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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good day, ladies and gentlemen, and welcome to the CPMC second-quarter 2008 results. My name is Keith and I will be your coordinator for today. At this time, all participants are in a listen-only mode, and we will be conducting questions-and-answer session towards the end the conference. (Operator Instructions)
I would now like to turn the presentation over to your host for today's call, Luis Llanos, CFO.
LUIS LLANOS, CFO, EMPRESAS CMPC S.A.: Thank you very much. Good morning, everyone. It is Olympic Day, and with the torch already light, we are very pleased to welcome you to CMPC's 2008 second-quarter results conference call.
I am Luis Llanos, CFO of the Company, and joining with me today are Fernando Hasenberg, our Deputy CFO, and Francisca Manuschevich, our Investor Relations Officer. Right now you should have received our press release, and hopefully you had a chance to take a look at the quarter results.
Now I will turn to Francisca Manuschevich, who will comment on these results, and at the end of the call we will have some time for Q&A.
FRANCISCA MANUSCHEVICH, IR, EMPRESAS CMPC S.A.: Good morning, everyone. Second-quarter 2008 results were positively affected by higher volumes in the Forestry, Pulp, and Tissue divisions. This increase in sales volumes was partially offset by the lower volumes of corrugating paper and corrugated boxes during this quarter, in response to the seasonality of the fruit season and a decrease in the industrial activity in Chile.
At the same time, we have seen several price scenarios in some of the markets of the main products the Company commercializes, such as hardwood pulp, remanufactured wood, and plywood. This led to a 7% increase in consolidated sales for second-quarter '08 compared to the previous quarter, reaching $925 million.
On the cost side, there was a 7% increase compared to last quarter, mainly explained by the growth in the Company's total sales. Cost of sales remained at 66%. Despite the Chilean peso depreciated 20% during the quarter, which reduces cost pressures, the Company continued to face elevated energy and transportation costs due to the increased price of oil and its derivatives. At the same time, the prices of some raw materials such as timber, chemicals, and recycled paper cuttings continued to be high.
Despite this, the growth in sales meant a 10% increase in the Company's EBITDA, which was mainly explained by the higher EBITDA in Forestry and Pulp business. CMPC's EBITDA margin reached 26%, remaining at the same level as in the previous quarter.
On the other hand, net income reduced to an 11% decrease, amounting to $109 million or $0.55 per share.
During this quarter, the individual businesses in general operated normally, a situation that is projected to remain during the rest of the year. The global economy has continued to show signs of slowdown. The historical prices reached by oil, inflation, and other issues are generating certain level of uncertainty in the global economy. Nevertheless the Company expects the demand for most of the products itself will remain stable.
Increases in costs of raw materials affected the operational results of CMPC during the period. This effect is expected to continue during the remainder of the year. Therefore the Company has continued its efforts to contain pricing costs and achieve greater efficiency and competitiveness in the business process.
Regarding CMPC's projects, the boxboard expansion project in the Maule mill has continued to advance, and it should be starting up in some few months. This will take the Company's boxboard capacity to 430,000 tonnes per year. During this quarter, a new tissue paper machine in Peru started operations. This is part of the $150 million investment plan for the Tissue business.
Considering its financial needs, the Company subscribed a syndicated loan for $250 million in which nine banks participated. The funds will be used to refinance debt, capital expenditures, and working capital.
Let's take a look at each of the five business divisions. In the Forestry division, there were higher sales compared to the previous quarter, totaling $117 million. Sales volumes were up by 2%, especially on remanufactured wood...
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