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Arauco & Constitution Pulp

Filed: 24 Nov 21, 5:21pm
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 November 2021

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.

  Unaudited Interim Consolidated Statements of Financial Position   6 

3.

  Unaudited Interim Consolidated Statements of Profit or Loss   8 

4.

  Unaudited Interim Consolidated Statements of Comprehensive Income   9 

5.

  Unaudited Interim Consolidated Statements of Changes in Equity   10 

6.

  Unaudited Interim Consolidated Statements of Cash Flow   11 

7.

  Unaudited Notes to the Interim Consolidated Financial Statements   12 
  

Annex: Press Release

  


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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

  09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
   Variation
ThU.S.$
 

Current assets

   4,285,748    3,544,325    741,423 

Non-current assets

   12,691,369    12,483,994    207,375 
  

 

 

   

 

 

   

 

 

 

Total assets

   16,977,117    16,028,319    5.92
  

 

 

   

 

 

   

 

 

 

 

Liabilities

  09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
   Variation
ThU.S.$
 

Current liabilities

   1,860,712    1,097,593    763,119 

Non-current liabilities

   7,312,525    7,515,091    (202,566

Non–parent participation

   25,748    30,913    (5,165

Net equity attributable to parent company

   7,778,132    7,384,722    393,410 
  

 

 

   

 

 

   

 

 

 

Total net equity and liabilities

   16,977,117    16,028,319    5.92
  

 

 

   

 

 

   

 

 

 

As of September 30, 2021, total assets increased MU.S.$ 949 compared to December 31, 2020, equivalent to a 5.92% variation. This variation was driven mainly by an increase in property, plants & equipment resulting from the investment in the MAPA project, accounts receivable from sales to national and foreign customers, cash in banks and term deposit, which was partially offset by decreases in current tax assets and biological assets.

In turn, total liabilities increased by MU.S.$ 561 principally due to a 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

  09-30-2021   12-31-2020 

Current Liquidity (current assets / current liabilities)

   2.30    3.23 

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

   1.55    2.10 

 

Debt indicators

  09-30-2021   12-31-2020 

Debt to equity ratio (total liabilities / equity)

   1.18    1.16 

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

   0.20    0.13 

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

   0.80    0.87 
   09-30-2021   09-30-2020 

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

   7.75    0.72 

 

Activity ratio

  09-30-2021   12-31-2020 

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

   2.74    2.68 

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

   3.58    3.46 

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

   131.45    134.30 

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

   100.66    104.08 

As of September 30, 2021, the short-term debt to total debt ratio represented 20% of total liabilities (13% as of December 31, 2020).

Our financial expenses coverage ratio increased from 0.72 to 7.75, mainly due to the profits before taxes generated for the period ended September 30, 2021, compared to a loss before taxes generated in the same period of 2020.

 

1


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2021

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.$ 1,150 compared to a loss of approximately MU.S.$ 57 in the same period of 2020. The variation of MU.S.$ 1,207 is explained by the factors described in the following table:

 

Item

  MU.S.$ 

Gross margin

   1,030 

Distribution and Administrative Expenses

   (145

Other income and expenses

   248 

Others

   74 
  

 

 

 

Net change in profit (loss) before income tax

   1,207 
  

 

 

 

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

  09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Pulp

   2,047,958    1,513,880 

Wood

   2,559,203    1,865,991 

Other

   190    82 
  

 

 

   

 

 

 

Total revenues

   4,607,351    3,379,953 
  

 

 

   

 

 

 

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 September 30, 2021.

 

Sales costs

  09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Wood

   569,827    606,919 

Forestry work and other services

   412,113    338,396 

Depreciation and amortization

   332,442    344,371 

Other operating costs

   1,394,004    1,221,778 
  

 

 

   

 

 

 

Total sales costs

   2,708,386    2,511,464 
  

 

 

   

 

 

 

 

Profitability index

  09-30-2021   12-31-2020 

Profitability on equity

   14.29    0.34 

Profitability on assets

   6.59    0.16 

Return on operating assets

   9.20    (3.90

 

Profitability ratios

  09-30-2021   09-30-2020 

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

   6.8786    (0.4354

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

   815,314    (49,594

Gross margin (ThU.S.$)

   1,898,965    868,489 

Finance costs (ThU.S.$)

   (170,443   (202,099

 

(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

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2021

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

 

 

EBITDA

  09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Profit (loss)

   815,314    (49,594

Finance costs

   170,443    202,099 

Finance income

   (22,612   (23,683

Income tax expense

   335,106    (7,726

EBIT

   1,298,251    121,096 

Depreciation and amortization

   367,418    378,637 

EBITDA

   1,665,669    499,733 

Cost at fair value of the harvest

   245,276    228,072 

Gain from changes in fair value of biological assets

   (124,531   (130,004

Exchange difference

   2,858    16,186 

Others*

   63,735    77,063 

Adjusted EBITDA

   1,853,007    691,049 

 

*

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

During the third quarter, pulp demand remained stable, with some minor price declines in some markets towards the end of the quarter, due to the low season in the northern hemisphere. Customers in every market, but mainly in Asia, have been affected by the rise in logistics costs, which made them reduce their exports and concentrate in the domestic market. World inventories for both fibers increased between June and August 2021, short fiber increased by 8 days and long fiber by 6 days.

In China, pulp demand started to decline towards the end of the third quarter because mills in all type of industries had to reduce their operating rate or stop their production lines due to the government limiting energy consumption in several provinces in the country. The tissue industry started to improve, with some producers achieving some price increases to their final products. The P&W industry remained relatively stable during the quarter, with some producers trying to implement price increases. Long fiber prices remained steady through the quarter, however, short fiber prices decreased. The spread between the long and short fiber, after decreasing for several quarters, began to increase considerably, reaching US$205 at the end of September 2021.

In Europe, pulp demand continued positively throughout the quarter, price remained unchanged at a high level, which caused the price spread with China to increase towards the end of the quarter. The tissue industry started the quarter weak, however, during the quarter it began to improve in both the At-Home and Away-from-Home segments. The P&W industry remained strong, with very good demand for their products, and producers were able to implement price increases for their final products. By the end of the quarter, some producers in the paper industry started to be affected by high energy prices, and to a lesser extent, high chemical prices.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2021

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

 

 

The dissolving pulp market remained steady, with prices slightly declining due to lower demand. The viscose market, after remaining stable during the first months of the quarter, began to deteriorate due to increases in some of their costs.

Production during the third quarter was higher than Q2, but slightly lower compared to the same period of 2020. During the quarter we had the programmed maintenance stoppage of the Licancel mill, in Chile.

Wood Products Business

Panels

Revenues increased when compared to the second quarter, mainly as a result of a 10.8% increase in average prices. Sales volume increased 2.3%.

During the third quarter, demand continued at high levels. The foregoing is explained by an strong demand for products of home improvement and remodeling. We observed this for most of our products, such as MDF, PB and mouldings.

Sawn timber

During the third quarter sales volume decreased by 2.0% while average prices increased by 14.9%.

During the beginning of the third quarter, we observed strong demand and prices especially for remanufactured wood products. Sawn Timber demand decreased somewhat by mid-quarter, especially in China.

Plywood

Sales volume increased by 6.5% during the third quarter, coupled with an increase in average prices of 9.5%. Higher demand in markets such as Chile, Europe, Oceania and the US, despite some effects arising from logistical issues leading to some shipping delays.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2021

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

 

 

4. ANALYSIS OF INTERIM CASH FLOW

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

 

   09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Positive (negative) Cash flow

    

Net cash flows from operating activities

   1,397,646    804,684 

Cash flows from (used in) financing activities:

    

Issuance of shares

   200,000    250,000 

Obtaining and paying loans and bonds

   (249,196   (90,122

Payment of lease liabilities

   (52,600   (55,731

Dividends paid

   (167   (394

Others

   (1,487   (8,938

Cash flows from (used in) investment activities:

    

Purchase and sale of property, plant and equipment

   (922,003   (1,097,274

Purchase and sale of biological assets

   (132,010   (150,200

Purchase and sale of intangible assets

   (3,382   (10,165

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

   43,155    (15,252

Dividends received

   1,454    4,042 

Others

   (1,633   2,236 
  

 

 

   

 

 

 

Positive (negative) net cash flow

   279,777    (367,114
  

 

 

   

 

 

 

Our cash flow from operating activities increased to MU.S.$ 1,398 for the current period (compared to the positive balance of MU.S.$ 805 for the same period in 2020), resulting mainly from higher revenue from customer collections and tax refunds available in the current period.

The cash flow from financing activities shows a negative balance of MU.S.$ 103 for the current period (compared to the positive balance of MU.S.$ 95 for the same period in 2020). The decrease is attributable to the increase in financial debts in the previous period compared to the current period.

Regarding the cash flow from investment activities, the balance decreased to MU.S.$ 1,014 (compared to MU.S.$ 1,267 for the same period of 2020), mainly due to lower disbursements made for the purchase of property, plant and equipment and the sale of the participation in the subsidiary Forestal Los Lagos SpA of MU.S.$ 48 in the current period.

5. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of September 30, 2021 a ratio of fixed rate debt to total consolidated debt of approximately 94.2%, which we believe is consistent with industry standards.

Regarding variations in prices of pulp and forestry products, since the risks of price fluctuation are limited/can be managed without hedging, the Company does not participate in futures trading, which allows it to maintain one of the lowest cost structures in the industry, thes risks are 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 September 30, 2021, 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

September 30, 2021

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

       09-30-2021   12-31-2020 
   Note   ThU.S.$   ThU.S.$ 

Assets

      

Current Assets

      

Cash and cash equivalents

   5-23    1,323,459    1,064,714 

Other current financial assets

   23    16,450    1,763 

Other current non-financial assets

   25    174,865    168,597 

Trade and other current receivables

   23    1,248,167    737,381 

Accounts receivable from related companies

   13    7,334    6,274 

Current inventories

   4    1,081,162    938,279 

Current biological assets

   20    315,035    302,710 

Current tax assets

   6    104,793    320,730 

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

     4,271,265    3,540,448 

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

   22    14,483    3,877 

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

     14,483    3,877 

Total Current Assets

     4,285,748    3,544,325 

Non-Current Assets

      

Other non-current financial assets

   23    9,386    28,982 

Other non-current non-financial assets

   25    99,408    113,214 

Trade and other non-current receivables

   23    14,934    16,606 

Investments accounted for using equity method

   15-16    333,251    316,939 

Intangible assets other than goodwill

   19    94,238    102,090 

Goodwill

   17    58,105    59,567 

Property, plant and equipment

   7    8,749,631    8,325,304 

Right of use assets

   8    192,434    219,134 

Non-current biological assets

   20    3,134,735    3,296,117 

Deferred tax assets

   6    5,247    6,041 

Total Non-Current Assets

     12,691,369    12,483,994 

Total Assets

     16,977,117    16,028,319 
    

 

 

   

 

 

 

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

September 30, 2021

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

 

       09-30-2021  12-31-2020 
   Note   ThU.S.$  ThU.S.$ 

Equity and Liabilities

     

Liabilities

     

Current Liabilities

     

Other current financial liabilities

   23    475,340   307,136 

Current lease liabilities

   8-23    52,498   63,640 

Trade and other current payables

   23    705,335   626,504 

Accounts payable to related companies

   13    7,600   3,739 

Other current provisions

   18    387   386 

Current tax liabilities

   6    94,308   44,672 

Current provisions for employee benefits

   10    5,872   6,786 

Other current non-financial liabilities

   25    519,372   44,730 

Total Current Liabilities other than assets included in disposal groups classified as held for sale

     1,860,712   1,097,593 

Total Current Liabilities

     1,860,712   1,097,593 

Non-Current Liabilities

     

Other non-current financial liabilities

   23    5,446,642   5,714,728 

Non-current lease liabilities

   8-23    125,130   148,115 

Other non-current provisions

   18    28,787   30,450 

Deferred tax liabilities

   6    1,564,459   1,463,886 

Non-current provisions for employee benefits

   10    67,866   74,609 

Other non-current non-financial liabilities

   25    79,641   83,303 

Total Non-Current Liabilities

     7,312,525   7,515,091 

Total Liabilities

     9,173,237   8,612,684 

Equity

     

Issued capital

   3    803,618   603,618 

Retained earnings

     8,227,270   7,889,901 

Other reserves

     (1,252,756  (1,108,797

Equity attributable to parent company

     7,778,132   7,384,722 

Non-controlling interests

     25,748   30,913 

Total Equity

     7,803,880   7,415,635 

Total Equity and Liabilities

     16,977,117   16,028,319 
    

 

 

  

 

 

 

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

September 30, 2021

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

 

       January - September  July - September 
       2021  2020  2021  2020 
   Note   ThU.S.$  ThU.S.$  ThU.S.$  ThU.S.$ 

Statements of profit or loss

       

Revenue

   9    4,607,351   3,379,953   1,705,070   1,202,913 

Cost of sales

   3    (2,708,386  (2,511,464  (923,429  (867,850

Gross profit

     1,898,965   868,489   781,641   335,063 

Other income

   3    405,568   175,623   285,192   52,779 

Distribution costs

   3    (486,457  (389,826  (182,387  (129,581

Administrative expenses

   3    (424,980  (376,396  (137,825  (122,668

Other expense

   3    (123,473  (141,426  (53,017  (33,132

Profit from operating activities

     1,269,623   136,464   693,604   102,461 

Finance income

   3    22,612   23,683   8,178   4,164 

Finance costs

   3    (170,443  (202,099  (52,263  (64,395

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

   3-15    31,486   818   20,270   1,306 

Gains (losses) on exchange differences on translation

     (2,858  (16,186  10,838   13,898 

Profit before income tax

     1,150,420   (57,320  680,627   57,434 

Income Tax

   6    (335,106  7,726   (169,100  (21,385

Net Profit

     815,314   (49,594  511,527   36,049 
    

 

 

  

 

 

  

 

 

  

 

 

 

Net profit attributable to

       

Net profit attributable to parent company

     813,993   (49,320  511,081   36,157 

Net profit attributable to non-controlling interests

     1,321   (274  446   (108

Net Profit

     815,314   (49,594  511,527   36,049 
    

 

 

  

 

 

  

 

 

  

 

 

 

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

       

Basic and diluted earnings per share from continuing operations

     6.8786037   (0.4353879  4,2523338   0.3195220 

Basic and diluted earnings per share

     6.8786037   (0.4353879  4,2523338   0.3195220 
    

 

 

  

 

 

  

 

 

  

 

 

 

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

September 30, 2021

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

       January - September  July - September 
       2021  2020  2021  2020 
   Note   ThU.S.$  ThU.S.$  ThU.S.$  ThU.S.$ 

Net profit

     815,314   (49,594  511,527   36,049 

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    497   (465  (732  (11

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

     497   (465  (732  (11

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    (59,248  (285,017  (83,984  (3,625

Other Comprehensive Income before tax exchange differences on translation

     (59,248  (285,017  (83,984  (3,625

Cash flow hedges

       

Gains (losses) on cash flow hedges, before tax

   23    (125,091  (16,556  (75,351  50,317 

Recycle of cash flow hedges to profit or loss before tax

   23    (10,137  (53,065  —     (32,211

Other Comprehensive Income before tax Cash flow hedges

     (135,228  (69,621  (75,351  18,106 

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

     1,048   (6,512  (1,139  (590

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

     1,048   (6,512  (1,139  (590

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

     (193,428  (361,150  (160,474  13,891 

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

     (95  125   198   6 

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

     (95  125   198   6 

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    41,546   17,589   24,414   (3,838

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

     (230  1,356   240   119 

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

     41,316   18,945   24,654   (3,719

Other comprehensive income (loss)

     (151,710  (342,545  (136,354  10,167 

Comprehensive income (loss)

     663,604   (392,139  375,173   46,216 
    

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive Income (loss) attributable to

       

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

     668,612   (385,674  376,274   47,123 

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

     (5,008  (6,465  (1,101  (907

Total comprehensive income (loss)

     663,604   (392,139  375,173   46,216 
    

 

 

  

 

 

  

 

 

  

 

 

 

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

September 30, 2021

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

09-30-2021

 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

  —     —     —     —     —     —     813,993   813,993   1,321   815,314 

Other comprehensive income, net of tax

  —     (52,919  (93,682  402   818   (145,381  —     (145,381  (6,329  (151,710

Comprehensive income

  —     (52,919  (93,682  402   818   (145,381  813,993   668,612   (5,008  663,604 

Issue of equity

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

Dividends

  —     —     —     —     —     —     (475,058  (475,058  (157  (475,215

Increase (decrease) from transfers and other changes

  —     —     —     —     1,422   1,422   (1,566  (144  —     (144

Changes in equity

  200,000   (52,919  (93,682  402   2,240   (143,959  337,369   393,410   (5,165  388,245 

Closing balance at 09-30-2021

  803,618   (1,134,239  (130,689  (19,323  31,495   (1,252,756  8,227,270   7,778,132   25,748   7,803,880 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

09-30-2020

 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 01-01-2020

  353,618   (902,387  9,010   (19,511  20,024   (892,864  7,873,650   7,334,404   35,011   7,369,415 

Changes in Equity:

  —     —     —     —     —     —     —     —     —     —   

Comprehensive income

  —     —     —     —     —     —     —     —     —     —   

Net profit

  —     —     —     —     —     —     (49,320  (49,320  (274  (49,594

Other comprehensive income, net of tax

  —     (278,822  (52,032  (344  (5,156  (336,354  —     (336,354  (6,191  (342,545

Comprehensive income

  —     (278,822  (52,032  (344  (5,156  (336,354  (49,320  (385,674  (6,465  (392,139

Issue of equity

  250,000   —     —     —     —     —     —     250,000   —     250,000 

Dividends

  —     —     —     —     —     —     —     —     1,076   1,076 

Increase (decrease) from transfers and other changes

  —     —     —     —     4,968   4,968   (4,968  —     —     —   

Changes in equity

  250,000   (278,822  (52,032  (344  (188  (331,386  (54,288  (135,674  (5,389  (141,063

Closing balance at 09-30-2020

  603,618   (1,181,209  (43,022  (19,855  19,836   (1,224,250  7,819,362   7,198,730   29,622   7,228,352 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

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

September 30, 2021

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

 

 

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   January - September 
   2021  2020 
   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

   4,491,787   3,549,835 

Other cash receipts from operating activities

   383,655   581,366 

Classes of cash payments

   

Payments to suppliers for goods and services

   (2,862,068  (2,513,900

Payments to and on behalf of employees

   (446,516  (426,345

Other cash payments from operating activities

   (126,990  (256,680

Interest paid

   (167,578  (180,193

Interest received

   21,612   12,954 

Income taxes paid

   103,929   36,263 

Other inflows (outflows) of cash, net

   (185  1,384 

Net Cash flow from Operating Activities

   1,397,646   804,684 
  

 

 

  

 

 

 

Cash flows from (used in) Investing Activities

   

Cash flow used in obtaining control of subsidiaries and other businesses

   47,988   —   

Cash flow used in the purchase of non-controlling interests

   (33  (3

Other cash payments to acquire interests in joint ventures

   (4,800  (15,249

Loans to related entities

   (1,071  —   

Proceeds from sale of property, plant and equipment

   14,989   415 

Purchase of property, plant and equipment

   (936,992  (1,097,689

Purchase of intangible assets

   (3,382  (10,165

Proceeds from sales of other long-term assets

   29,010   7,411 

Purchase of other non-current assets

   (161,020  (157,611

Dividends received

   1,454   4,042 

Other inflows (outflows) of cash, net

   (562  2,236 

Cash flows used Investing Activities

   (1,014,419  (1,266,613
  

 

 

  

 

 

 

Cash flows from (used in) Financing Activities

   

Total issuance of shares

   200,000   250,000 

Total loanss obtained

   56,184   389,827 

Debt obtained in long-term

   51,184   239,827 

Debt obtained in short-term

   5,000   150,000 

Repayments of loans

   (305,380  (479,949

Payments of lease liabilities

   (52,600  (55,731

Dividends paid

   (167  (394

Other outflows of cash, net

   (1,487  (8,938

Cash flows from (used in) Financing Activities

   (103,450  94,815 
  

 

 

  

 

 

 

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

   279,777   (367,114

Effect of exchange rate changes on cash and cash equivalents

   (21,032  (30,240
  

 

 

  

 

 

 

Net increase (decrease) of Cash and Cash Equivalents

   258,745   (397,354

Cash and cash equivalents, at the beginning of the period

   1,064,714   1,560,012 

Cash and cash equivalents, at the end of the period

   1,323,459   1,162,658 
  

 

 

  

 

 

 

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

September 30, 2021

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

 

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2021 AND 2020 AND AS OF DECEMBER 31, 2020

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 September 30, 2021, Arauco is controlled by Empresas Copec S.A., tax identification number 90,690,000-9, which owns 99,978048% 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 Consolidated Financial Statements presented by Arauco are comprised by the following:

 

  

Interim Consolidated Statements of Financial Position as of September 30, 2021 and as of December 31, 2020.

 

  

Interim Consolidated Statements of Profit or Loss for the periods ended September 30, 2021 and 2020.

 

  

Interim Consolidated Statements of Comprehensive Income for the periods ended September 30, 2021 and 2020.

 

  

Interim Consolidated Statements of Changes in Equity for the periods ended September 30, 2021 and 2020.

 

  

Interim Consolidated Statements of Cash Flows for the periods ended September 30, 2021 and 2020.

 

  

Explanatory disclosures (notes).

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

Period Covered by the Interim Consolidated Financial Statements

Periods ended September 30, 2021 and 2020.

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. 659 on November 12, 2021.

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

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 operating 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 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

September 30, 2021

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

 

 

Summary of significant accounting policies

a) Basis for preparation of the interim consolidated financial statements

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

The interim 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 interim 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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

- 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.

c) Consolidation

The interim 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 interim consolidated financial statements from the date it gains control until the date when the entity ceases to control the subsidiary.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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.

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

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

Certain consolidated subsidiaries have Brazilian 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 interim 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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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 interim consolidated financial statements are presented in U.S. dollars, which is Arauco’s functional and presentation currency.

 

(ii)

Translation to the presentation currency of Arauco

For the purposes of presenting interim 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 interim 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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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

(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 interim interim 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. Loans 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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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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 interim 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 selling expenses.

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 interim consolidated statement of profit or loss.

Financial liabilities are initially recognized at fair value, and in the case of loans, 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 loans included in Other Current and Non-Current Financial Liabilities.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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 interim 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.

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.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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 interim 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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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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 interim 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 interim consolidated statements of profit or loss.

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.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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 interim consolidated statement of financial position in the line item “Investments accounted for using equity method”.

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

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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.

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.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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.

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 loans;

 

 -

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.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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 loans.

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 Interim Consolidated Statement of Financial Position and are further disclosed in Note 8. Likewise, lease liabilities are presented in the Interim 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.

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.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

q)

Biological Assets

IAS 41 requires that biological assets, such as standing trees, are measured at fair value less cost to sell in the interim 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 interim consolidated statements of profit or loss.

 

r)

Income taxes

The tax liabilities are recognized in the interim 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.

 

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.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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.

“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.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

(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.

On September 28, 2021, Arauco update 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, a transaction that was informed to the stock market through a Material Fact (Hecho Esencial). For the following fiscal years, it will be distributed to the shareholders an amount equivalent to the 40% of the cash income of each fiscal year, capable of being distributed as dividends. In any event, the Board of Directors will be able to distribute and pay interim dividends to the shareholders, as long as it is projected a year end with positive financial results and the availability of cash of the Company permit it so.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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.

“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 interim consolidated statement of profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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.

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 interim consolidated statements of financial position.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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, 2021:

 

Amendments and

improvements

  

Content

  

Mandatory application
for annual periods
beginning on or after

IFRS 9, IAS 39, IFRS 7, IFRS 4 y IFRS 16

  

Reference interest rate reform (IBOR). These amendments provide specific simplifications regarding reference rate reform. The Phase 2 amendments address issues that arise from the implementation of the reforms, including the replacement of one benchmark with an alternative one.

  

January 1, 2021

IFRS 16  

Lease concessions

As a result of the coronavirus (COVID-19) pandemic, rent concessions have been granted to lessees. In May 2020, the IASB published an amendment to IFRS 16 that provided an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification. On 31 March 2021, the IASB published an additional amendment to extend the date of the practical expedient from 30 June 2021 to 30 June 2022. Lessees can elect to account for such rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concession as variable lease payments in the period(s) in which the event or condition that triggers the reduced payment occurs.

  January 1, 2021

The amendments above do not have an impact on Arauco Interim Consolidated Financial Statements during its initial application period.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

IFRS 10 y IAS 28-Amendments

 

  Asset sale or contribution between an investor and an associate or joint venture.  Indeterminate
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, 2023

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.

  January 1, 2022
  

IFRS 16 Leases

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

 

  
  

NIIF 1: First-time Adoption of International Financial Reporting Standards

Allows entities that have valued their assets and liabilities at their book values in their parent company’s accounts to also value cumulative translation differences using the amounts reported by the parent company.

 

  
  

IAS 41 Agriculture

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

 

  
IAS 1 and IAS 8  

Presentation of financial statements’, on classification of liabilities

clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date (for example, the receipt of a waiver or a breach of covenant). The amendment also clarifies what IAS 1 means when it refers to the ‘settlement’ of a liability.

 

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

Arauco estimates that the adoption of the standards, amendments and interpretations described above will not have a significant impact on Arauco’s 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 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 the business. Thus, the new segments are: Pulp and 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 and September 30, 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 Income, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows and Notes to the statements financial statements, except for the Note 24).

Changes to accounting estimates

As of September 30, 2021, there have been no changes in the methodologies for calculating the accounting estimates with respect to the 2020 financial year.

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 September 30, 2021, the shareholders composition according to the amount of shares owned is as follows:

 

Shareholders

  % 

Empresas Copec S.A.

   99.97804761

Chilur S.A.

   0.02054047

Administradora Sintra Ltda.

   0.00132808

AntarChile S.A.

   0.00008384
   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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

   09-30-2021  12-31-2020

Description of Ordinary Capital Share Types

  100% of Capital corresponds to
ordinary shares

Number of Authorized Shares by Type of Capital in Ordinary Shares

  120,474,350  117,223,375

Nominal Value of Shares by Type of Capital in Ordinary Shares

  U.S.$ 6.6704
per share
  U.S.$ 5.1493
per share

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

  ThU.S.$ 803,618  ThU.S.$ 603,618
   09-30-2021  12-31-2020

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

  120,474,350  117,223,375

 

b)

Dividends paid

As of September 30, 2021 and as of December 31, 2020, no dividends were paid.

In 2021, Arauco update 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.

 

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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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

d)

Other items in the 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 September 30, 2021 and 2020 are as follows:

 

   January - September   July - September 
   2021
ThU.S.$
   2020
ThU.S.$
   2021
ThU.S.$
   2020
ThU.S.$
 

Classes of Other Income

        

Other Income, Total

   405,568    175,623    285,192    52,779 

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

   124,531    130,004    41,451    41,861 

Net income from insurance compensation

   847    2,378    241    272 

Revenue from export promotion

   1,134    718    392    210 

Lease income

   1,177    1,396    452    612 

Gain on sales of assets

   237,245    3,015    233,597    799 

Access easement

   295    411    134    376 

Recovery of tax credits

   6    21,133    —      —   

Compensations received

   7,018    964    —      14 

Gain on sales of associates

   20,381    —      —      —   

Other operating results

   12,934    15,604    8,925    8,635 

Classes of Other Expenses by activity

        

Total of Other Expenses by activity

   (123,473   (141,426   (53,017   (33,132

Provision Legal expenses

   (7,115   (3,770   (943   (951

Impairment provision for property, plant and equipment and others

   (42,812   (53,364   (30,980   (841

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

   (4,941   (23,749   (1,328   (2,679

Expenses related to projects

   (16,206   (10,755   (4,809   (3,980

Loss of asset sales

   (7,579   (7,257   (4,377   (4,047

Loss and repair of assets

   (692   (5,213   (198   (1,058

Loss of forest due to fires

   (21,669   (19,183   (4,166   (13,986

Other Taxes

   (13,668   (12,128   (3,657   (3,608

Research and development expenses

   (2,879   (2,093   (842   (815

Fines, readjustments and interests

   (189   (441   (96   236 

Loss on sale of permanent investments

   (431   —      —      —   

Loss of tax credits

   (396   —      (141   —   

Other expenses

   (4,896   (3,473   (1,480   (1,403

Classes of financing income

        

Financing income, total

   22,612    23,683    8,178    4,164 

Financial income from mutual funds - term deposits

   21,071    11,246    7,866    3,179 

Financial income resulting from swap - forward instruments

   39    835    —      168 

Other financial income

   1,502    11,602    312    817 

Classes of financing costs

        

Financing costs, Total

   (170,443   (202,099   (52,263   (64,395

Interest expense, Banks loans

   (17,701   (22,549   (7,029   (6,774

Interest expense, Bonds

   (103,068   (129,119   (29,090   (41,427

Interest expense, other financial instruments

   (17,776   (24,830   (6,813   (7,459

Interest expence for right-of-use

   (6,294   (7,129   (1,882   (2,299

Other financial costs

   (25,604   (18,472   (7,449   (6,436

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

        

Total

   31,486    818    20,270    1,306 

Investments in associates

   389    4,532    250    902 

Joint ventures

   31,097    (3,714   20,020    404 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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 – September   July – September 
   2021   2020   2021   2020 

Cost of sales (*)

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

Timber

   569,827    606,919    159,780    216,527 

Forestry labor costs and other services

   412,113    338,396    155,941    122,921 

Depreciation and amortization

   300,318    300,352    96,061    101,188 

Depreciation for right of use

   32,124    44,019    10,217    13,933 

Maintenance costs

   195,724    167,418    68,055    54,637 

Chemical costs

   389,615    328,163    144,127    110,320 

Sawmill Services

   79,701    72,307    26,044    22,859 

Other Raw Materials

   182,254    159,561    72,673    59,962 

Other Indirect costs

   93,540    85,818    34,994    30,379 

Energy and fuel

   142,540    127,269    56,848    43,541 

Cost of electricity

   30,284    24,477    8,202    7,336 

Staff expenses

   280,346    256,765    90,487    84,247 

Total

   2,708,386    2,511,464    923,429    867,850 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(*)

Total amount is comprised of the cost of inventory sales for ThU.S.$ 2,631,561 (ThU.S.$ 2,440,006 as of September 30, 2020) and the cost of rendering services for ThU.S.$ 76,825 (ThU.S.$ 71,458 as of September 30, 2020).

 

   January – September   July – September 
   2021   2020   2021   2020 

Distribution cost

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

Selling costs

   27,764    27,644    10,109    9,205 

Commissions

   10,635    10,003    3,438    3,607 

Insurance

   2,911    2,846    937    646 

Provision for doubtful accounts

   519    1,063    219    426 

Other selling costs

   13,699    13,732    5,515    4,526 

Shipping and freight costs

   458,693    362,182    172,278    120,376 

Port services

   37,493    29,673    13,946    11,141 

Freights

   388,068    298,588    146,736    97,099 

Depreciation for right of use

   1,813    1,238    602    413 

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

   31,319    32,683    10,994    11,723 

Total

   486,457    389,826    182,387    129,581 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

   January – September   July – September 
   2021   2020   2021   2020 

Administrative expenses

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

Wages and salaries

   182,074    157,236    59,212    52,967 

Marketing, advertising, promotion and publications expenses

   9,213    6,745    3,241    1,781 

Insurances

   17,909    17,885    6,105    7,082 

Depreciation and amortization

   27,689    24,984    9,652    8,753 

Depreciation for right of use

   5,102    6,160    1,631    1,993 

Computer services

   24,800    24,167    6,500    7,255 

Lease rentals (offices, other property and vehicles)

   4,765    3,904    1,539    843 

Donations, contributions, scholarships

   4,616    9,647    1,553    896 

Fees (legal and technical advisors)

   28,657    27,293    10,441    9,085 

Property taxes, city permits and rights

   19,035    14,455    6,322    4,968 

Cleaning services, security services and transportation

   25,410    19,745    8,433    8,450 

Third-party variable services (maneuvers, logistics)

   32,284    27,425    10,357    9,148 

Basic services (electricity, telephone)

   15,264    5,743    3,705    2,145 

Maintenance and repair

   5,802    4,228    2,088    1,369 

Seminars, courses, training materials

   1,927    1,232    843    367 

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

   20,433    25,547    6,203    5,566 

Total

   424,980    376,396    137,825    122,668 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

e)

Auditor Fees and Number of Employees

 

Auditors fees

  09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Audit services

   1,747    1,815 

Other services

    

Tax services

   616    865 

Others

   100    183 

TOTAL

   2,463    2,863 
  

 

 

   

 

 

 

Number of employees

     

 

 
   17,551    18,119 

NOTE 4. INVENTORIES

 

Components of Inventory

  09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Raw materials

   77,163    83,267 

Production supplies

   144,673    129,065 

Work in progress

   56,233    64,449 

Finished goods

   611,573    460,419 

Spare Parts

   191,520    201,079 

Total Inventories

   1,081,162    938,279 
  

 

 

   

 

 

 

Inventories recognized as cost of sales as of September 30, 2021 were ThU.S.$ 2,631,561 (ThU.S.$ 2,440,006 as of September 30, 2020).

In order to have inventories recorded at net realizable value as of September 30, 2021, a net decrease of inventories was recognized associated with an higher provision of obsolescence of ThU.S.$ 24,410 (decrease of ThU.S.$ 18,834 as of September 30, 2020). As of September 30, 2021, the amount of obsolescence provision is ThU.S.$ 56,010 (ThU.S.$ 31,600 as of December 31, 2020).

As of September 30, 2021, there were inventory write-offs of ThU.S.$ 635 (ThU.S.$ 1,321 as of September 30, 2020) 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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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

  09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Cash on hand

   124    99 

Bank checking account balances

   651,464    357,354 

Time deposits

   544,030    507,519 

Mutual funds

   127,841    199,742 

Total

   1,323,459    1,064,714 
  

 

 

   

 

 

 

The risk classification of the Company’s mutual funds as of September 30, 2021 and as of December 31, 2020 is shown below.

 

   09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

AAAfm

   60,139    137,534 

No classification

   67,702    62,208 

Total Mutual Funds

   127,841    199,742 
  

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

Changes in Financial Liabilities

 

   09-30-2021 
   Borrowings from
banks
  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   56,184   —     —     56,184 
  

(-) Borrowings paid

   (278,661  128   (26,847  (305,380
  

(-) Commissions paid

   (1,945  —     —     (1,945
  

(-) Interest paid

   (9,188  (11,415  (140,092  (160,695

(+) Accrued interest

   10,217   10,034   151,505   171,756 

(+/-) Inflation adjustment

   (33,043  —     (110,627  (143,670

(+/-) Changes in fair value

   —     274,463   —     274,463 

(+/-) Other non-cash movements

   3,342   —     6,063   9,405 

Closing balance

   1,021,166   312,870   4,587,946   5,921,982 
    

 

 

  

 

 

  

 

 

  

 

 

 

 

   12-31-2020 
   Borrowings from
banks
  Hedging
liabilities
  Bonds and
promissory notes
  Other financial
liabilities, Total
 
   ThU.S.$  ThU.S.$  ThU.S.$  ThU.S.$ 

Opening balance January 1

   947,022   134,275   4,831,743   5,913,040 

Cash flows

  (+) Borrowings obtained   412,077   —     —     412,077 
  

(-) Borrowings paid

   (257,551  (37,127  (225,796  (520,474
  

(-) Commissions paid

   (9,113  —     —     (9,113
  

(-) Interest paid

   (29,515  (32,189  (194,512  (256,216

(+) Accrued interest

   26,174   33,613   204,678   264,465 

(+/-) Inflation adjustment

   51,510   —     83,809   135,319 

(+/-) Changes in fair value

   —     (58,898  —     (58,898

(+/-) Other non-cash movements

   133,656   (14  8,022   141,664 

Closing balance

   1,274,260   39,660   4,707,944   6,021,864 
    

 

 

  

 

 

  

 

 

  

 

 

 

 

   Lease liabilities 
   09-30-2021  12-31-2020 
   ThU.S.$  ThU.S.$ 

Opening balance January 1

   211,755   271,025 
Cash flows  (-) Borrowings paid   (52,600  (75,233
  

(-) Interest paid

   (6,883  (9,428

(+) Accrued interest

   7,024   10,021 

(+/-) Inflation adjustment

   (12,544  4,394 

(+) Increase due to new leases liabilities

   32,933   16,760 

(+/-) Other movements

   (2,057  (5,784

Closing balance

   177,628   211,755 
    

 

 

  

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

NOTE 6. INCOME TAXES

The tax rates applicable in the countries in which Arauco operates are 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 net taxable income of up to 5,000,000 Argentine pesos (AR$) (approximately ThU.S.$ 51 as of September 30, 2021), a 30% rate will be applied to companies with a net taxable income ranging between AR$ 5,000,000 and AR$ 50,000,000 (approximately ThU.S.$ 506 as of September 30, 2021), and a 35% rate will be applied to companies with a net 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. The rate applied to Arauco Argentina S.A. in 2020 was 30%.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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:

 

   09-30-2021   12-31-2020 

Deferred Tax Assets

  ThU.S.$   ThU.S.$ 

Deferred tax Assets relating to Provisions

   4,707    5,042 

Deferred tax Assets relating to Accrued Liabilities

   7,941    8,107 

Deferred tax Assets relating to Post-Employment benefits

   19,827    22,026 

Deferred tax Assets relating to Property, Plant and equipment

   31,972    24,397 

Deferred tax Assets relating to Impairment provision

   9,025    14,193 

Deferred tax Assets relating to Financial Instruments

   120,347    79,765 

Deferred tax Assets relating to Tax Loss Carryforward

   145,649    126,405 

Deferred tax Assets relating to Inventories

   15,800    7,964 

Deferred tax Assets relating to Provisions for Income

   23,098    7,905 

Deferred tax Assets relating to Allowance for Doubtful Accounts

   2,140    2,427 

Deferred tax Assets relating to Intangible revaluation

   2,825    3,713 

Deferred tax Assets relating to tax credits

   12,267    20,898 

Deferred tax Assets relating to Other Deductible Temporary Differences

   28,515    20,018 

Total Deferred Tax Assets

   424,113    342,860 
  

 

 

   

 

 

 

Offsetting presentation

   (418,866   (336,819
  

 

 

   

 

 

 

Net Effect

   5,247    6,041 
  

 

 

   

 

 

 

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 record as deferred tax assets, given our the projection of future profits, will allow the recovery of these assets. The total amount of these tax losses is ThU.S.$ 865,886 (ThU.S.$ 622,621 at December 31, 2020).

In addition, as of the closing date of these interim consolidated financial statements there are ThU.S.$ 145,723 (ThU.S.$ 152,898 at December 31, 2020) of non-recoverable tax losses from subsidiaries in USA and from joint operations, 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:

 

   09-30-2021   12-31-2020 

Deferred Tax Liabilities

  ThU.S.$   ThU.S.$ 

Deferred tax Liabilities relating to Property, Plant and Equipment

   1,201,489    1,020,282 

Deferred tax Liabilities relating to Financial Instruments

   25,360    26,755 

Deferred tax Liabilities relating to Biological Assets

   634,773    644,348 

Deferred tax Liabilities relating to Inventory

   49,467    32,567 

Deferred tax Liabilities relating to Prepaid Expenses

   39,403    42,319 

Deferred tax Liabilities relating to Intangible

   13,522    14,826 

Deferred tax Liabilities relating to Other Taxable Temporary Differences

   19,311    19,608 

Total Deferred Tax Liabilities

   1,983,325    1,800,705 
  

 

 

   

 

 

 

Offsetting presentation

   (418,866   (336,819
  

 

 

   

 

 

 

Net Effect

   1,564,459    1,463,886 
  

 

 

   

 

 

 

The effect of this period in current and deferred tax liabilities related to financial hedging instruments corresponds to a credit of ThU.S.$ 41,546 as of September 30, 2021 (credit of ThU.S.$ 17,589 as of September 30, 2020), which is presented net in Reserves for Cash Flow Hedges in the interim Consolidated Statement of Changes in Equity.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

Reconciliation of deferred tax assets and liabilities

 

  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
09-30-2021
 

Deferred Tax Assets

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

Deferred tax Assets relating to Provisions

  5,042   (293  —     —     (42  4,707 

Deferred tax Assets relating to Accrued Liabilities

  8,107   (133  —     (24  (9  7,941 

Deferred tax Assets relating to Post-Employment benefits

  22,026   (2,035  (95  (56  (13  19,827 

Deferred tax Assets relating to Property, Plant and equipment

  24,397   7,575   —     —     —     31,972 

Deferred tax Assets relating to Impairment provision

  14,193   (4,860  —     —     (308  9,025 

Deferred tax Assets relating to Financial Instruments

  79,765   (849  41,652   —     (221  120,347 

Deferred tax Assets relating to Tax Loss Carryforward

  126,405   20,468   —     (207  (1,017  145,649 

Deferred tax Assets relating to Inventories

  7,964   7,855   —     —     (19  15,800 

Deferred tax Assets relating to Provisions for Income

  7,905   15,203   —     —     (10  23,098 

Deferred tax Assets relating to Allowance for Doubtful Accounts

  2,427   (281  —     —     (6  2,140 

Deferred tax Assets relating to Intangible revaluation

  3,713   (749  —     —     (139  2,825 

Deferred tax Assets relating to tax credits

  20,898   (8,631  —     —     —     12,267 

Deferred tax Assets relating to Other Deductible Temporary Differences

  20,018   8,733   —     4   (240  28,515 

Total Deferred Tax Assets

  342,860   42,003   41,557   (283  (2,024  424,113 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  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 09-
30-2021
 

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   183,364   —     (121  (2,036  1,201,489 

Deferred tax Liabilities relating to Financial Instruments

  26,755   (1,501  106   —     —     25,360 

Deferred tax Liabilities relating to Biological Assets

  644,348   (3,740  —     (2,946  (2,889  634,773 

Deferred tax Liabilities relating to Inventory

  32,567   18,263   —     (1,395  32   49,467 

Deferred tax Liabilities relating to Prepaid Expenses

  42,319   (2,913  —     —     (3  39,403 

Deferred tax Liabilities relating to Intangible

  14,826   (1,065  —     —     (239  13,522 

Deferred tax Liabilities relating to Other Taxable Temporary Differences

  19,608   187   —     (179  (305  19,311 

Total Deferred Tax Liabilities

  1,800,705   192,595   106   (4,641  (5,440  1,983,325 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

   Opening
Balance
01-01-2020
   Deferred tax
Income
(Expenses)
  Deferred tax of
items charged
to other
comprehensive
income
   Increase
(decrease)
Net exchange
differences
  Closing
balance
12-31-2020
 

Deferred Tax Assets

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

Deferred tax Assets relating to Provisions

   5,749    (267  —      (440  5,042 

Deferred tax Assets relating to Accrued Liabilities

   7,182    937   —      (12  8,107 

Deferred tax Assets relating to Post-Employment benefits

   20,378    1,598   68    (18  22,026 

Deferred tax Assets relating to Property, Plant and equipment

   16,609    7,788   —      —     24,397 

Deferred tax Assets relating to Impairment provision

   20,169    (4,598  —      (1,378  14,193 

Deferred tax Assets relating to Financial Instruments

   68,390    (1,641  13,685    (669  79,765 

Deferred tax Assets relating to Tax Loss Carryforward

   133,221    2,605   —      (9,421  126,405 

Deferred tax Assets relating to Inventories

   12,460    (4,363  —      (133  7,964 

Deferred tax Assets relating to Provisions for Income

   6,631    1,295   —      (21  7,905 

Deferred tax Assets relating to Allowance for Doubtful Accounts

   4,349    (1,545  —      (377  2,427 

Deferred tax Assets relating to Intangible revaluation

   6,044    (1,042  —      (1,289  3,713 

Deferred tax Assets relating to tax credits

   19,460    1,438   —      —     20,898 

Deferred tax Assets relating to Other Deductible Temporary Differences

   16,161    5,096   —      (1,239  20,018 

Total Deferred Tax Assets

   336,803    7,301   13,753    (14,997  342,860 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 
   Opening
Balance
01-01-2020
   Deferred tax
(Income)
Expenses
  Deferred tax of
items charged
to other
comprehensive
income
   

Increase

(decrease)
Net exchange
differences

  Closing
balance 12-
31-2020
 

Deferred Tax Liabilities

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

Deferred tax Liabilities relating to Property, Plant and Equipment

   900,415    128,933   —      (9,066  1,020,282 

Deferred tax Liabilities relating to Financial Instruments

   25,630    986   139    —     26,755 

Deferred tax Liabilities relating to Biological Assets

   642,221    20,239   —      (18,112  644,348 

Deferred tax Liabilities relating to Inventory

   38,251    (5,711  —      27   32,567 

Deferred tax Liabilities relating to Prepaid Expenses

   41,338    989   —      (8  42,319 

Deferred tax Liabilities relating to Intangible

   17,942    (1,118  —      (1,998  14,826 

Deferred tax Liabilities relating to Other Taxable Temporary Differences

   25,126    (2,846  —      (2,672  19,608 

Total Deferred Tax Liabilities

   1,690,923    141,472   139    (31,829  1,800,705 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:

 

   09-30-2021   12-31-2020 
   Deductible   Taxable   Deductible   Taxable 
   Difference   Difference   Difference   Difference 

Detail of classes of Deferred Tax Temporary Differences

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

Deferred Tax Assets

   278,464    —      216,455    —   

Deferred Tax Assets - Tax loss carryforward

   145,649    —      126,405    —   

Deferred Tax Liabilities

   —      1,983,325    —      1,800,705 

Total

   424,113    1,983,325    342,860    1,800,705 
  

 

 

   

 

 

   

 

 

   

 

 

 
   January - September   July - September 
   2021   2020   2021   2020 

Detail of Temporary Difference Income and Loss Amounts

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

Deferred Tax Assets

   21,535    17,855    17,771    3,108 

Deferred Tax Assets - Tax loss carryforward

   20,468    51,081    (77,473   19,973 

Deferred Tax Liabilities

   (192,595   (20,541   (27,355   (6,844

Total

   (150,592   48,395    (87,057   16,237 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income Tax Expense

Income tax expense consists of the following:

 

   January – September   July - September 

Income Tax composition

  2021   2020   2021   2020 
   ThU.S.$   ThU.S.$   ThU.S.$   ThU.S.$ 

Current income tax expense

   (180,887   (41,271   (79,331   (36,534

Tax benefit from tax credits, used to reduce current tax expense

   5,026    3,552    —      —   

Prior period current income tax adjustments

   (2,788   1,226    (59   (76

Other current benefit tax (expenses)

   (5,865   (4,176   (2,653   (1,012

Current Tax Expense, Net

   (184,514   (40,669   (82,043   (37,622

Deferred tax expense relating to origination and reversal of temporary differences

   (171,060   (2,686   (9,584   (3,736

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

   20,468    51,081    (77,473   19,973 

Total deferred Tax benefit (expense), Net

   (150,592   48,395    (87,057   16,237 

Income Tax benefit (expense), Total

   (335,106   7,726    (169,100   (21,385
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table presents the current income tax expense detailed by foreign and domestic (Chile) companies at September 30, 2021 and 2020:

 

   January – September   July - September 
   2021   2020   2021   2020 
   ThU.S.$   ThU.S.$   ThU.S.$   ThU.S.$ 

Foreign current income tax expense

   (93,184   2,132    (39,904   (11,197

Domestic current income tax expense

   (91,330   (42,801   (42,139   (26,425

Total current income tax expense

   (184,514   (40,669   (82,043   (37,622

Foreign deferred tax benefit (expense)

   (53,254   (14,907   (3,266   (325

Domestic deferred tax benefit (expense)

   (97,338   63,302    (83,791   16,562 

Total deferred tax benefit (expense)

   (150,592   48,395    (87,057   16,237 

Total income tax benefit (expense)

   (335,106   7,726    (169,100   (21,385
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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 - September  July - September 

Reconciliation of Income tax from Statutory Rate to Effective Tax Rate

  2021  2020  2021  2020 
  ThU.S.$  ThU.S.$  ThU.S.$  ThU.S.$ 

Statutory domestic (Chile) income tax rate

   27.0  27.0  27.0  27.0

Tax Expense at statutory tax rate

   (310,613  15,476   (183,769  (15,508

Tax effect of foreign tax rates

   (7,829  (2,061  (4,183  (420

Tax effect of revenues exempt from taxation

   43,652   3,720   17,714   1,324 

Tax effect of not deductible expenses

   (16,853  (13,069  (3,109  (9,420

Tax rate effect of previously unrecognized tax loss

   —     —     —     (11,066

Tax rate effect of previously unrecognized tax benefits in P&L

   —     14,301   —     14,301 

Tax effect of a new evaluation of deferred tax assets

   8,993   (1,787  4,539   (1,009

Tax effect of changes in tax rates

   (45,980  —     (886  —   

Tax Effect of tax provided in excess in prior periods

   (2,788  1,226   (59  (76

Other tax rate effects

   (3,688  (10,080  653   489 

Total adjustments to tax expense at applicable tax rate

   (24,493  (7,750  14,669   (5,877

Tax benefit (expense) at effective tax rate

   (335,106  7,726   (169,100  (21,385
  

 

 

  

 

 

  

 

 

  

 

 

 

Current tax assets and liabilities

The current tax assets and liabilities balances are as follow:

 

Current tax Assets

  09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Monthly Provisional Payments (MPP)

   415    17,540 

Income tax receivable

   94,876    298,093 

Fixed assets tax credits

   —      10 

Provision tax income

   (2,038   (928

Other tax receivables

   11,540    6,015 

Total

   104,793    320,730 
  

 

 

   

 

 

 

Current tax Liabilities

  09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Provision tax income (First category)

   145,341    81,368 

Monthly Provisional Payments (MPP)

   (69,611   (43,232

Other tax payables

   18,578    6,536 

Total

   94,308    44,672 
  

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

 

Property, Plant and Equipment, Net

  09-30-2
021 ThU.S.$
   12-31-2020
ThU.S.$
 

Construction work in progress

   2,570,372    1,944,578 

Land

   884,846    930,372 

Buildings

   2,190,785    2,248,784 

Plant and equipment

   2,937,121    3,026,136 

Information technology equipment

   23,981    26,166 

Fixtures and fittings

   13,549    16,627 

Motor vehicles

   13,872    15,055 

Other property, plant and equipment

   115,105    117,586 

Total Net

   8,749,631    8,325,304 
  

 

 

   

 

 

 

Property, Plant and Equipment, Gross

    

Construction work in progress

   2,570,372    1,944,578 

Land

   884,846    930,372 

Buildings

   4,462,124    4,420,293 

Plant and equipment

   7,094,418    7,027,942 

Information technology equipment

   104,401    102,632 

Fixtures and fittings

   49,263    50,209 

Motor vehicles

   59,605    59,515 

Other property, plant and equipment

   132,647    135,199 

Total Gross

   15,357,676    14,670,740 
  

 

 

   

 

 

 

Accumulated depreciation and impairment

    

Buildings

   (2,271,339   (2,171,509

Plant and equipment

   (4,157,297   (4,001,806

Information technology equipment

   (80,420   (76,466

Fixtures and fittings

   (35,714   (33,582

Motor vehicles

   (45,733   (44,460

Other property, plant and equipment

   (17,542   (17,613

Total

   (6,608,045   (6,345,436
  

 

 

   

 

 

 

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

As of September 30, 2021, 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.

 

   09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Amount committed for the acquisition of property, plant and equipment

   322,130    542,230 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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 September 30, 2021 and as of December 31, 2020:

 

   Construction
work in
progress
  Land  Buildings  Plant and
equipment
  IT
Equipment
  Fixtures
and
fittings
  Motor
vehicles
  Other
Property,
Plant and
Equipment
  TOTAL 

Reconciliation of Property, Plant
and Equipment

  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

   808,823   74   4,603   11,327   454   119   255   3,127   828,782 

Disposals

   (149  (25,150  (583  (15,490  (166  (4  (290  (205  (42,037

Withdrawals

   (1,179  —     (1,409  (3,930  (5  —     (13  (4,039  (10,575

Depreciation

   —     —     (103,497  (216,112  (4,857  (2,355  (2,475  (887  (330,183

Impairment loss recognized in profit or loss

   —     (44  (4,669  10,300   (74  —     (19  —     5,494 

Increase (decrease) through net exchange differences

   (165  (4,963  (5,253  (7,669  77   130   (8  (329  (18,180

Reclassification of assets held for sale

   —     55   949   206   —     —     —     —     1,210 

Increase (decrease) through transfers from construction in progress

   (181,536  822   51,907   126,315   2,386   (961  1,215   (148  —   

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

   625,794   (45,526  (57,999  (89,015  (2,185  (3,078  (1,183  (2,481  424,327 

Closing balance 09-30-2021

   2,570,372   884,846   2,190,785   2,937,121   23,981   13,549   13,872   115,105   8,749,631 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

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 01-01-2020

   1,128,431   971,061   2,247,996   3,139,761   20,906   13,421   14,922   111,685   7,648,183 

Changes

          

Additions

   1,258,602   3,449   5,149   38,618   906   1,602   1,553   12,839   1,322,718 

Disposals

   —     (14,957  (545  (8,323  (5  (1  (197  (1,583  (25,611

Withdrawals

   (418  (782  (1,540  (3,986  (97  (30  (6  (46  (6,905

Depreciation

   —     —     (139,971  (286,740  (6,572  (3,009  (4,325  (1,149  (441,766

Impairment loss recognized in profit or loss

   —     —     (22,176  (36,032  (480  —     (107  —     (58,795

Increase (decrease) through net exchange differences

   (4,102  (28,405  (21,954  (55,349  (288  (190  (309  (4,709  (115,306

Increase (decrease) through transfers from construction in progress

   (437,935  6   181,825   235,776   11,796   4,834   3,149   549   —   

Reclassification from lease to Property, plant and equipment

   —     —     —     2,411   —     —     375   —     2,786 

Total changes

   816,147   (40,689  788   (113,625  5,260   3,206   133   5,901   677,121 

Closing balance 12-31-2020

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

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

The depreciation expense for the period ending September 30, 2021 and 2020 is as follows:

 

   January - September   July - September 
   2021   2020   2021   2020 

Depreciation for the year

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

Cost of sales

   300,318    300,352    96,061    102,420 

Administrative expenses

   14,191    13,556    4,986    4,667 

Other expenses

   372    1,885    153    284 

Total

   314,881    315,793    101,200    107,371 
  

 

 

   

 

 

   

 

 

   

 

 

 

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

September 30, 2021

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

 

   09-30-2021   12-31-2020 
   ThU.S.$   ThU.S.$ 
  

 

 

   

 

 

 

Property, Plant and Equipment by right of use, Net

    

Land

   73,218    60,761 

Buildings

   21,386    19,954 

Plant and equipment

   18,235    24,035 

Information technology equipment

   284    380 

Fixtures and fittings

   274    698 

Motor vehicles

   64,154    92,951 

Other property, plant and equipment

   14,883    20,355 

Total Net

   192,434    219,134 
  

 

 

   

 

 

 

Property, Plant and Equipment by right of use, Gross

    

Land

   92,974    74,047 

Buildings

   32,002    30,443 

Plant and equipment

   31,369    67,662 

Information technology equipment

   882    798 

Fixtures and fittings

   1,512    1,636 

Motor vehicles

   168,567    168,808 

Other property, plant and equipment

   20,640    21,574 

Total Gross

   347,946    364,968 
  

 

 

   

 

 

 

Accumulated depreciation and impairment by right of use

    

Land

   (19,756   (13,286

Buildings

   (10,616   (10,489

Plant and equipment

   (13,134   (43,627

Information technology equipment

   (598   (418

Fixtures and fittings

   (1,238   (938

Motor vehicles

   (104,413   (75,857

Other property, plant and equipment

   (5,757   (1,219

Total

   (155,512   (145,834
  

 

 

   

 

 

 

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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 September 30, 2021 and as of December 31, 2020:

 

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

   19,370   11,539   1,578   127   —     319   —     32,933 

Withdrawals

   (15  (2,976  —     —     —     (211  —     (3,202

Depreciation

   (6,795  (4,090  (6,046  (202  (300  (28,888  (1,593  (47,914

Increase (decrease) through net exchange differences

   (103  13   (441  (3  —     1   —     (533

Increase (decrease) through others

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

Reclassification from lease to Property, plant and equipment

   —     (3,054  (891  (18  (124  (18  3,524   (581

Total changes

   12,457   1,432   (5,800  (96  (424  (28,797  (5,472  (26,700

Closing balance 09-30-2021

   73,218   21,386   18,235   284   274   64,154   14,883   192,434 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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 01-01-2020

   67,804   25,940   44,753   574   1,138   126,587   17,583   284,379 

Changes

         

Additions

   5,543   1,601   —     203   —     5,663   3,750   16,760 

Withdrawals

   (474  (33  (5,087  —     —     (862  (435  (6,891

Depreciation

   (7,032  (6,224  (17,455  (270  (481  (38,885  (2,802  (73,149

Increase (decrease) through net exchange differences

   (5,080  200   540   (63  41   (297  —     (4,659

Increase (decrease) through others

   —     (1,530  1,284   (64  —     745   5,045   5,480 

Reclassification from lease to Property, plant and equipment

   —     —     —     —     —     —     (2,786  (2,786

Total changes

   (7,043  (5,986  (20,718  (194  (440  (33,636  2,772   (65,245

Closing balance 12-31-2020

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

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The depreciation expense for the period ending September 30, 2021 and 2020 Property, Plant and Equipment by right of use is as follows:

 

   January - September   July - Septemeber 

Depreciation for the period

  2021
ThU.S.$
   2020
ThU.S.$
   2021
ThU.S.$
   2020
ThU.S.$
 

Cost of sales

   32,124    44,019    10,217    13,933 

Distribution costs

   1,813    1,238    602    413 

Administrative expenses

   5,102    6,160    1,631    1,993 

Total

   39,039    51,417    12,450    16,339 
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation charged to profit or loss statement differs from the movement of the period for Property, Plant and Equipment for right of use. This is mainly due to the periodic cost processes in which a portion of the depreciation charge remains in the Inventories. Furthermore, this deviation is also affected by the conversion differences of the companies with 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 – September   July - September 
   2021
ThU.S.$
   2020
ThU.S.$
   2021
ThU.S.$
   2020
ThU.S.$
 

Expenses from payments of variable leases

   105,307    100,902    31,494    35,582 

Expenses from low value leases

   2,343    3,000    797    655 

Expenses from short-term leases

   17,056    24,079    1,674    2,147 

Total

   124,706    127,981    33,965    38,384 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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:

 

   09-30-2021 

Periods

  Gross
ThU.S.$
   Interest
ThU.S.$
   Present
Value
ThU.S.$
 

Less than one year

   54    54    —   

Between one and five years

   —      —      —   

More than five years

   —      —      —   

Total

   54    54    —   
  

 

 

   

 

 

   

 

 

 

 

   12-31-2020 

Periods

  Gross
ThU.S.$
   Interest
ThU.S.$
   Present
Value

ThU.S.$
 

Less than one year

   121    12    109 

Between one and five years

   26    —      26 

More than five years

   —      —      —   

Total

   147    12    135 
  

 

 

   

 

 

   

 

 

 

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 five-years at market interest rates and leased assets are forestry machinery and equipment. They also include an early termination option, under general and special conditions stipulated in each contract.

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 - September   July - September 

Classes of revenue

  2021
ThU.S.$
   2020
ThU.S.$
   2021
ThU.S.$
   2020
ThU.S.$
 

Revenue from sales of goods

   4,535,316    3,324,674    1,679,431    1,186,123 

Revenue from rendering of services

   72,035    55,279    25,639    16,790 

Total

   4,607,351    3,379,953    1,705,070    1,202,913 
  

 

 

   

 

 

   

 

 

   

 

 

 

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

September 30, 2021

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

 

 

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

 

   January - September   July - September 
   2021
ThU.S.$
   2020
ThU.S.$
   2021
ThU.S.$
   2020
ThU.S.$
 

Employee expenses

   499,664    437,995    168,625    147,436 

Wages and salaries

   485,629    425,889    165,123    142,090 

Severance indemnities

   14,035    12,106    3,502    5,346 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

   09-30-2021  12-31-2020 

Discount rate

   1.81  1.81

Inflation

   3.40  3.00

Annual rate of wage growth

   5.22  5.22

Mortality rate (1)

   RV-2014   RV-2014 

 

(1)

For the purposes of determining the technical reserves, Chilean annuity providers are required by law to utilize the mortality tables specified by the CMF (Chilean Commission for the Financial Market). The most recent table is the RV-2014, which is based on Chilean pensioner experience from 2006-2013 (SP & SVS, 2013). The mortality tables distinguish between males and females.

 

Sensitivities to assumptions

  ThU.S.$ 

Discount rate

  

Increase in 100 bps

   (5,994

Decrease in 100 bps

   5,742 
  

 

 

 

Wage growth rates

  

Increase in 100 bps

   5,694 

Decrease in 100 bps

   (5,002
  

 

 

 

The following tables set forth the balances and the reconciliation of the present value of severance indemnities obligations as of September 30, 2021 and as of December 31, 2020:

 

   09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Current

   5,872    6,786 

Non-current

   67,866    74,609 

Total

   73,738    81,395 
  

 

 

   

 

 

 

Reconciliation of the present value of severance indemnities obligations

  09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Opening balance

   81,395    75,429 

Current service cost

   4,260    6,298 

Interest cost

   2,553    3,802 

(Gains) losses from changes in actuarial assumptions

   (1,917   159 

Actuarial gains and losses arising from experience

   1,564    124 

Benefits paid

   (3,164   (8,323

Decrease due to sale of subsidiary

   (393   —   

Increase (decrease) for foreign currency exchange rates changes

   (10,560   3,906 

Closing balance

   73,738    81,395 
  

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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.

 

September 30, 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

   855,584    5,590    177,294    81,214    51,011    5,100    147,666    —      1,323,459 

Other current financial assets

   16,450    —      —      —      —      —      —      —      16,450 

Other current non-financial assets

   45,389    83    22,045    9,945    1,083    6,074    90,246    —      174,865 

Trade and other current receivables

   1,002,907    9,967    52,481    21,748    36,813    4,761    116,988    2,502    1,248,167 

Accounts receivable due from related companies

   —      —      —      —      —      —      7,334    —      7,334 

Current Inventories

   973,985    —      74,685    —      32,453    —      38    —      1,081,162 

Current biological assets

   251,007    —      64,028    —      —      —      —      —      315,035 

Current tax assets

   301    —      168    —      664    948    102,712    —      104,793 

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

   3,145,624    15,640    390,701    112,907    122,024    16,883    464,984    2,502    4,271,265 

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

   14,395    —      15    —      73    —      —      —      14,483 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Current Assets

   3,160,019    15,640    390,716    112,907    122,097    16,883    464,984    2,502    4,285,748 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-Current Assets

                  

Other non-current financial assets

   9,386    —      —      —      —      —      —      —      9,386 

Other non-current non-financial assets

   1,638    —      7,246    199    772    8    89,545    —      99,408 

Trade and other non-current receivables

   12,112    —      1    —      —      —      2,781    40    14,934 

Investments accounted for using equity method

   77,332    207,067    28,188    —      —      —      20,664    —      333,251 

Intangible assets other than goodwill

   86,077    —      1,404    —      647    —      6,110    —      94,238 

Goodwill

   41,523    —      16,582    —      —      —      —      —      58,105 

Property, plant and equipment

   8,278,377    —      344,872    —      126,036    —      346    —      8,749,631 

Right of use assets

   160,141    —      32,293    —      —      —      —      —      192,434 

Non-current biological assets

   2,906,500    —      228,235    —      —      —      —      —      3,134,735 

Deferred tax assets

   4,820    —      —      —      427    —      —      —      5,247 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Non-Current Assets

   11,577,906    207,067    658,821    199    127,882    8    119,446    40    12,691,369 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

   14,737,925    222,707    1,049,537    113,106    249,979    16,891    584,430    2,542    16,977,117 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

September 30, 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

   358,856    68,790    704    —      —      —      —      46,990    475,340 

Current lease liabilities

   9,484    92    4,562    —      1,314    86    28,240    8,720    52,498 

Trade and other current payables

   199,663    13,885    79,824    19,219    26,678    7,184    324,979    33,903    705,335 

Accounts payable to related companies

   7,262    —      —      —      —      —      338    —      7,600 

Other current provisions

   387    —      —      —      —      —      —      —      387 

Current tax liabilities

   2,403    9,090    8,984    28,468    10,220    —      35,143    —      94,308 

Current provisions for employee benefits

   —      —      —      —      —      —      5,872    —      5,872 

Other current non-financial liabilities

   481,882    52    25,295    2,616    2,574    1,051    5,902    —      519,372 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities, current

   1,059,937    91,909    119,369    50,303    40,786    8,321    400,474    89,613    1,860,712 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-Current Liabilities

                  

Other non-current financial liabilities

   3,947,635    481,442    —      —      —      —      —      1,017,565    5,446,642 

Non-current lease liabilities

   71,015    186    19,189    —      2,263    119    18,541    13,817    125,130 

Other non-current provisions

   —      —      2,827    25,960    —      —      —      —      28,787 

Deferred tax liabilities

   1,483,479    —      76,732    —      4,248    —      —      —      1,564,459 

Non-current provisions for employee benefits

   —      —      —      —      930    —      66,936    —      67,866 

Other non-current non-financial liabilities

   22    —      79,592    13    —      —      14    —      79,641 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current liabilities

   5,502,151    481,628    178,340    25,973    7,441    119    85,491    1,031,382    7,312,525 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities

   6,562,088    573,537    297,709    76,276    48,227    8,440    485,965    1,120,995    9,173,237 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

December 31, 2020

  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

   773,822    3,891    127,459    62,149    43,049    5,334    49,010    —      1,064,714 

Other current financial assets

   1,763    —      —      —      —      —      —      —      1,763 

Other current non-financial assets

   19,802    92    28,253    5,886    572    6,147    107,845    —      168,597 

Trade and other current receivables

   542,296    10,448    38,362    9,757    30,856    5,999    96,847    2,816    737,381 

Accounts receivable due from related companies

   369    —      829    —      —      —      5,076    —      6,274 

Current Inventories

   847,161    —      63,935    —      27,183    —      —      —      938,279 

Current biological assets

   246,637    —      56,073    —      —      —      —      —      302,710 

Current tax assets

   29,069    752    2,384    1,732    3,471    667    282,655    —      320,730 

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

   2,460,919    15,183    317,295    79,524    105,131    18,147    541,433    2,816    3,540,448 

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

   3,815    —      15    —      47    —      —      —      3,877 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Current Assets

   2,464,734    15,183    317,310    79,524    105,178    18,147    541,433    2,816    3,544,325 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-Current Assets

                  

Other non-current financial assets

   28,982    —      —      —      —      —      —      —      28,982 

Other non-current non-financial assets

   1,739    —      17,346    431    692    102    92,904    —      113,214 

Trade and other non-current receivables

   13,637    —      40    —      —      —      2,859    70    16,606 

Investments accounted for using equity method

   78,108    184,191    32,402    —      —      —      22,238    —      316,939 

Intangible assets other than goodwill

   95,231    —      1,675    —      22    —      5,162    —      102,090 

Goodwill

   42,210    —      17,357    —      —      —      —      —      59,567 

Property, plant and equipment

   7,838,893    —      349,877    —      136,188    —      346    —      8,325,304 

Right of use assets

   190,252    —      28,882    —      —      —      —      —      219,134 

Non-current biological assets

   3,038,157    —      257,960    —      —      —      —      —      3,296,117 

Deferred tax assets

   4,449    —      1,168    —      424    —      —      —      6,041 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Non-Current Assets

   11,331,658    184,191    706,707    431    137,326    102    123,509    70    12,483,994 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

   13,796,392    199,374    1,024,017    79,955    242,504    18,249    664,942    2,886    16,028,319 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2020

  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

   230,230    32,697    753    —      —      —      —      43,456    307,136 

Current lease liabilities

   13,687    84    3,292    —      426    148    32,554    13,449    63,640 

Trade and other current payables

   153,860    11,924    80,607    11,336    26,400    7,485    298,908    35,984    626,504 

Accounts payable to related companies

   236    —      —      —      —      —      3,503    —      3,739 

Other current provisions

   386    —      —      —      —      —      —      —      386 

Current tax liabilities

   152    —      5,298    —      190    24    39,008    —      44,672 

Current provisions for employee benefits

   —      —      —      —      —      —      6,786    —      6,786 

Other current non-financial liabilities

   6,616    58    25,726    4,118    2,382    1,319    4,511    —      44,730 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities, current

   405,167    44,763    115,676    15,454    29,398    8,976    385,270    92,889    1,097,593 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-Current Liabilities

                  

Other non-current financial liabilities

   4,070,126    498,484    657    —      —      —      —      1,145,461    5,714,728 

Non-current lease liabilities

   74,135    230    14,833    —      218    171    44,604    13,924    148,115 

Other non-current provisions

   —      —      4,238    26,212    —      —      —      —      30,450 

Deferred tax liabilities

   1,388,713    —      68,788    —      6,385    —      —      —      1,463,886 

Non-current provisions for employee benefits

   —      —      —      —      1,069    —      73,540    —      74,609 

Other non-current non-financial liabilities

   29    —      83,249    14    —      —      11    —      83,303 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current liabilities

   5,533,003    498,714    171,765    26,226    7,672    171    118,155    1,159,385    7,515,091 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities

   5,938,170    543,477    287,441    41,680    37,070    9,147    503,425    1,252,274    8,612,684 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

54


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

   09-30-2021   12-31-2020 
   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 Liabilities, current

   1,528,342    332,370    1,860,712    765,176    332,417    1,097,593 

Other current financial liabilities

   192,258    283,082    475,340    63,605    243,531    307,136 

U.S Dollar

   130,218    228,638    358,856    63,509    166,721    230,230 

Euros

   35,188    33,602    68,790    —      32,697    32,697 

Brazilian Real

   76    628    704    96    657    753 

U.F.

   26,776    20,214    46,990    —      43,456    43,456 
         —       

Bank Loans

   127,799    123,671    251,470    30,774    184,660    215,434 

U.S Dollar

   92,535    89,441    181,976    30,678    151,306    181,984 

Euros

   35,188    33,602    68,790    —      32,697    32,697 

Brazilian Real

   76    628    704    96    657    753 

Other Loans

   64,459    159,411    223,870    32,831    58,871    91,702 

U.S Dollar

   37,683    139,197    176,880    32,831    15,415    48,246 

U.F.

   26,776    20,214    46,990    —      43,456    43,456 

Current lease liabilities

   14,302    38,196    52,498    18,631    45,009    63,640 

U.S Dollar

   3,080    6,404    9,484    4,675    9,012    13,687 

Euros

   23    69    92    23    61    84 

Brazilian Real

   1,281    3,281    4,562    823    2,469    3,292 

Mexican Pesos

   316    998    1,314    293    133    426 

Other currencies

   38    48    86    37    111    148 

Chilean Pesos

   6,958    21,282    28,240    8,578    23,976    32,554 

U.F.

   2,606    6,114    8,720    4,202    9,247    13,449 

Trade and other current payables

   699,249    6,086    705,335    585,428    41,076    626,504 

U.S Dollar

   199,620    43    199,663    153,856    4    153,860 

Euros

   13,885    —      13,885    11,924    —      11,924 

Brazilian Real

   74,030    5,794    79,824    39,596    41,011    80,607 

Argentine Pesos

   19,219    —      19,219    11,336    —      11,336 

Mexican Pesos

   26,429    249    26,678    26,339    61    26,400 

Other currencies

   7,184    —      7,184    7,485    —      7,485 

Chilean Pesos

   324,979    —      324,979    298,908    —      298,908 

U.F.

   33,903    —      33,903    35,984    —      35,984 

Accounts payable to related companies

   7,600    —      7,600    3,739    —      3,739 

U.S Dollar

   7,262    —      7,262    236    —      236 

Chilean Pesos

   338    —      338    3,503    —      3,503 

Other current provisions

   387    —      387    384    2    386 

U.S Dollar

   387    —      387    384    2    386 

Current tax liabilities

   89,896    4,412    94,308    42,580    2,092    44,672 

U.S Dollar

   2,403    —      2,403    152    —      152 

Euro

   9,090    —      9,090       

Brazilian Real

   5,033    3,951    8,984    5,298    —      5,298 

Argentine Pesos

   28,468    —      28,468       

Mexican Pesos

   10,220    —      10,220    190    —      190 

Other currencies

   —      —      —      24    —      24 

Chilean Pesos

   34,682    461    35,143    36,916    2,092    39,008 

Current provisions for employee benefits

   5,278    594    5,872    6,079    707    6,786 

Chilean Pesos

   5,278    594    5,872    6,079    707    6,786 

Other current non-financial liabilities

   519,372    —      519,372    44,730    —      44,730 

U.S Dollar

   481,882    —      481,882    6,616    —      6,616 

Euros

   52    —      52    58    —      58 

Brazilian Real

   25,295    —      25,295    25,726    —      25,726 

Argentine Pesos

   2,616    —      2,616    4,118    —      4,118 

Mexican Pesos

   2,574    —      2,574    2,382    —      2,382 

Other currencies

   1,051    —      1,051    1,319    —      1,319 

Chilean Pesos

   5,902    —      5,902    4,511    —      4,511 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

55


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

   09-30-2021   12-31-2020 
   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

   2,173,223    463,876    4,675,426    7,312,525    1,789,288    971,281    4,754,522    7,515,091 

Other non-current financial liabilities

   1,108,449    403,400    3,934,793    5,446,642    726,206    919,591    4,068,931    5,714,728 

U.S Dollar

   902,705    195,000    2,849,930    3,947,635    515,399    706,525    2,848,202    4,070,126 

Euros

   126,983    128,943    225,516    481,442    122,891    125,247    250,346    498,484 

Brazilian Real

   —      —      —      —      657    —      —      657 

U.F.

   78,761    79,457    859,347    1,017,565    87,259    87,819    970,383    1,145,461 

Bank Loans

   220,237    323,943    225,516    769,696    473,233    335,247    250,346    1,058,826 

U.S Dollar

   93,254    195,000    —      288,254    349,685    210,000    —      559,685 

Euros

   126,983    128,943    225,516    481,442    122,891    125,247    250,346    498,484 

Brazilian Real

   —      —      —      —      657    —      —      657 

Other Loans

   888,212    79,457    3,709,277    4,676,946    252,973    584,344    3,818,585    4,655,902 

U.S Dollar

   809,451    —      2,849,930    3,659,381    165,714    496,525    2,848,202    3,510,441 

U.F.

   78,761    79,457    859,347    1,017,565    87,259    87,819    970,383    1,145,461 

Non-current lease liabilities

   53,234    26,684    45,212    125,130    85,964    21,906    40,245    148,115 

U.S Dollar

   19,322    13,643    38,050    71,015    22,935    15,787    35,413    74,135 

Euros

   174    12    —      186    168    62    —      230 

Brazilian Real

   7,575    7,800    3,814    19,189    5,452    4,842    4,539    14,833 

Mexican Pesos

   1,874    389    —      2,263    218    —      —      218 

Other currencies

   116    3    —      119    141    30    —      171 

Chilean Pesos

   18,038    503    —      18,541    44,604    —      —      44,604 

U.F.

   6,135    4,334    3,348    13,817    12,446    1,185    293    13,924 

Other non-current provisions

   28,787    —      —      28,787    30,450    —      —      30,450 

Brazilian Real

   2,827    —      —      2,827    4,238    —      —      4,238 

Argentine Pesos

   25,960    —      —      25,960    26,212    —      —      26,212 

Deferred tax liabilities

   877,866    5,848    680,745    1,564,459    840,171    —      623,715    1,463,886 

U.S Dollar

   802,734    —      680,745    1,483,479    764,998    —      623,715    1,388,713 

Brazilian Real

   70,884    5,848    —      76,732    68,788    —      —      68,788 

Mexican Pesos

   4,248    —      —      4,248    6,385    —      —      6,385 

Non-current provisions for employee benefits

   67,856    —      10    67,866    74,336    273    —      74,609 

Mexican Pesos

   920    —      10    930    796    273    —      1,069 

Chilean Pesos

   66,936    —      —      66,936    73,540    —      —      73,540 

Other non-current non-financial liabilities

   37,031    27,944    14,666    79,641    32,161    29,511    21,631    83,303 

U.S Dollar

   22    —      —      22    29    —      —      29 

Brazilian Real

   36,982    27,944    14,666    79,592    32,107    29,511    21,631    83,249 

Argentine Pesos

   13    —      —      13    14    —      —      14 

Chilean Pesos

   14    —      —      14    11    —      —      11 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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
Arauco Quimica S.A. de C.V.  Mexico  Mexican pesos
Arauco Serviquimex, S.A. de C.V.  Mexico  Mexican pesos
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 Participacoes S.A.  Brazil  Brazilian Real
Novo Oeste Gestao de Ativos Florestais S.A.  Brazil  Brazilian Real
ODD Industries SpA  Chile  Chilean pesos
Tablered Araucomex, S.A. de C.V.  Mexico  Mexican pesos

The table below shows a detail per company of the effect in the period of the Reserve of Exchange Differences on translation:

 

   January - September   July - September 
   2021   2020   2021   2020 
   ThU.S.$   ThU.S.$   ThU.S.$   ThU.S.$ 

Arauco do Brasil S.A.

   (16,320   (117,130   (31,040   (9,405

Arauco Forest Brasil S.A.

   (14,267   (107,600   (26,607   (8,246

Sonae Arauco S.A.

   (11,373   7,224    (4,724   6,999 

Arauco Florestal Arapoti S.A.

   (3,117   (26,992   (5,930   (1,935

Arauco Industria México S.A. de C.V.

   (4,552   (30,678   (6,246   5,498 

Arauco Canada Ltd.

   106    (2,774   (4,437   4,228 

Others

   (3,396   (872   (3,453   47 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total reserve of exchange differences on translation

   (52,919   (278,822   (82,437   (2,814
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of foreign exchange rates changes

 

   January - September   July - September 
   2021   2020   2021   2020 
   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

   7,569    (9,886   12,857    17,666 
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   (59,248   (285,017   (83,984   (3,625
  

 

 

   

 

 

   

 

 

   

 

 

 

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 extension of Planta Arauco (MAPA).

 

   January – September  July - September 
   2021  2020  2021  2020 
   ThU.S.$  ThU.S.$  ThU.S.$  ThU.S.$ 
Property, plant and equipment capitalized cost             

Property, plant and equipment capitalized interest cost rate

   4.75  4.63  4.75  4.64

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

   54,788   30,173   22,521   12,191 
  

 

 

  

 

 

  

 

 

  

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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 Consolidated Financial Statements for Public Use

Empresas Copec S.A.

Compensation to Key Management Personnel

Compensation to key management personnel, including directors, managers and deputy managers, consist of a fixed monthly salary, and 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

September 30, 2021

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

 

         Functional  % Ownership interest
09-30-2021
   % Ownership interest
12-31-2020
 
ID N°  

Company Name

  Country  Currency  Direct   Indirect   Total   Direct   Indirect   Total 
-  Agenciamiento y Servicios Profesionales S.A.  Mexico  U.S. Dollar   0.0020    99.9970    99.9990    0.0020    99.9970    99.9990 
-  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
   —      99.9990    99.9990    —      99.9990    99.9990 
-  Arauco Colombia S.A.  Colombia  U.S. Dollar   1.4778    98.5204    99.9982    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.  Netherlands  U.S. Dollar   0.5215    99.4775    99.9990    0.5215    99.4775    99.9990 
-  Arauco Florestal Arapoti S.A.  Brazil  Brazilian
Real
   —      79.9992    79.9992    —      79.9992    79.9992 
-  Arauco Forest Brasil S.A.  Brazil  Brazilian
Real
   10.0809    89.9182    99.9991    10.0809    89.9182    99.9991 
-  Arauco Industria de México, S.A. de C.V.  Mexico  Mexican
pesos
   —      99.9990    99.9990    —      99.9990    99.9990 
-  Arauco Industria de Paineis Ltda.  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    99.9989    99.9990    0.0001    99.9989    99.9990 
76620842-8
  Arauco Nutrientes Naturales SPA(*)  Chile  U.S. Dollar   —      —      —      —      99.9484    99.9484 
-  Arauco Perú S.A.  Perú  U.S. Dollar   0.0013    99.9977    99.9990    0.0013    99.9977    99.9990 
-  Arauco Química S.A. de C.V.  Mexico  Mexican
pesos
   —      99.9990    99.9990    —      99.9990    99.9990 
-  Arauco Serviquimex, S.A. de C.V.  Mexico  Mexican
pesos
   —      99.9990    99.9990    —      99.9990    99.9990 
-  Arauco Wood (China) Company Limited  China  U.S. Dollar   —      99.9990    99.9990    —      99.9990    99.9990 
-  Araucomex S.A. de C.V.  Mexico  U.S. Dollar   0.0005    99.9985    99.9990    0.0005    99.9985    99.9990 
-  Araucomex Servicios, S.A. de C.V.  Mexico  Mexican
pesos
   —      99.9990    99.9990    —      99.9990    99.9990 
96657900-5
  Consorcio Protección Fitosanitaria Forestal S.A.  Chile  Chilean
Pesos
   —      56.4474    56.4474    —      57.0831    57.0831 
-  Empreendimentos Florestais Santa Cruz Ltda.  Brazil  Brazilian
Real
   —      99.9984    99.9984    —      99.9984    99.9984 
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   —      98.5811    98.5811    —      98.5683    98.5683 
78049140-K
  Forestal Los Lagos S.A.(**)  Chile  U.S. Dollar   —      —      —      —      79.9587    79.9587 
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   99.0000    0.9995    99.9995    99.0000    0.9995    99.9995 
-  Mahal Empreendimentos e Participacoes S.A.  Brazil  Brazilian
Real
   —      99.9990    99.9990    —      99.9990    99.9990 
-  Novo Oeste Gestao de Ativos Florestais S.A.  Brazil  Brazilian
Real
   —      99.9990    99.9990    —      99.9990    99.9990 
76860724-9  ODD Industries SpA  Chile  Chilean
Pesos
   —      86.6151    86.6151    —      86.6151    86.6151 
-  Prime-Line,Inc.  United
States
  U.S. Dollar   —      99.9990    99.9990    —      99.9990    99.9990 
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    54.9997    99.9997    45.0000    54.9997    99.9997 
-  Tablered Araucomex, S.A. de C.V.  Mexico  Mexican
pesos
   —      99.9990    99.9990    —      99.9990    99.9990 
  

 

  

 

  

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*)

This company was merged in March of 2021 (see note 14).

(**)

The stake in this company was sold in March of 2021 (see note 14).

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

According to significant restrictions on the ability of subsidiaries to transfer funds to Arauco, in the form of cash dividends or repayment of loans and/or advances, we state the following:

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

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 Company received an amount of U.S.$ 250,000,000, which accrues accrues a 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.

During 2020, the Central Bank of the Argentine Republic established certain foreign exchange controls, preventing Arauco Argentina S.A. from making two principal payments for ThU.S.$ 12,500 each, both due during 2020. Under those circumstances, Arauco agreed to reschedule the maturity of the principal repayments that became due in 2020 to May 30, 2021. The principal amount rescheduled will accrue interest at LIBOR rate until the moment of its total or partial payment. As of September 30, 2021, the total principal outstanding under the mutual agreement was ThU.S.$ 160,000.

Employee Benefits for Key Management Personnel

 

   January – September   July – September 
   2021   2020   2021   2020 
   ThU.S.$   ThU.S.$   ThU.S.$   ThU.S.$ 

Salaries and bonuses

   58,401    47,380    18,701    15,598 

Per diem compensation to members of the Board of Directors

   1,834    1,648    592    561 

Termination benefits

   2,234    3,042    239    824 

Total

   62,469    52,070    19,532    16,983 
  

 

 

   

 

 

   

 

 

   

 

 

 

Related Party Receivables, Current

 

Name of Related Party

  Tax ID No.   Nature of Relationship   Country   Currency   Maturity   09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Forestal Mininco S.A.

   91.440.000-7    Common Stockholder    Chile    Chilean pesos    30 days    9    8 

Eka Chile S.A.

   99.500.140-3    Joint Venture    Chile    Chilean pesos    30 days    2,510    1,251 

Forestal del Sur S.A.

   79.825.060-4    
Associate of a subsidiary’s
minority shareholder
 
 
   Chile    Chilean pesos    -    —      575 

Unilin Arauco Pisos Ltda.

   —      Joint Venture    Brazil    
Brazilian
Real
 
 
   30 days    —      829 

CMPC Maderas S.A.

   95.304.000-K    Common Stockholder    Chile    Chilean pesos    30 days    —      21 

CMPC Pulp S.A.

   96.532.330-9    Common Stockholder    Chile    Chilean pesos    30 days    981    866 

Fundación Educacional Arauco

   71.625.000-8    
Parent company is founder
and contributor
 
 
   Chile    Chilean pesos    30 days    562    —   

Fundación Acerca Redes

   65.097.218-K    
Parent company is founder
and contributor
 
 
   Chile    Chilean pesos    30 days    1,036    968 

Sonae Arauco Portugal S.A.

   —      
Subsidiary of a Joint
Venture
 
 
   Portugal    U.S. Dollar    —      —      369 

E2E S.A.

   76.879.577-0    Joint Venture    Chile    Chilean pesos    10-may-21    457    460 

E2E S.A.

   76.879.577-0    Joint Venture    Chile    Chilean pesos    27-Apr-21    435    —   

E2E S.A.

   76.879.577-0    Joint Venture    Chile    Chilean pesos    28-Oct-21    287    288 

E2E S.A.

   76.879.577-0    Joint Venture    Chile    Chilean pesos    31-Jul-23    648    —   

E2E S.A.

   76.218.856-2    Joint Venture    Chile    Chilean pesos    30 days    319    639 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

             7,334    6,274 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Related Party Payables, Current

 

Name of Related Party

  Tax ID No.   Nature of Relationship   Country   Currency   Maturity   09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Compañía de Petróleos de Chile S.A.

   99.520.000-7    
Common controlling
parent
 
 
   Chile    Chilean pesos    30 days    6,924    2,657 

Abastible S.A.

   91.806.000-6    
Common controlling
parent
 
 
   Chile    Chilean pesos    30 days    98    139 

Fundación Educacional Arauco

   71.625.000-8    

Parent company is
founder and
contributor
 
 
 
   Chile    Chilean pesos    —      —      694 

Red to Green S.A.

   86.370.800-1    
Common
Stockholder
 
 
   Chile    Chilean pesos    30 days    6    —   

Empresa Nacional de Telecomunicaciones S.A.

   92.580.000-7    
Common
Stockholder
 
 
   Chile    Chilean pesos    30 days    4    7 

Servicios Corporativos Sercor S.A.

   96.925.430-1    Associate    Chile    Chilean pesos    30 days    7    —   

Compañía Puerto de Coronel S.A.

   79.895.330-3    
Subsidiary of an
associate
 
 
   Chile    U.S. Dollar    30 days    338    236 

Adm. de Ventas al Detalle Arco Prime Ltda.

   77.215.640-5    
Common controlling
parent
 
 
   Chile    Chilean pesos    30 days    2    1 

Woodtech S.A.

   76.724.000-7    
Associate of
controlling parent
 
 
   Chile    Chilean pesos    30 days    221    —   

Air BP Copec S.A.

   96.942.120-8    
Joint venture of
controlling parent
 
 
   Chile    Chilean pesos    30 days    —      5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

             7,600    3,739 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

Related Party Transactions

Purchases

 

Name of Related Party

  Tax ID No.  Nature of Relationship  Country  Currency  Transaction
Descriptions
  09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

Abastible S.A.

  91.806.000-6  Common controlling parent  Chile  Chilean
pesos
  Fuel   1,815    2,113 

Compañía de Petróleos de Chile S.A.

  99.520.000-7  Common controlling parent  Chile  Chilean
pesos
  Fuel and
other
   60,661    48,983 

Compañía Puerto de Coronel S.A.

  79.895.330-3  Subsidiary of the Associate  Chile  U.S.
Dollar
  Transport,
stowage and
port services
   6,630    17,506 

EKA Chile S.A.

  99.500.140-3  Joint Venture  Chile  Chilean
pesos
  Sodium
chlorate
   31,397    38,633 

Forestal del Sur S.A.

  79.825.060-4  Associate of a subsidiary’s
minority shareholder
  Chile  Chilean
pesos
  Wood and
chips
   433    4,495 

Portaluppi, Guzman y Bezanilla Abogados Ltda.

  78.096.080-9  Common director  Chile  Chilean
pesos
  Legal
services
   586    703 

Empresa Nacional de Telecomunicaciones S.A.

  92.580.000-7  Common Stockholder  Chile  Chilean
pesos
  Telephone
services
   190    229 

Colbún S.A.

  96.505.760-9  Common Stockholder  Chile  Chilean
pesos
  Electrical
Power
   296    51 

Colbún Transmisión S.A.

  76.218.856-2  Common Stockholder  Chile  Chilean
pesos
  Electrical
Power
   415    399 

Woodtech S.A.

  76.724.000-7  Indirect associate of
controlling parent
  Chile  Chilean
pesos
  Wood
volumen
measurement
services
   1,070    1,362 

Inversiones Siemel S.A.

  94.082.000-6  Common Stockholder  Chile  Chilean
pesos
  Rentals   51    279 

Elemental S.A.

  76.659.730-0  Associate of controlling
parent
  Chile  Chilean
pesos
  Services and
other
purchases
   45    364 

Servicios Corporativos Sercor S.A.

  96.925.430-1  Associate  Chile  Chilean
pesos
  Other
purchases
   176    242 
  

 

  

 

  

 

  

 

  

 

  

 

 

   

 

 

 

Sales and other transactions

 

Name of Related Party

  Tax ID No.  Nature of Relationship  Country  Currency  Transaction
Descriptions
  09-30-2021
ThU.S.$
   12-31-2020
ThU.S.$
 

EKA Chile S.A.

  99.500.140-3  Joint venture  Chile  Chilean
pesos
  Electrical
Power
   16,701    16,559 

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    21,146 

CMPC Pulp S.A.

  96.532.330-9  Common Stockholder  Chile  Chilean
pesos
  Wood and
chips
   6,955    7,849 

CMPC Tissue S.A.

  96.529.310-8  Common Stockholder  Chile  Chilean
pesos
  Pulp   425    3,681 

Unilin Arauco Pisos Ltda.

  —    Joint venture  Brazil  Brazilian
Real
  Wood   —      4,623 

E2E S.A.

  76.879.577-0  Joint venture  Chile  Chilean
pesos
  Loan   1,100    41 

E2E S.A.

  76.879.577-0  Joint venture  Chile  Chilean
pesos
  Wood,
plywood
and boards
   302    471 
  

 

  

 

  

 

  

 

  

 

  

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

NOTE 14. INVESTMENTS IN SUBSIDIARIES

On March 26, 2021, Arauco Nutrientes Naturales SpA was merged into the subsidiary Forestal Arauco S.A. This operation had no effect on Arauco´s results or on any of the companies that participated on this merger.

On March 10, 2021, Arauco through the subsidiary Forestal Arauco S.A. sold its total stake 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.

On December 2020, through its subsidiary Maderas Arauco S.A., Arauco acquired the 86.6155% of ODD Industries SpA, a pioneer company in the field of industrial artificial intelligence with ethical purposes. Arauco’s objective is to move forward with the implementation of artificial intelligence seeking to develop tools to mitigate climate change, among others. The price paid as of December 31, 2020 for the shares acquired and subscribed in this operation was ThU.S.$ 5,064 out of a total of ThU.S.$ 9,157.

Arauco carried out the initial recognition of the acquisition based on the information available as of that date, performing a preliminary determination about the allocation of the fair values during the acquisition of the same. The amounts of acquired assets and liabilities are deemed to be provisional amounts and could be adjusted during the measurement period of this acquisition, in order to reflect new information obtained based on facts and circumstances that existed as of the acquisition date and which, if known, would have affected the measurement of the amounts recognized as of that date.

NOTE 15. INVESTMENTS IN ASSOCIATES

As of September 30, 2021 and as of December 31, 2020, 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%
  09-30-2021  12-31-2020

Carrying amount accounted for using equity method

  ThU.S.$ 55,019  ThU.S.$ 56,314
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%
  09-30-2021  12-31-2020
Carrying amount accounted for using equity method  ThU.S.$ 246  ThU.S.$ 187

 

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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%
  09-30-2021  12-31-2020
Carrying amount accounted for using equity method  ThU.S.$ 5  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%
  09-30-2021  12-31-2020
Carrying amount accounted for using equity method  ThU.S.$ 1  ThU.S.$ 1
Name  Vale do Corisco S.A.
Country  Brazil
Functional Currency  Brazilian Real

Corporate purpose

  Management of forestry activities.
Ownership interest (%)  49.0000%
  09-30-2021  12-31-2020
Carrying amount accounted for using equity method  ThU.S.$ 28,188  ThU.S.$ 29,205

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

Summarized Financial Information of Associates

 

   Assets 

09-30-2021

  Inversiones
Puerto
Coronel S.A.
ThU.S.$
  Serv.Corporativos
Sercor S.A.
ThU.S.$
  Vale do
Corisco S.A.
ThU.S.$
  Consorcio
Tecnológico
Bioenercel S.A.
ThU.S.$
  Genómica
Forestal S.A.
ThU.S.$
  Total
ThU.S.$
 

Current

   1   3,065   4,639   —     13   7,718 

Non-current

   111,858   2,735   71,735   6   50   186,384 

Total

   111,859   5,800   76,374   6   63   194,102 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Liabilities and Equity 
   Inversiones
Puerto
Coronel S.A.
ThU.S.$
  Serv.Corporativos
Sercor S.A.
ThU.S.$
  Vale do
Corisco S.A.
ThU.S.$
  Consorcio
Tecnológico
Bioenercel S.A.
ThU.S.$
  Genómica
Forestal S.A.
ThU.S.$
  Total
ThU.S.$
 

Current

   54   2,190   165   —     7   2,416 

Non-current

   —     2,381   18,681   4   34   21,100 

Equity

   111,805   1,230   57,527   2   22   170,586 

Total

   111,859   5,801   76,373   6   63   194,102 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
09-30-2021                   

Income

   —     3,543   6,442   —     —     9,985 

Other income / expenses

   (2,606  (3,108  (3,166  (1  (2  (8,883

Profit or loss (continuing operations)

   (2,606  435   3,276   (1  (2  1,102 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income

   —     —     —     —     —     —   

Comprehensive income

   (2,606  435   3,276   (1  (2  1,102 

Dividends received

   —     —     1,307   —     —     1,307 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Assets 

12-31-2020

  Inversiones
Puerto
Coronel S.A.
ThU.S.$
  Serv.Corporativos
Sercor S.A.
ThU.S.$
  Vale do
Corisco S.A.
ThU.S.$
  Consorcio
Tecnológico
Bioenercel S.A.
ThU.S.$
  Genómica
Forestal S.A.
ThU.S.$
  Total
ThU.S.$
 

Current

   114,463   4,155   3,725   1   18   122,362 

Non-current

   1   3,444   76,129   11   57   79,642 

Total

   114,464   7,599   79,854   12   75   202,004 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Liabilities and Equity 
   Inversiones
Puerto
Coronel S.A.
ThU.S.$
  Serv.Corporativos
Sercor S.A.
ThU.S.$
  Vale do
Corisco S.A.
ThU.S.$
  Consorcio
Tecnológico
Bioenercel S.A.
ThU.S.$
  Genómica
Forestal S.A.
ThU.S.$
  Total
ThU.S.$
 

Current

   54   4,029   699   —     8   4,790 

Non-current

   —     2,634   19,554   5   39   22,232 

Equity

   114,410   936   59,601   7   28   174,982 

Total

   114,464   7,599   79,854   12   75   202,004 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
09-30-2020                   

Income

   —     3,408   4,782   —     —     8,190 

Other income / expenses

   7,041   (3,073  (2,816  —     (2  1,150 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit or loss (continuing operations)

   7,041   335   1,966   —     (2  9,340 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income

   —     —     —     —     —     —   

Comprehensive income

   7,041   335   1,966   —     (2  9,340 

Dividends received

   —     —     1,148   —     —     1,148 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Reconciliation of Investment in Associates and Joint Ventures

 

   09-30-2021   12-31-2020 
   ThU.S.$   ThU.S.$ 

Opening balance as of January 1 Changes

   316,939    293,118 

Investment in joint ventures, additions (*)

   4,800    20,129 

Disposals, investment in associates and joint ventures (**)

   (3,197   (943

Share of profit (loss) in investment in associates

   389    4,821 

Share of profit (loss) in investment in joint ventures

   31,097    (2,504

Dividends Received, Investments in Associates

   (1,900   (4,357

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

   (15,647   8,351 

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

   770    (1,676

Total changes

   16,312    23,821 

Closing balance

   333,251    316,939 
  

 

 

   

 

 

 

 

(*)

During the first semester of 2021 Maderas Arauco S.A. made two capital contribution to E2E S.A., the first one was on January 8, 2021 for ThCLP$ 1,600,000 for160 shares, and the second was made on June 22, 2021 in the amount of ThCLP$ 1,900,000 for 190 shares, both equivalents to ThU.S.$ 4,800.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

(**)

ThU.S.$ 3,197 account for the carrying amount of investment in Unilin Arauco Pisos Ltda., which was sold on January 12, 2021.

 

   09-30-2021   12-31-2020 
   ThU.S.$   ThU.S.$ 

Carrying amount of associates accounted for using equity method

   83,460    85,714 

Carrying amount of joint ventures accounted for using equity method

   249,791    231,225 

Total investment accounted for using equity method

   333,251    316,939 
  

 

 

   

 

 

 

NOTE 16. INTERESTS IN JOINT ARRANGEMENTS

Investments and contributions made

On January 12, 2021 Arauco through its subsidiary Arauco do Brasil S.A. sold its total 50% stake in Unilin Arauco Pisos Ltda. This transaction generated a loss before taxes of ThU.S.$ 431.

On July 29, 2020 Arauco through its subsidiary Forestal Arauco S.A. entered into a shareholders agreement with respect to Agrícola El Paque SpA, which was established for the plantating, construction and integral management of agricultural projects. The capital contributed by Forestal Arauco S.A. was ThCLP$ 3,651,895 equivalent to ThU.S.$ 4,753.

Between January and February 2020, Arauco through its subsidiary Maderas Arauco S.A. has contributed ThCLP$ 12,000,000 (equivalent to ThU.S.$ 15,022) to E2E S.A., representing 50% of the interest in this company. Between January and July 2021 Arauco contributed ThCLP$ 3,500,000, equivalent to ThU.S.$ 4,800.

Between February and December 2020, Arauco through its subsidiary Arauco Bioenergía S.A. has contributed ThU.S.$ 354 to Parque Eólico Ovejera Sur SpA., representing 50% of the interest in this company.

As of September 30, 2021 and as of December 31, 2020, 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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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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:

 

   09-30-2021   12-31-2020 

Celulosa y Energía Punta Pereira S.A. (Uruguay)

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   359,031    193,747    262,446    163,887 

Non-current

   2,051,654    212,555    2,103,903    325,894 

Equity

   —      2,004,383    —      1,876,568 

Total Joint Arrangement

   2,410,685    2,410,685    2,366,349    2,366,349 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   1,002,192      938,284   
  

 

 

     

 

 

   

 

   09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Income

   640,992    472,897 

Expenses

   (419,420   (448,056

Joint Arrangement Net Income (Loss)

   221,572    24,841 
  

 

 

   

 

 

 

 

   09-30-2021   12-31-2020 

Forestal Cono Sur S.A. (consolidated)

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   52,075    2,463    44,684    2,121 

Non-current

   164,379    8,990    170,028    10,637 

Equity

   —      205,000    —      201,954 

Total Joint Arrangement

   216,454    216,453    214,712    214,712 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   102,500      100,977   
  

 

 

     

 

 

   

 

   

09-30-2021

ThU.S.$

   

09-30-2020

ThU.S.$

 

Income

   10,362    16,839 

Expenses

   (7,315   (16,771

Joint Arrangement Net Income (Loss)

   3,047    68 
  

 

 

   

 

 

 

 

   09-30-2021   12-31-2020 

Eufores S.A. (consolidated)

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   159,961    230,548    115,971    192,443 

Non-current

   900,903    141,402    870,093    131,893 

Equity

   —      688,914    —      661,728 

Total Joint Arrangement

   1,060,864    1,060,864    986,064    986,064 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   344,457      330,864   
  

 

 

     

 

 

   

 

   

09-30-2021

ThU.S.$

   

09-30-2020

ThU.S.$

 

Income

   177,971    180,760 

Expenses

   (150,643   (176,279

Joint Arrangement Net Income (Loss)

   27,328    4,481 
  

 

 

   

 

 

 

 

   09-30-2021   12-31-2020 

Zona Franca Punta Pereira S.A. (Uruguay)

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   6,489    103,729    6,233    107,131 

Non-current

   445,390    10,258    453,572    19,179 

Equity

   —      337,892    —      333,495 

Total Joint Arrangement

   451,879    451,879    459,805    459,805 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   168,946      166,748   
  

 

 

     

 

 

   

 

   

09-30-2021

ThU.S.$

   

09-30-2020

ThU.S.$

 

Income

   13,606    13,706 

Expenses

   (9,209   (20,083

Joint Arrangement Net Income (Loss)

   4,397    (6,377
  

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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:

 

   09-30-2021   12-31-2020 

Unilin Arauco Pisos Ltda.

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   —      —      8,050    4,995 

Non-current

   —      —      3,747    408 

Equity

   —      —      —      6,394 

Total Joint Arrangement

   —      —      11,797    11,797 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   —        3,197   
  

 

 

     

 

 

   

 

   09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Income

   —      11,568 

Expenses

   —      (10,917

Joint Arrangement Net Income (Loss)

   —      651 
  

 

 

   

 

 

 

Other comprehensive income

   —      —   

Comprehensive income

   —      651 

Dividends

   —      —   
  

 

 

   

 

 

 

 

   09-30-2021   12-31-2020 

Eka Chile S.A.

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   15,914    3,750    16,551    4,154 

Non-current

   36,400    4,431    35,599    4,782 

Equity

   —      44,133    —      43,214 

Total Joint Arrangement

   52,314    52,314    52,150    52,150 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   22,067      21,607   
  

 

 

     

 

 

   

 

   09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Income

   32,649    30,040 

Expenses

   (30,543   (27,092

Joint Arrangement Net Income (Loss)

   2,106    2,948 
  

 

 

   

 

 

 

Other comprehensive income

   —      —   

Comprehensive income

   2,106    2,948 

Dividends

   594    2,895 
  

 

 

   

 

 

 

 

   09-30-2021   12-31-2020 

Sonae Arauco S.A.

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   283,014    326,341    258,058    276,127 

Non-current

   714,544    257,084    765,712    379,260 

Equity

   —      414,134    —      368,383 

Total Joint Arrangement

   997,558    997,559    1,023,770    1,023,770 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net assets

   181,529      157,552   

Net asset adjustment (Goodwill)

   25,538      26,640   

Investment

   207,067      184,192   
  

 

 

     

 

 

   

 

   09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Income

   847,092    569,207 

Expenses

   (780,031   (577,901

Joint Arrangement Net Income (Loss)

   67,061    (8,694
  

 

 

   

 

 

 

Other comprehensive income

   —      —   

Comprehensive income

   67,061    (8,694

Dividends

   —      —   
  

 

 

   

 

 

 

 

   09-30-2021   12-31-2020 

Agrícola El Paque SpA.

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   1,598    560    4,562    69 

Non-current

   11,459    3,398    5,782    —   

Equity

   —      9,098    —      10,275 

Total Joint Arrangement

   13,057    13,056    10,344    10,344 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   4,549      5,138   
  

 

 

     

 

 

   

 

   09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Income

   —      —   

Expenses

   90    —   

Joint Arrangement Net Income (Loss)

   90    —   
  

 

 

   

 

 

 

Other comprehensive income

   —      —   

Comprehensive income

   90    —   

Dividends

   —      —   
  

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

   09-30-2021   12-31-2020 

Parque Eólico Ovejera del Sur SpA.

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   58    123    367    27 

Non-current

   2,150    —      2,057    —   

Equity

   —      2,085    —      2,398 

Total Joint Arrangement

   2,208    2,208    2,424    2,425 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   1,043      1,199   
  

 

 

     

 

 

   

 

   09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Income

   —      —   

Expenses

   (15   (78

Joint Arrangement Net Income (Loss)

   (15   (78
  

 

 

   

 

 

 

Other comprehensive income

   —      —   

Comprehensive income

   (15   (78

Dividends

   —      —   
  

 

 

   

 

 

 

 

   09-30-2021   12-31-2020 

E2E S.A.

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   5,919    1,041    9,196    4,233 

Non-current

   27,719    3,202    27,045    1,407 

Equity

   —      29,394    —      30,601 

Total Joint Arrangement

   33,638    33,637    36,241    36,241 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   14,697      15,301   
  

 

 

     

 

 

   

 

   09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Income

   668    800 

Expenses

   (7,405   (1,556

Joint Arrangement Net Income (Loss)

   (6,737   (756
  

 

 

   

 

 

 

Other comprehensive income

   —      —   

Comprehensive income

   (6,737   (756

Dividends

   —      —   
  

 

 

   

 

 

 

 

   09-30-2021   12-31-2020 

Agrícola San Gerardo SpA.

  Assets
ThU.S.$
   Liabilities
ThU.S.$
   Assets
ThU.S.$
   Liabilities
ThU.S.$
 

Current

   950    30    603    387 

Non-current

   4,869    2,164    3,859    —   

Equity

   —      3,625    —      4,075 

Total Joint Arrangement

   5,819    5,819    4,462    4,462 
  

 

 

   

 

 

   

 

 

   

 

 

 

Investment

   1,813      2,038   
  

 

 

     

 

 

   

 

   09-30-2021
ThU.S.$
   09-30-2020
ThU.S.$
 

Income

   —      —   

Expenses

   (62   (156

Joint Arrangement Net Income (Loss)

   (62   (156
  

 

 

   

 

 

 

Other comprehensive income

   —      —   

Comprehensive income

   (62   (156

Dividends

   —      —   
  

 

 

   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

NOTE 17. IMPAIRMENT OF ASSETS

As a result of current market conditions in the United States generated by the decrease in prices, the impairment tests carried out at the CGU yielded an impairment provision of ThU.S.$ 14,918 relating to Property, Plant and Equipment and spare parts from Inventories corresponding to facilities of wood products in United States. For these calculations we used a discount rate of 8.7%. In the 2021 period, provisions associated with assets sold and recovered were reversed for a total of ThU.S.$ 10,911.

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 September 30, 2021, we recorded an impairment provision due to a reduction in the useful lives for the CGU Line 1 of Arauco Mill (Pulp business) in an amount of ThU.S.$ 7,712 (ThU.S.$ 46,577 as of December 31, 2020). For this calculation, we used a discount rate of 6.1%. The Line 1 of the Arauco mill will be permanently shut down upon completion of the MAPA project.

Both impairment provision charges are presented in the consolidated statement of profit or loss under Other expenses and they constitue the main changes in the total CGU impairment provision as shown below:

 

Changes in CGU impairment provision

  09-30-2021   12-31-2020 
  ThU.S.$   ThU.S.$ 

Opening balance

   218,764    180,209 

Impairment loss recognized in profit or loss

   9,543    62,701 

Reversal of impairment loss in profit or loss

   (17,978   (6,171

Increase (Decrease) in foreign exchange currency on translation

   (2,825   (17,975
  

 

 

   

 

 

 

Closing balance

   207,504    218,764 
  

 

 

   

 

 

 

Changes in provisions for impairment of property, plant and equipment due to technical obsolescence are shown below:

 

Changes in impairment provision from impaired assets

  09-30-2021   12-31-2020 
  ThU.S.$   ThU.S.$ 

Opening balance

   8,088    8,135 

Impairment loss recognized in profit or loss

   2,050    1,262 

Reverse of ompairment loss in profit or loss

   (1,859   (1,204

Increase (Decrease) in foreign exchange currency on translation

   189    (105
  

 

 

   

 

 

 

Closing balance

   8,469    8,088 
  

 

 

   

 

 

 

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.$ 58,105 (ThU.S.$ 59,567 on December 31, 2020), as shown below:

 

Goodwill

  09-30-2021   12-31-2020 
  ThU.S.$   ThU.S.$ 

Arauco Canada Ltd. (Flakeboard Company Ltd)

   40,791    40,793 

Arauco do Brasil S.A. (Pien mill)

   16,582    17,357 

Arauco North America, Inc. (Prime-Line, Inc.)

   732    732 

Forestal Arauco S.A. (Forestal Los Lagos S.A.)

   —      685 
  

 

 

   

 

 

 

Closing balance

   58,105    59,567 
  

 

 

   

 

 

 

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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

 

 

Goodwill

  09-30-2021   12-31-2020 
  ThU.S.$   ThU.S.$ 

Opening balance at January 1

   59,567    65,751 

Increase (decrease) due to business combination

   (685   —   

Increase (decrease) in foreign currency exchange

   (777   (6,184
  

 

 

   

 

 

 

Closing balance

   58,105    59,567 
  

 

 

   

 

 

 

Of the total of goodwill, ThU.S.$ 40,791 (ThU.S.$ 40,793 as of December 31, 2020) 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.$ 16,582 (ThU.S.$ 17,357 as of December 31, 2020).

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 September 30, 2021 and as of December 31, 2020, 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

September 30, 2021

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 $4,571,664,617 Chilean Pesos (equal to ThU.S.$ 5,631 as of September 30, 2021). 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 $1,209,399,164 Chilean Pesos (equal to ThU.S.$ 1,490 as of September 30, 2021), resulting in a total disputed amount as of October of 2002 of $3,362,265,453 Chilean Pesos (equal to ThU.S.$ 4,141 as of as of September 30, 2021) 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 related 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 September 30, 2021, Arauco has not made any provision whatsoever in connection with this contingency.

 

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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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, 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.$ 6,050 as of September 30, 2021). 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 September 30, 2021, 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., 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 $575,000,000 Chilean Pesos (equal to ThU.S.$ 708 as of September 30, 2021) in compensation for damages. In the alternative, it claims (a) $11,189,270,050 Chilean Pesos (equivalent to ThU.S.$ 13,782 as of September 30, 2021), 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) $5,000,000,000 Chilean Pesos (equivalent to ThU.S.$ 6,158 as of September 30, 2021) 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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Unaudited Interim Consolidated Financial Statements

September 30, 2021

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 September 30, 2021, 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, and its notification remains 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 September 30, 2021, 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 $3,486,187,431 Chilean Pesos (equivalent to ThU.S.$ 4,294 as of September 30, 2021).

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 $421,723,281 Chilean Pesos (equivalent to ThU.S$ 519 as of September 30, 2021).

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.