Arauco posts sharp fall in EBITDA for Q4/2018

Arauco posts sharp fall in EBITDA for Q4/2018

Arauco´s fourth quarter net income was US$70.1 million, a decrease of 68.2% compared to the third quarter, driven by lower revenues mainly in the pulp segment, and higher other expenses. This lower income explains the decrease by 33.2% in the company's Adjusted EBITDA compared to last quarter, reaching US$342.6 million. Arauco's Adjusted EBITDA margin was 24.9%, down from 33.0% in the previous quarter.

In general, for Arauco all markets showed a stable demand, however, the pulp industry was affected by the uncertainty of the trade war between United States and China. Pulp division and wood products sales decreased compared to the last quarter, due to a slight fall in prices and sales volume. This was mainly as result of the delayed impact of the trade war between China and U.S. and seasonality effects that decrease demand, the company reported. This result was slightly offset by an increase in forestry products sales.

Arauco's revenues reached US$1,377.6 million during the fourth quarter of 2018, a decrease of 11.3% compared to the US$1,553.3 million in the previous quarter. This is explained primarily by a decrease in our pulp sales and, additionally, by lower wood products sales, which were partly offset by an increase in our forestry segment sales. Pulp revenues decreased by 16.4% compared to the previous quarter, resulting from a decrease in sales volume of 11.6% and average prices of 4.2%, because of a lower demand in our main market, China. Wood products sales fell by 7.3% compared to the third quarter, due to lower panel sales volume, Arauco says.

Arauco's composite panel sales decreased compared to the previous quarter, with sales volume going down by 7.1% (including both MDF and PBO products) and average price increasing by 1.2%. Chile and Mexico showed an increase in sales volume compared to the third quarter while Argentina remained weak in the local market.

The North American market showed sales volume slightly lower than expected for Arauco and some adjustments in prices due to oversupply as well as the stable housing market index, not to mention the seasonality effects on the MDF and PB sales during the fourth quarter.

For Arauco, Latin America showed a positive trend during the fourth quarter, with good demand specially in Colombia and Peru. Brazil showed a positive signal after elections with the economy expected to start improving, which allows us to maintain sales volume and increase prices.

Arauco's sawn timber sales volume decreased during the fourth quarter with a slight decrease in prices by the end of the year. This decrease is a consequence of the oversupply, the lower demand from China and less consumption because of seasonality. China, as it was expected, showed an unstable demand because of the uncertainty of the duties from U.S. This general situation was offset by the relocation of some products in the Middle East and Japan, where Arauco saw a healthy demand, which has been positive to keep the prices in a good level.

Plywood demand remained slow with some price adjustments. In Europe the demand remained low due to the seasonality effects during the fourth quarter, but it is expected to be stable in the coming months, even though there are higher supply levels from South America and Asia. Same trend was seen in United States and Canada.

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