Chilean panel producer Masisa reports net income after minority interest of US$15.5M in Q3, up from US$13.4M a year earlier, attributes increase to higher wood board sales, improved cost efficiency
November 22, 2011
THIRD QUARTER 2011 HIGHLIGHTS:
ANALYSIS OF CONSOLIDATED RESULTS
Sales in the third quarter of 2011 were US$335.9 million, increasing US$72.8 million (+27.7%) on the same quarter of
the previous year.
Particleboard (PB) and medium density particleboard (MDP) sales surged US$16.5 million (+22.6%) in the third quarter of 2011, mainly because of the higher production and sales of the new MDP mill at Montenegro in Brazil, which had a sales increase of US$7.2 million (+33.4%) compared with the same period of the previous year. This new mill was operating at 82% of its production capacity in the third quarter of 2011. There were large PB sales increases in Colombia (+44.2%), Argentina (+30.1%), Chile (+21.7%), Mexico (+14.6%) and Venezuela (+11.7%).
Medium density fiberboard (MDF) sales rose US$32.8 million (+26.9%) due to higher sales in Colombia (+77.7%), Mexico (+26.0%), Chile (+24.0%), Venezuela (+22.4%), and Argentina (+21.8%).
In the forestry business unit sawlog sales to third parties amounted to US$29.6 million, which was a US$12.4 million (-29.4%) decrease on the same quarter of the previous year. That was largely due to sales decreases in Chile (-40.3%) and Brazil (-45.5%). That was partly offset by higher sales Argentina (+57.8%) and Venezuela (+761.8%).
The Company’s consolidated EBITDA amounted to US$53.4 million in the third quarter of 2011, which was a 10.1% decrease on the same period of the previous year. That was mainly due to the increase in the industrial business unit EBITDA, which grew US$2.9 million (+10.6%) because of the higher sales and margins of operations in Venezuela, Argentina, Mexico, Colombia, Ecuador and in the Chilean domestic market. The EBITDA in Brazil was down on the previous year, due to the difficulty of offsetting higher costs of resins with volume and price increases. This also affected exports from Chile, because of the difficulty of implementing price increases to markets outside the region on account of the global economic situation. The forestry business unit EBITDA dropped US$10.9 million (-33.6%), mainly because of a change in the product mix.
Operations in Chile and Brazil accounted for 46.0% of the Company’s consolidated EBITDA in the third quarter of 2011. Venezuela accounted for a 24.5% share. Considering the accumulate EBITDA for 2011, Venezuela represents 22.8% of the total EBITDA.
Profits attributable to the controller’s owners after minority interest (previously called net income in the year) were US$15.5 million, compared to net income of US$13.4 million in the same period in 2010. This 16.4% increase was because of a better operating performance of US$16.1 million across the Company’s different business lines, arising from higher sales in the industrial and forestry business units in most markets.
Income from net biological asset variations dropped US$4.5 million, mainly due to higher forestry costs related to greater forestry stewardship investments and forestry activities for forest development.
In non-operating terms, lower net financial costs on account of debt renegotiations, lower income tax and an unfavorable impact on minority interest arising from higher income in Venezuela where the Company has 60% ownership were partially offset by lower income due to readjustment units and exchange rate differences. In aggregate such effects generated a net favorable difference of US$0.2 million.
ANALYSIS BY BUSINESS UNIT
Industrial Business Unit
Sales of the Industrial Business Unit amounted to US$306.6 million in the third quarter of 2011, which was a US$83.5 million (+37.4%) increase on the same period of the previous year. Such increase was mainly due to higher MDF and PB/MDP sales in the regional markets where the Company operates, highlighting increases in Colombia (+67.5%), Argentina (+25.1%), Chile (+22.4%), Venezuela (+20.5%) and Mexico (+20.1%).
MDF sales volumes in m3 were up 19.9% on the third quarter of 2010, mainly in Colombia (+92.0%), Peru (+91.4%), Mexico (+27.4%) and export markets (+330.0%). PB/MDP volumes in m3 climbed 13.9% on the third quarter of the previous year due to increases in Colombia (+62.6%), Argentina (+24.8%), Brazil (+21.6%), Ecuador (+12.0%) and Chile (+9.6%).
Sales costs in the quarter were US$249.1 million and were 45.3% up on the same quarter of the previous year. This increase was mainly due to higher resin costs arising from the sharp surge in demand for urea in the agricultural market. Wood costs also increased in all markets and there were higher electric power costs in Chile for part of the needs that are not met by supply at regulated prices (about 34%), fixed-price contracts or the generation of the new co-generation plant at Cabrero.
EBITDA grew US$2.9 million due to better operations in Venezuela, Argentina, Mexico, Colombia and Ecuador. EBITDA in Brazil was down on the previous year due to the difficulty of offsetting higher costs with volume and price increases. This also affected the EBITDA generation in Chile’s exports, because of the difficulty of implementing price increases for sales to markets outside the region on account of the global economic situation.
Forestry Business Unit
This business unit had total sales of US$44.0 million in the third quarter of 2011, which was a US$5.1 million (-10.4%) decrease on the same quarter of 2010.
Sawlog sales to third parties (excluding inter-company sales) were US$29.6 million, decreasing US$12.4 million on the third quarter of the previous year. That was mainly due to lower sales in Chile (-40.3%) and Brazil (-45.5%). That was partly offset by higher sales in Venezuela (+761.8%) and Argentina (+57.8%).
The sales costs of this business unit were US$35.6 million, 20.2% down on the third quarter of the previous year and mainly due to the lower sales volume.
The forestry business unit’s EBITDA dropped US$10.8 million, mainly due to different sales mix.
BALANCE SHEET ANALYSIS
MASISA’s total assets rose US$16.9 million (+0.7%) due to a 1.9% increase in current assets, mainly because of the increase in property, plant and equipment (US$33.2 million) on account of the investment made to build the new MDP mill and the new co-generation plant, both at Cabrero in Chile, and the increase in non-current biological assets (US$31.9 million). That was partially offset by lower other non-current financial assets (US$45.6 million).
Current assets dipped 2.7% because of lower other current financial assets (US$22.1 million) and current biological assets (US$31.4 million). This decrease was partially offset by higher cash (US$10.0 million) and accounts receivable (US$15.8 million).
The CAPEX was US$22.4 million in the third quarter of 2011 compared to US$22.3 million in the same quarter of the previous year.
MASISA’s total financial debt in the third quarter of 2011 was US$8.8 million higher than that at the close of 2010 and amounted to US$759.5 million.
This increase was mainly due to the start-up of the Dalkia-built electric power co-generating plant costing approximately US$20.9 million, which operates under a building, operation and transfer (BOT) contract with leasing characteristics, and additional debt of US$5.7 million to finance working capital needs. This was offset by the appreciation of the Chilean peso against the US dollar, which lowered the value of bonds in UF by approximately US$17.7 million. Regarding the latter, it should be highlighted that the Company has hedging for about 100% of these bonds in UF to convert them to US dollar readjustability by means of hedging instruments, whose valuation offsets increases and decreases in the balance of bonds in UF due to the exchange rate, but is not stated in the financial debt accounts. The balance in favor of these instruments is stated in the Other current or non-current financial assets accounts, as the case may be, and the balance against these instruments is stated in Other current or non-current financial liabilities, when applicable.
Cash and cash equivalents in the third quarter of 2011 amounted to US$89.4 million (0.4 times the short-term financial debt), and the net financial debt was therefore US$670.1 million (US$672.7 million at December 31, 2010).
Currently, the company is in process to refinance 2011 and 2012 maturities through a mix of bank loans and bonds issuance.
The Company met all its financial covenants in the third quarter of 2011.
Summary of the main significant events reported to Chile’s Superintendency of Securities and Insurance (SVS) in 2011 and other subsequent significant events.
1) Payment of dividends
On April 27, 2011, it was agreed to pay a compulsory minimum final dividend charged to the net distributable income of the year ended December 31, 2010. The total dividend to be distributed amounted to US$24,270,546.61, which accounted for 30% of the net distributable income for the year ended December 31, 2010. The total dividend per share therefore amounted to US$0.00348459239002193.
The dividend was paid in Chilean pesos according to the “observed US dollar” exchange rate published in the Official Gazette on May 18, 2011. Those shareholders listed in MASISA’s Shareholders’ Registry as of May 18, 2011, were entitled to this dividend.
2) Sale of OSB mill in Brazil
In June, MASISA sold Louisiana Pacific its remaining 25% of the OSB mill at Ponta Grossa in Brazil, for US$24 million in cash.
3) Inauguration of the MDP mill in Chile
The new MDP mill at Cabrero in Chile was inaugurated in October. It has a production capacity of 280,000 m3 and entailed an investment of about US$59 million. This mill will offer a new top quality product and have major production cost savings.
THIRD QUARTER 2011 HIGHLIGHTS:
ANALYSIS OF CONSOLIDATED RESULTS