022 amounted to ThU.S.$ 146,534 (ThU.S.$ 96,584 as of June 30, 2021).

 

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June 30, 2022

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

 

 

 

Forestry plantations are harvested according to the needs of Arauco’s production plants.

 

 

The discount rates used are 5.5% in Chile, 6.7% Brazil, 16.2% in Argentina and 8% in Uruguay.

 

 

It is expected that prices of harvested timber are constant in real terms based on market prices.

 

 

Cost expectations with respect to the lifetime of the forests are constant based on estimated costs included in the projections made by Arauco.

 

 

The average crop age by species and country is:

 

     Chile      Argentina      Brazil      Uruguay  

Pine

     24        15        15        —    

Eucalyptus

     12        10        7        10  

The following table sets forth changes in fair value of biological assets considering variations in significant assumptions considered in calculating the fair value of the assets:

 

            ThU.S.$  

Discount rate

     0.5        (128,888
     -0.5        137,390  

Margins (%)

     10        461,490  
     -10        (461,490

The significant unobservable input data used in the measurement of the fair value of biological assets are discount rates and sales margins of the different products that are harvested from the forest. Increases (decreases) in any of these input data considered in isolation would result in a smaller or greater fair value measurement.

The adjustment to fair value of biological assets minus sale costs is recorded in the interim consolidated statements of profit or loss, under the line item other income or other expenses, depending on whether it corresponds to profits or losses.

Forestry plantations classified as current biological assets are those to be harvested and sold within twelve months after the reporting period.

The Company has contracted fire insurance policies for its forestry plantations, which in conjunction with the Company’s resources, allow risks to be minimized.

As of the date of these interim consolidated financial statements, there are no committed disbursements for the acquisition of biological assets.

Detail of Biological Assets Pledged as Security

As of June 30, 2022, there are no forestry plantations pledged as security.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Detail of Biological Assets with Restricted Ownership

As of the date of these interim consolidated financial statements, there are no biological assets with restricted ownership.

No significant government grants have been received.

Current and Non-Current Biological Assets

As of the date of these interim consolidated financial statements, the current and non-current biological assets are as follows:

 

     06-30-2022      12-31-2021  
     ThU.S.$      ThU.S.$  

Current

     364,043        329,586  

Non-current

     3,008,550        3,008,897  

Total

     3,372,593        3,338,483  
  

 

 

    

 

 

 

Reconciliation of carrying amount of biological assets

 

     06-30-2022  
     Current      Non-current      Total  

Movement

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

Opening balance

     329,586        3,008,897        3,338,483  

Changes in real incurred cost

     3,401        71,509        74,910  

Additions through acquisition

     —          124,120        124,120  

Sales

     (186      (7,146      (7,332

Harvest

     (55,096      —          (55,096

Increases (decreases) in foreign exchange

     158        12,985        13,143  

Loss of forest due to fires

     —          (7,514      (7,514

Transfers to non-current assets held for sale

     —          4,786        4,786  

Transfers from non-current to current

     55,722        (55,722      —    

Other increases (decreases)

     2,803        —          2,803  

Changes in fair value

     31,056        (71,856      (40,800

Gain (losses) arising from changes in fair value minus sale costs

     5,048        125,516        130,564  

Sales

     38        (10,676      (10,638

Harvest

     (161,452      —          (161,452

Loss of forest due to fires

     —          (5,182      (5,182

Transfers to non-current assets held for sale

     —          4,798        4,798  

Transfers from non-current to current

     186,312        (186,312      —    

Other increases (decreases)

     1,110        —          1,110  

Total changes

     34,457        (347      34,110  

Closing balance

     364,043        3,008,550        3,372,593  
  

 

 

    

 

 

    

 

 

 

 

     12-31-2021  
     Current      Non-current      Total  

Movement

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

Opening balance

     302,710        3,296,117        3,598,827  

Changes in real incurred cost

     656        (64,314      (63,658

Additions through acquisition

     78        191,316        191,394  

Sales

     (105      (72,963      (73,068

Harvest

     (114,157      —          (114,157

Increases (decreases) in foreign exchange

     (3,884      (18,246      (22,130

Loss of forest due to fires

     (3,398      (13,455      (16,853

Transfers to non-current assets held for sale

     —          (5,770      (5,770

Transfers from non-current to current

     125,219        (125,219      —    

Decrease due to loss of control in subsidiary

     (3,097      (19,977      (23,074

Changes in fair value

     26,220        (222,906      (196,686

Gain (losses) arising from changes in fair value minus sale costs

     —          81,986        81,986  

Sales

     —          (20,297      (20,297

Harvest

     (223,712      —          (223,712

Loss of forest due to fires

     (1,164      (19,898      (21,062

Transfers to non-current assets held for sale

     —          (5,232      (5,232

Transfers from non-current to current

     252,860        (252,860      —    

Decrease due to loss of control in subsidiary

     (1,764      (6,605      (8,369

Total changes

     26,876        (287,220      (260,344

Closing balance

     329,586        3,008,897        3,338,483  
  

 

 

    

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 21. ENVIRONMENTAL MATTERS

Environment Management

For Arauco, sustainability means management strategy. This strategy incorporates values, commitments and standards, that together with the adoption of best practices as well as the use of the latest available technologies, seek to continuously improve the Company’s environmental management. It is the environmental department and each of its specialists that ensure these guidelines are met and are put into practice in everyday company operations.    

All Arauco’s production units have certified environmental management systems, which reinforce the Company’s commitment to environmental performance and ensure the traceability of all raw materials used.

Arauco uses several supplies in its productive processes such as wood, chemical products, and water, etc., which in turn produce liquid and gas emissions. As a way to make the Company’s environmental management more efficient, significant progress has been made to reduce consumption and emissions.

Environmental investments have been made related to the control of atmospheric emissions, process improvements, water and waste management, as well as effluent treatment, in order to improve the environmental performance of all Arauco’s business units.    

These investments are reflected in the interim consolidated financial statements as properties, plants and equipment when they refer to disbursements in major works executed and are reflected in Expenses when they refer to improvements or management not directly associated with investment projects.

Detail information of disbursements related to the environment

As of June 30, 2022 and as of December 31, 2021 Arauco has made and / or has committed the following disbursements in major environmental projects:

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

06-30-2022

   Disbursements undertaken 2022      Committed
disbursements
 
          State      Amount      Asset      Asset/expense      Amount      Estimated  

Company

  

Name of project

   of project      ThU.S.$      expense      destination item      ThU.S.$      date  

Celulosa Arauco y Constitucion S.A.

   Environmental improvement studies      In process        4,935        Assets       
Properties, plants
and equipments
 
 
     1,838        2022  

Celulosa Arauco y Constitucion S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        632        Assets       
Properties, plants
and equipments
 
 
     10,088        2022  

Celulosa Arauco y Constitucion S.A.

   Investment projects for the control and management of gas emissions from industrial process      In process        20        Assets       
Properties, plants
and equipments
 
 
     434        2022  

Celulosa Arauco y Constitucion S.A.

   Expansion of solid industrial waste dumpsite for management of these in the future      In process        33        Assets       
Properties, plants
and equipments
 
 
     667        2022  

Celulosa Arauco y Constitucion S.A.

   Environmental improvement studies      In process        5,844        Expenses        Operating costs        6,016        2022  

Celulosa Arauco y Constitucion S.A.

   Expansion of solid industrial waste dumpsite for management of these in the future      In process        6,031        Expenses        Operating costs        4,234        2022  

Arauco Argentina S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        31        Assets       
Properties, plants
and equipments
 
 
     270        2022  

Arauco Argentina S.A.

   Expansion of solid industrial waste dumpsite for management of these in the future      In process        427        Assets       
Properties, plants
and equipments
 
 
     163        2022  

Arauco Forestal Arapoti S.A.

   Environmental improvement studies      In process        285        Assets       
Properties, plants
and equipments
 
 
     471        2022  

Arauco Industria de Paineis S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        3,721        Assets       
Properties, plants
and equipments
 
 
     455        2022  

Forestal Arauco S.A.

   Environmental improvement studies      In process        670        Expenses       
Administration
expenses
 
 
     1,194        2022  

Maderas Arauco S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        102        Assets       
Properties, plants
and equipments
 
 
     228        2022  

Maderas Arauco S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        290        Expenses        Operating costs        97        2022  

Arauco North America, Inc

   Investment projects for the control and management of gas emissions from industrial process      In process        514        Assets       
Properties, plants
and equipments
 
 
     866        2022  

Arauco North America, Inc

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        107        Assets       
Properties, plants
and equipments
 
 
     1,697        2022  
     

 

 

    

 

 

          

 

 

    

 

 

 
        TOTAL        23,642              28,718     
     

 

 

    

 

 

          

 

 

    

 

12-31-2021

   Disbursements undertaken 2021      Committed
disbursements
 
          State      Amount      Asset      Asset/expense      Amount      Estimated  

Company

  

Name of project

   of project      ThU.S.$      expense      destination item      ThU.S.$      date  

Celulosa Arauco y Constitucion S.A.

   Environmental improvement studies      In process        19,802        Assets       
Properties, plants
and equipments
 
 
     14,049        2022  

Celulosa Arauco y Constitucion S.A.

   Environmental improvement studies      Finished        248        Assets       
Properties, plants
and equipments
 
 
     14        2022  

Celulosa Arauco y Constitucion S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        410        Assets       
Properties, plants
and equipments
 
 
     5,244        2022  

Celulosa Arauco y Constitucion S.A.

   Environmental improvement studies      In process        11,860        Expenses        Operating costs        —          2022  

Celulosa Arauco y Constitucion S.A.

   Expansion of solid industrial waste dumpsite for management of these in the future      In process        10,367        Expenses        Operating costs        —          2022  

Arauco Argentina S.A.

   Expansion of solid industrial waste dumpsite for management of these in the future      In process        1,856        Assets       
Properties, plants
and equipments
 
 
     590        2022  

Arauco Argentina S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        921        Assets       
Properties, plants
and equipments
 
 
     581        2022  

Maderas Arauco S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        585        Expenses        Operating costs        —          2022  

Maderas Arauco S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      In process        423        Assets       
Properties, plants
and equipments
 
 
     66        2022  

Maderas Arauco S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      Finished        618        Assets       
Properties, plants
and equipments
 
 
     6        2022  

Forestal Arauco S.A.

   Environmental improvement studies      In process        1,280        Expenses       
Administration
expenses
 
 
     504        2022  

Celulosa y Energía Punta Pereira S.A.

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      Finished        948        Assets       
Properties, plants
and equipments
 
 
     —          —    

Arauco North America, Inc

   Environmental improvement studies      Finished        222        Assets       
Properties, plants
and equipments
 
 
     —          —    

Arauco North America, Inc

   Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants      Finished        205        Assets       
Properties, plants
and equipments
 
 
     —          —    

Arauco North America, Inc

   Investment projects for the control and management of gas emissions from industrial process      Finished        997        Assets       
Properties, plants
and equipments
 
 
     —          —    
     

 

 

    

 

 

          

 

 

    

 

 

 
        TOTAL        50,742              21,054     
     

 

 

    

 

 

          

 

 

    

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 22. NON-CURRENT ASSETS HELD FOR SALE

The following table sets forth information on the main types of non-current assets held for sale:

 

     06-30-2022      12-31-2021  
     ThU.S.$      ThU.S.$  

Land

     392        2,306  

Buildings

     307        307  

Plant and equipment

     —          —    

Forest

     1,418        11,002  

Roads

     181        543  

Total

     2,298        14,158  
  

 

 

    

 

 

 

As of June 30, 2022, in the line other income of the interim consolidated statements of profit or loss, the amount of ThU.S.$ 17,933 from the sale of properties whose operation began at the end of 2020 was shown, which was made to Consorcio led by BTG Pactual Timberland Investment Group LLC.

As of December 31, 2021, there was a profit of ThU.S.$ 229,866 from the sale of the largest part of the properties of the aforementioned operation. In the line other income of the interim consolidated statements of profit or loss this profit was shown.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 23. FINANCIAL INSTRUMENTS

23.1 Classification

Arauco’s financial instruments as of June 30, 2022 and as of December 31, 2021, are displayed in the table below. Regarding those instruments valued at an amortized cost, an estimation of their fair value is displayed for informational purposes.

 

     June 2022      December 2021  

Financial instruments

Thousands of dollars

   Carrying
amount
     Fair value      Carrying
amount
     Fair value  

Financial assets at fair value through profit or loss (held for trading)

     253,239        253,239        230,068        230,068  

Mutual funds (1)

     253,239        253,239        230,068        230,068  

Financial assets at amortized cost

     1,566,047        1,566,047        1,783,643        1,783,643  

Cash and cash equivalents (amortized cost)

     648,468        648,468        781,032        781,032  

Cash

     472,902        472,902        529,076        529,076  

Time deposits

     175,566        175,566        251,956        251,956  

Accounts receivable (net)

     897,348        897,348        994,261        994,261  

Trade receivables

     775,451        775,451        826,784        826,784  

Lease receivable

     10,922        10,922        27        27  

Sundry debtors

     15,923        15,923        32,542        32,542  

Other receivables

     48,976        48,976        48,531        48,531  

Prepayments

     46,076        46,076        86,377        86,377  

Accounts receivable from related parties

     6,877        6,877        5,559        5,559  

Other financial assets (2)

     13,354        13,354        2,791        2,791  

Hedging assets

     22,968        22,968        13,599        13,599  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at amortized cost (3)

     6,207,943        5,859,894        6,317,598        6,114,417  

Bonds issued denominated in U.S. dollars

     3,394,691        3,021,311        3,392,010        3,161,062  

Bonds issued denominated in U.F. (4)

     981,476        998,687        1,034,023        1,024,721  

Bank borrowings in U.S. dollars

     411,723        404,894        454,652        463,308  

Bank borrowings in other currencies

     476,066        491,015        537,304        565,717  

Lease liabilities

     224,347        224,347        163,304        163,304  

Trade and other payables

     716,271        716,271        733,728        733,728  

Accounts payable to related parties

     3,369        3,369        2,577        2,577  

Financial liabilities at fair value through profit or loss

     10        10        133        133  

Hedging liabilities

     220,263        220,263        296,183        296,183  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Although mutual funds are measured at fair value through profit or loss for purposes of the interim consolidated statements of financial position mutual funds are classified as “Cash and cash equivalents” due to the are highly liquid short-term investment.

(2)

Corresponds to the balance of assets from margin call for current derivatives (collateral).

(3)

Financial liabilities measured at amortized cost, other than “Trade and other payables”, “Accounts payable to related parties” and derivatives are presented in the interim consolidated statements of financial position in the line item “Other financial liabilities” as current and non-current based on their maturity.

(4)

The Unidad de Fomento (“U.F.”) is a unit of account that is linked to, and is adjusted daily to reflect changes in the Chilean consumer price index.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

23.2 Fair Value Hierarchy of Financial Assets and Liabilities

The assets and liabilities measured at fair value in the interim consolidated statements of financial position as of June 30, 2022 and as of December 31, 2021, have been measured based on the valuation methodologies provided in IFRS 13. The methodologies applied for each financial instrument are classified according to their hierarchy as follows:

 

 

Level 1: Securities or quoted prices in active markets for identical assets and liabilities

 

 

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

 

 

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

 

Fair value

   June 2022
ThU.S.$
     Level 1
ThU.S.$
     Level 2
ThU.S.$
     Level 3
ThU.S.$
 

Financial assets at fair value through profit or loss (held for trading)

           

Mutual Funds

     253,239        253,239        —          —    

Hedging assets

     22,968        —          22,968        —    

Financial liabilities at fair value through profit or loss

     10        —          10        —    

Hedging liabilities

     220,263        —          220,263        —    

 

Fair value

   December
2021
ThU.S.$
     Level 1
ThU.S.$
     Level 2
ThU.S.$
     Level 3
ThU.S.$
 

Financial assets at fair value through profit or loss (held for trading)

           

Mutual Funds

     230,068        230,068        —          —    

Hedging assets

     13,599        —          13,599        —    

Financial liabilities at fair value through profit or loss

     133        —          133        —    

Hedging liabilities

     296,183        —          296,183        —    

At the closing date of these interim consolidated financial statements, there have been no transfers between the different hierarchy levels.

23.3 Explanation of the valuation of Financial Instruments.

Cash and cash equivalent and accounts receivable

The carrying amount of accounts receivable, cash and cash equivalents (including mutual funds), and other financial assets and liabilities approximate their fair value due to the short-term nature of such instruments.

Derivative financial instruments

Arauco’s current derivatives are valued under the cash flow discount method. These flows are discounted at the rate applicable according to the transaction’s and counterparties’ risk, using an internal methodology based on the information obtained from Bloomberg.

 

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June 30, 2022

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

 

 

Given that our cross-currency swaps correspond to future flows in UF, U.S. dollars and Euros, Arauco calculates the current value of such flows by using the UF zero coupon curve, dollar zero coupon and the Euro zero coupon.

The fair value of the interest rate swap contracts is calculated by reference to the rate differential between the agreed upon rate and the market rate as of the end date of these financial statements.

The fair value of the currency forward contracts is calculated by reference to the current forward exchange rates of contracts with similar maturity profiles.

The fair value of zero cost collar contracts is calculated by reference to the price differential between the agreed price range and the market price of the hedge’s object.

The counterparty risk uses the Z-Spread obtained from the curve of the bonds issued by counterparties, and they are deducted from each flow as appropriate.

Financial Liabilities

The fair value of bonds issued was determined with reference to quoted market prices as they have standard terms and conditions.

The fair value of bank borrowings was determined based on discounted cash flow analysis applying the corresponding discount yield curves to the remaining term to maturity.

Disclosures of the fair value of financial liabilities at amortized cost are determined via the use of discounted cash flows, calculated over variables of the observable markets as of the date of informing the interim consolidated financial statements, and correspond to Level 2 of the fair value hierarchy.

 

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June 30, 2022

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

 

 

The following table shows the compliance with the financial covenants (level of indebtedness, detailed in section 23.9.3), for the bonds issued prior to the year 2015, as required by domestic indentures (Chile):

 

     June 2022      December 2021  
     ThU.S.$      ThU.S.$  

Interest bearing borrowings, current (a)

     383,652        388,809  

Other current financial liabilities

     340,310        339,441  

Current lease liabilities

     43,371        49,603  

Current hedging liabilities + current financial liabilities through profit or loss

     29        235  

Interest bearing borrowings, non-current (b)

     5,104,651        5,192,484  

Other non-current financial liabilities

     5,143,919        5,374,864  

Non-current lease liabilities

     180,976        113,701  

Non-current hedging liabilities + non-current financial liabilities through profit or loss

     220,244        296,081  

Financial debt total (c)

     5,488,303        5,581,293  

Cash and cash equivalents

     901,707        1,011,100  

Other current financial assets

     20,529        5,865  

Total cash (d)

     922,236        1,016,965  

Net financial debt (e)

     4,566,067        4,564,328  

Equity attributable to parent company

     8,262,186        7,810,733  

Non-controlling interests

     7,197        7,771  

Total equity (f)

     8,269,383        7,818,504  

Debt to equity ratio (g)

     0.59        0.58  

 

(a)

Other current financial liabilities + current lease liabilities – (current hedging liabilities + current financial liabilities through profit or loss)

(b)

Other non-current financial liabilities + non-current lease liabilities – (non-current hedging liabilities + non-current financial liabilities through profit or loss)

(c)

Interest bearing borrowings, current + interest bearing borrowings, non-current

(d)

Cash and cash equivalents + other current financial assets

(e)

Total financial debt – total cash

(f)

Equity attributable to parent company + non-controlling interests

(g)

Net financial debt / total equity

 

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June 30, 2022

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

 

 

The following table shows the compliance with the financial covenants (level of indebtedness, detailed in section 23.9.3), for the bonds issued after year 2015, as required by domestic indentures (Chile):

 

     June 2022      December 2021  
     ThU.S.$      ThU.S.$  

Other financial liabilities (a)

     5,484,229        5,714,305  

Other current financial liabilities

     340,310        339,441  

Other non-current financial liabilities

     5,143,919        5,374,864  

Lease liabilities (b)

     224,347        163,304  

Current lease liabilities

     43,371        49,603  

Non-current lease liabilities

     180,976        113,701  

Financial liabilities at fair value through profit or loss

     10        133  

Hedging liabilities (c)

     220,263        296,183  

Swaps

     220,222        295,958  

Forward

     41        225  

Financial debt total (d)

     5,488,303        5,581,293  

Cash and cash equivalents

     901,707        1,011,100  

Total Cash (e)

     901,707        1,011,100  

Net financial debt (f)

     4,586,596        4,570,193  

Equity attributable to parent company

     8,262,186        7,810,733  

Non-controlling interests

     7,197        7,771  

Total equity (g)

     8,269,383        7,818,504  

Debt to equity ratio (h)

     0.59        0.58  

 

(a)

Other current financial liabilities + other non-current financial liabilities

(b)

Current lease liabilities + non-current lease liabilities

(c)

Swaps + forwards

(d)

Other financial liabilities + lease liabilities + financial liabilities at fair value through profit or loss + Hedging liabilities

(e)

Cash and cash equivalents + other current financial assets

(f)

Total financial debt – total cash

(g)

Equity attributable to parent company + non-controlling interests

(h)

Net financial debt / total equity

 

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June 30, 2022

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

 

 

The following table sets forth a reconciliation between the financial liabilities and the interim consolidated statements of financial position as of June 30, 2022 and as of December 31, 2021:

 

     June 2022  

Thousands of dollars

   Up to 90
days
     From 91
days to 1
year
     Other
current
financial
liabilities,
Total
     From 1
year to 3
years
     From 3
years to
5 years
     More than
5 years
     Other
non-current
financial
liabilities,
Total
     Total  

Bonds obligations

     29,114        59,634        88,748        572,862        249,280        3,465,277        4,287,419        4,376,167  

Bank borrowings

     29,939        221,594        251,533        358,459        131,463        146,334        636,256        887,789  

Swap and Forward

     29        —          29        220,244        —          —          220,244        220,273  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other financial liabilities (a)

     59,082        281,228        340,310        1,151,565        380,743        3,611,611        5,143,919        5,484,229  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     June 2022  

Thousands of dollars

   Up to 90
days
     From 91
days to 1
year
     Total
Current
     From 1
year to 3
years
     From 3
years to
5 years
     More than
5 years
     Total
non-current
     Total  

Lease liabilities

     13,359        30,012        43,371        48,940        39,315        92,721        180,976        224,347  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total lease liabilities (b)

     13,359        30,012        43,371        48,940        39,315        92,721        180,976        224,347  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     June 2022  

Thousands of dollars

   Up to 90
days
     From 91
days to 1
year
     Total
Current
     From 1
year to 3
years
     From 3
years to
5 years
     More than
5 years
     Total
non-current
     Total  

Trade and other payables

     687,513        26,312        713,825        2,446        —          —          2,446        716,271  

Accounts payable to related companies

     3,369        —          3,369        —          —          —          —          3,369  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total accounts payable (c)

     690,882        26,312        717,194        2,446        —          —          2,446        719,640  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities (a) + (b) + (c)

     763,323        337,552        1,100,875        1,202,951        420,058        3,704,332        5,327,341        6,428,216  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     December 2021  

Thousands of dollars

   Up to 90
days
     From 91
days to 1
year
     Other
current
financial
liabilities,
Total
     From 1
year to 3
years
     From 3
years to
5 years
     More than
5 years
     Other
non-current
financial
liabilities,
Total
     Total  

Bonds obligations

     29,114        61,257        90,371        574,850        257,362        3,503,450        4,335,662        4,426,033  

Bank borrowings

     29,658        219,177        248,835        227,008        325,244        190,869        743,121        991,956  

Swap and Forward

     235        —          235        296,081        —          —          296,081        296,316  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other financial liabilities (a)

     59,007        280,434        339,441        1,097,939        582,606        3,694,319        5,374,864        5,714,305  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     December 2021  

Thousands of dollars

   Up to 90
days
     From 91
days to 1
year
     Total
Current
     From 1
year to 3
years
     From 3
years to
5 years
     More than
5 years
     Total
non-current
     Total  

Lease liabilities

     13,204        36,399        49,603        44,459        26,083        43,159        113,701        163,304  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total lease liabilities (b)

     13,204        36,399        49,603        44,459        26,083        43,159        113,701        163,304  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     December 2021  

Thousands of dollars

   Up to 90
days
     From 91
days to 1
year
     Total
Current
     From 1
year to 3
years
     From 3
years to
5 years
     More than
5 years
     Total
non-current
     Total  

Trade and other payables

     725,188        6,268        731,456        2,272        —          —          2,272        733,728  

Accounts payable to related companies

     2,577        —          2,577        —          —          —          —          2,577  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total accounts payable (c)

     727,765        6,268        734,033        2,272        —          —          2,272        736,305  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities (a) + (b) + (c)

     799,976        323,101        1,123,077        1,144,670        608,689        3,737,478        5,490,837        6,613,914  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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June 30, 2022

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

 

 

23.4 Derivative Instruments

Hedging instruments recorded as of June 30, 2022 are cash flow hedges. Arauco uses derivatives for hedging purposes, such as cross currency swaps, currency and commodity forwards, interest rate swaps, and options. Depending on the fair value of each instrument, the position could be either an asset or a liability, and they are listed in the interim consolidated statements of financial position under other non-current financial assets or other non-current financial liabilities, respectively. The effects for the period are presented in consolidated statement of changes in equity as other interim comprehensive income or the statements of comprehensive income as finance income or finance costs, net of differences in exchange rate of the hedged items and the deferred tax.

A summary of the derivative financial instruments included in the interim consolidated statements of financial position as of June 30, 2022 and as of December 31, 2021, is presented below:

 

Financial instruments

   June 2022
Fair value ThU.S.$
     December 2021
Fair value ThU.S.$
 

Hedging assets

     22,968        13,599  

Derivatives (1)

     22,968        13,599  

Financial liabilities at fair value through profit or loss

     (10      (133

Forward

     (10      (133

Hedging liabilities

     (220,263      (296,183

Derivatives (1)

     (41      (401

Cross currency swaps (2)

     (220,222      (295,782

 

(1)

Includes HFO swap, zero cost collar, forward and IRS from Chile, USA, Argentina and Uruguay tables.

(2)

Includes cross currency swaps from Chile.

23.4.1. Chile

In order to cover the exposure to variation in cash flows associated with fluctuations in exchange rates, interest rates or commodity prices, Arauco Chile has the following derivatives as of June 30, 2022 and as of December 31, 2021:

Cross Currency Swaps

Cross currency swaps to cover the exposure to the exchange rate risk generated from bonds denominated in U.F.

 

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June 30, 2022

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

 

 


Bond

  

Institution

   Amount U.S.$      Amount
U.F.
     Starting date      Ending date      June 2022
fair value
ThU.S.$
    December 2021
fair value
ThU.S.$
 

F

   Scotiabank – Chile      26,199,841        727,273        10-30-2014        04-30-2023        (1,643     (2,141

F

   Scotiabank – Chile      26,167,117        727,273        10-30-2014        04-30-2023        (1,577     (2,048

F

   BCI – Chile      26,250,017        727,273        10-30-2021        10-30-2029        (1,324     (1,380

F

   BCI – Chile      25,651,064        727,273        10-30-2014        04-30-2023        (991     (3,239

F

   Scotiabank – Chile      26,281,540        727,273        10-30-2021        10-30-2029        (681     (2,450

F

   Santander – Chile      25,893,452        727,273        10-30-2014        04-30-2023        (1,188     (1,550

F

   Banco de Chile – Chile      25,893,454        727,273        04-30-2019        10-30-2029        (2,082     (4,203

P

   BCI – Chile      36,750,025        954,545        11-15-2021        11-15-2032        (1,650     (5,077

P

   BCI – Chile      36,746,924        954,545        11-15-2021        11-15-2032        (526     (3,749

P

   Scotiabank – Chile      40,484,993        954,545        11-15-2013        11-15-2023        (5,974     (7,085

P

   Santander – Chile      39,854,865        954,545        11-15-2013        11-15-2023        (5,134     (6,053

P

   Deutsche – U.K.      39,854,865        954,545        11-15-2013        11-15-2023        (5,280     (6,304

R

   Santander – Chile      128,611,183        3,000,000        10-01-2014        04-01-2024        (21,151     (24,743

R

   JP Morgan – U.K.      43,185,224        1,000,000        10-01-2014        04-01-2024        (7,234     (8,509

R

   Itau – Chile      43,277,070        1,000,000        10-01-2014        04-01-2024        (7,310     (8,543

S

   Santander – Chile      201,340,031        5,000,000        11-15-2016        11-15-2026        (19,064     (36,758

W

   Goldman Sachs – N.A.      40,521,750        1,000,000        10-10-2018        10-10-2028        (7,038     (11,921

W

   Goldman Sachs – N.A.      40,537,926        1,000,000        10-10-2018        10-10-2028        (6,464     (11,275

W

   Scotiabank – Chile      40,066,555        1,000,000        10-10-2018        10-10-2028        (6,951     (11,807

X

   Santander – Chile      118,400,504        3,000,000        10-10-2018        10-10-2038        (24,276     (50,527

X

   Santander – Chile      97,971,786        2,500,000        10-10-2018        10-10-2038        (19,988     (41,802
                 

 

 

   

 

 

 
                    (147,526     (251,164
                 

 

 

   

 

 

 

Cross currency swaps contracts to cover the exposure to the risk of the exchange rate for bank contracts in Euro.

 

Institution

   Amount U.S.$      Amount EUR      Starting date      Ending date      June 2022
fair value ThU.S.$
    December 2021
fair value ThU.S.$
 

Santander – Chile

     104,708,824        94,117,647        06-15-2021        12-15-2029        (14,396     (8,476

Banco de Chile – Chile

     52,354,412        47,058,824        06-15-2021        12-15-2029        (7,264     (4,484

MUFG – N.A.

     104,708,824        94,117,647        06-15-2021        12-15-2029        (14,490     (9,000

JP Morgan – N.A.

     209,417,647        188,235,294        06-15-2021        12-15-2029        (29,297     (18,154

HSBC – N.A.

     52,354,412        47,058,824        06-15-2021        12-15-2029        (7,249     (4,504
              

 

 

   

 

 

 
                 (72,696     (44,618
              

 

 

   

 

 

 

Zero Cost Collars

Zero cost collar to cover the exposure to the Oil Brent.

 

Commodity

   Institution      Volume      Unit      Starting date      Ending date      June 2022
fair value ThU.S.$
     December 2021
fair value ThU.S.$
 

Brent

     BNP Paribas – E.U.        220,000        bbl        08-01-2021        07-31-2021        2,986        3,737  

Brent

    
Goldman Sachs –
 N.A.
 
 
     220,000        bbl        08-01-2021        07-31-2021        3,044        3,798  
                 

 

 

    

 

 

 
                    6,030        7,535  
                 

 

 

    

 

 

 

 

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June 30, 2022

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

 

 

23.4.2. Uruguay

Forward

As of June 30, 2022 and as of December 31, 2021, Arauco through its subsidiaries as a joint operation (50%) in Uruguay maintains the following forward contracts in force and effect for the purposes of ensuring an exchange rate for sale of dollars:

 

Exchange rate

   Institution      June 2022
notional
ThU.S.$
     June 2022
fair value
ThU.S.$
    December 2021
notional
ThU.S.$
     December 2021
fair value
ThU.S.$
 

UYUUSD

     Santander-Uruguay            —          —         1,765        19  

UYUUSD

     HSBC-Uruguay        11,115        991       6,510        106  

UYUUSD

     Itaú-Uruguay        14,042        1,795       9,892        (91

UYUUSD

     Itaú-Uruguay        —          —         —          258  

EURUSD

     Santander-Uruguay        3,802        (21     —          —    
        

 

 

      

 

 

 
           2,765          292  
        

 

 

      

 

 

 

Arauco Uruguay’s profits and through its subsidiaries as a joint operation (50%), also face exposure to the price variation of certain fuels, as occurs with Fuel Oil N°6, which is used during the pulp manufacturing process. In order to minimize this risk, the volatility of future flows associated to the purchase of Fuel Oil No. 6 through forwards of this commodity. The agreements that are in force and effect as of June 30, 2022 and as of December 31, 2021, are detailed below:

 

Commodity

  

Institution

   June 2022
notional
ThU.S.$
     June 2022
fair value
ThU.S.$
     December 2021
notional
ThU.S.$
     December 2021
fair value
ThU.S.$
 

Fuel Oil N°6

   JP Morgan - N.A.      7,051        3,141        8,491        1,963  

Fuel Oil N°6

   DNB Bank ASA      4,360        1,830        3,149        978  

Fuel Oil N°6

   JP Morgan - N.A.      —          —          —          (77

Fuel Oil N°6

   DNB Bank ASA      —          (20      —          (57
        

 

 

       

 

 

 
           4,951           2,807  
        

 

 

       

 

 

 

Interest Rate Swap

In addition, Arauco through its subsidiaries as a joint operation (50%) in Uruguay maintains an Interest Rate Swap in force and effect, a derivative instrument which purpose is to set the interest rate of a variable rate debt in the same currency (USD). The valuation off this instrument as of June 30, 2022 and as of December 31, 2021 is shown below:

 

Exchange rate

   Institution      Notional
ThU.S.$
     June 2022
fair value
ThU.S.$
     December 2021
fair value
ThU.S.$
 

USD

     DNB Bank ASA        12,659        100        (176
        

 

 

    

 

 

 
           100        (176
        

 

 

    

 

 

 

Note: The values and amounts indicated in the section 23.4.2 correspond to 50% of the total Uruguayan companies amounts, showing the participation that Arauco has in this companies.

 

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June 30, 2022

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

 

 

23.4.3. United States

Interest Rate Swap

Arauco through its subsidiary in United States maintains an Interest Rate Swap with the purpose of setting the interest rate of a variable rate debt in the same currency (USD). The instrument was settled on September 2020 and the valuation off this instrument as of June 30, 2022 and as of December 31, 2021 is shown below:

 

Institution

   Amount
ThU.S.$
     Starting date      Ending date      June 2022
fair value
ThU.S.$
     December 2021
fair value
ThU.S.$
 

JP Morgan - N.A.

     100,000,000        04-28-2020        10-28-2023        3,000        845  

Goldman Sachs N.A.

     100,000,000        04-28-2020        10-28-2023        3,075        1,043  

JP Morgan - N.A.

     100,000,000        04-28-2020        10-28-2023        3,006        852  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
              9,081        2,740  
           

 

 

    

 

 

 

23.4.4. Argentina

As of June 30, 2022 and as of December 31, 2021, Arauco through its subsidiary in Argentina maintains the following forward contracts in force and effect for the purposes of ensuring an exchange rate of dollars:

 

Exchange rate

  

Institution

   Amount
ThU.S.$
     Starting date      Ending date      June 2022
fair value
ThU.S.$
     December 2021
fair value
ThU.S.$
 

ARSUSD

   Santander - Argentina      3,800        12-10-2021        01-31-2022        —          (65

ARSUSD

   BBVA - Argentina      3,800        12-10-2021        02-25-2022        —          (68

ARSUSD

   Santander - Argentina      2,000        05-31-2022        07-29-2022        (5      —    

ARSUSD

   BBVA - Argentina      2,000        05-31-2022        07-29-2022        (5      —    
              

 

 

    

 

 

 
                 (10      (133
              

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

23.5 Cash equivalent, Loans and Receivables

The financial assets measured at amortized cost using the effective interest method and tested for impairment are: cash and cash equivalent, time deposits, repurchase agreements, trade and other current/non-current receivables (with third parties and from related parties)

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. In the interim consolidated statements of financial position, they are included in line items “Cash and cash equivalents” (certain components of cash and cash equivalents), “Trade and other current/non-current receivables” and “Accounts receivable from related parties”.

As of June 30, 2022 and as of December 31, 2021, there are provisions for impairment for ThU.S.$ 8,805 and ThU.S.$ 8,792, respectively.

 

     June 2022
ThU.S.$
     December 2021
ThU.S.$
 

Financial assets at amortized cost

     1,566,047        1,783,643  

Cash and cash equivalents (Mutual Funds not included)

     648,468        781,032  

Cash

     472,902        529,076  

Time deposits

     175,566        251,956  

Accounts receivables (net)

     904,225        999,820  

Trade receivables

     775,451        829,097  

Lease receivable

     10,922        27  

Sundry debtors

     15,923        32,542  

Other receivables

     48,976        46,218  

Prepayments

     46,076        86,377  

Accounts receivable from related parties

     6,877        5,559  

Other financial assets

     13,354        2,791  
  

 

 

    

 

 

 

23.5.1. Cash and Cash Equivalents

Includes cash on hand, bank checking account balances and time deposits and other short-term highly liquid investments with an original maturity of three months or less. They are short-term, highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value.

The composition of cash and cash equivalents (including the balance of mutual funds displayed in this note as valuation, instruments at fair value with profit or loss) at June 30, 2022 and as of December 31, 2021, classified by currency is as follows:

 

     06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Cash and cash equivalents

     901,707        1,011,100  

U.S. dollars

     659,686        703,232  

Euro

     8,228        5,755  

Mexican pesos

     28,242        20,467  

Other currencies

     146,694        277,441  

Chilean pesos

     58,857        4,205  
  

 

 

    

 

 

 

23.5.2 Time Deposits and Repurchase Agreements: The investment objective of time deposits and repurchase agreements is to maximize in the short-term the amounts of cash surpluses. These instruments are authorized by 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.

 

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June 30, 2022

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

 

 

23.5.3 Trade and Other Receivables: These represent enforceable rights for Arauco resulting from the normal course of the business.

23.5.4 Sundry debtors: These correspond to receivables from sales, services or loans that are not considered within the normal course of the business.

The allowance for doubtful accounts is presented as a deduction of trade and other receivables. The provision for doubtful accounts is established based on an analysis of the age of the portfolio and considering the insurance coverage on accounts receivable. Other conditions are assessed for example when there is objective evidence that Arauco will not receive payments under the original sale terms and 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.

23.5.5 Accounts receivable from related parties: Represent enforceable rights for Arauco resulting from the normal course of business, calling normal to the line of business, activity or purpose of exploitation and financing, and which Arauco owns a non-controlling ownership of the counterparty.

The following table sets forth trade and other current/non-current receivables classified by currencies as of June 30, 2022 and as of December 31, 2021:

 

     06-30-2022
ThU.S.$
     12-31-2021
ThU.S.$
 

Trades and other current receivables

     874,609        979,923  

U.S. dollars

     682,254        789,236  

Euros

     16,901        21,884  

Mexican pesos

     34,840        31,288  

Other currencies

     67,177        66,886  

Chilean pesos

     71,213        70,127  

U.F.

     2,224        502  

Accounts receivable from related parties, current

     6,877        5,559  

Chilean pesos

     6,877        5,559  

Trade and other non-current receivables

     22,739        14,338  

U.S. dollars

     11,230        11,806  

Chilean pesos

     3,105        2,492  

U.F.

     8,404        40  
  

 

 

    

 

 

 

23.6 Financial Liabilities

Arauco’s financial liabilities to the date of these interim consolidated financial statements are as follows:

 

Financial liabilities

   June 2022
ThU.S.$
     December 2021
ThU.S.$
 

Total financial liabilities

     6,428,216        6,613,914  

Financial liabilities at fair value through profit or loss

     10        133  

Hedging liabilities

     220,263        296,183  

Financial liabilities at amortized cost

     6,207,943        6,317,598  
  

 

 

    

 

 

 

 

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June 30, 2022

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

 

 

The following table sets forth the current portion of the non-current bank borrowings and debt issued as of June 30, 2022 and as of December 31, 2021.

 

     June 2022
ThU.S.$
     December 2021
ThU.S.$
 

Bank borrowings - current portion

     240,377        248,835  

Bonds issued - current portion

     88,748        90,371  

Total

     329,125        339,206  
  

 

 

    

 

 

 

23.7 Financial Liabilities Measured at Amortized Cost

Financial liabilities correspond to non-derivative financial instruments with contractual cash-flow payments that can be either fixed or variable.

Also, this category includes those non-derivative financial liabilities for services or goods delivered to Arauco at the end of each reporting period that have not yet been paid. These amounts are not insured and are generally paid within thirty days after being recognized.

At the end of these financial statements, Arauco includes in this category bank borrowings, bonds issued denominated in U.S. dollars and in U.F., lease liabilities, and trade and other payables.

 

            06-30-2022      12-31-2021      06-30-2022      12-31-2021  
            ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$  
     Currency      Amortized cost      Fair value  

Total financial liabilities

        6,207,943        6,317,598        5,859,894        6,114,417  

Bonds issued

     U.S. dollar        3,394,691        3,392,010        3,021,311        3,161,062  

Bonds issued

     U.F.        981,476        1,034,023        998,687        1,024,721  

Bank borrowings

     U.S. dollar        411,723        454,652        404,894        463,308  

Bank borrowings

     Euro        446,513        509,540        491,015        565,717  

Bank borrowings

     Other currencies        29,553        27,764        —          —    

Lease liabilities

     U.F.        15,111        19,875        15,111        19,875  

Lease liabilities

     Chilean pesos        22,505        38,278        22,505        38,278  

Lease liabilities

     Mexican pesos        3,521        3,768        3,521        3,768  

Lease liabilities

     U.S. dollar        132,749        79,045        132,749        79,045  

Lease liabilities

     Euro        237        266        237        266  

Lease liabilities

     Other currencies        50,224        22,072        50,224        22,072  

Trade and other payables

     U.S. dollar        241,362        284,690        241,362        284,690  

Trade and other payables

     Euro        12,985        10,834        12,985        10,834  

Trade and other payables

     Mexican pesos        24,203        27,889        24,203        27,889  

Trade and other payables

     Other currencies        120,000        106,904        120,000        106,904  

Trade and other payables

     Chilean pesos        284,326        268,624        284,326        268,624  

Trade and other payables

     U.F.        33,395        34,787        33,395        34,787  

Accounts payable to related parties

     U.S. dollar        67        230        67        230  

Accounts payable to related parties

     Chilean pesos        3,302        2,347        3,302        2,347  

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

The financial liabilities at amortized cost presented in the interim consolidated statements of financial positions as of June 30, 2022 and as of December 31, 2021 are as follows:

 

     June 2022
ThU.S.$
 
     Current      Non-current      Total  

Other financial liabilities

     340,281        4,923,675        5,263,956  

Lease liabilities

     43,371        180,976        224,347  

Trade and other payables

     713,825        2,446        716,271  

Accounts payable to related parties

     3,369        —          3,369  
  

 

 

    

 

 

    

 

 

 

Total financial liabilities at amortized cost

     1,100,846        5,107,097        6,207,943  
  

 

 

    

 

 

    

 

 

 
     December 2021
ThU.S.$
 
     Current      Non-current      Total  

Other financial liabilities

     339,206        5,078,783        5,417,989  

Lease liabilities

     49,603        133,701        163,304  

Trade and other payables

     731,456        2,272        733,728  

Accounts payable to related parties

     2,577        —          2,577  
  

 

 

    

 

 

    

 

 

 

Total financial liabilities at amortized cost

     1,122,842        5,194,756        6,317,598  
  

 

 

    

 

 

    

 

 

 

23.8 Cash Flow Hedges Reserve Reconciliation

The following table sets forth the reconciliation balances of cash flow hedges presented in the interim consolidated statements of comprehensive income:

 

     January – June      April – June  
     2022      2021      2022      2021  
   ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$  

Opening balance

     (136,859      (37,007      (52,935      (11,416

Gains (losses) on cash flow hedges, before tax

     156,807        (49,740      49,486        (82,658

Reclassification adjustments on cash flow hedges, before tax

     (5,080      (10,137      (5,080      (9,862

Income tax relating to cash flow hedges of other comprehensive income

     (41,248      17,132        (17,851      24,184  

Closing balance

     (26,380      (79,752      (26,380      (79,752
  

 

 

    

 

 

    

 

 

    

 

 

 

23.9 Capital Disclosures

23.9.1 Information on Objectives, Policies and Processes applied by the Company regarding Capital Management

Arauco’s policies on capital management have the objective of:

 

a)

Ensuring business continuity and normal operations in the long-term;

 

b)

Ensuring funding for new investments to achieve sustainable growth over time;

 

c)

Keeping adequate capital structure considering all economic cycles that impact the business and the nature of the industry; and

 

d)

Maximizing the Company’s value and providing an adequate return to shareholders.

23.9.2 Qualitative Information on Objectives, Policies and Processes applied by the Company regarding Capital Management

Arauco determines and manages its capital structure based on its carrying amount of equity plus its financial debt (bank borrowings and bonds issued).

 

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June 30, 2022

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

 

 

23.9.3 Quantitative Information on Capital Management

The following table sets forth the financial covenants that the Company has to comply with as part of the terms of certain of its obligations:

 

Instrument

   June 2022
ThU.S.$
     December 2021
ThU.S.$
     Interest
coverage
>= 2,0x
   Debt level
(1) <=
1,2x

Domestic bonds (Chile)

     981,476        1,034,023      N/R   

Syndicate borrowing

     —          —          

Syndicate borrowing - Grayling

     256,062        270,214        

Syndicate ECA - MAPA

     446,513        509,540        

N/R: Not required for the financial obligation

(1) Debt to equity ratio (financial debt divided by equity plus non-controlling interests)

As of June 30, 2022 and as of December 31, 2021, Arauco has complied with all of its financial covenants.

The following table sets forth the credit ratings of our debt instruments as of June 30, 2022, are as follows:

 

Instrument

   Standard &
Poor’s
     Fitch
Ratings
     Moody’s      Feller
Rate
 

Local bonds

     —          AA        —          AA  

Foreign bonds

     BBB-        BBB        Baa3        —    

Capitalization requirements are established based on the Company’s financial needs and on maintaining an adequate liquidity level and complying with financial covenants established in current debt arrangements. The Company manages its capital structure and makes adjustments based on the prevailing economic conditions in order to mitigate the risks associated with adverse market conditions and based on opportunities that may arise to improve the Company’s level of liquidity.

The capitalization of Arauco as of June 30, 2022 and as of December 31, 2021 is as follows:

 

     June 2022      December
2021
 
     ThU.S.$      ThU.S.$  

Equity

     8,269,383        7,818,504  

Bank borrowings

     887,789        991,956  

Lease liabilities

     224,347        163,304  

Bonds issued

     4,376,167        4,426,033  
  

 

 

    

 

 

 

Capitalization

     13,757,686        13,399,797  
  

 

 

    

 

 

 

23.10 Risk Management

Arauco’s financial instruments are exposed to various financial risks: credit risk, liquidity risk and market risk (including exchange rate risks, interest rate risks and price risks). Arauco’s overall risk management program focuses on uncertainty in financial markets and aims to minimize potential adverse effects on Arauco’s financial profitability.

Arauco’s financial risk management is overseen by the Corporate Finance Department. This department identifies, assesses and hedges financial risks in close collaboration with Arauco’s operational units. The company is not actively involved in trading its financial assets for speculative purposes.

 

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June 30, 2022

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

 

 

23.10.1 Type of Risk: Credit Risk

Description

Credit risk refers to financial uncertainty at different periods of time relating to the fulfillment of obligations with counterparties, at the time of exercising the contract rights to receive cash or other financial assets on behalf of Arauco.    

Explanation of Credit Risk Exposure and How This Risk Arises

Arauco’s exposure to credit risk is directly related to each of its customer’s individual abilities to fulfill their contractual commitments, reflected in trade receivables.

Accounts exposed to credit risk are trade receivables, financial lease debtors and other debtors.

Arauco does not have a securitized portfolio.

 

     June 2022      December 2021  
     ThU.S.$      ThU.S.$  

Current receivables

     

Trade receivables

     775,415        826,750  

Lease receivable

     1,901        27  

Sundry debtors

     5,266        21,646  

Other receivables

     47,107        46,394  

Prepayments

     44,920        85,106  

Net subtotal

     874,609        979,923  

Trade receivables

     781,303        832,612  

Lease receivable

     1,901        27  

Sundry debtors

     5,353        21,732  

Other receivables

     47,908        47,198  

Prepayments

     44,920        85,106  

Gross subtotal

     881,385        986,675  

Provision for doubtful trade receivables

     5,888        5,862  

Provision for doubtful lease receivable

     —          —    

Provision for doubtful sundry debtors

     87        86  

Provision for doubtful other receivables

     801        804  

Subtotal bad bebt

     6,776        6,752  

Non-current receivables

     

Trade receivables

     36        34  

Lease receivable

     9,021        —    

Sundry debtors

     10,657        10,896  

Other receivables

     1,869        2,137  

Prepayments

     1,156        1,271  

Net subtotal

     22,739        14,338  

Trade receivables

     2,065        2,074  

Lease receivable

     9,021        —    

Sundry debtors

     10,657        10,896  

Other receivables

     1,869        2,137  

Prepayments

     1,156        1,271  

Gross subtotal

     24,768        16,378  

Provision for doubtful trade receivables

     2,029        2,040  

Provision for doubtful lease receivable

     —          —    

Provision for doubtful sundry debtors

     —          —    

Provision for doubtful other receivables

     —          —    

Subtotal bad debt

     2,029        2,040  

 

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June 30, 2022

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

 

 

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

The Credit and Collections Sub-Division, dependent from the Treasury Department, is the area entrusted with minimizing the credit risk of the accounts receivable, supervising the delinquency of the accounts. The regulations and procedures applicable for the control and administration of the Arauco Group can be found in the Corporate Credit Policy.

As of June 30, 2022, Arauco’s balance for commercial debtors was ThU.S.$ 783,368 of which, according to the agreed sales conditions, 66.56% corresponded to sales on credit (open account), 33.00% to sales with letters of credit and 0.44% to other types of sales. The client with the largest Open Account debt represented 2.01% of the total accounts receivable as of that date.

Below we provide detail regarding accounts receivable, classified in tranches:

 

June 30, 2022

 

Age of trade receivables

 

Days

   Non-past due     1 to 30     31 to 60     61 to 90     91 to 120     121 to 150     151 to 180     181 to 210     211 to 250     More
than
250
    Total  

N° debtor

     1,718       694       79       56       36       21       22       14       27       90       2,757  

ThU.S.$

     727,277       46,358       1,793       607       261       379       246       293       294       5,860       783,368  

%

     92.84     5.92     0.23     0.08     0.03     0.05     0.03     0.04     0.04     0.74     100
December 31, 2021

 

                   

Age of trade receivables

 

Days

   Non-past due     1 to 30     31 to 60     61 to 90     91 to 120     121 to 150     151 to 180     181 to 210     211 to 250     More
than
250
    Total  

N° debtor

     1,710       676       100       53       30       49       2       2       1       67       2,690  

ThU.S.$

     791,729       36,011       965       361       87       13       1       2       1       5,516       834,686  

%

     94.85     4.31     0.12     0.04     0.01     0.00     0.00     0.00     0.00     0.67     100

Arauco applies the simplified approach regarding the expected losses from commercial debtors, which allows for the use of an estimate of expected credit losses over the instrument’s lifespan for all commercial accounts receivable. In order to establish this estimate, the commercial debtors have been grouped in relation to the corresponding risks for sales conditions as well as for tranches, including clients that are up-to-date or in default.

June 30, 2022:

 

Days

   Non-past due     1 to 30     31 to 60     61 to 90     91 to 120     121 to 150     151 to 180     181 to 210     211 to 250     More
than
250
    Total  

Letters of credit

     254,679       3,820       —         —         —         —         —         —         —         —         258,499  

Loss allowance provision

     —         —         —         —         —         —         —         —         —         —         —    

Expected loss rate

     0.00     0.00     0.00     0.00     0.00     0.00     0.00     0.00     0.00     0.00  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Credit line

     474,059       39,736       1,747       577       261       378       244       293       294       3,842       521,431  

Loss allowance provision

     2,313       —         52       60       26       39       29       293       295       2,714       5,821  

Expected loss rate

     0.49     0.00     2.98     10.40     9.96     10.32     11.89     100.34     100.00     70.63  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Others

     665       676       46       30       —         1       2       —         —         2,018       3,438  

Loss allowance provision

     —         —         7       71       —         —         1       —         —         2,017       2,096  

Expected loss rate

     0.00     0.00     15.22     236.67     0.00     0.00     50.00     0.00     0.00     99.95  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total trade receivables (ThU.S.$)

     729,403       44,232       1,793       607       261       379       246       293       294       5,860       783,368  

Total allowance for doubtful accounts (ThU.S.$)

     2,313       —         59       131       26       39       30       293       295       4,731       7,917  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2021:

 

Days

   Non-past due     1 to 30     31 to 60     61 to 90     91 to 120     121 to 150     151 to 180     181 to 210     211 to 250     More
than
250
    Total  

Letters of credit

     372,687       3,076       41       —         —         —         —         —         —         —         375,804  

Loss allowance provision

     —         —         —         —         —         —         —         —         —         —         —    

Expected loss rate

     0.00     0.00     0.00     0.00     0.00     0.00     0.00     0.00     0.00     0.00  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Credit line

     408,723       29,705       686       50       87       13       1       —         —         5,406       444,671  

Loss allowance provision

     2,313       —         21       5       9       1       —         —         —         5,406       7,755  

Expected loss rate

     0.57     0.00     3.06     10.00     10.34     7.69     0.00     0.00     0.00     100.00  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Others

     10,319       3,230       238       311       —         —         —         2       1       110       14,211  

Loss allowance provision

     —         —         2       32       —         —         —         2       1       110       147  

Expected loss rate

     0.00     0.00     0.84     10.29     0.00     0.00     0.00     100.00     100.00     100.00  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total trade receivables (ThU.S.$)

     791,729       36,011       965       361       87       13       1       2       1       5,516       834,686  

Total allowance for doubtful accounts (ThU.S.$)

     2,313       —         23       37       9       1       —         2       1       5,516       7,902  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Arauco does not conduct rescheduling or renegotiations with its clients that imply an amendment to the maturity of the invoices and, should it be necessary, any debt renegotiation with a client shall be analyzed on a case-by-case basis and subjected to the approval of the Corporate Finance Division.

Regarding the loss allowance for trade receivables and others, below we provide detail for the movements as of June 30, 2022 and as of December 31, 2021:

 

     June 2022      December 2021  
     ThU.S.$      ThU.S.$  

Opening loss allowance as at January 1

     8,792        8,000  

Increase in loan loss allowance recognised in profit or loss during the year

     2,289        2,229  

Receivables written off during the year as uncollectible

     —          (216

Unused amount reversed

     (2,276      (1,221

Closing balance

     8,805        8,792  
  

 

 

    

 

 

 

Currently there is a policy for provisions for doubtful accounts receivable under IFRS for all the Arauco group companies.

Explanation regarding the Sales Risk with Letters of Credit

The sales with letters of credit mainly occur in markets in Asia and the Middle East. Periodically, a credit assessment is conducted regarding the banks that issue the letters of credit with the purpose of obtaining their score over the basis of risk-qualification ratings, country-specific risk and financial statements. The decision of approving the issuing bank or asking for confirmation of the letter of credit is made in consideration to this assessment.

Explanation of the Sales Risk with Credit Line

Sales on credit are subject to the credit limit for each customer. The approval or rejection of a credit limit for all term sales is conducted by the Corporate Credit Sub-Division, as well as by the Credit and Collections area for North America, Brazil and Argentina, which report to the Corporate Finance Division. The regulations and procedures applicable for the correct control and risk management over the sales on credit are ruled by the Credit Policy.

A procedure that must be applied by all the companies of the Arauco group has been established for the approval and/or modification of client credit lines. Credit line requests are entered to the SAP that analyzes all available information. Afterwards, the same are either approved or rejected in each one of the internal committees of each company belonging to the Arauco group, depending on the maximum amount authorized by the Credit Policy. Lines of credit are renewed during this internal process on a yearly basis.

All sales are automatically controlled by a credit verification system, which has been configured to block any orders from clients who are delinquent in a given percentage of a debt and/or from clients whose line of credit, as of the time of the product’s shipping, has been exceeded or is overdue.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

In order to minimize the credit risk for term or Open Account sales, it is Arauco’s policy to take out insurance to cover the export sales of companies Celulosa Arauco y Constitución S.A., Maderas Arauco S.A., Forestal Arauco S.A., Arauco Argentina S.A., and Arauco do Brasil S.A., as well as the domestic sales of Arauco Europe Coöperatief U.A., Arauco Argentina S.A., Araucomex S.A. de C.V., Arauco Industria de México, S.A. de C.V., Arauco Colombia S.A., Arauco Peru S.A., Arauco North America, Inc., Arauco Canada Ltd., Celulosa Arauco y Constitución S.A., Maderas Arauco S.A., Arauco Florestal Arapoti S.A., Arauco Forest Brasil S.A., Arauco do Brasil S.A. and Arauco Industria de Paineis S.A. Arauco works with credit insurance company Euler Hermes World Agency (Aa3 rating, as per risk rating companies Moody’s). The company grant a 90% coverage over the amount of each invoice, without deductibles, for registered clients and of 90% for non-registered clients (*).

(*) Non-registered clients are those whose lines are under ThU.S.$ 100 (equivalent currency of their invoicing) of the credit sales for all companies in the Arauco group that have a valid insurance policy. The top lines are from nominated clients.

As another way of minimizing risk and supporting a line of credit approved by the Credit Committee, Arauco holds guarantees such as mortgages, pledges, Standby letters of credit, bank performance bonds, checks, promissory notes, borrowings or any other that could be required under the laws of each country. The total amount held in guarantees amounts to ThU.S.$ 103,741, effective as of June 30, 2022, as summarized in the following chart. The procedure for guarantees is regulated by Arauco’s Policy on Guarantees, whose purpose is to control their accounting, due date and custody.

 

Guarantees Arauco group (ThU.S.$)

 

Guarantees debtors (received from clients)

     

Certificate of deposits

     6,665        6.4

Standby

     7,028        6.8

Promissory notes

     76,286        73.5

Finance

     10,774        10.4

Mortgage

     1,480        1.4

Pledge

     108        0.1

Promissory notes

     1,400        1.4
  

 

 

    

 

 

 

Total guarantees

     103,741        100
  

 

 

    

 

 

 

The maximum exposure to credit risk is limited to the value at amortized cost of the Debtors’ account for sales registered as of the date of this report, minus the percentage of sales insured by the aforementioned credit insurance companies and the guarantees granted in favor of Arauco.

In summary, the open account debt covered by the various insurance policies and guarantees amounts to 97.23% and, therefore, Arauco’s portfolio exposure amounts to 2.77%.

 

Secured open accounts receivable

   ThU.S.$      %  

Total open accounts receivable

     588,544        100.0

Secured receivables (*)

     572,216        97.23

Unsecured receivables

     16,328        2.77
  

 

 

    

 

 

 

(*) Insured debt is deemed to be the portion of accounts receivable that is covered by a credit company or by guarantees such as standby letters of credit, mortgages, performance bonds, among others

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Investment Policy:

Arauco has an Investment Policy which identifies and limits the financial instruments and the entities into which the Arauco companies, in particular Celulosa Arauco y Constitucion S.A., are authorized to invest. The Company’s Treasury Department is centralized with operations in Chile. The Head Office is responsible for carrying out investments, cash flow surplus investments, and short and long-term debt subscriptions. Exceptions to this rule apply to short and long-term debt, and will be for specific investments made through other companies where authorization is required from the Chief Financial Officer.

For financial instruments, the only permitted investments are fixed income investments with adequate liquidity. Each instrument has defined classifications and limits, depending on duration and type of issuer.

Regarding intermediaries (such as banks, securities brokers and dealers of mutual funds that are bank affiliates), a scoring methodology is used to determine the relative degree of risk of each intermediary based on their financial position and assign score points that result in a credit risk rating to each intermediary. Arauco uses this scoring system to determine its investment limits for each intermediary.

The required information to evaluate the various criteria are obtained from published financial statements from the banks under evaluation and from the credit risk ratings of short and long-term debt securities obtained from rating agencies authorized by the Superintendence of Banks and Financial Institutions (Fitch Ratings Chile, Humphreys and Feller Rate).

Any necessary exceptions regarding investment limits in each particular instrument or entity must have the authorization from Arauco’s Chief Financial Officer.

23.10.2 Type of Risk: Liquidity Risk

Description

This risk corresponds to Arauco’s ability to fulfill its financial obligations upon maturity.

Explanation of Liquidity Risk Exposure and How This Risk Arises

Arauco’s exposure to liquidity risk is mainly from its obligations to bondholders, banks and financial institutions, creditors and other payables. Liquidity risk may arise if Arauco is unable to meet the net cash flow requirements, which sustain its operations under both normal and exceptional circumstances.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Explanation of Objectives, Policies and Processes for Risk Management, and Measurement Methods

The Corporate Financial Management Division monitors on an ongoing basis the Company’s cash flow forecasts based on short and long-term forecasts and available financing alternatives. In order to manage the risk level of financial assets, Arauco follows its investment policy.    

The following tables detail Arauco’s liquidity analysis for its financial liabilities as of June 30, 2022 and as of December 31, 2021. The tables have been drawn up based on the contractual undiscounted cash outflows and their remaining contractual maturities.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

June 30, 2022

  Maturity     Total     Effective
rate
    Nominal rate

Tax ID

 

Name

 

Currency

 

Bank
borrowings

 

Up to 3
months
ThU.S.$

   

3 to 12
months
ThU.S.$

   

1 to 2
Years
ThU.S.$

   

2 to 3
years
ThU.S.$

   

3 to 4
years
ThU.S.$

   

4 to 5
years
ThU.S.$

   

More
than 5
years
ThU.S.$

   

Current
ThU.S.$

   

Non
current
ThU.S.$

 

93.458.000-1

  Celulosa Arauco y Constitución S.A.   Euros   BNP Paribas /
ECA
    —         73,349       65,694       64,974       64,321       63,675       156,331       73,349       414,994       1.10   1.06%

—  

  Zona Franca Punta Pereira S.A.   U.S. dollars   Banco
Interamericano
de Desarrollo
A
    1,093       1,077       1,060       —         —         —         —         2,170       1,060       3.18   Libor
6M
+2.05%

—  

  Zona Franca Punta Pereira S.A.   U.S. dollars   Banco BBVA     —         18,376       —         —         —         —         —         18,376       —         1.40   Fixed
1.40%

—  

  Celulosa y Energia Punta Pereira S.A.   U.S. dollars   Banco
Interamericano
de Desarrollo
A
    4,422       4,355       4,287       —         —         —         —         8,777       4,287       3.18   Libor
6M
+2.05%

—  

  Celulosa y Energia Punta Pereira S.A.   U.S. dollars   Finnish Export
Credit
    24,446       24,065       —         —         —         —         —         48,511       —         3.20   3.20%

—  

  Celulosa y Energia Punta Pereira S.A.   U.S. dollars   DnB Nor     40       26       13       —         —         —         —         66       13       1.47   1.47%

—  

  Eufores S.A.   U.S. dollars   Banco
República
Oriental del
Uruguay
    —         26,535       —         —         —         —         —         26,535       —         1.40   Fixed
1.4%

—  

  Stora Enso Uruguay S.A.   U.S. dollars   Banco
República
Oriental del
Uruguay
    —         554       —         —         —         —         —         554       —         1.40   Fixed
1.4%

—  

  Eufores S.A.   U.S. dollars   Banco
República
Oriental del
Uruguay
    —         3,670       —         —         —         —         —         3,670       —         1.40   Fixed
1.40%

—  

  Zona Franca Punta Pereira S.A.   U.S. dollars   Banco
República
Oriental del
Uruguay
    —         7,552       —         —         —         —         —         7,552       —         1.40   Fixed
1.4%

—  

  Eufores S.A.   U.S. dollars   ITAU     —         5,069       —         —         —         —         —         5,069       —         2.78   Fixed
2.780%

—  

  Eufores S.A.   U.S. dollars   Santander     —         21,131       —         —         —         —         —         21,131       —         2.70   Fixed
2.70%

—  

  Eufores S.A.   U.S. dollars   Scotiabank     —         10,113       —         —         —         —         —         10,113       —         2.30   Fixed
2.30%

—  

  Arauco Florestal Arapoti S.A.   Brazilian
real
  Banco
Votorantim
    241       —         —         —         —         —         —         241       —         5.00   5.00%

—  

  Arauco Forest Brasil S.A.   Brazilian
real
  Banco
Votorantim
    214       —         —         —         —         —         —         214       —         5.00   5.00%

—  

  Arauco Forest Brasil S.A.   Brazilian
real
  Banco Bndes
Subcrédito A
    33       —         —         —         —         —         —         33       —         8.91   TJLP
+2.91%

—  

  Arauco Forest Brasil S.A.   Brazilian
real
  Banco Bndes
Subcrédito B
    20       —         —         —         —         —         —         20       —         9.91   TJLP
+3.91%

—  

  Arauco Forest Brasil S.A.   U.S. dollars   Banco Bndes
Subcrédito C
    37       12       —         —         —         —         —         49       —         5.88   Cesta
+2.91%

—  

  Arauco Forest Brasil S.A.   Brazilian
real
  Banco Bndes
Subcrédito D
    22       —         —         —         —         —         —         22       —         11.11   TJLP
+5.11%

—  

  Mahal Emprendimientos e participações S.A.   Brazilian
real
  Banco Safra
S.A.
    —         4,054       8,785       12,611       11,245       5,119       —         4,054       37,760       14.70   CDI
+1.55%
  Arauco North America, Inc.   U.S. dollars   Banco Itau
Corpbanca –
NY Branch
    —         41,507       235,139       —         —         —         —         41,507       235,139       4.59   Libor
6M
+1.65%
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
      Total     30,568       241,445       314,977       77,585       75,566       69,794       156,331       272,013       693,253      
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

June 30, 2022

  Maturity     Total     Effective
rate
    Nominal rate

Tax ID

 

Name

 

Currency

 

Bonds

 

Up to 3

months
ThU.S.$

   

3 to 12

months
ThU.S.$

   

1 to 2

years
ThU.S.$

   

2 to 3

years
ThU.S.$

   

3 to 4

years
ThU.S.$

   

4 to 5

years
ThU.S.$

   

More
than 5

years
ThU.S.$

   

Current
ThU.S.$

   

Non

current
ThU.S.$

 

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-F     —         21,055       20,377       19,698       19,020       18,341       42,882       21,055       120,318       4.25   4.25%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-F     —         8,422       8,151       7,879       7,608       7,336       17,153       8,422       48,127       4.25   4.25%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-P     —         22,686       22,047       21,408       20,769       20,130       99,290       22,686       183,644       4.00   4.00%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-R     —         6,333       6,333       6,333       6,333       6,333       228,155       6,333       253,487       3.60   3.60%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-S     —         4,235       4,235       4,235       4,235       179,606       —         4,235       192,311       2.40   2.40%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-W     —         2,225       2,225       2,225       2,225       2,225       109,831       2,225       118,731       2.10   2.10%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-X     —         5,236       5,236       5,236       5,236       5,236       281,637       5,236       302,581       2.70   2.70%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2024     11,250       11,250       22,500       511,250       —         —         —         22,500       533,750       4.50   4.50%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2027     —         19,375       19,375       19,375       19,375       19,375       500,000       19,375       577,500       3.88   3.88%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2047     —         22,000       22,000       22,000       22,000       22,000       851,000       22,000       939,000       5.50   5.50%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2029     —         21,250       21,250       21,250       21,250       21,250       542,500       21,250       627,500       4.25   4.25%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2049     —         27,500       27,500       27,500       27,500       27,500       1,105,000       27,500       1,215,000       5.50   5.50%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2030     10,500       10,500       21,000       21,000       21,000       21,000       563,000       21,000       647,000       4.20   4.20%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2050     12,875       12,875       25,750       25,750       25,750       25,750       1,092,250       25,750       1,195,250       5.15   5.15%
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
      Total     34,625       194,942       227,979       715,139       202,301       376,082       5,432,698       229,567       6,954,199      
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

110


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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

June 30, 2022

   Maturity      Total  

Tax ID

  

Name

  

Currency

  

Underlying
asset class

  

Up to 3

months
ThU.S.$

    

3 to 12

months
ThU.S.$

    

1 to 2

years
ThU.S.$

    

2 to 3

years
ThU.S.$

    

3 to 4

years
ThU.S.$

    

4 to 5

years
ThU.S.$

    

More
than 5

years
ThU.S.$

    

Current
ThU.S.$

    

Non

current
ThU.S.$

 
85.805.200-9    Forestal Arauco
S.A.
   U.F.    Motor
vehicles
     320        936        610        396        344        78        —          1,256        1,428  
85.805.200-9    Forestal Arauco
S.A.
   U.S. dollars    Lands      60        180        240        240        240        240        360        240        1,320  
85.805.200-9    Forestal Arauco
S.A.
   U.F.    Plants and
equipments
     394        185        —          —          —          —          —          579        —    
85.805.200-9    Forestal Arauco
S.A.
   U.F.    Other
properties,
plant and
equipment
     704        702        308        181        644        —          —          1,406        1,133  
85.805.200-9    Forestal Arauco
S.A.
   Chilean
pesos
   Other
properties,
plant and
equipment
     89        267        121        110        380        —          —          356        611  
   Arauco
Argentina S.A.
   U.S. dollars    Buildings
and
constructions
     131        361        460        268        —          —          —          492        728  
   Arauco
Argentina S.A.
   U.S. dollars    IT
equipment
     9        —          —          —          —          —          —          9        —    
   Arauco
Argentina S.A.
   U.S. dollars    Plants and
equipments
     347        848        1,002        167        —          —          —          1,195        1,169  
   Arauco
Argentina S.A.
   U.S. dollars    Motor
vehicles
     524        1,268        1,500        —          —          —          —          1,792        1,500  
   Arauco Industria
de Paineis S.A.
   Brazilian
real
   Other
properties,
plant and
equipment
     1        —          —          —          —          —          —          1        —    
   Arauco Industria
de Paineis S.A.
   Brazilian
real
   Fixed
facilities and
accessories
     9        28        6        —          —          —          —          37        6  
   Arauco Industria
de Paineis S.A.
   Brazilian
real
   IT
equipment
     7        5        —          —          —          —          —          12        —    
   Arauco Forest
Brasil S.A.
   Brazilian
real
   IT
equipment
     3        3        —          —          —          —          —          6        —    
   Arauco Forest
Brasil S.A.
   Brazilian
real
   Lands      2,466        6,037        8,102        8,102        8,102        8,102        1,350        8,503        33,758  
   Arauco Forest
Brasil S.A.
   Brazilian
real
   Motor
vehicles
     20        61        47        —          —          —          —          81        47  
   Arauco Florestal
Arapoti S.A.
   Brazilian
real
   IT
equipment
     7        20        25        2        —          —          —          27        27  
   Arauco do Brasil
S.A.
   Brazilian
real
   Buildings
and
constructions
     52        156        156        —          —          —          —          208        156  
   Arauco do Brasil
S.A.
   Brazilian
real
   IT
equipment
     28        65        49        —          —          —          —          93        49  
   Arauco do Brasil
S.A.
   Brazilian
real
   Motor
vehicles
     105        46        10        —          —          —          —          151        10  
   Mahal
Emprendimientos
e participações
S.A.
   Brazilian
real
   Motor
vehicles
     88        1,227        1,173        962        962        962        9,620        1,315        13,679  
93.458.000-1    Celulosa Arauco
y Constitucion
S.A.
   U.F.    Buildings
and
constructions
     367        1,102        1,469        1,469        1,469        1,469        2,203        1,469        8,079  
93.458.000-1    Celulosa Arauco
y Constitucion
S.A.
   U.F.    Motor
vehicles
     124        310        154        96        53        4        —          434        307  
93.458.000-1    Celulosa Arauco
y Constitucion
S.A.
   Chilean
pesos
   Buildings
and
constructions
     14        28        —          —          —          —          —          42        —    
93.458.000-1    Celulosa Arauco
y Constitucion
S.A.
   U.S. dollars    Plants and
equipments
     996        2,994        4,004        4,018        4,033        4,048        62,554        3,990        78,657  
93.458.000-1    Celulosa Arauco
y Constitucion
S.A.
   Chilean
pesos
   Motor
vehicles
     3,856        8,209        989        —          —          —          —          12,065        989  
   Arauco North
America, Inc.
   U.S. dollars    Buildings
and
constructions
     15        48        1,531        1,698        1,880        912        1,911        63        7,932  
   Arauco North
America, Inc.
   U.S. dollars    Motor
vehicles
     5        14        429        245        48        —          —          19        722  
   Arauco Canada
Limited
   Canadian
dollars
   Motor
vehicles
     1        3        46        16        —          —          —          4        62  
   Celulosa y
Energía Punta
Pereira S.A.
   U.S. dollars    Plants and
equipments
     228        684        912        593        593        593        6,850        912        9,541  
   Eufores S.A.    U.S. dollars    Lands      978        2,650        6,827        6,438        5,956        5,528        39,215        3,628        63,964  
   Eufores S.A.    U.S. dollars    Plants and
equipments
     306        917        1,222        1,222        1,222        1,222        611        1,223        5,499  
   Eufores S.A.    U.S. dollars    Buildings
and
constructions
     70        169        107        —          —          —          —          239        107  
96.510.970-6    Maderas Arauco
S.A.
   Chilean
pesos
   Motor
vehicles
     2,533        4,688        1,883        —          —          —          —          7,221        1,883  
96.510.970-6    Maderas Arauco
S.A.
   U.F.    Motor
vehicles
     72        141        33        11        5        —          —          213        49  
   Arauco Europe
Cooperatief U.A.
   Euros    Motor
vehicles
     7        20        19        16        5        —          —          27        40  
   Arauco Europe
Cooperatief U.A.
   Euros    Buildings
and
constructions
     17        53        71        53        —          —          —          70        124  
   Araucomex S.A.
de C.V.
   Mexican
pesos
   Buildings
and
constructions
     376        1,052        1,231        662        —          —          —          1,428        1,893  
   Araucomex S.A.
de C.V.
   U.S. dollars    Buildings
and
constructions
     30        91        42        —          —          —          —            121        42  
   Arauco Industria
de México, S.A.
de C.V.
   Mexican
pesos
   Motor
vehicles
     —          27        51        55        7        —          —          27        113  
   Arauco Industria
de México, S.A.
de C.V.
   U.S. dollars    Plants and
equipments
     27        244        —          —          —          —          —          271        —    
   Arauco Industria
de México, S.A.
de C.V.
   Mexican
pesos
   Lands      —          2        4        5        —          —          —          2        9  
   Araucomex
Servicios S.A. de
C.V.
   Mexican
pesos
   Motor
vehicles
     —          11        22        24        16        2        —          11        64  
   Araucomex
Servicios S.A. de
C.V.
   Mexican
pesos
   Buildings
and
constructions
     —          55        81        88        28        —          —          55        197  
96.637.330-K    Servicios
Logisticos
Arauco S.A.
   U.F.    Motor
vehicles
     14        28        —          —          —          —          —          42        —    
79.990.550-7    Investigaciones
Forestales
Bioforest S.A.
   U.F.    Motor
vehicles
     8        21        10        —          —          —          —          29        10  
           

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
         Total      15,408        35,956        34,946        27,137        25,987        23,160        124,674        51,364        235,904  
           

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As part of the policy of Arauco, it considers compliance with all accounts payable, whether with related (see Note 13) or third parties, within a period not exceeding 30 days.

 

111


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

December 31, 2021

  Maturity     Total     Effective
rate
    Nominal rate

Tax ID

 

Name

 

Currency

 

Bank
borrowings

 

Up to 3
months
ThU.S.$

   

3 to 12
months
ThU.S.$

   

1 to 2
Years
ThU.S.$

   

2 to 3
years
ThU.S.$

   

3 to 4
years
ThU.S.$

   

4 to 5
years
ThU.S.$

   

More
than 5
years
ThU.S.$

   

Current
ThU.S.$

   

Non
current
ThU.S.$

 

93.458.000-1

  Celulosa Arauco y Constitución S.A.   Euros   BNP Paribas /
ECA
    —         74,577       73,840       73,129       72,358       71,631       210,478       74,577       501,433       1.10   1.06%

—  

  Zona Franca Punta Pereira S.A.   U.S. dollars   Banco
Interamericano
de Desarrollo
A
    1,089       1,078       2,121       —         —         —         —         2,167       2,121       2.20   Libor
6M
+2.05%

—  

  Zona Franca Punta Pereira S.A.   U.S. dollars   Banco BBVA     —         18,340       —         —         —         —         —         18,340       —         1.00   Fixed
1.00%

—  

  Celulosa y Energia Punta Pereira S.A.   U.S. dollars   Banco
Interamericano
de Desarrollo
A
    4,406       4,359       8,579       —         —         —         —         8,765       8,579       2.20   Libor
6M
+2.05%

—  

  Celulosa y Energia Punta Pereira S.A.   U.S. dollars   Finnish Export
Credit
    24,827       24,442       24,065       —         —         —         —         49,269       24,065       3.20   3.20%

—  

  Celulosa y Energia Punta Pereira S.A.   U.S. dollars   DnB Nor     136       102       102       —         —         —         —         238       102       0.00   0.00%

—  

  Eufores S.A.   U.S. dollars   Banco
República
Oriental del
Uruguay
    —         26,532       —         —         —         —         —         26,532       —         1.40   Fixed
1.4%

—  

  Stora Enso Uruguay S.A.   U.S. dollars   Banco
República
Oriental del
Uruguay
    —         554       —         —         —         —         —         554       —         1.40   Fixed
1.4%

—  

  Eufores S.A.   U.S. dollars   Citibank     —         2,512       —         —         —         —         —         2,512       —         1.00   Fixed
1.00%

—  

  Eufores S.A.   U.S. dollars   ITAU     —         12,562       —         —         —         —         —         12,562       —         1.00   Fixed
1.00%

—  

  Eufores S.A.   U.S. dollars   Scotiabank     —         5,025       —         —         —         —         —         5,025       —         1.00   Fixed
1.00%

—  

  Eufores S.A.   U.S. dollars   Santander     —         27,135       —         —         —         —         —         27,135       —         1.00   Fixed
1.00%

—  

  Arauco Florestal Arapoti S.A.   Brazilian
real
  Banco
Votorantim
    —         226       —         —         —         —         —         226       —         5.00   5.00%

—  

  Arauco Forest Brasil S.A.   Brazilian
real
  Banco
Votorantim
    —         201       —         —         —         —         —         201       —         5.00   5.00%

—  

  Arauco Forest Brasil S.A.   Brazilian
real
  Banco Bndes
Subcrédito A
    32       62       —         —         —         —         —         94       —         8.23   TJLP
+2.91%

—  

  Arauco Forest Brasil S.A.   Brazilian
real
  Banco Bndes
Subcrédito B
    19       37       —         —         —         —         —         56       —         9.23   TJLP
+3.91%

—  

  Arauco Forest Brasil S.A.   U.S. dollars   Banco Bndes
Subcrédito C
    38       86       —         —         —         —         —         123       —         5.72   Cesta
+2.91%

—  

  Arauco Forest Brasil S.A.   Brazilian
real
  Banco Bndes
Subcrédito D
    22       42       —         —         —         —         —         64       —         10.43   TJLP
+5.11%

—  

  Mahal Emprendimientos e participações S.A.   Brazilian
real
  Banco Safra
S.A.
    —         2,776       2,800       11,540       10,587       9,655       —         2,776       34,583       10.70   CDI
+1.55%
  Arauco North America, Inc.   U.S. dollars   Banco Itau
Corpbanca –
NY Branch
    —         35,293       34,688       212,123       —         —         —         35,293       246,811       1.99   Libor
6M
+1.65%
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
      Total     30,569       235,941       146,195       296,792       82,945       81,286       210,478       266,509       817,694      
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

December 31, 2021

  Maturity     Total     Effective
rate
    Nominal rate

Tax ID

 

Name

 

Currency

 

Bonds

 

Up to 3

months
ThU.S.$

   

3 to 12

months
ThU.S.$

   

1 to 2

years
ThU.S.$

   

2 to 3

years
ThU.S.$

   

3 to 4

years
ThU.S.$

   

4 to 5

years
ThU.S.$

   

More
than 5

years
ThU.S.$

   

Current
ThU.S.$

   

Non

current
ThU.S.$

 

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-F     —         22,113       21,412       20,710       20,009       19,308       53,713       22,113       135,153       4.25   4.25%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-F     —         8,845       8,565       8,284       8,004       7,723       21,486       8,845       54,061       4.25   4.25%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-P     —         23,778       23,118       22,457       21,797       21,136       112,945       23,778       201,453       4.00   4.00%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-R     —         6,546       6,546       6,546       6,546       6,546       239,090       6,546       265,274       3.60   3.60%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-S     —         4,377       4,377       4,377       4,377       187,827       —         4,377       200,958       2.40   2.40%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-W     —         2,299       2,299       2,299       2,299       2,299       114,669       2,299       123,865       2.10   2.10%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.F.   Barau-X     —         5,412       5,412       5,412       5,412       5,412       293,802       5,412       315,450       2.70   2.70%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2024     11,250       11,250       22,500       522,500       —         —         —         22,500       545,000       4.50   4.50%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2027     —         19,375       19,375       19,375       19,375       19,375       509,688       19,375       587,188       3.88   3.88%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2047     —         22,000       22,000       22,000       22,000       22,000       862,000       22,000       950,000       5.50   5.50%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2029     —         21,250       21,250       21,250       21,250       21,250       553,125       21,250       638,125       4.25   4.25%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2049     —         27,500       27,500       27,500       27,500       27,500       1,118,750       27,500       1,228,750       5.50   5.50%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2030     10,500       10,500       21,000       21,000       21,000       21,000       573,500       21,000       657,500       4.20   4.20%

93.458.000-1

  Celulosa Arauco y Constitución S.A.   U.S. dollars   Yankee 2050     12,875       12,875       25,750       25,750       25,750       25,750       1,105,125       25,750       1,208,125       5.15   5.15%
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     
      Total     34,625       198,120       231,104       729,460       205,319       387,126       5,557,893       232,745       7,110,902      
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

December 31, 2021

   Maturity      Total  

Tax ID

   Name    Currency    Underlying
asset class
   Up to 3
months
ThU.S.$
     3 to 12
months
ThU.S.$
     1 to 2
years
ThU.S.$
     2 to 3
years
ThU.S.$
     3 to 4
years
ThU.S.$
     4 to 5
years
ThU.S.$
     More
than 5

years
ThU.S.$
     Current
ThU.S.$
     Non
current
ThU.S.$
 
85.805.200-9    Forestal
Arauco S.A.
   U.F.    Motor
vehicles
     420        996        948        511        387        239        4        1,416        2,089  
85.805.200-9    Forestal
Arauco S.A.
   U.S. dollars    Lands      60        180        240        240        240        240        480        240        1,440  
85.805.200-9    Forestal
Arauco S.A.
   U.F.    Plants and
equipments
     550        633        —          —          —          —          —          1,183        —    
85.805.200-9    Forestal
Arauco S.A.
   Chilean
pesos
   Plants and
equipments
     32        96        64        —          —          —          —          128        64  
85.805.200-9    Forestal
Arauco S.A.
   U.F.    Other
properties,
plant and
equipment
     1,050        2,177        371        250        177        572        —          3,227        1,370  
85.805.200-9    Forestal
Arauco S.A.
   Chilean
pesos
   Other
properties,
plant and
equipment
     91        132        122        122        122        359        —          223        725  
   Arauco
Argentina S.A.
   U.S. dollars    Buildings
and
constructions
     51        48        —          —          —          —          —          99        —    
   Arauco
Argentina S.A.
   U.S. dollars    IT
equipment
     13        22        —          —          —          —          —          35        —    
   Arauco
Argentina S.A.
   U.S. dollars    Plants and
equipments
     347        1,040        1,002        668        —          —          —          1,387        1,670  
   Arauco
Argentina S.A.
   U.S. dollars    Motor
vehicles
     519        1,286        1,589        750        —          —          —          1,805        2,339  
   Arauco
Industria de
Paineis S.A.
   Brazilian
real
   Other
properties,
plant and
equipment
     3        4        —          —          —          —          —          7        —    
   Arauco
Industria de
Paineis S.A.
   Brazilian
real
   Fixed
facilities and
accessories
     9        27        24        —          —          —          —          36        24  
   Arauco
Industria de
Paineis S.A.
   Brazilian
real
   IT
equipment
     13        24        1        —          —          —          —          37        1  
   Arauco
Industria de
Paineis S.A.
   Brazilian
real
   Motor
vehicles
     110        54        —          —          —          —          —          164        —    
   Arauco Forest
Brasil S.A.
   Brazilian
real
   IT
equipment
     5        10        1        —          —          —          —          15        1  
   Arauco Forest
Brasil S.A.
   Brazilian
real
   Lands      1,038        3,113        4,149        4,149        4,149        4,149        2,768        4,151        19,364  
   Arauco
Florestal
Arapoti S.A.
   Brazilian
real
   IT
equipment
     2        3        —          —          —          —          —          5        —    
   Arauco do
Brasil S.A.
   Brazilian
real
   Buildings
and
constructions
     49        199        143        49        —          —          —          248        192  
   Arauco do
Brasil S.A.
   Brazilian
real
   IT
equipment
     23        73        31        13        —          —          —          96        44  
   Arauco do
Brasil S.A.
   Brazilian
real
   Motor
vehicles
     94        221        —          —          —          —          —          315        —    
93.458.000-1    Celulosa
Arauco y
Constitucion
S.A.
   U.F.    Buildings
and
constructions
     389        1,139        1,518        1,518        1,518        1,518        3,036        1,528        9,108  
93.458.000-1    Celulosa
Arauco y
Constitucion
S.A.
   U.F.    Motor
vehicles
     146        395        280        127        79        24        —          541        510  
93.458.000-1    Celulosa
Arauco y
Constitucion
S.A.
   Chilean
pesos
   Buildings
and
constructions
     15        46        15        —          —          —          —          61        15  
93.458.000-1    Celulosa
Arauco y
Constitucion
S.A.
   Chilean
pesos
   Motor
vehicles
     4,255        12,764        5,896        —          —          —          —          17,019        5,896  
93.458.000-1    Celulosa
Arauco y
Constitucion
S.A.
   U.S. dollars    Motor
vehicles
     31        —          —          —          —          —          —          31        —    
   Arauco North
America, Inc.
   U.S. dollars    Buildings
and
constructions
     271        864        1,194        1,325        1,468        1,318        1,775        1,135        7,080  
   Arauco North
America, Inc.
   U.S. dollars    Motor
vehicles
     40        204        128        113        —          —          —          244        241  
   Arauco Canada
Limited
   Canadian
dollars
   Buildings
and
constructions
     9        —          —          —          —          —          —          9        —    
   Arauco Canada
Limited
   Canadian
dollars
   Motor
vehicles
     14        43        86        33        —          —          —          57        119  
   Celulosa y
Energía Punta
Pereira S.A.
   U.S. dollars    Plants and
equipments
     148        445        593        593        593        593        7,147        593        9,519  
   Eufores S.A.    U.S. dollars    Lands      1,070        3,211        6,321        5,999        5,559        5,155        35,766        4,281        58,800  
   Eufores S.A.    U.S. dollars    Plants and
equipments
     306        917        1,223        1,223        1,222        1,222        1,221        1,223        6,111  
   Eufores S.A.    U.S. dollars    Buildings
and
constructions
     70        210        158        49        —          —          —          280        207  
96.510.970-6    Maderas
Arauco S.A.
   Chilean
pesos
   Motor
vehicles
     2,795        7,925        4,915        —          —          —          —          10,720        4,915  
96.510.970-6    Maderas
Arauco S.A.
   U.F.    Motor
vehicles
     85        224        94        25        5        2        —          309        126  
   Arauco
Colombia S.A.
   U.S. dollars    Buildings
and
constructions
     6        45        —          —          —          —          —          51        —    
   Arauco Europe
Cooperatief
U.A.
   Euros    Motor
vehicles
     5        16        19        12        3        —          —          21        34  
   Arauco Europe
Cooperatief
U.A.
   Euros    Buildings
and
constructions
     37        56        77        66        —          —          —          93        143  
   Araucomex
S.A. de C.V.
   Mexican
pesos
   Buildings
and
constructions
     321        1,003        1,104        1,106        —          —          —          1,324        2,210  
   Araucomex
S.A. de C.V.
   U.S. dollars    Buildings
and
constructions
     27        84        97        —          —          —          —          111        97  
   Arauco
Industria de
México, S.A.
de C.V.
   U.S. dollars    Plants and
equipments
     98        33        —          —          —          —          —          131        —    
   Arauco
Industria de
México, S.A.
de C.V.
   Mexican
pesos
   Motor
vehicles
     11        39        50        54        8              50        112  
   Arauco
Industria de
México, S.A.
de C.V.
   Mexican
pesos
   Lands      1        3        4        4        —          —          —          4        8  
   Araucomex
Servicios S.A.
de C.V.
   Mexican
pesos
   Motor
vehicles
     —          —          15        16        16        7        —          —          54  
   Araucomex
Servicios S.A.
de C.V.
   Mexican
pesos
   Buildings
and
constructions
     —          1        105        79        86        28        —          1        298  
96.637.330-K    Servicios
Logisticos
Arauco S.A.
   U.F.    Motor
vehicles
     17        46        15        —          —          —          —          63        15  
79.990.550-7    Investigaciones
Forestales
Bioforest S.A.
   U.F.    Motor
vehicles
     8        25        19        5        —          —          —          33        24  
           

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
         Total      14,654        40,076        32,611        19,099        15,632        15,426        52,197        54,730        134,965  
           

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As part of the policy of Arauco, it considers compliance with all accounts payable, whether with related (see Note 13) or third parties, within a period not exceeding 30 days.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Regarding the Libor rate and its discontinuity, at the end of March 2022 Arauco maintains 4.96% of its total debt at said rate and it is not estimated that the effect of its elimination will be material. Additionally, Arauco maintains interest rate derivatives for 98.80% of its Libor rate based debt.

Guarantees

As of the date of these interim consolidated financial statements, Arauco has financial assets of approximately MU.S.$ 81 that have been pledged to third parties (beneficiaries), as direct guarantee. If Arauco does not fulfill its obligations, the guarantors could execute the guarantees.

As of June 30, 2022, the total assets pledged as an indirect guarantee were MU.S.$ 318. In contrast to direct guarantees, indirect guarantees are given to secure obligations assumed by a third party.

On September 29, 2011, Arauco entered into a Security Agreement under which it granted a non-joint guarantee limited to 50% of the obligations of the Uruguayan companies (joint ventures) Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A., under the IDB Facility Agreement in the amount of up to MU.S.$ 454 and the Finnevera Guaranteed Facility Agreement in the amount of up to MU.S.$ 900. Both borrowing agreements were signed with the International Development Bank. Such guarantee is included in the table below, under indirect guarantees.

Direct and indirect guarantees granted by Arauco:

DIRECT

 

Subsidiary

   Guarantee      Assets
pledged
     Currency      ThU.S.$     

Guarantor

Celulosa Arauco y Constitución S.A.

    
Guarantee
letter
 
 
     —         
Chilean
pesos
 
 
     817      Directorate General of Maritime Territory and Merchant Marine

Celulosa Arauco y Constitución S.A.

    
Guarantee
letter
 
 
     —         
Chilean
pesos
 
 
     379      Railways

Celulosa Arauco y Constitución S.A.

    
Guarantee
letter
 
 
     —         
Chilean
pesos
 
 
     2,299      Ministry of Public Works (MOP)

Celulosa Arauco y Constitución S.A.

    
Guarantee
letter
 
 
     —         
Chilean
pesos
 
 
     2,453      Ministry of Public Works (MOP)

Celulosa Arauco y Constitución S.A.

    
Guarantee
letter
 
 
     —         
Chilean
pesos
 
 
     563      Illustrious municipality of Arauco

Celulosa Arauco y Constitución S.A.

    
Guarantee
letter
 
 
     —         
Chilean
pesos
 
 
     15,656      Sociedad Concesionaria Autopista Costa Arauco S.A.

Arauco Forest Brasil S.A.

    




Mortgage
Industrial
Plant of

Jaguariaíva
of Arauco do
Brasil

 
 
 

 
 
 

    

Property
plant and
equipment
 
 
 
    
Brazilian
real
 
 
     29,269      BNDES

Arauco Forest Brasil S.A.

    

Endorsement
of Arauco do
Brasil
 
 
 
     —         
Brazilian
real
 
 
     407      Bank Votorantim S.A.

Mahal Empreendimentos e Participações S.A.

    

Endorsement
of Arauco do
Brasil
 
 
 
     —         
Brazilian
real
 
 
     28,637      Bank Safra S.A.

Arauco Florestal Arapoti S.A.

    

Endorsement
of Arauco do
Brasil
 
 
 
     —         
Brazilian
real
 
 
     459      Bank Votorantim S.A.
        Total           80,939     
           

 

 

    

INDIRECT

              

Subsidiary

   Guarantee      Assets
pledged
     Currency      ThU.S.$     

Guarantor

Celulosa Arauco y Constitución S.A.

    



Suretyship
not
supportive
and
cumulative
 
 
 
 
 
     —          U.S. dollar        63,158      Joint Ventures (Uruguay)

Celulosa Arauco y Constitución S.A.

    
Full
Guarantee
 
 
     —          U.S. dollar        255,000      Arauco North America, Inc.
        Total           318,158     
           

 

 

    

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

23.10.3 Type of Risk: Market Risk – Exchange Rate

Description

Market risk arises from the probability of being affected by losses from fluctuations in currencies exchange rates in which assets and liabilities are denominated, in a functional currency other than the functional currency of Arauco.

Explanation of Currency Risk Exposure and How This Risk Arises

Arauco is exposed to the foreign currency risk from currency fluctuations arising from sales, purchases and obligations undertaken in foreign currencies, such as the Chilean peso, Euro, Brazilian Real or other foreign currencies. In the case of significant exchange rate variations, the Chilean peso is the currency that represents the main currency risk. See Note 11 for details assets and liabilities classified by currency.

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

Arauco performs sensitivity analyses to measure the effect of this variable on equity and net result.

Sensitivity analysis considers a variation of +/- 10% of the exchange rate over the Chilean peso. This fluctuation range is considered possible given current market conditions as of the date of these financial statements. With all other variables at a constant rate, a U.S. dollar exchange rate variation of +/- 10% in relation to the Chilean peso would mean a change in the net income year after tax +/- 0.42% (equivalent to ThU.S.$ -/+ 2,638), and +/- 0.02% of equity (equivalent to ThU.S.$ -/+ 1,583).

Additionally, a sensitivity analysis is carried out assuming a variation of +/- 10% in the closing exchange rate on the Brazilian Real, which is considered a possible range of fluctuation given the market conditions as of the date of these financial statements. With all the other variables constant, a variation of +/- 10% in the exchange rate of the dollar on the Brazilian Real would mean a variation on the net income after tax +/- 0.63% (equivalent to ThU.S.$-/+$ 3,970) and a change on the equity of +/- 1.12% (equivalent to ThU.S. -/+$ 92,389).

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

23.10.4 Type of Risk: Market Risk – Interest rate risk

Description

Interest rate risk refers to the sensitivity of the value of financial assets and liabilities in terms of interest rate fluctuations.

Explanation of Interest Rate Risk Exposure and How This Risk Arises

Arauco is exposed to risks due to interest rate fluctuations for bonds issued, bank borrowings and financial instruments that bear interest at a variable rate.

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

Arauco completes its risk analysis by reviewing its exposure to changes in interest rates. As of June 30, 2022, 5.5% our financial debt accrues interest at variable rates. A change of +/- 10% in the interest rate is considered a possible range of fluctuation. Such market conditions would affect the income after tax at rate of +/- 0.1% (equivalent to ThU.S.$-/+ 645) and +/- 0.005% (equivalent to ThU.S.$-/+ 387) on equity.

 

     June
2022
ThU.S.$
     Total  

Fixed rate

     5,187,170        94.5

Bonds issued

     4,376,167     

Bank borrowings and others (*)

     586,656     

Lease liabilities

     224,347     

Variable rate

     301,133        5.5

Bonds issued

     —       

Bank borrowings

     301,133     

Total

     5,488,303        100.0
  

 

 

    

 

 

 
     December
2021

ThU.S.$
     Total  

Fixed rate

     5,262,448        94.3

Bonds issued

     4,426,033     

Bank borrowings and others (*)

     673,111     

Lease liabilities

     163,304     

Variable rate

     318,845        5.7

Bonds issued

     —       

Bank borrowings

     318,845     

Total

     5,581,293        100.0
  

 

 

    

 

 

 

 

(*)

Includes variable rate bank borrowings changed by fixed rate swaps.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

23.10.5 Type of Risk: Market Risk – Price of Pulp Risks

Description

Pulp prices are determined by world and regional market conditions. Prices fluctuate based on demand, production capacity, commercial strategies adopted by large-scale forestry companies, pulp and paper producers and by the availability of substitutes.    

Explanation of Price Risk Exposure and How This Risk Arises

Pulp prices are reflected in revenue from sales and directly affect the net income for the period.

As of June 30, 2022, revenue due to pulp sales accounted for 41.4% of total sales. Pulp prices are fixed on a monthly basis in accordance with the market. Forward contracts or other financial instruments are not used for pulp sales.

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

This risk is approached in different ways. Arauco has a team of specialists who perform periodic market and competition analyses, providing tools to analyze and evaluate trends and adjust forecasts. Similarly, Arauco performs price financial sensitivity analysis in order to take the necessary safeguards to confront different scenarios in the best possible manner.    

Sensitivity analysis considers a variation of +/- 10% in the average pulp price, a possible fluctuation range given current market conditions at the date of the closing balance. With all other variables constant, a variation of +/- 10% in the average pulp price would mean a variation of +/- 15.49% (equivalent to ThU.S.$-/+ 98,024) on the income for the year after tax and +/- 0.71% (equivalent to ThU.S.$ -/+ 58,815) on equity.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 24. REPORTABLE SEGMENTS

The main products that generate revenue for each reportable segment are described as follows:

Pulp segment

The main products sold by this reportable segment are long fiber bleached pulp (BSKP), short fiber bleached pulp (BHKP), long fiber raw pulp (UKP), pulp fluff and dissolving pulp (DP). Additionally, it manages a forest plantations in order to supply its production plants and, at the same time, to sell to the wood products segment or to third parties what it does not use (pruning, sawing, poles and chips). Finally, depending on the needs, it buys logs and chips from third parties which are consumed or sold to the wood products segment.

The Pulp reportable segment uses wood exclusively from pine and eucalyptus plantations for the production of different classes of wood cellulose or pulp. Bleached pulp is mainly used as raw material for producing printing and writing paper, as well as toilet paper and high-quality wrapping paper. Unbleached pulp is used to produce packing paper, filters, fiber cement products, dielectric paper and others. Fluff pulp is mainly used in the production of diapers and female hygiene products. On the other hand, dissolving pulp is used as raw material for the manufacture of different fabrics.

Arauco has seven plants, five in Chile, one in Argentina and one in Uruguay (50% property of Arauco) and they have a total production capacity of approximately 4 million tons per year. Pulp is sold in more than 35 countries, mainly in Asia and Europe.

 

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June 30, 2022

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

 

 

Wood products segment

The main products sold by this segment correspond to plywood, MDF (Medium Density Fiberboard), PB (chipboard), sawn wood of different dimensions and remanufactured products such as moldings, pre-cut pieces, finger joints, among others.

The Panels area produces a wide range of panel products and several kinds of moldings aimed at the furniture, decoration and construction industries. It consists of 20 industrial plants: 4 in Chile, 2 in Argentina, 4 in Brazil, 2 in Mexico, and 8 plants around USA and Canada. The Company has a total annual production capacity of 7.6 million cubic meters of PBO, MDF, plywood and moldings.

Through the joint venture Sonae Arauco, Arauco produces and sells wood panels, of the type of MDF, PB and OSB, and sawn timber, through the operation of 2 panel plants and one sawmill in Spain; 2 panel plants and one resin plant in Portugal; 4 panel plants in Germany and 2 panel plants in South Africa. In total, Sonae Arauco’s production capacity is approximately 1.5 million m3 of MDF, 2.4 million m3 of PB, 460,000 m3 of OSB and 70,000 m3 of sawn timber.

Including Sonae Arauco at 50%, Arauco totalize a capacity of 4.3 million m3 of MDF, 4.5 million m3 of PB and 230,000 m3 of OSB in its plants.

The Sawn Timber area produces a wide range of wood and remanufactured products with different kinds of uses and appearances, which include a wide variety of uses in the furniture, packing, construction and refurbishing industries.

With 8 sawmills in operation (7 in Chile and 1 in Argentina), the Company has a production capacity of 3.0 million m3 of sawn wood.

Furthermore, the Company has 5 remanufacturing plants, 4 in Chile and 1 in Argentina. These plants reprocess sawn wood and produce high quality remanufactured products, such as finger joint and solid moldings as well as precut pieces.

Arauco has no customers representing 10% or more of its revenues.

Below, please find summarized information concerning the assets, liabilities and profits and losses at the end of each period, by segments. The profit (loss) of each segment informed takes into consideration that taxes and income and financial costs have not been allocated to the various segments, and are shown as part of the Corporate’s segment:

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

     Pulp      Wood
products
     Others     Corporate     Subtotal     Elimination     Total  

Period ended June 30, 2022

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

Revenues from sales of goods

     1,445,990        2,126,968        —         —         3,572,958         3,572,958  

Revenues from rendering of services

     55,362        —          377       —         55,739         55,739  

Revenues from ordinary activities

     1,501,352        2,126,968        377       —         3,628,697         3,628,697  

Revenues from transactions with reportable segments

     260,422        12,237        25,887       —         298,546       (143,416     —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

     —          —          —         28,794       28,794         28,794  

Finance costs

     —          —          —         (93,210     (93,210       (93,210

Net finance costs

     —          —          —         (64,416     (64,416       (64,416
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

Depreciation and amortizations

     153,197        102,486        839       5,331       261,853         261,853  

Other income

     156,943        13,416        —         1,457       171,816         171,816  

Other expenses

     67,860        11,458        7       7,386       86,711         86,711  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

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

                

Associates

     2,074        —          —         2,703       4,777         4,777  

Joint ventures

     —          38,413        —         981       39,394         39,394  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

Income tax expense

     —          —          —         (151,542     (151,542       (151,542
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

Profit (loss) of each reportable segment

     361,787        584,122        (4,274     (308,725     632,910         632,910  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

Geographical information on revenues

                

Revenue – Chilean entities

     1,016,135        973,324        377       —         1,989,836         1,989,836  

Revenue – Foreign entities

     485,217        1,153,644        —         —         1,638,861         1,638,861  

Total revenues from ordinary activities

     1,501,352        2,126,968        377       —         3,628,697         3,628,697  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

Period ended June 30, 2022

   Pulp
ThU.S.$
     Wood
products
ThU.S.$
     Others
ThU.S.$
    Corporate
ThU.S.$
    Subtotal
ThU.S.$
    Elimination
ThU.S.$
    Total
ThU.S.$
 

Amounts of additions to non-current assets

                

Acquisition of property, plant and equipment and biological assets

     769,719        44,535        251       5,737       820,242       —         820,242  

Acquisition and contribution of investments in associates and joint venture

     —          —          —         118       118       —         118  

 

     Pulp      Wood
products
     Others      Corporate      Subtotal      Elimination     Total  

Period ended June 30, 2022

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

Segment assets

     12,570,986        3,186,681        18,369        1,412,036        17,188,072        (107,000     17,081,072  

Segment assets (excluding deferred tax assets)

     12,570,986        3,186,681        18,369        1,404,090        17,180,126        (107,000     17,073,126  

Deferred tax assets

              7,946        7,946          7,946  

Investments accounted through equity method

                   

Associates

     30,464        —          —          58,790        89,254          89,254  

Joint Ventures

     —          194,266        —          54,043        248,309          248,309  

Segment liabilities

     816,115        585,135        14,077        7,396,362        8,811,689          8,811,689  

Segment liabilities (excluding deferred tax liabilities)

     816,115        585,135        14,077        5,556,743        6,972,070          6,972,070  

Deferred tax liabilities

              1,839,619        1,839,619          1,839,619  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Geographical information on non-current assets

                   

Chile

     8,388,046        507,014        17,525        328,118        9,240,703        (10,760     9,229,943  

Foreign countries

     2,754,354        1,202,361        —          30,916        3,987,631          3,987,631  

Total non-current assets

     11,142,400        1,709,375        17,525        359,034        13,228,334        (10,760     13,217,574  

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

     Pulp      Wood
products
     Others     Corporate     Subtotal     Elimination     Total  

Period ended June 30, 2021

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

Revenues from sales of goods

     1,240,933        1,614,953        —         —         2,855,886         2,855,886  

Revenues from rendering of services

     46,195        26        174       —         46,395         46,395  

Revenues from ordinary activities

     1,287,128        1,614,979        174       —         2,902,281         2,902,281  

Revenues from transactions with reportable segments

     239,934        14,429        17,314       —         271,677       (271,677     —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

     —          —          —         14,434       14,434         14,434  

Finance costs

     —          —          —         (118,180     (118,180       (118,180

Net finance costs

     —          —          —         (103,746     (103,746       (103,746
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

Depreciation and amortizations

     151,306        91,449        802       5,545       249,102         249,102  

Other income

     91,476        8,176        —         20,724       120,376         120,376  

Other expenses

     48,760        12,535        133       9,028       70,456         70,456  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

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

                

Associates

     848        —          —         (709     139         139  

Joint ventures

     —          12,565        —         (1,488     11,077         11,077  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

Income tax expense

     —          —          —         (166,006     (166,006       (166,006
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

Profit (loss) of each reportable segment

     298,219        347,418        (4,567     (337,283     303,787         303,787  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 

Geographical information on revenues

                

Revenue – Chilean entities

     887,247        423,157        174       —         1,310,578         1,310,578  

Revenue – Foreign entities

     399,881        1,191,822        —         —         1,591,703         1,591,703  

Total revenues from ordinary activities

     1,287,128        1,614,979        174       —         2,902,281         2,902,281  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

     

 

 

 
     Pulp      Wood
products
     Others     Corporate     Subtotal     Elimination     Total  

Period ended June 30, 2021

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

Amounts of additions to non-current assets

                

Acquisition of property, plant and equipment and biological assets

     699,497        34,983        52       2,401       736,933       —         736,933  

Acquisition and contribution of investments in associates and joint venture

     —          —          —         4,805       4,805       —         4,805  

 

     Pulp      Wood
products
     Others      Corporate      Subtotal      Elimination     Total  

Period ended December 31, 2021

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

Segment assets

     12,234,443        3,017,154        19,350        1,487,952        16,758,899        (97,589     16,661,310  

Segment assets (excluding deferred tax assets)

     12,234,443        3,017,154        19,350        1,480,315        16,751,262        (97,589     16,653,673  

Deferred tax assets

              7,637        7,637          7,637  

Investments accounted through equity method

                   

Associates

     26,823        —          —          56,101        82,924          82,924  

Joint Ventures

     —          203,504        —          50,214        253,718          253,718  

Segment liabilities

     723,046        475,871        11,010        7,632,879        8,842,806          8,842,806  

Segment liabilities (excluding deferred tax liabilities)

     723,046        475,871        11,010        5,885,074        7,095,001          7,095,001  

Deferred tax liabilities

              1,747,805        1,747,805          1,747,805  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

      

 

 

 

Geographical information on non-current assets

                   

Chile

     7,978,472        528,776        18,307        330,600        8,856,155        (9,304     8,846,851  

Foreign countries

     2,671,205        1,200,693        —          23,236        3,895,134          3,895,134  

Total non-current assets

     10,649,677        1,729,469        18,307        353,836        12,751,289        (9,304     12,741,985  

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

The following table shows information related to cash flows by segments which is presented as a complementary information as required by our regulatory entities:

 

     Pulp     Wood
products
    Others     Corporate     Subtotal     Elimination      Total  

Period ended June 30, 2022

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

Segment cash flows

               

Cash flows from (used in) operating activities

     676,684       374,351       4,147       (109,419     945,753       —          945,753  

Cash flows (used in) investing activities

     (702,528     (36,572     (8,100     23,605       (723,595     —          (723,595

Cash flows from (used in) financing activities

     (296,677     (19,563     (805     (1,754       (318,799     —          (318,799

Net increase (decrease) in cash and cash equivalents

     (322,521     318,216       (4,768     (87,568     (96,641       —          (96,641
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

     Pulp     Wood
products
    Others     Corporate     Subtotal     Elimination      Total  

Period ended June 30, 2021

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

Segment cash flows

               

Cash flows from (used in) operating activities

     467,894       382,363       (491     5,072       854,838       —          854,838  

Cash flows (used in) investing activities

     (635,195     (44,141     (271     (1,983     (681,590     —          (681,590

Cash flows from (used in) financing activities

     (76,493     (24,716     (885     (1,497     (103,591     —          (103,591

Net increase (decrease) in cash and cash equivalents

     (243,794     313,506       (1,647     1,592       69,657       —          69,657  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Information required by geographic area:

 

     Geographical area  
2022    Local country      Foreign country  
     Chile      Argentina      Brazil      USA/
Canada
     Uruguay      Mexico      Total  

Disclosure of geographical areas

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

Revenues from sale of goods

     1,949,083        282,437        319,059        634,462        275,493        112,424        3,572,958  

Revenues from rendering of services

     40,753        —          —             14,986        —          55,739  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Revenues as of June 30, 2022

     1,989,836        282,437        319,059        634,462        290,479        112,424        3,628,697  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-current Assets at 06-30-2022 other than deferred tax

     9,225,714        685,146        758,678        724,945        1,690,571        124,574        13,209,628  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Geographical area  
2021    Local
country
     Foreign country  
     Chile      Argentina      Brazil      USA/
Canada
     Uruguay      Mexico      Total  

Disclosure of geographical areas

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

Revenues from sale of goods

     1,282,065        226,713        285,220        749,323        223,478        89,087        2,855,886  

Revenues from rendering of services

     28,513        —          —          —          17,857        25        46,395  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Revenues as of June 30, 2021

     1,310,578        226,713        285,220        749,323        241,335        89,112        2,902,281  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-current Assets at 12-31-2021 other than deferred tax

     8,842,910        688,698        642,578        735,846        1,698,320        125,995        12,734,347  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 25. OTHER NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES

 

     06-30-2022      12-31-2021  

Current non-financial assets

   ThU.S.$      ThU.S.$  

Roads to amortize, current

     60,349        56,949  

Prepayment to amortize (insurance and others)

     33,291        21,749  

Recoverable taxes (related to purchases)

     99,825        83,996  

Other current non-financial assets

     16,599        5,196  

Total

     210,064        167,890  
  

 

 

    

 

 

 
     06-30-2022      12-31-2021  

Non-current non-financial assets

   ThU.S.$      ThU.S.$  

Roads to amortize, non-current

     73,923        72,054  

Guarantee values

     3,586        3,296  

Recoverable taxes

     4,991        4,605  

Other non-current non-financial assets

     10,154        8,594  

Total

     92,654        88,549  
  

 

 

    

 

 

 
     06-30-2022      12-31-2021  

Current non-financial liabilities

   ThU.S.$      ThU.S.$  

Provision of minimum dividend (1)

     262,558        125,657  

ICMS, PIS-COFINS and other tax payables - Brazil

     25,494        24,590  

Other tax payable

     18,474        17,618  

Other Current non-financial liabilities

     5,034        5,789  

Total

     311,560        173,654  
  

 

 

    

 

 

 

 

(1)

Correspond mainly to the minimum dividend provision of the parent company.

 

     06-30-2022      12-31-2021  

Non-current non-financial liabilities

   ThU.S.$      ThU.S.$  

ICMS and other tax payable - Brazil

     76,133        74,780  

Other non-current non-financial liabilities

     2,760        2,226  

Total

     78,893        77,006  
  

 

 

    

 

 

 

NOTE 26. DISTRIBUTABLE NET PROFIT AND EARNINGS PER SHARE

Distributable net profit

As a general policy, the Board of Directors of Arauco agreed that the net profit to be distributed as dividend is determined based on realized net gains/(losses) of any relevant variations in the value of unrealized assets and liabilities, which are excluded from the calculation of net profit during the period such changes are made.

As a result of the foregoing, for purposes of determining the distributable net profit of the Company, which is the same considered for calculating the minimum dividend required and additional dividend, the following unrealized gains/losses are excluded from the net profit for the year:

 

  1)

Unrealized gains/losses relating to the fair value recorded for forestry assets under IAS 41, adding them back to distributable net profit when they are realized through sale or disposed of by other means.

 

  2)

Those generated through the acquisition of entities. These results will be added back to net profit when they are realized through sale.

The deferred taxes associated with the amounts described in 1) and 2) above are also excluded.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

In 2021, Arauco updated the dividend policy of the Company, establishing that in respect of fiscal year 2021, it will be distributed among the shareholders an amount equivalent to the 40% of the cash income for such year capable of being distributed as dividends, excluding from the calculation of such cash income the extraordinary benefits that the Company will obtain, through its subsidiary Forestal Arauco S.A., for the sale of several real estate to Vista Hermosa Inversiones Forestales SpA.

As of December 31, 2021 Arauco in the Financial Statements recognized the balance of minimum dividend provision of the parent company for ThU.S.$ 125,012. As of November 5, 2021 Arauco paid ThU.S.$ 271,000 decreasing the minimum dividend provision.

In consideration of the profits obtained by the Company during the year 2021, in the Extraordinary Shareholders’ Meeting held on October 12, 2021, it was agreed the distribution of a definitive dividend (eventual dividend) with charge on the fund of retain profits. Generating a provision for ThU.S.$ 200,000, it was paid from October 25, 2021.

On April 8, 2022, our Board of Directors approved an amendment to the abovementioned dividend policy in respect of net income obtained in fiscal year 2021, in order to include in the calculation of the distributable net income for such fiscal year the extraordinary profits obtained by the Company for the aforementioned sale of real estate by the subsidiary Forestal Arauco S.A. to Vista Hermosa Inversiones Forestales SpA. The amendment to the dividend policy is based upon the very positive financial results obtained by Arauco during fiscal year 2021, already informed to the market, and its current cash availability.

The aforementioned modification to the Company’s dividend policy only applies for fiscal year 2021. For the eventual profits of the current fiscal year 2022 and for subsequent fiscal years, an amount equivalent to the 40% of the distributable net income for each fiscal year will be distributed as dividends. Nevertheless, the Board of Directors may decide to distribute and pay interim dividends to the shareholders, to the extent that it expects the year to finalize with positive results and that the Company’s liquidity allows such distribution and payment.

Considering the change in the dividend policy described above, the final dividend paid for the year 2021 increased by ThU.S.$ 67,121 compared to the provision as of December 31, 2021.

The following table details the adjustments made for the determination of distributable net profit as of June 30, 2022 and December 31, 2021:

 

     Distributable net profit  
     06-30-2022
ThU.S.$
     06-30-2021
ThU.S.$
 

Net profit attributable to parent company

     632,877        302,912  

Adjustments:

     

Biological assets

     

Unrealized gains (losses)

     (130,564      (81,810

Realized gains (losses)

     161,924        109,077  

Deferred income taxes

     (10,205      (5,615
  

 

 

    

 

 

 

Total adjustments

     21,155        21,652  
  

 

 

    

 

 

 

Distributable net profit

     654,032        324,564  
  

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

Basic and diluted earnings per share

Basic and diluted earnings per share are calculated by dividing the profit or loss attributable to ordinary equity holders of parent by the weighted average number of ordinary shares outstanding. Arauco does not have any shares with potential dilutive effect.

 

     January - June      April - June  
     2022      2021      2022      2021  
     ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$  

Profit or loss attributable to ordinary equity holder of parent

     632,877        302,912        303,827        201,004  

Weighted average of number of shares

     120,474,350        118,336,956        120,474,350        120,188,355  

Basic and diluted earnings per share (in U.S.$ per share)

     5.2532095        2.5597414        2.5219227        1.6724083  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 27. COVID-19

In late December 2019 a notice of pneumonia originating from Wuhan, Hubei province (COVID-19, caused by a novel coronavirus) was reported to the World Health Organization, with cases soon confirmed in multiple provinces in China, as well as in other countries. As of the date of this report, the virus has affected most nations, including Chile, Argentina, Brazil, Uruguay, Mexico, and the United States.

Several measures have been undertaken by governments around the globe, including the use of quarantine, screening at airports and other transport hubs, travel restrictions, suspension of visas, nation-wide lockdowns, closing of public and private institutions, suspension of sport events, restrictions to museums and tourist attractions and extension of holidays, among many others.

In this complex scenario, it is important to highlight that, in March 2020, our industrial activities were declared as essential business by the authorities in most of the countries where we have operations. This has allowed us, as of the date of this report, to maintain the operational continuity in most of our industrial operations, helping to mitigate negative effects on the demand of some of our clients and products. We have implemented health and safety protocols for our workers both in industrial operations and in commercial offices. The measures adopted -such as social distancing, sanitation of the facilities, preventive testing, personnel transportation, home office, among others- are being continuously monitored so that workers have all the necessary protection for the performance of their functions.

Arauco’s commitment is not only with its workers, but also with the communities where we operate. In this regard, we have developed programs aimed at strengthening the capacities of the health system, through massive sanitation and fumigation programs of common spaces in the suburbs where we are present in Chile and delivery of sanitary supplies and essential reagents for 8 thousand diagnostic tests in the Ñuble region. In addition, support has been provided in temperature taking points and sanitary barriers in coordination with authorities; contributuion of hospital equipment and mechanical fans in Curanilahue, Biobío region; support in the implementation of rest areas for hospital personnel and improvements in spaces within hospitals in Chile; and collaborated in research for the development of mechanical fans.

On the other hand, our employees have participated as volunteers to deliver food boxes, as part of the campaign promoted by the CPC to reach the most vulnerable families in the country. This initiative entailed deliverying 5,226 food boxes in 28 communes of Chile, and putting together a network of Arauco Chile seamstresses for the development of reusable masks. Support was also provided, through the Fundación AcercaRedes, to the economy of small producers in Chile and for thereopening of agricultura fairs, applying various sanitation actions and delivering health kits. A network of volunteers was also assembled to support families living in rural areas.

No significant economic impacts have been generated in the operations reflected in Arauco’s financial statements.

 

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Unaudited interim consolidated financial statements

June 30, 2022

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

 

 

NOTE 28. SUBSEQUENT EVENTS

The authorization for the issuance and publication of these interim consolidated financial statements for the period ended June 30, 2022 was approved by the Board of Directors of Arauco at the Extraordinary Meeting No. 674 held on August 10, 2022.

Subsequent to June 30, 2022 and as of the date of issuance of these interim consolidated financial statements, there have been no events, that could materially affect the presentation of these financial statements.

 

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arauco Press Release 2Q 2022 carbon neutral


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2Q 2022 RESULTS Highlights 2Q 2022 For more details on ARAUCO´s financial statements please visit www.cmfchile.cl or www.arauco.com Readers are referred to the documents filed by ARAUCO with the United States Securities and Exchange Commission, specifically the most recent filing on Form 20-F that identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements. All forward-looking statements are based on information available to ARAUCO on the date hereof and ARAUCO does not assume any obligation to update such statements. References herein to “U.S.$” are to United States dollars. Discrepancies in any table between totals and sums of the amounts listed are due to rounding. This report is unaudited. REVENUES US$1,867.1 million NET INCOME US$303.9 million ADJUSTED EBITDA US$597.8 million NET DEBT TO EBITDA 1.64x CAPEX US$395.3 million


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2Q 2022 RESULTS Overview ARAUCO´s net income for the second quarter of 2022 was US$303.9 million, a decrease of US$25.2 million compared to the first quarter of 2022. Our Adjusted EBITDA was 4.9% lower than the first quarter of 2022, totalling US$597.8 million. Net Financial Debt decreased by US$99.5 million or 2.1 % compared to the last quarter. Our Net Debt/LTM EBITDA ended up in 1.64x, a decrease when compared to the 1.71x reached during the first quarter of 2022. In US$ Million Q2 Q1 Q2 YTD YTD YoY QoQ YoY 2022 2022 2021 2022 2021 Acum Revenue 1,867.1 1,761.6 1,555.6 6.0% 20.0% 3,628.7 2,902.3 25.0% Net income 303.9 329.1 201.4 -7.7% 50.9% 632.9 303.8 108.3% Adjusted 597.8 628.4 545.4 -4.9% 9.6% 1,226.2 930.1 31.8% EBITDA Adjusted 32.0% 35.7% 35.1% -10.3% -8.7% 33.8% 32.0% 5.4% EBITDA Margin LTM Adj. 2,789.5 2,737.0 1,601.6 1.9% 74.2% 2,789.5 1,601.6 74.2% EBITDA CAPEX 395.3 424.8 404.4 -6.9% -2.3% 820.0 693.8 18.2% Net Financial 4,586.6 4,686.1 4,760.3 -2.1% -3.6% 4,586.6 4,760.3 -3.6% Debt Net Financial Debt / 1.64x 1.71x 2.97x -4.0% -44.7% 1.64x 2.97x -44.7% LTM Adj. EBITDA Adjusted EBITDA and EBITDA Margin (in US$ Million)


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2Q 2022 RESULTS Income Statement Revenues ARAUCO’s revenues reached US$1,867.1 million in the second quarter of 2022, an increase of 6.0% when compared to the previous quarter. This variation is mostly explained by higher revenues in our wood products division, with an increase in sales volume of 2.7%, partially offset by a decrease of 2.0% in prices. Additionally, revenues for our pulp division increased by 2.4% or US$17.7 million. The following table shows a breakdown of our revenues by business segment: In US$ Million Q2 2022 Q1 2022 Q2 2021 QoQ YoY Pulp 759.5 741.8 711.9 2.4% 6.7% Wood Products 1,107.5 1,019.5 843.6 8.6% 31.3% Total 1,867.1 1,761.6 1,555.6 6.0% 20.0% 2Q 2022 Revenue’s Breakdown


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2Q 2022 RESULTS Cost of sales Increased by 9.2% or US$92.7 million compared to the first quarter of 2022. This is mostly explained by increases in timber due to higher prices and volumes, as well as adjustments in our forest valuation. In US$ Million Q2 2022 Q1 2022 Q2 2021 QoQ YoY Timber 221.8 147.8 181.0 50.1% 22.5% Forestry labor costs 157.9 140.2 136.5 12.6% 15.6% Depreciation and amortization 105.3 110.7 100.3 -4.9% 5.0% Depreciation for right of use 10.4 10.5 10.2 -0.5% 2.0% Maintenance costs 78.2 81.7 63.2 -4.3% 23.8% Chemical costs 188.5 178.0 130.5 5.9% 44.5% Sawmill services 35.0 28.6 28.1 22.3% 24.5% Other raw materials and indirect 116.5 128.5 86.6 -9.4% 34.4% costs Energy and fuel 62.9 60.6 42.8 3.7% 46.8% Cost of electricity 11.4 9.7 12.5 17.8% -8.4% Wage, salaries and severance 107.9 106.7 95.3 1.1% 13.2% indemnities Cost of Sales 1,095.8 1,003.2 887.2 9.2% 23.5% Administrative expenses Increased by 12.5% or US$17.6 million, when compared to the previous quarter, mostly due to an increase in, (i) computer services and (ii) property taxes, licenses and municipality rights. In US$ Million Q2 2022 Q1 2022 Q2 2021 QoQ YoY Wages, salaries and severance 62.6 62.4 62.7 0.4% -0.1% indemnities Marketing, advertising, promotion 4.6 3.9 3.3 19.2% 37.9% and publications expenses Insurance 6.3 6.4 6.0 -1.2% 5.8% Depreciation and amortization 8.4 8.5 9.4 -1.0% -11.1% Depreciation for the right of use 1.4 1.9 1.7 -27.9% -17.3% Computer services 16.3 5.6 9.6 191.6% 69.2% Lease rentals (offices, warehouses 1.0 1.5 1.6 -35.6% -38.4% and machinery) Donations, contributions, 2.0 2.1 1.2 -5.4% 69.1% scholarships Fees (legal and technical advisories) 9.1 8.7 9.3 5.3% -2.2% Property taxes, patents and 8.8 5.9 8.2 48.5% 6.5% municipality rights Other administration expenses 37.9 33.9 37.6 11.6% 0.8% Administrative Expenses 158.4 140.8 150.7 12.5% 5.1%


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2Q 2022 RESULTS Distribution costs Distribution costs increased by 9.2%, or US$21.6 million mostly due to an increase of US$12.7 million or 6.5%, in freight costs, and Port services increased 35.5% or US$5.4 million caused by global logistic issues.    In US$ Million Q1 2022 Q1 2022 Q2 2021 QoQ YoY Commissions 3.3 3.7 3.6 -11.8% -8.9% Insurance 1.9 1.5 0.9 29.5% 123.1% Other selling costs 5.4 4.9 4.5 9.2% 20.3% Port services 20.7 15.2 11.8 35.5% 74.5% Freight 207.0 194.3 128.2 6.5% 61.4% Depreciation for the right of use 0.4 0.5 0.6 -33.7% -44.9% Other shipping and freight costs 17.0 13.7 9.6 23.8% 76.6% Distribution Costs 255.6 234.0 159.3 9.2% 60.5% Other income Increased by US$6.3 million mostly due to an increase in gains from changes in fair value of biological assets due to re-evaluation of our forest. Additionally, there was a decrease in gains on sales of assets mostly associated to the completion of the forestry asset sale we announced on August 2021. In US$ Million Q2 2022 Q1 2022 Q2 2021 QoQ YoY Gain from changes in fair value of biological assets 76.9 53.7 41.8 43.1% 84.0% Net income from insurance compensation 0.1 0.2 0.6 -16.5% -75.4% Leases received 0.6 0.5 0.2 20.5% 232.5% Gains on sales of assets 3.8 25.8 1.7 -85.5% 123.9% Other operating results 7.7 2.6 1.1 200.7% 575.0% Other Income 89.1 82.8 45.4 7.6% 96.3%


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2Q 2022 RESULTS Other expenses Increased by 111.4% or US$31.1 million when compared to the first quarter of 2022. This is mostly explained by an increase in Operating expenses related to plant stoppages, and a significant increase in loss and repair of assets mainly explained by an insurance deductible, both due to the incident that occurred at the Valdivia mill (more information detailed in Subsequent Events). In US$ Million Q2 2022 Q1 2022 Q2 2021 QoQ YoY Legal payments 2.4 1.6 4.7 48.8% -48.8% Impairment provision property, plant and 3.7 2.5 7.9 41.2% -54.7% equipment and others Operating expenses related to plant stoppages 19.6 1.9 2.1 911.1% 833.3% Project expenses 6.4 3.7 6.1 72.8% 4.6% Loss (gain) from asset sales 3.1 1.7 1.2 83.3% 170.3% Loss and repair of assets 10.5 0 0.2 58,427.8% 6060.8% Loss of forests 2.3 10.4 0.6 -77.4% 286.9% Other taxes 5.5 3.3 6.8 68.3% -18.0% Other expenses (donations, repayments insurance) 5.4 2.7 3.5 101.2% 55.9% Other expenses 58.9 27.8 33.0 111.4% 78.5% Foreign exchange differences Showed a net loss of US$2.4 million, US$ 16.5 million lower than the first quarter that ended with a US$19.0 million loss. The main significant effects are given by the variation of local currencies in the countries where we have industrial operations. Income tax For the second quarter, income tax expenses reached US$74.9 million, US$2.2 million lower than the US$76.6 million of the previous quarter.


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2Q 2022 RESULTS Adjusted EBITDA Adjusted EBITDA for the second quarter of 2022 was US$597.8 million, a 4.9% or US$30.7 million decrease when compared to the previous quarter. There was a decrease of 13.7% in the Adjusted EBITDA of our pulp business segment mostly associated to a 8.4% decrease in sales volume, partially offset by a 12.5% increase in average prices. This was partially offset by an increase of 8.1% in the Adjusted EBITDA of our wood products segment, mostly due to an increase of 5.7% prices and 2.7% in sales volume. In U.S. Million Q2 2022 Q1 2022 Q2 2021 QoQ YoY Net Income 303.9 329.1 201.4 -7.7% 50.9% Financial costs 46.2 47.0 57.2 -1.8% -19.2% Financial income (15.5) (13.3) (7.6) 16.0% 103.5% Income tax 74.9 76.6 123.4 -2.2% -39.3% EBIT 409.5 439.4 374.4 -6.8% 9.4% Depreciation & amortization 129.2 132.7 122.4 -2.6% 5.6% EBITDA 538.7 572.1 496.7 -5.8% 8.4% Fair value cost of timber harvested 122.6 78.2 77.2 56.8% 58.8% Gain from changes in fair value of biological assets (76.9) (53.7) (41.8) 43.1% 84.0% Exchange rate differences 2.4 19.0 5.2 -87.2% -53.4% Others (*) 10.9 12.9 8.0 -15.3% 37.1% Adjusted EBITDA 597.8 628.4 545.4 -4.9% 9.6% (*)Includes provision from forestry fires and provisions from property, plants and equipment, and others. Adjusted EBITDA variation by business segment (in US$ million)


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2Q 2022 RESULTS Pulp Business During the second quarter of 2022, pulp prices increased in all markets mostly due to logistic issues, inflation and restricted supply. Finland was directly affected by the conflict between Russia and Ukraine due to the ban on using Russian raw material, causing a supply shortage for short fiber pulp; notwithstanding, pulp demand remained stable. In China, the market was affected because of an increase in cases related with covid-19 causing mobility and port area restrictions, confinements in cities, etc., leading to a reduction of activity. Despite these facts, prices of short and long fiber pulp rose significantly because of supply shortages. In Europe, unlike the Chinese market, there was a very strong demand in every type of fiber leading to higher prices, allowing the hike in costs to be transferred to the final products. The demand for dissolving pulp remained very stable during this quarter, but prices increased approximately 20% due to low supply. Production during the second quarter was affected due to the scheduled maintenance stoppage at the Nueva Aldea mill and the incident of the Valdivia mill. Production and Sales Volume (In thousand tonnes) The Adjusted EBITDA for our pulp business segment reached US$281.0 million during this quarter, which translates to a 13.7% or US$44.5 million decrease compared to the first quarter of 2022. Pulp EBITDA Mg reached 37.0%, 6.9% lower than the previous quarter which reached 43.9%.


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2Q 2022 RESULTS Wood Products Business Panels Average sales prices increased 15.5% and sales volume increased 1.6% when compared to the first quarter. In the second quarter volumes and prices, despite remaining at good levels, were affected by the increase in exports from Brazil to the rest of the region. North America remained firm in its panel consumption. Sawn timber Sales volume increased 4.8% when compared to the first quarter. Average sales prices increased 1.3%. Good demand levels carried throughout the second quarter, allowing price levels to remain stable Plywood Sales volume decreased by 11.1%, and average prices increased by 7.8%. Demand remained at high levels, in particular in the US, Europe and Oceania. Supply restrictions persisted in Russia and Belarus, both which supply Europe and the US. Adjusted EBITDA for our wood products business was US$358.0 million during the second quarter of 2022, which translates to a 8.1% or US$26.7 million increase, compared to the previous quarter. Wood products EBITDA Mg was 32.3%, slightly lower than the 32.5 % reached during the first qu


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2Q 2022 RESULTS During this quarter, capital expenditures(*) reached US$395.3 million, US$29.5 million lower than the previous quarter. This is mostly explained by a decrease in purchase of other long-term assets. Capital The biggest single item in CAPEX-related expenditures, were those related to the MAPA project. These expenditures reached US$188.6 million, 5.9% higher when compared to the US$178.1 million spent in the MAPA project Expenditures during the previous quarter. US$ Million Q2 2022 Q1 2022 Q2 2021 YTD 2022 YTD 2021 Cash flow used to obtain control of — — 48.0 subsidiaries or other businesses Cash flow used to purchase in (0.1)—(5.2) (0.1) (4.8) associates Other cash payments to acquire — (0.0)—(0.0) interests in joint ventures Purchase and sale of property, plant (330.5) (337.1) (346.2) (667.6) (603.1) and equipment Purchase and sale of intangible assets (0.9) (1.1) 0.4 (1.9) (2.5) Purchase of other long-term assets (63.8) (86.6) (53.4) (150.4) (131.3) Total CAPEX (*) (395.3) (424.8) (404.4) (820.0) (693.8) (*) On a cash basis.


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2Q 2022 RESULTS During the second quarter, Free Cash Flow decreased by US$162.3 million compared to the first quarter, with outflows of US$88.9 million. Cash from Operations increased Free US$14.4 million mostly due to working capital variation. Cash used in investment activities decreased US$63.8 million on a quarterly basis, mostly due to last quarter’s proceeds from the forestry sale closed in August 2021. Cash used in financing activities increased Cash Flow US$192.3 mostly due to dividends paid in Q2 2022. US$ Million Q2 2022 Q1 2022 Q2 2021 Adjusted EBITDA 597.8 628.4 545.4 Working Capital Variation 22.5 (121.5) (164.4) Interest paid and received (77.2) (29.4) (73.4) Income tax received (paid/refunded) (11.0) (51.8) 82.1 Other cash inflows (outflows) (52.1) 40.0 63.1 Cash from Operations 480.1 465.7 452.7 Capex (*) (395.3) (424.8) (404.4) Proceeds from investment activities 41.9 32.1 2.5 Other inflows of cash, net 23.5 (1.1) 0.2 Cash from (used in) Investment Activities (329.9) (393.7) (401.8) Dividends paid (192.3)—(0.2) Other inflows of cash, net (16.3) (16.3) (17.5) Proceeds from issue of shares — 200.0 Cash from (used in) Financing Activities—Net of Proceeds and Repayments (208.6) (16.3) 182.3 Effect of exchange rate changes on cash and cash equivalents (30.5) 17.7 19.9 Free Cash Flow (88.9) 73.4 253.1 (*) On a cash basis. Q2 2022 – Q1 2022 (in US$ million) Net Debt Variation


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2Q 2022 RESULTS Cash Our cash position was US$901.7 million at the end of the second quarter, which translates to a 15.4% decrease, equivalent to US$163.6 million, when compared to the end of the first quarter of 2022. This decrease was mostly due to a negative Free Cash Flow of the quarter (negative 88.9 US$ million). Additionally to our cash position, the Company has a committed revolving credit facility for a total amount of US$375 million, which as of the date of this report hasn’t been withdrawn. This facility is due in February 2025. Cash by Currency


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As of June 2022 short term bank obligations (which includes accrued interest) sum up US$203.3 million. Bank obligations include the following maturities: US$173.5 million in bank loans and US$29.8 million in leasing. Bond obligations for 2022 sum up US$69 million. These obligations include amortizations of local bonds, and interest payments of our USD-denominated bonds. Debt Amortization Profile as of June 30, 2022 (In US$ Million) Debt by Currency Debt by Instrument (1) UF is a Chilean monetary unit indexed to inflation. (2) Swapped to USD


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2Q 2022 RESULTS Second Quarter Subsequent Events and News Sucuriu Project In our challenge to seek new opportunities that contribute to our development, a collaboration agreement was signed with the Gonvernment of Mato Grosso de Sul in Brazil. The foregoing is an important preparatory step that allows us to continue with the evaluation of building a new pulp mill. This project is subject to a series of variables that are under study such as, market conditions, the environmental impact permit, the evaluation of timber supply and the approval by the Board of Directors. If conditions allow it, the construction stage of this new plant may begin in 2025. This project considers a CAPEX of approximately US$3 billion. The facility would have an estimated production capacity of 2.5 million tons of short fiber and would be located 50 km from the town of Inocência, an area that offers a number of logistical benefits. Valdivia Pulp Mill On May 26th the presence of fire was detected in the drying machine of our Valdivia Pulp Mill, Los Rios Region, Chile. The situation was duly addressed by personnel under emergency and safety protocols resulting in no injuries and a control of the fire. Various measures were adopted, including the halt of the mill in order to carry out the necessary repairs and maintenances. It is worth mentioning that the company has insurance to deal with this type of situation. The repairs will be carried out simultaneously in two stages. One stage consists of a small temporary repair, allowing a significant amount of production to be resumed in mid-September 2022. The other stage, is the complete repair of the dryer, work that should be completed in April 2023, restoring the full productive capacity of the mill. The Valdivia Mill has an authorized annual production capacity of 550,000 tons of pulp. Since 2020, the mill mainly produces textile pulp (Dissolving Pulp), without prejudice to being able to also produce pulp for paper according to market conditions. In addition, the Valdivia Mill produces renewable electricity, injecting significant surpluses into the National Electric System.


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2Q 2022 RESULTS ESG Local Business Licenses Payment In Chile, a local business license (“patentes municipales”) is a permit necessary to develop any secondary or tertiary activity requiring a physical location granted by the local authorities of where the activity takes place. The location where this license is paid allows the community of the region to have more resources to meet their needs in terms of infrastructure, education, roads, quality of life, among others. Arauco has historically contributed based on these principles and today, as a result of an administrative and tax restructuring generated within the company, 95% of the business licenses remain in the regions where we operate. The increase in our taxation in these regions is a sign of commitment to the development of these areas that have been part of our evolution. We seek to contribute to local development, first through our own work, by having a renewable activity that contributes to the challenges of a more sustainable world. As well as implementing programs, installing capacities and making alliances that seek well-being, from dialogue and participation. Sustainability Report 2021 We are a global company that with our work and innovation, we develop products based on renewable forest resources. Everything you need to know about us can be found in our 2021 Sustainability Report, click here for English, or here for Spanish. For more information dial in to our Conference Call.


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2Q 2022 RESULTS UPCOMING EVENTS 2Q 2022 RESULTS CONFERENCE CALL Friday, August 19, 2022 11:30 Santiago Time 11:30 Eastern Time (New York) Dial in: +1 (844) 450 3845 from the US +56 (44) 208 1274 from Chile +55 (11) 3181 8565 from Brazil +1 (412) 317 6368 from other countries Conference ID: Arauco For further information, please contact: Marcelo Bennett Treasurer marcelo.bennett@arauco.com Phone: +56 2 2461 7309 Constanza Vasquez Investor Relations constanza.vasquez@arauco.com Phone: +56 2 2461 7434 investor_relations@arauco.cl


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2Q 2022 RESULTS Financial Statements Income Statement In US$ Million Q2 2022 Q1 2022 Q2 2021 YTD 2022 YTD 2021 Revenues 1,867.1 1,761.6 1,555.6 3,628.7 2,902.3 Cost of sales (1,095.8) (1,003.2) (887.2) (2,099.0) (1,785.0) Gross profit 771.3 758.5 668.4 1,529.7 1,117.3 Other income 89.1 82.8 45.4 171.8 120.4 Distribution costs (255.6) (234.0) (159.3) (489.6) (304.1) Administrative expenses (158.4) (140.8) (150.7) (299.2) (287.2) Other expenses (58.9) (27.8) (33.0) (86.7) (70.5) Financial income 15.5 13.3 7.6 28.8 14.4 Financial costs (46.2) (47.0) (57.2) (93.2) (118.2) Share of profit (loss) of associates and joint 24.5 19.7 8.7 44.2 11.2 ventures accounted for using equity method Other income (loss) 0.0 0.0 0.0 0.0 0.0 Exchange rate differences (2.4) (19.0) (5.2) (21.4) (13.7) Income before income tax 378.8 405.7 324.8 784.5 469.8 Income tax (74.9) (76.6) (123.4) (151.5) (166.0) Net income 303.9 329.1 201.4 632.9 303.8 Profit attributable to parent company 303.8 329.1 201.0 632.9 302.9 Profit attributable to non-parent company 0.0 0.0 0.4 0.0 0.9


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2Q 2022 RESULTS Balance Sheet In US$ Million 30-06-2022 31-03-2022 30-06-2021 Cash and cash equivalents 901.7 1,065.4 1,133.7 Other financial current assets 20.5 9.6 3.3 Other current non-financial assets 210.1 194.5 208.0 Trade and other receivables-net 874.6 956.6 878.6 Related party receivables 6.9 6.0 5.8 Inventories 1,358.3 1,299.0 1,019.8 Biological assets, current 364.0 355.6 297.9 Tax assets 125.1 227.3 111.8 Non-Current Assets classified as held for sale 2.3 1.7 132.0 Total Current Assets 3,863.5 4,115.8 3,790.9 Other non-current financial assets 15.8 34.6 16.7 Other non-current and non-financial assets 92.7 100.9 117.9 Non-current receivables 22.7 21.3 15.7 Investments accounted through equity method 337.6 363.0 324.4 Intangible assets 78.5 82.1 97.1 Goodwill 58.8 60.6 59.6 Property, plant and equipment 9,595.0 9,443.6 8,806.7 Biological assets, non-current 3,008.6 3,062.6 3,189.7 Deferred tax assets 7.9 8.2 5.7 Total Non-Current Assets 13,217.6 13,176.9 12,633.4 TOTAL ASSETS 17,081.1 17,292.7 16,424.4 Other financial liabilities, current 383.7 415.4 487.7 Trade and other payables 713.8 711.3 700.2 Related party payables 3.4 5.3 3.9 Other provisions, current 6.3 0.3 0.4 Tax liabilities 44.3 147.8 56.0 Current provision for employee benefits 5.8 6.3 6.4 Other non-financial liabilities, current 311.6 397.4 50.0 Total Current Liabilities 1,468.9 1,683.9 1,304.5 Other non-current financial liabilities 5,324.9 5,471.2 5,517.5 Trade and Other payables non-current 2.4 2.7 0.0 Other provisions, non-current 30.5 30.6 29.3 Deferred tax liabilities 1,839.6 1,779.3 1,509.3 Non-current provision for employee benefits 66.4 73.1 73.9 Other non-financial liabilities, non-current 78.9 89.9 86.0 Total Non-Current Liabilities 7,342.8 7,446.8 7,216.1 Non-parent participation 7.2 7.4 26.9 Net equity attributable to parent company 8,262.2 8,154.6 7,876.9 TOTAL LIABILITIES AND EQUITY 17,081.1 17,292.7 16,424.4


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2Q 2022 RESULTS Cash Flow Statement US$ Million Q2 2022 Q1 2022 Q2 2021 YTD 2022 YTD 2021 Receipts from sales of goods and rendering of 2,059.8 1,806.0 1,476.0 3,865.8 2,832.4 services Other cash receipts (payments) 61.0 110.5 93.7 171.5 199.5 Payments of suppliers and personnel (less) (1,554.3) (1,371.4) (1,123.3) (2,925.8) (2,192.7) Interest paid and received (77.2) (29.4) (73.4) (106.5) (112.1) Income tax paid (11.0) (51.8) 82.1 (62.8) 130.0 Other (outflows) inflows of cash, net (0.1) 1.9 (2.3) 1.7 (2.3) Net Cash Provided by (Used in) Operating 480.1 465.7 452.7 945.8 854.8 Activities Capital Expenditures (395.3) (424.8) (404.4) (820.0) (693.8) Other investment cash flows 65.4 31.1 2.6 96.5 12.2 Net Cash Provided by (Used in) Investing Activities (329.9) (393.7) (401.8) (723.6) (681.6) Proceeds from borrowings 157.5 10.0 0.0 167.5 5.0 Repayments of borrowings (232.2) (29.1) (43.5) (261.3) (272.6) Dividends paid (192.3) 0.0 (0.2) (192.3) (0.2) Other inflows of cash, net (16.3) (16.3) (17.5) 0.0 0.0 Proceeds from Issue of Shares 0.0 0.0 200.0 (32.6) (35.8) Net Cash Provided by (Used in) Financing Activities (283.4) (35.4) 138.9 (318.8) (103.6) Total Cash Inflow (Outflow) of the Period (133.2) 36.6 189.8 (96.6) 69.7 Effect of exchange rate changes on cash and cash (30.5) 17.7 19.9 (12.8) (0.6) equivalents Cash and Cash equivalents at beginning of the 1,065.4 1,011.1 924.1 1,011.1 1,064.7 period Cash and Cash Equivalents at end of the Period 901.7 1,065.4 1,133.7 901.7 1,133.7


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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Celulosa Arauco y Constitución, S.A.
                    (Registrant)
Date: August 23, 2022     By:  

/s/ Matías Domeyko Cassel

    Name:   Matías Domeyko Cassel
    Title:   Chief Executive Officer