Celulosa Arauco y Constitución S.A. (ARA)

Celulosa Arauco y Constitución S.A. Financial Report (FY 2024)

Report Date: 2025‑03‑01
Period Covered: Year ended December 31, 2024
Form Type: 6‑K (Form for Foreign Private Issuers)

1. Executive Summary

• Revenue: US$6.546 billion, up 8.8% versus US$6.012 billion in 2023
• Net Profit: US$476.28 million, up 32.8% from US$358.53 million
• Total Financial Debt: US$7.415 billion, down 6.1% from US$7.896 billion
• EBITDA: US$1.664 billion vs. US$0.517 billion (FY 2023)
• Earnings per Share: US$0.3924 vs. US$0.2976

2. Profit & Loss Analysis

• Revenue Drivers:
  • Pulp segment delivered US$3.429 billion (+22.3%) driven by higher sales volumes and stronger average selling prices.
  • Wood products segment generated US$3.116 billion (‑3.0%) as domestic construction demand remained slow.
• Cost Control:
  • COGS totaled US$4.634 billion, down 2.1% on improved forestry yield and optimization of manufacturing costs.
  • Administrative & distribution expenses were stable at US$1.260 billion combined.
• Profitability Expansion:
  • Gross margin improved to 29.2% from 21.1%.
  • Financial expense coverage ratio rose to 2.63× (vs. 0.03×).
  • Net margin expanded to 7.3% (from 6.0%).

3. Balance‑Sheet & Debt Analysis

• Assets: Total assets of US$18.159 billion, up 1.4%.
  • Biological assets increased to US$3.063 billion.
  • Cash & equivalents at US$1.071 billion (vs. US$0.570 billion).
• Liabilities: Total liabilities of US$9.436 billion, down 4.8%.
  • Current liabilities dropped 34.0% to US$1.363 billion, driven by lower short‑term borrowings.
  • Long‑term debt and lease obligations fell to US$8.073 billion vs. US$7.830 billion.
• Leverage:
  • Debt/Equity ratio improved to 1.08× from 1.24×.
  • Net debt/EBITDA ratio at 2.02× (vs. 4.36×).

4. Cash‑Flow Highlights

• Operating Cash Flow: +US$1.181 billion vs. +US$0.740 billion, driven by faster receivables collection.
• Investing Cash Flow: ‑US$0.329 billion vs. ‑US$1.333 billion, reflecting disposal proceeds (Brazilian forestry assets) and reduced capex.
• Financing Cash Flow: ‑US$0.306 billion vs. ‑US$0.646 billion, due to higher debt repayments partially offset by equity injections.

5. Strategic Pros & Cons

Pros:
• Strong top‑line lift from global pulp demand and tighter supply in key markets (Asia, Europe).
• Margin expansion via cost controls, inventory optimization, and higher utilization in pulp mills.
• Robust liquidity position with >US$1 billion cash balance and improved credit‑coverage metrics.

Cons:
• Wood segment under pressure from slow construction in Brazil and Chile, and mill shutdowns.
• Exposure to forestry fires in southern Chile—2024 losses of ~US$2.8 million.
• Currency and commodity price volatility (BRL, ARS, pulp prices) remain a risk.

Revenue by segment (FY 2024):
• Pulp: US$3,429,265 thousand (52.4% of total)
• Wood products: US$3,115,981 thousand (47.6% of total)

Cost of sales breakdown (FY 2024):
• Wood cost: US$963,721 thousand
• Forestry work: US$702,315 thousand
• Depreciation & amortization: US$619,348 thousand
• Other manufacturing costs: US$2,348,765 thousand

Arauco’s FY 2024 results confirm a clear recovery in its pulp business, underpinned by strong global demand and disciplined pricing amid supply tightness. Debt reduction and free‐cash‐flow generation have strengthened the balance sheet, improving funding flexibility for growth investments. Going forward, the group must navigate headwinds in its wood segment, manage currency‐translation effects (notably BRL and ARS), and mitigate environmental risks such as forest fires. The company’s heavy investment in sustainable forestry and efficiency projects should support medium‐term EPS growth, while consistent dividend policy changes point to shareholder returns staying robust. However, cyclicality in construction end‐markets and sensitivity to commodity cycles warrant a cautious outlook on segment diversification and margin stability.