Arauco & Constitution Pulp 6K Current report

FORM6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule13a-16 or15d-16

of the Securities Exchange Act of 1934

For the month of September, 2019

Commission File Number33-99720

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 Form20-F or Form40-F.

Form20-F ☒ Form40-F ☐

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-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 Rule12g3-2(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 Rule12g3-2(b):82-

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		7
3.	Unaudited Interim Consolidated Statements of Profit or Loss		9
4.	Unaudited Interim Consolidated Statements of Comprehensive Income		10
5.	Unaudited Interim Consolidated Statements of Changes in Equity		11
6.	Unaudited Interim Consolidated Statements of Cash Flow		12
7.	Unaudited Notes to the Interim Consolidated Financial Statements		13
	Annex: Press Release

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2019

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

1. ANALYSIS OF FINANCIAL POSITION

Statement of Financial Position

The principal components of assets and liabilities at each period are as follows:


Assets	09-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Current assets		3,602,675		3,441,160
Non-current assets		11,679,128		11,152,588

Total assets		15,281,803		14,593,748


Liabilities	09-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Current liabilities		1,382,809		1,579,764
Non-current liabilities		6,532,565		5,675,013
Non–parent participation		35,659		37,192
Net equity attributable to parent company		7,330,770		7,301,779

Total net equity and liabilities		15,281,803		14,593,748

As of September 30, 2019, total assets increased MU.S.$688 compared to December 31, 2018, equivalent to a 4.71% variation. This variation was driven mainly by increases in the balance of property, plant and equipment which were partially offset by a decrease in trade and other current receivables and investment in related parties.

In turn, total liabilities increased by MU.S.$661 principally due to an increase in financial liabilities (mainly bonds issuances), partially offset by decreases in tax liabilities and currentnon-financial liabilities (minimum dividend).

The main financial and operational indicators as of the dates and periods indicated below are as follows:


Liquidity ratios	09-30-2019		12-31-2018
Current Liquidity (current assets / current liabilities)		2.61		2.18
Acid ratio ((current assets-inventories, biological assets) / current liabilities)		1.59		1.33

Debt indicators	09-30-2019		12-31-2018
Debt to equity ratio (total liabilities / equity)		1.07		0.99
Short-term debt to total debt (current liabilities / total liabilities)		0.17		0.22
Long-term debt to total debt(non-current liabilities / total liabilities)		0.83		0.78

	09-30-2019		09-30-2018
Financial expenses coverage ratio (earnings before taxes + interest expense / interest expense)		1.99		6.38

Activity ratio	09-30-2019		12-31-2018
Inventory turnover-time (cost of sales / inventories + current biological assets)		2.88		2.95
Inventory turnover-time (excluding biological assets) (Cost of sales /inventory)		3.75		3.92
Inventory permanence-days ((inventories + biological assets) /cost of sales)		125.20		121.96
Inventory permanence-days (excluding biological assets) (inventory / cost of sales)		96.00		91.80

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2019

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

As of September 30, 2019, the short-term debt to total debt ratio represented 17% of total liabilities (22% as of December 31, 2018).

Our financial expenses coverage ratio decreased from 6.38 to 1.99, mainly due to lower earnings before taxes for the nine-month period ended September 30, 2019, compared to the same period of 2018.

Statement of profit or loss

Profit before income tax

Profit before income tax registered a profit of approximately MU.S.$191 compared to a profit of approximately MU.S.$857 in the same period of 2018. The negative variation of MU.S.$666 is explained by the factors described in the following table:


Item	MU.S.$
Gross profit		(611	)
Distribution and Administrative Expenses		(45	)
Other income and expenses		36
Other financial income and expenses		(24	)
Others		(22	)

Net change in profit before income tax		(666	)

The main indicators related to result accounts and the details of revenues and operation costs are as follows:


Revenues	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Pulp		1,845,750			2,367,162
Timber		2,177,681			2,122,207
Forestry		103,182			83,934
Other		298			608

Total revenues		4,126,911			4,573,911


Sales costs	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Wood		642,415			519,296
Forestry work and other services		429,276			510,211
Depreciation and amortization		355,693			288,786
Other costs		1,532,783			1,478,253

Total sales costs		2,960,167			2,796,546


Profitability index	09-30-2019			12-31-2018
Profitability on equity		2.79			10.05
Profitability on assets		1.37			5.08
Return on operating assets		2.70			8.19

Profitability ratios	09-30-2019			09-30-2018
Income per share (U.S.$) (1)		1.32			5.81
Profit after tax (ThU.S.$) (2)		153,932			656,637
Gross margin (ThU.S.$)		1,166,744			1,777,365
Finance costs (ThU.S.$)		(192,718	)		(159,319	)

(1)	Earnings per share refer to the profit to net equity to parent company.

(2)	Includesnon-controlling interest.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2019

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


EBITDA	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Profit (loss)		153,932			656,637
Finance costs		192,718			155,902
Finance income		(22,328	)		(12,104	)
Income tax expense		36,636			199,926
EBIT		360,958			1,000,361
Depreciation and amortization		386,921			310,453
EBITDA		747,879			1,310,814
Cost at fair value of the harvest		244,567			241,957
Gain from changes in fair value of biological assets		(110,500	)		(78,298	)
Exchange difference		19,509			22,267
Others*		34,879			11,178
Adjusted EBITDA		936,335			1,507,918

*	Considers impairment provision for 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 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. DIFFERENCE BETWEEN ECONOMIC VALUES AND BOOK ASSETS

Assets and liabilities are presented in the Interim Consolidated Financial Statements according to International Financial Reporting Standards and instructions issued by Chilean Commission for the Financial Market. We believe that there are no material differences between the economic value of our assets and the value reflected in these Financial Statements.

4. MARKET SITUATION

Pulp Division

During the third quarter of 2019, no significant changes were seen regarding the market situation and compared to the second quarter results: the demand didn’t recover significantly and prices suffered even more deterioration. Only by the end of the quarter, a few markets showed stability in prices, but this was not yet enough to signal a trend reversal. High inventory levels, economic uncertainty, the ongoing trade war and the lower demand from the northern hemisphere in the summer season affected the market recovery.

In China and the rest of the Asian markets, paper production showed a slight recovery, as the high demand season started (usually between September and December). Even though prices for softwood stabilized, prices for hardwood continued falling during the third quarter. With this scenario for both fibers, the gap between them increased. Paper producers have been increasing their margins due to pulp prices and a slight recovery in paper demand.

In Europe, the paper market’s situation was different, characterized by lower consumption and low economic activity. All of these factors pushed some companies into reducing their

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2019

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

production and to some lines shutdowns. This situation offset all positive margins that could have been generated by the fall in pulp prices. Additionally, European paper exporters had to deal with Chinese competitors mainly in the Middle East and Africa.

Our production, during the third quarter, showed a slight increase compared to the last quarter, mainly due to less programmed maintenance stoppages. Compared to the same period of 2018 production increased by 1.1%. Sales volume increased by 25.3%, as our total stock decreased by approximately 75 thousand tonnes.

Composite Panel

Sales increased compared to the previous quarter, with sales volume going up 11.0%, slightly offset by a decrease in price of 3.8%. During the third quarter, the Latin American market remained stable showing a close fit between supply and demand, except in Brazil and Argentina. The Brazilian market didn’t show any significant improvement, mainly due to a weak economy and oversupply, particularly in MDF. In contrast, the Argentine market has been showing signs of improvement which have resulted in higher sales volume and better prices. Despite that, US$ denominated income has been affected by the depreciation of the Argentine Peso. In US and Canada, sales have remained healthy, mainly due to a decrease in local supply and higher sales from our Grayling mill.

Sawn timber

During the third quarter, the demand for sawn timber was affected mainly by the ongoingUS-China trade war and due to oversupply, particularly in Asia and Oceania, which are one of our main markets. Sales volume decreased by 5.1%. In remanufactured wood products, North America, which is one of our main markets, showed positive results due to the introduction of new products and less competition from Chinese producers because of the tariffs imposed by the US.

Plywood

Sales volume increased 15.1%, with the US demand remaining positive. The oversupply from Brazil, Chile and China and a generalized low global demand led to some price decreases.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2019

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

5. ANALYSIS OF CASH FLOW

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


	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Positive (negative) Cash flow

Net cash flows from operating activities		505,880			867,092
Cash flows from (used in) financing activities:
Loan and bond obtention and payments		715,036			(17,299	)
Payment of lease liabilities		(59,868	)		(5,236	)
Dividends paid		(182,109	)		(114,689	)
Others		(7,853	)		(728	)
Cash flows from (used in) investment activities:
Purchase and sale of property, plant and equipment		(645,007	)		(386,164	)
Purchase and sale of biological assets		(174,064	)		(164,878	)
Purchase and sale of intangible assets		(15,266	)		(791	)
Additions (Disposals), Investments in joint ventures and associates		(70,211	)		(17,550	)
Dividends received		13,007			10,330
Others		346			(298	)

Positive (negative) net cash flow		79,891			170,385

Cash flow from operating activities shows a lower positive balance of MU.S.$506 for the current period, representing a negative variation of MU.S.$361 compared to the same period of 2018, resulting mainly from higher tax payments and higher payments to accounts payables.

The financing cash flow shows a positive balance of MU.S.$465 for the current period, representing a variation in respect of the same period of 2018 (negative balance of MU.S.$138), resulting mainly from bonds issuances, which was offset by higher dividends payments.

Regarding the investment cash flow, the current period shows a higher negative balance of MU.S.$891 (compared to the negative balance MU.S.$559 for the same period of 2018), mainly due to higher disbursements for the purchase of property, plant and equipment and the purchase of plants to Masisa in Mexico, offset by the disposal of Puertos y Logística S.A.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2019

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

6. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of September 30, 2019, a ratio of fixed rate debt to total consolidated debt of approximately 89.2%, which we believe is consistent with industry standards.

Regarding variations in prices of pulp and forestry products, the Company does not participate in futures trading as to maintain one of the lowest cost structures in the industry, the risks for price fluctuations are bounded.

The Company and most of its subsidiaries maintain their accounting records and prepare their financial statements in U.S. dollars. Both the accounts receivable and most financial liabilities are denominated in U.S. dollars or are covered by an exchange rate swap, as well as most of their revenues. As a result, exposure to changes in the exchange rate has decreased significantly.

In the Interim Consolidated Financial Statements as of September 30, 2019, a detailed analysis of the risks associated with the business of Arauco is available (See Note 23).

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


	Note	09-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Assets
Current Assets
Cash and cash equivalents	4-23		1,142,230		1,075,942
Other current financial assets	23		368		497
Other currentnon-financial assets	25		168,909		129,854
Trade and other current receivables	23		773,521		839,184
Accounts receivable from related companies	13		6,211		7,324
Current inventories	6		1,074,760		1,030,196
Current biological assets	20		324,374		315,924
Current tax assets	5		106,795		36,513
Total Current Assets other than assets or disposal groups classified as held for sale			3,597,168		3,435,434
Non-Current Assets or disposal groups classified as held for sale	22		5,507		5,726
Non-Current Assets or disposal groups classified as held for sale or as held for distribution to owners			5,507		5,726

Total Current Assets			3,602,675		3,441,160
Non-Current Assets
Othernon-current financial assets	23		31,272		20,346
Othernon-currentnon-financial assets	25		93,247		86,948
Trade and othernon-current receivables	23		11,256		15,149
Accounts receivable from related companies,non-current	13		—		481
Investments accounted for using equity method	15-16		284,815		358,053
Intangible assets other than goodwill	19		96,743		90,093
Goodwill	17		73,521		65,851
Property, plant and equipment	7		7,773,091		7,174,693
Non-current biological assets	20		3,308,594		3,336,339
Deferred tax assets	5		6,589		4,635
TotalNon-Current Assets			11,679,128		11,152,588
Total Assets			15,281,803		14,593,748

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)


	Note	09-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Equity and Liabilities
Liabilities
Current Liabilities
Other current financial liabilities	23		557,453			537,596
Trade and other current payables	23		696,815			659,618
Accounts payable to related companies	13-23		4,512			10,229
Other current provisions	18		1,264			413
Current tax liabilities	5		1,937			153,642
Current provisions for employee benefits	10		5,621			5,656
Other currentnon-financial liabilities	25		115,207			212,610

Total Current Liabilities other than assets included in disposal groups classified as held for sale			1,382,809			1,579,764
Total Current Liabilities			1,382,809			1,579,764
Non-Current Liabilities
Othernon-current financial liabilities	23		4,951,257			4,044,279
Non-current payables			2,230			2,230
Othernon-current provisions	18		31,830			33,884
Deferred tax liabilities	5		1,371,811			1,417,658
Non-current provisions for employee benefits	10		65,118			64,895
Othernon-currentnon-financial liabilities	25		110,319			112,067
TotalNon-Current Liabilities			6,532,565			5,675,013
Total Liabilities			7,915,374			7,254,777
Equity
Issued capital	3		353,618			353,618
Retained earnings			7,891,990			7,824,045
Other reserves			(914,838	)		(875,884	)
Equity attributable to parent company			7,330,770			7,301,779
Non-controlling interests			35,659			37,192
Total Equity			7,366,429			7,338,971

Total Equity and Liabilities			15,281,803			14,593,748

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS


		January-September						July-September
		2019			2018			2019			2018
	Note	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Statements of profit or loss

Revenue	9		4,126,911			4,573,911			1,387,155			1,549,920
Cost of sales	3		(2,960,167	)		(2,796,546	)		(1,054,296	)		(938,484	)
Gross profit			1,166,744			1,777,365			332,859			611,436
Other income	3		173,552			103,173			41,600			36,714
Distribution costs	3		(448,587	)		(414,819	)		(160,409	)		(147,114	)
Administrative expenses	3		(427,939	)		(416,266	)		(140,435	)		(133,799	)
Other expense	3		(87,184	)		(52,836	)		(37,178	)		(19,217	)
Profit from operating activities			376,586			996,617			36,437			348,020
Finance income	3		22,328			12,843			7,483			5,498
Finance costs	3		(192,718	)		(159,319	)		(65,778	)		(56,238	)

Share of profit of associates and joint ventures accounted for using equity method	3-15		3,881			28,689			(5,776	)		4,680
Exchange rate differences			(19,509	)		(22,267	)		(12,290	)		(6,037	)
Profit before income tax			190,568			856,563			(39,924	)		295,923
Income tax expense	5		(36,636	)		(199,926	)		10,329			(75,230	)
Net Profit			153,932			656,637			(29,595	)		220,693

Net profit attributable to

Net profit attributable to Parent company			153,682			657,075			(29,477	)		220,840

Net profit attributable toNon-controlling interests			250			(438	)		(118	)		(147	)
Net Profit			153,932			656,637			(29,595	)		220,693


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

Basic and diluted earnings per share from continuing operations			1.3581			5.8066			(0.2605	)		1.9516


Basic and diluted earnings per share			1.3581			5.8066			(0.2605	)		1.9516

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


			January-September						July-September
			2019			2018			2019			2018
	Note		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Net profit				153,932			656,637			(29,595	)		220,693
Components of other comprehensive income that will not be reclassified to profit or loss before tax:
Other comprehensive income before tax actuarial gain (losses) on defined benefit plans		10		1,174			(1,863	)		675			(178	)
Other Comprehensive Income that will not be reclassified to profit or loss before tax				1,174			(1,863	)		(333	)		(178	)
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		(76,473	)		(202,229	)		(89,952	)		(34,369	)
Other Comprehensive Income before tax exchange differences on translation				(76,473	)		(202,229	)		(89,952	)		(34,369	)
Cash flow hedges
Gains (losses) on cash flow hedges, before tax		23		35,516			63,363			3,118			11,972
Recycle of cash flow hedges to profit or loss before tax		23		(15,465	)		(8,558	)		(2,558	)		(2,438	)
Other Comprehensive Income before tax Cash flow hedges				20,051			54,805			560			9,534
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				25,938			(3,095	)		17,776			(2,587	)
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				25,938			(3,095	)		17,776			(2,587	)
Other Comprehensive income that will be reclassified to profit or loss before tax				(30,484	)		(150,519	)		(71,616	)		(27,422	)
Income tax relating to components of other comprehensive income that will not be reclassified to profit or loss before tax
Income tax relating to actuarial losses on defined benefit plans				(317	)		503			(182	)		48
Income tax relating to components of other comprehensive Income that will not be reclassified to profit or loss before tax				(317	)		503			(182	)		48
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		5		(4,458	)		(14,971	)		701			(2,679	)
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				(6,467	)		575			(4,296	)		2,097
Income tax relating to components of other comprehensive income that will be reclassified to profit or loss				(10,925	)		(14,396	)		(3,595	)		(582	)
Other comprehensive income (loss)				(40,552	)		(166,275	)		(74,718	)		(28,134	)
Comprehensive income (loss)				113,380			490,362			(105,094	)		192,559

Comprehensive Income (loss) attributable to
Comprehensive income (loss), attributable to Owners of parent company				114,728			495,692			(102,415	)		193,481
Comprehensive income (loss), attributable toNon-controlling interests				(1,348	)		(5,330	)		(1,898	)		(922	)
Total comprehensive income (loss)				113,380			490,362			(104,313	)		192,559

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


09-30-2019	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 at01-01-2019		353,618		(872,395	)		13,395		(17,571	)		687			(875,884	)		7,824,045			7,301,779			37,192			7,338,971
Increase (decrease) for changes in accounting policies		—		—			—		—			—			—			(107	)		(107	)		—			(107	)
Restated opening balance		353,618		(872,395	)		13,395		(17,571	)		687			(875,884	)		7,823,938			7,301,672			37,192			7,338,864
Changes in Equity:
Comprehensive income
Net profit		—		—			—		—			—			—			153,682			153,682			250			153,932
Other comprehensive income, net of tax		—		(74,871	)		15,593		853			19,471			(38,954	)		—			(38,954	)		(1,598	)		(40,552	)
Comprehensive income		—		(74,871	)		15,593		853			19,471			(38,954	)		153,682			114,728			(1,348	)		113,380
Dividends		—		—			—		—			—			—			(74,200	)		(74,200	)		(128	)		(74,328	)
Increase (decrease) from transfers and other changes		—		—			—		—			—			—			(11,430	)		(11,430	)		(57	)		(11,487	)
Changes in equity		—		(74,871	)		15,593		853			19,471			(38,954	)		68,052			29,098			(1,533	)		27,565
Closing balance at09-30-2019		353,618		(947,266	)		28,988		(16,718	)		20,158			(914,838	)		7,891,990			7,330,770			35,659			7,366,536


09-30-2018	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 at01-01-2018		353,618		(691,772	)		4,752		(18,926	)		2,168			(703,778	)		7,425,133			7,074,973			41,920			7,116,893
Increase (decrease) for changes in accounting policies		—		—			—		—			—			(1,918	)		(1,956	)		(3,874	)		—			(3,874	)
Restated opening balance		353,618		(691,772	)		2,834		(18,926	)		2,168			(705,696	)		7,423,177			7,071,099			41,920			7,113,019
Changes in Equity:
Comprehensive income
Net profit		—		—			—		—			—			—			657,075			657,075			(438	)		656,637
Other comprehensive income, net of tax		—		(197,336	)		39,834		(1,360	)		(2,520	)		(161,382	)		—			(161,382	)		(4,893	)		(166,275	)
Comprehensive income		—		(197,336	)		39,834		(1,360	)		(2,520	)		(161,382	)		657,075			495,693			(5,331	)		490,362
Dividends		—		—			—		—			—			—			(284,511	)		(284,511	)		(90	)		(284,601	)
Increase (decrease) from transfers and other changes		—		—			—		—			—			—			(172	)		(172	)		—			(172	)
Changes in equity		—		(197,336	)		39,834		(1,360	)		(2,520	)		(161,382	)		372,392			211,010			(5,421	)		205,589
Closing balance at09-30-2018		353,618		(889,108	)		42,668		(20,286	)		(352	)		(867,078	)		7,795,569			7,282,109			36,499			7,318,608

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the years ended September 30,
	2019			2018
	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		4,462,712			4,442,076
Other cash receipts from operating activities		345,537			288,458
Classes of cash payments
Payments to suppliers for goods and services		(3,311,656	)		(3,090,396	)
Payments to and on behalf of employees		(469,077	)		(423,270	)
Other cash payments from operating activities		(104,399	)		(164,262	)
Interest paid		(159,961	)		(128,590	)
Interest received		21,025			7,229
Income taxes paid		(273,509	)		(60,225	)
Other inflows (outflows) of cash, net		(4,792	)		(3,928	)
Net Cash flow from Operating Activities		505,880			867,092


Cash flows from (used in) Investing Activities
Cash flow from loss of control of subsidiaries and other businesses		102,080			—
Cash flow used in obtaining control of subsidiaries or other businesses		(171,821	)		(16,592	)
Cash used for the purchase ofnon-controlling interests		(470	)		(960	)
Other cash receipts from sales of equity or debt instruments in other entities		—			2
Proceeds from sale of property, plant and equipment		7,516			6,516
Purchase of property, plant and equipment		(652,523	)		(392,680	)
Purchase of intangible assets		(15,266	)		(791	)
Proceeds from sales of other long-term assets		3,639			3,235
Purchase of othernon-current assets		(177,703	)		(168,113	)
Dividends received		13,007			10,330
Other inflows (outflows) of cash, net		346			298
Cash flows from (used in) Investing Activities		(891,195	)		(558,755	)


Cash flows from (used in) Financing Activities
Total borrowings obtained		1,146,234			445,474
Debt obtained in long-term		1,129,127			90,000
Debt obtained in short-term		17,107			355,474
Repayments of borrowings		(431,198	)		(462,773	)
Payments of lease liabilities		(59,868	)		(5,236	)
Dividends paid		(182,109	)		(114,689	)
Other outflows of cash, net		(7,853	)		(728	)
Cash flows from (used in) Financing Activities		465,206			(137,952	)

Net increase (decrease) in Cash and Cash Equivalents before effect of exchange rate changes		79,891			170,385
Effect of exchange rate changes on cash and cash equivalents		(13,603	)		(25,485	)

Net increase (decrease) of Cash and Cash Equivalents		66,288			144,900
Cash and cash equivalents, at the beginning of the period		1,075,942			589,886
Cash and cash equivalents, at the end of the period		1,142,230			734,786

The accompanying notes are an integral part of these interim consolidated financial statements.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2019 AND 2018 AND DECEMBER 31, 2018

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 number93,458,000-1, 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 anon-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, 14^thfloor, 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, wood products and forestry.

As of September 30, 2019, Arauco is controlled by Empresas Copec S.A., tax identification number90,690,000-9, which owns 99.9780% 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 number96,556,310-5, 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 Mrs. María Noseda Zambra de Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi. It is noted in this regard, that Mrs. María Noseda Zambra de Angelini passed away on April 15, 2018, and the effective possession of her property is in process. More details of the control of Celulosa Arauco y Constitución S.A. can be obtained from its Annual Report 2018, which appears on its website.

Arauco’s Interim Consolidated Financial Statements were prepared on a going concern basis.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Presentation of Interim Consolidated Financial Statements

The Interim Consolidated Financial Statements presented by Arauco are comprised by the following:

•

Interim Consolidated Statements of Financial Positionas of September 30, 2019 and December 31, 2018.

•

Interim Consolidated Statements of Profit or Loss for the periods ended September 30, 2019 and 2018.

•

Interim Consolidated Statements of Comprehensive Income for the periods ended September 30, 2019 and 2018.

•

Interim Consolidated Statements of Changes in Equity for the periods ended September 30, 2019 and 2018.

•

Interim Consolidated Statements of Cash Flows for the periods ended September 30, 2019 and 2018.

•

Explanatory disclosures (notes)

Period Covered by the Interim Consolidated Financial Statements

Nine-month period ended September 30, 2019 and 2018.

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. 620 on November 8, 2019.

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)

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 products and forestry reportable segments, 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.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

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 interim 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.$).

Summary of significant accounting policies

a)	Basis for preparation of the interim consolidated financial statements

The 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 interim 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.

These discounted cash flows require estimates in growth, harvest, sales prices and costs; therefore, it is important that management makes appropriate estimates of future levels and trends for sales and costs, as well as conduct regular surveys of the forests to establish the volumes of wood available for harvesting and their current growth rates. The main considerations used to measure forest plantations are presented in Note 20, including a sensitivity analysis.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

- Goodwill

Goodwill represents the excess of the acquisition cost over the fair value of the Group’s holding in the identifiable net assets of the acquired subsidiary at the date of acquisition. The aforementioned fair value is determined whether based on assessments and/or the discounted future flow method using hypotheses in their determination, such as sales prices and industry indexes, among others. See Note 17.

- 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

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.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

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

The profit or loss of each component of other comprehensive income is attributed to owners of the parent company and thenon-controlling interest, as appropriate. Total comprehensive income is attributed to the owners of the parent company andnon-controlling interests even if the results of thenon-controlling interest have a deficit balance.

If a subsidiary uses accounting policies other than those adopted in the 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 andnon-controlling interest is presented in the interim consolidated statement of financial position within equity, separately from the equity of the owners of the parent company.

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, Argentine Pesos, Canadian Dollars and Chilean 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 presentnon-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 Corporate Managing Directors of each segment.

Based on the aforementioned process, the Company has established reportable segments according to the following business units:

•

Pulp

•

Wood products

•

Forestry

Refer to Note 24 for detailed financial information by reportable segment.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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 atyear-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognized in the 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 includecash-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.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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 andNon-Current Financial Assets. They are subsequently valuated by determining their fair value, registering changes in value in the 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 arenon-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.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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 financial statements. 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 distribution costs.

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 awrite-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 includesnon-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 andNon-Current Financial Liabilities.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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 subsequentlyre-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 innon-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.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The Group 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) asnon-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 asnon-current assets held for sale.

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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 anynon-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 5Non-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 presentnon-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 whichnon-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 ofnon-controlling interests, in the recognized amounts of the acquirer’s identifiable net assets. The choice is made on atransaction-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 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, 2019

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, 2019

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 anynon-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 theliabilities 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, 2019

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

Goodwill recognized in subsidiaries Arauco Canada Ltd., Arauco do Brasil S.A. and Arauco Argentina 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

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

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.

After the initial recognition, Arauco, as lessee, recognizes its asset for right of use by applying the cost model, minus the accumulated depreciation and the 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, 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, within Properties, Plants and Equipment, and are further disclosed in Note 7. Likewise, lease liabilities are included in the Interim Consolidated Statement of Financial Position within Other Current andNon-Current Financial Liabilities, and further disclosed as Lease liabilities in note 23.

q)	Biological Assets

IAS 41 requires that biological assets, such as standing trees, are measured at fair value less cost to sell in the 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 forestry plantations is based on discounted cash flow models whereby the fair value of the biological assets is determined using estimated future cash flows from continuing operations calculated using our sustainable forest management plans and including the estimated growth of the forests. 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 statement of profit or loss.

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

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.

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 circumtances 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. Aditionally, 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.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

(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. The point of sale is the delivery of the products to the carrier chartered by the seller.

(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.

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Electrical power is generated as aby-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 othernon-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 interim 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 theby-laws for preferred shares, if any, except where necessary to absorb accumulated losses from prior years.

The General Shareholders’ Meeting of Arauco agreed to distribute annual dividends at 40% of net distributable income, including an interim dividend to be distributed at year end. Dividends payable are recognized as a liability in the interim consolidated financial statements in the period when they are declared and approved by the Arauco’s shareholders or when arises the corresponding present obligation based on existing legislation or distribution policies established by the Shareholders’ Meeting.

The dividends payable provision is registered for 40% of the liquid distributable profit and against a lower equity, based on the yearly resolution of the Shareholders’ Meeting.

Dividends payable are presented in the line item “Other currentnon-financial liabilities” in the interim consolidated statement of financial position.

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.

CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

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 profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

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.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

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 reversedeither 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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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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, 2019:


Standards and interpretations	Content	Mandatory application for annual periods beginning on or after
IFRS 16	Leases The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value.	January 1, 2019
IFRIC 23	Uncertain tax positions It clarifies the method for applying the acknowledgment and measurement requirements of IAS 12 when there is uncertainty regarding the fiscal treatments.	January 1, 2019
Amendments and improvements	Content	Mandatory application for annual periods beginning on or after
IAS 19	Employee Benefits Prescribe the accounting and disclosure for employee benefits, requiring an entity to recognise a liability where an employee has provided service and an expense when the entity consumes the economic benefits of employee service.	January 1, 2019

IAS 28	Investments in associates and joint ventures It clarifies that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.	January 1, 2019

IFRS 9	Financial instruments Allows assets to be measured at amortised cost.	January 1, 2019

IFRS 3	Business Combinations Clarifies that when an entity obtains control of a business that is a joint operation, it is a business combination achieve by steps.	January 1, 2019

IFRS 11	Joint Arrangements Clarifies that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.	January 1, 2019

IAS 12	Income taxes Clarifies the income tax consequences of dividends from financial instruments at amortized cost should be recognized according to the past transactions or events that generated distributable profits.	January 1, 2019

IAS 23	Borrowing Costs Clarifies that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the general borrowings.	January 1, 2019

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The adoption of the standards, amendments and interpretations described above do not have a significant impact on Arauco’s Interim Consolidated Financial Statements during its initial application period, with exception of the following paragraphs related to IFRS 16.

IFRS 16 - Leases

Arauco has decided to apply IFRS 16 for the first time, starting on January 1, 2019.

IFRS 16 introduces a single lessee accounting model. The lessee is required to recognize an asset a right of use representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. There are recognition exceptions for short-term leases orlow-value leases. Accounting for lessors remains similar to IAS 17, that means, lessors continue classifiying the leases as financial or operational.

Entities can apply IFRS 16 using either a full retrospective or a modified retrospective approach for leases. If the company applies the modified retrospective approach it is not required to restate the comparative financial information and the cumulative effect of the initial application of IFRS 16 must be presented as an adjustment to the opening balances of retained earnings.

Arauco has adopted to recognize the cumulative effect of the initial application of the standard as an adjustment to the opening balance of retained earnings as of January 1, 2019. Given this alternative, it is not required to restate the comparative information

The following table shows the initial effects of the adoption of IFRS 16 as of January 1, 2019 on the Arauco Interim Consolidated Financial Statements:


	January 1, 2019 ThU.S.$
Right of use assets		251,114
Advances granted		(4,308	)
Sublease		1,540
Lease liabilities		248,346

Advances granted are presented net in the line of other financial liabilities.

Sublease has a net impact on the Acumulated earnings on January 1, 2019 of ThU.S.$ 107.


	2019 ThU.S.$
Operating leases as of December 31, 2018		110,928
Discounted using the lessee’s incremental borrowing rate as of January 1, 2019		88,634
Finance lease liabilities recognized as of December 31, 2018		68,187
Lease liabilities recognized due to IFRS 16 implementation		159,712
Total Lease liabilities as of January 1, 2019		316,533


	January 1, 2019 ThU.S.$
Lease liabilities - IFRS 16		248,346
Lease liabilities - IAS 17		68,187
Increase (decrease) for changes in accounting policies		316,533

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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:


Standards and interpretations	Content	Mandatory application for annual periods beginning on or after

IFRS 17	Insurance Contracts Supersedes IFRS 4. It changes mainly the accounting for insurance contracts and inverstments contracts.	January 1, 2021

Amendments and improvements	Content	Mandatory application for annual periods beginning on or after

IFRS 10 y IAS 28- Amendments	Sale or Contribution of assets among an Investor and its Associates or Joint Ventures.	Indeterminate

IAS 1 y IAS 8	Presentation of Financial Statementes and Accounting Policies, Changes in Accounting Estimates and Errors. Clarifies the definition of material and align the definition used in the Conceptual Framework and the standards themselves.	January 1, 2020

IFRS 3	Definition of a Business Narrows the definitions of a business	January 1, 2020

Arauco estimates that the adoption of the standards, amendments and interpretations described above do not have a significant impact on Arauco’s Interim Consolidated Financial Statements during its initial application period.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 2. ACCOUTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES

Changes to accounting policies

Arauco has decided to apply IFRS 16 Leases, in accordance with the transition options of this standard, retroactively with the accumulated effect of the initial application, recognized on January 1, 2019, withoutre-expressing its comparative financial statements as of December 31, 2018.

Arauco has adopted IFRS 16, recognizing liabilities in connection with leases that had been previously classified as operating leases under IAS 17 - Leases.

The lease liabilities under IFRS 16 were measured at the present value of the remaining payments for leases, discounted using the average incremental rate of 3.99%, applied as of January 1, 2019.

The assets by right of use were measured by an amount equivalent to the lease liability, adjusted by the amount of any lease payment that was prepaid or accumulated, in connection with the lease recognized in the balance sheet as of December 31, 2018.

As a consequence of the adoption of IFRS 16, Properties, Plants and Equipment increased by ThU.S.$251,114 and Other Financial Liabilities by ThU.S.$248,346 on January 1, 2019. The following table shows a reconciliation between both amounts.


	January 1, 2019 ThU.S.$
Right of use assets		251,114
Advances granted		(4,308	)
Sublease		1,540
Lease liabilities		248,346

Advances granted are presented net in the line of other financial liabilities.

Sublease has a net impact on the Acumulated earnings on January 1, 2019 of ThU.S.$ 107.

Upon applying IFRS 16, Arauco chose not to apply the requirements for recognizing a liability and an asset for right of use for the leases which term expires within the 12 months following January 1, 2019 and for those where the underlying asset had insignificant value.

Changes to accounting estimates

As of September 30, 2019, there have been no changes regarding the accounting estimates with respect to the 2018 financial year.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 3. DISCLOSURE OF OTHER INFORMATION

a)	Disclosure of information on Issued Capital

At the date of these interim consolidated financial statements the share capital of Arauco is ThU.S.$353,618.

100% of Capital corresponds to ordinary shares.


	09-30-2019	12-31-2018
Description of Ordinary Capital Share Types	100% of Capital corresponds to ordinary shares
Number of Authorized Shares by Type of Capital in Ordinary Shares	113,159,655
Nominal Value of Shares by Type of Capital in Ordinary Shares	ThU.S.$0.0031210 per share
Amount of Capital in Shares by Type of Ordinary Shares that Constitute Capital	ThU.S.$353,618

	09-30-2019	12-31-2018
Number of Shares Issued and Fully Paid by Type of Capital in Ordinary Shares	113,159,655

b)	Dividends paid

The interim dividend paid in December 2018 was equivalent to 20% of the distributable net profit calculated as of the end of September 2018 and was considered a decrease in the interim consolidated statements of changes in equity.

The final dividend paid each year in May corresponds to the difference between the 40% of the prior year distributable net profit and the amount of the interim dividend paid, which is considered a decrease to the interim dividend already paid.

The amount of ThU.S.$74,200 (ThU.S.$ 284,511 as of September 30, 2018) presented in the interim consolidated statements of changes in equity correspond to the minimum dividend provision recorded for the period 2019.

In the interim consolidated statements of cash flows, the Dividends Paid line shows an amount of ThU.S.$ 182,109 as of September 30, 2019 (ThU.S.$ 114,689 as of September 30, 2018), of which ThU.S.$ 182,040 (ThU.S.$ 113,773 as of September 30, 2018) correspond to the payment of dividends of the Parent Company.

The following are the dividends paid and the corresponding per share amounts during the periods 2019 and 2018:


Detail of Dividend Paid, Ordinary Shares
Dividend Paid		Final Dividend
Type of Shares for which there is a Dividend Paid		Ordinary Shares
Date of Dividend Paid		05-08-2019
Amount of Dividend		ThU.S.$ 182,040
Number of Shares for which Dividends are Paid		113,159,655
Dividend per Share		U.S.$ 1.60870

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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



Detail of Dividend Paid, Ordinary Shares
Dividend Paid		Interim Dividend
Type of Shares for which there is a Dividend Paid		Ordinary Shares
Date of Dividend Paid		12-12-2018
Amount of Dividend		ThU.S.$ 142,256
Number of Shares for which Dividends are Paid		113,159,655
Dividend per Share		U.S.$ 1.25712



Detail of Dividend Paid, Ordinary Shares
Dividend Paid		Final Dividend
Type of Shares for which there is a Dividend Paid		Ordinary Shares
Date of Dividend Paid		05-10-2018
Amount of Dividend		ThU.S.$113,773
Number of Shares for which Dividends are Paid		113,159,655
Dividend per Share		U.S.$ 1.00542

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.

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

d)	Other items in the Interim 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, 2019 and 2018 are as follows:


	January - September						July - September
	2019 ThU.S.$			2018 ThU.S.$			2019 ThU.S.$			2018 ThU.S.$
Classes of Other Income
Other Income, Total		173,552			103,173			41,600			36,714
Gain from changes in fair value of biological assets (See note 20)		110,500			78,298			36,090			26,422
Net income from insurance compensation		1,319			1,536			165			277
Revenue from export promotion		931			3,188			251			1,112
Lease income		1,650			1,528			336			516
Gain on sales of assets		11,576			10,776			2,221			4,199
Access easement		—			193			—			48
Compensations received		782			2,487			722			1,978
Gain on sales of associates		40,842			—			—			—
Other operating results		5,952			5,167			1,815			2,162

Classes of Other Expenses by activity
Total of Other Expenses by activity		(87,184	)		(52,836	)		(37,178	)		(19,217	)
Depreciation		—			(381	)		—			(142	)
Legal expenses		(3,148	)		(2,332	)		76			(803	)
Impairment provision for property, plant and equipment and others		(28,670	)		(11,141	)		(19,869	)		(2,723	)
Operating expenses related to staff restructuring or from plants stoppage or closed		(8,869	)		(1,571	)		(4,544	)		(583	)
Expenses related to projects		(9,527	)		(9,696	)		(449	)		(5,125	)
Loss of asset sales		(8,939	)		(5,341	)		(4,547	)		(3,390	)
Loss and repair of assets		(674	)		(410	)		(163	)		(194	)
Loss of forest due to fires		(6,209	)		(52	)		—			577
Other Taxes		(10,995	)		(11,653	)		(3,206	)		(3,334	)
Research and development expenses		(2,942	)		(1,478	)		(1,283	)		(181	)
Fines, readjustments and interests		(1,545	)		(636	)		(900	)		(100	)
Other expenses		(5,666	)		(8,145	)		(2,293	)		(3,219	)

Classes of financing income
Financing income, total		22,328			12,843			7,483			5,498
Financial income from mutual funds - term deposits		14,936			8,145			4,744			3,113
Financial income resulting from swap - forward instruments		503			328			335			261
Other financial income		6,889			4,370			2,404			2,124

Classes of financing costs
Financing costs, Total		(192,718	)		(159,319	)		(65,778	)		(56,238	)
Interest expense, Banks loans		(26,296	)		(22,099	)		(9,947	)		(7,505	)
Interest expense, Bonds		(121,664	)		(107,532	)		(41,624	)		(35,940	)
Interest expense, other financial instruments		(20,329	)		(12,040	)		(7,753	)		(4,966	)
Interest expence forright-of-use		(8,519	)		—			(2,151	)		—
Other financial costs		(15,910	)		(17,648	)		(4,303	)		(7,827	)

Share of profit (loss) of associates and joint ventures accounted for using equity method
Total		3,881			28,689			(5,776	)		4,680
Investments in associates		1,935			2,457			791			934
Joint ventures		1,946			26,232			(6,567	)		3,746

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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
*Cost of sales ()**	2019 ThU.S.$		2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Timber		642,415		519,296		246,930		163,458
Forestry labor costs and other services		429,276		510,211		148,795		178,182
Depreciation and amortization		307,685		288,786		109,547		96,443
Depreciation for right of use		48,008		—		11,538		—
Maintenance costs		219,892		204,786		80,475		74,164
Chemical costs		429,842		424,807		151,067		148,641
Sawmill Services		109,533		112,506		33,265		35,197
Other Raw Materials		182,549		163,023		77,298		53,303
Other Indirect costs		107,308		126,283		26,043		35,303
Energy and fuel		166,007		154,744		60,264		57,519
Cost of electricity		26,748		29,569		8,490		8,646
Wages and salaries		290,904		262,535		100,584		87,628
Total		2,960,167		2,796,546		1,054,296		938,484

(*)	Total amount is composed by the cost of inventory sales for ThU.S.$ 2,921,766 (ThU.S.$2,740,336 as of September 30, 2018) and by cost of rendering services for ThU.S.$ 38,401 (ThU.S.$ 56,210 as of September 30, 2018)


	January - September				July - September
Distribution cost	2019 ThU.S.$		2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Selling costs		31,150		25,424		11,076		9,619
Commissions		11,093		11,251		4,500		3,624
Insurance		3,706		3,108		1,464		923
Provision for doubtful accounts		1,093		888		441		878
Other selling costs		15,258		10,177		4,671		4,194
Shipping and freight costs		417,437		389,395		149,333		137,495
Port services		26,852		21,264		10,531		7,405
Freights		362,112		332,651		128,239		119,260
Depreciation for right of use		1,354		—		434		—
Other shipping and freight costs (internation, warehousing, stowage, customs and other costs)		27,119		35,480		10,129		10,829
Total		448,587		414,819		160,409		147,114


	January - September				July - September
Administrative expenses	2019 ThU.S.$		2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Wages and salaries		182,476		184,021		60,499		61,554
Marketing, advertising, promotion and publications expenses		15,183		8,611		3,872		2,861
Insurances		14,794		11,303		5,242		3,866
Depreciation and amortization		21,148		20,593		7,386		6,890
Depreciation for right of use		7,442		—		4,155		—
Computer services		26,074		20,840		6,406		5,538
Lease rentals (offices, other property and vehicles)		5,842		10,454		1,267		3,192
Donations, contributions, scholarships		7,483		8,286		1,572		2,472
Fees (legal and technical advisors)		36,479		38,312		13,127		11,424
Property taxes, city permits and rights		13,469		14,270		4,490		4,386
Cleaning services, security services and transportation		16,932		18,393		5,495		5,735
Third-party variable services (maneuvers, logistics)		30,557		32,706		10,096		9,712
Basic services (electricity, telephone)		6,986		7,113		2,346		2,172
Maintenance and repair		5,105		5,160		1,851		1,690
Seminars, courses, training materials		1,935		2,081		606		805
Other administration expenses (travels, clothing and safety equipment, enviromental expenses, audits and others)		36,034		34,123		12,025		11,502
Total		427,939		416,266		140,435		133,799

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

e)	Auditor Fees and Number of Employees


Auditors fees	09-30-2019 ThU.S.$		09-30-2018 ThU.S.$
Audit services		1,919		1,840
Other services
Tax services		949		627
Others		169		249
TOTAL		3,037		2,716


Number of employees	N°
		17,252		15,379

NOTE 4. 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.

Theinvestment 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	09-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Cash on hand		186		126
Bank checking account balances		371,854		327,006
Time deposits		349,623		478,775
Mutual funds		420,567		270,035
Total		1,142,230		1,075,942

The risk classification of the Company’s mutual funds as of September 30, 2019 and December 31, 2018 is shown below.


	09-30-2019 ThU.S.$		12-31-2018 ThU.S.$
AAAfm		420,405		268,237
No classification		162		1,798
Total Mutual Funds		420,567		270,035

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Changes in Financial Liabilities


	Opening balance 01-01-2019 ThU.S.$		Increase (decrease) for changes in accounting policies ThU.S.$		Re- expressed opening balance ThU.S.$		Cash Flow																Increase (decrease) due to business combination ThU.S.$
	Opening balance 01-01-2019 ThU.S.$				Re- expressed opening balance ThU.S.$		Borrowings obtained ThU.S.$		Borrowings paid ThU.S.$			Comissions paid ThU.S.$			Interest paid ThU.S.$			Accrued interest ThU.S.$		Inflation adjustment ThU.S.$			Increase (decrease) due to business combination ThU.S.$		Non-cash movements ThU.S.$			Closing balance 09-30-2019 ThU.S.$
Borrowings from banks		940,435		—		940,435		156,349		(140,088	)		(4,797	)		(27,012	)		21,575		(3,550	)				3,307			946,219
Hedging liabilities		71,599		—		71,599		—		—						(15,654	)		15,654		—					41,684			113,283
Bonds and promissory notes		3,501,654		—		3,501,654		989,885		(291,110	)		(2,900	)		(109,006	)		129,542		(41,199	)		4,318		(5,285	)		4,175,899
Lease liabilities (IFRS 16)		68,187		248,346		316,533		—		(59,868	)					(8,289	)		8,043		(6,028	)		3,013		19,905			273,309
Total		4,581,875		248,346		4,830,221		1,146,234		(491,066	)		(7,697	)		(159,961	)		174,814		(50,777	)		7,331		59,611			5,508,710


	Opening balance 01-01-2018 ThU.S.$		Cash Flow																Closing balance 12-31-2018 ThU.S.$
	Opening balance 01-01-2018 ThU.S.$		Borrowings obtained ThU.S.$		Borrowings paid ThU.S.$			Interest paid ThU.S.$			Accrued interest ThU.S.$		Inflation adjustment ThU.S.$			Non-cash movements ThU.S.$			Closing balance 12-31-2018 ThU.S.$
Borrowings from banks		858,457		534,474		(453,789	)		(28,397	)		30,133		761			(1,204	)		940,435
Hedging liabilities		5,393		—		—			(803	)		—		(138	)		67,147			71,599
Bonds and promissory notes		3,302,685		329,077		(21,495	)		(143,080	)		144,116		(112,773	)		3,124			3,501,654
Total		4,166,535		863,551		(475,284	)		(172,280	)		174,249		(112,150	)		69,067			4,513,688

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 5. INCOME TAXES

The tax rates applicable in the countries in which Arauco operates are 27% in Chile, 30% in Argentina, 34% in Brazil, 25% in Uruguay and 21% in the United States (federal tax).

On December 22, 2017, a new law was enacted in the United States that amended several articles of the Income Tax Act. The most relevant amendments of this law include the reduction of the income tax rate, from 35% as to 21% by 2018 fiscal year. This amendment generated a benefit of ThU.S.$ 17,600 for Arauco’s subsidiaries in that country as of December 31, 2017, as a result of the reduction of the net deferred liabilities generated by the reduction of the federal income tax rate.

On December 29, 2017, Law No. 27,430 was enacted in the Official Gazette of Argentina, which amended several articles of the Income Tax Act. The most relevant amendments include the reduction of the federal income tax rate from 35% to 30% by 2018 and 2019 fiscal years, and 25% by 2020. This amendment generated a benefit of ThU.S$ 62,677 for Arauco’s subsidiaries in that country as of December 31, 2017, as a result of the reduction of the net deferred liabilities generated by the reduction of the federal income tax rate.

On March 25, 2019, the subsidiary Arauco Argentina S.A. chose to conduct the Tax Reappraisal set forth in Title X – Chapter 1 of Law No. 27,430. The option was exercised for all Properties, Plants and Equipments included in the category of amortizable movable assets, pursuant to the income tax law, which were adjusted to inflation using the coefficients published in such law for the purposes of calculating the aforementioned tax. The effect of the special tax in the presentation was $122,835,595 argentine pesos (equivalent to ThU.S.$2,132 as of September 30, 2019), which was paid in six instalments during year 2019. Additionally, the increase of the value of these tax assets, arising from this adjustment, generated a decrease of the liabilities for deferred taxes as of September 30, 2019 of approximately ThU.S.$13,154. Both the loss for the special tax as well as the profits for the decrease of the deferred tax, are shown in the Income tax line.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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:


	09-30-2019			12-31-2018
Deferred Tax Assets	ThU.S.$			ThU.S.$
Deferred tax Assets relating to Provisions		5,891			6,105
Deferred tax Assets relating to Accrued Liabilities		7,924			10,906
Deferred tax Assets relating to Post-Employment benefits		19,111			19,072
Deferred tax Assets relating to Property, Plant and equipment		13,388			10,125
Deferred tax Assets relating to Impairment provision		11,289			11,963
Deferred tax Assets relating to Financial Instruments		47,861			9,761
Deferred tax Assets relating to Tax Loss Carryforward		131,795			109,320
Deferred tax Assets relating to Inventories		7,695			5,532
Deferred tax Assets relating to Provisions for Income		7,284			7,443
Deferred tax Assets relating to Allowance for Doubtful Accounts		8,659			5,001
Intangible revaluation differences		7,006			7,651
Deferred tax Assets relating to Other Deductible Temporary Differences		19,594			11,328
Total Deferred Tax Assets		287,497			214,207

Offsetting presentation		(280,908	)		(209,572	)

Net Effect		6,589			4,635

Certain subsidiaries of Arauco mainly in Chile, Brazil and Uruguay, as of the date of these interim consolidated financial statements, present tax losses for which we estimate that, given the projection of future profits, will allow the recovery of these assets. The total amount of these tax losses is ThU.S.$474,513 (ThU.S.$ 368,938 at December 31, 2018), which are mainly originated by operational and financial losses.

In addition, as of the closing date of these interim consolidated financial statements there are ThU.S.$139,494 (ThU.S.$ 183,162 at December 31, 2018) ofnon-recoverable tax losses from companies in Uruguay as joint operations based on the participation of Arauco and subsidiaries in USA, 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:


	09-30-2019			12-31-2018
Deferred Tax Liabilities	ThU.S.$			ThU.S.$
Deferred tax Liabilities relating to Property, Plant and Equipment		866,936			831,471
Deferred tax Liabilities relating to Financial Instruments		21,863			14,225
Deferred tax Liabilities relating to Biological Assets		640,095			661,582
Deferred tax Liabilities relating to Inventory		38,420			39,025
Deferred tax Liabilities relating to Prepaid Expenses		39,923			37,897
Deferred tax Liabilities relating to Intangible		20,436			20,240
Deferred tax Liabilities relating to Other Taxable Temporary Differences		25,046			22,790
Total Deferred Tax Liabilities		1,652,719			1,627,230

Offsetting presentation		(280,908	)		(209,572	)

Net Effect		1,371,811			1,417,658

The effect of changes in current and deferred tax liabilities related to financial hedging instruments corresponds to a debit of ThU.S.$4,458 as of September 30, 2019 (ThU.S.$ 14,971 as of September 30, 2018), which is presented net in Reserves for Cash Flow Hedges in the Interim Consolidated Statement of Changes in Equity.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Reconciliation of deferred tax assets and liabilities


	Opening Balance 01-01-2019		Deferred tax Expenses (Income)			Deferred tax of items charged to other comprehensive income			Increase (decrease) through business combinations		Increase (decrease) Net exchange differences			Closing balance 09-30-2019
Deferred Tax Assets	ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$		ThU.S.$			ThU.S$
Deferred tax Assets relating to Provisions		6,105		(351	)		—			244		(107	)		5,891
Deferred tax Assets relating to Accrued Liabilities		10,906		(3,178	)		—			197		(1	)		7,924
Deferred tax Assets relating to Post-Employment benefits		19,072		190			(317	)		150		16			19,111
Deferred tax Assets relating to Property, Plant and equipment		10,125		3,264			—			—		(1	)		13,388
Deferred tax Assets relating to Impairment provision		11,963		(674	)		—			—		—			11,289
Deferred tax Assets relating to Financial Instruments		9,761		36,748			1,352			—		—			47,861
Deferred tax Assets relating to Tax Loss Carryforward		109,320		23,755			—			1,505		(2,785	)		131,795
Deferred tax Assets relating to Inventories		5,532		1,892			—			279		(8	)		7,695
Deferred tax Assets relating to Provisions for Income		7,443		(270	)		—			112		(1	)		7,284
Deferred tax Assets relating to Allowance for Doubtful Accounts		5,001		4,060			—			68		(470	)		8,659
Intangible revaluation differences		7,651		(231	)		—			—		(414	)		7,006
Deferred tax Assets relating to Other Deductible Temporary Differences		11,328		8,470			—			731		(935	)		19,594
Total Deferred Tax Assets		214,207		73,675			1,035			3,286		(4,706	)		287,497


	Opening Balance 01-01-2019		Deferred tax Expenses (Income)			Deferred tax of items charged to other comprehensive income			Increase (decrease) through business combinations		Increase (decrease) Net exchange differences			Closing balance 09-30-2019
Deferred Tax Liabilities	ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$		ThU.S.$			ThU.S$
Deferred tax Liabilities relating to Property, Plant and Equipment		831,471		35,342			—			4,234		(4,111	)		866,936
Deferred tax Liabilities relating to Financial Instruments		14,225		7,637			—			—		1			21,863
Deferred tax Liabilities relating to Biological Assets		661,582		(15,839	)		—			—		(5,648	)		640,095
Deferred tax Liabilities relating to Inventory		39,025		(605	)		—			—		—			38,420
Deferred tax Liabilities relating to Prepaid Expenses		37,897		1,891			—			69		66			39,923
Deferred tax Liabilities relating to Intangible		20,240		843			—			—		(647	)		20,436
Deferred tax Liabilities relating to Other Taxable Temporary Differences		22,790		3,132			—			182		(1,058	)		25,046
Total Deferred Tax Liabilities		1,627,230		32,401			—			4,485		(11,397	)		1,652,719


	Opening Balance 01-01-2018 IAS 39		Amounts restated		Opening Balance 01-01-2018 IFRS 9		Deferred tax Expenses (Income)			Deferred tax of items charged to other comprehensive income			Increase (decrease) Net exchange differences			Closing balance 12-31-2018
Deferred Tax Assets	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S$
Deferred tax Assets relating to Provisions		7,433				7,433		(1,015	)		—			(313	)		6,105
Deferred tax Assets relating to Accrued Liabilities		11,267				11,267		(361	)		—			—			10,906
Deferred tax Assets relating to Post-Employment benefits		19,276				19,276		297			(504	)		3			19,072
Deferred tax Assets relating to Property, Plant and equipment		11,657				11,657		(1,532	)		—			—			10,125
Deferred tax Assets relating to Financial Instruments		4,348		709		5,057		(507	)		5,211			—			9,761
Deferred tax Assets relating to Tax Loss Carryforward		62,706				62,706		53,103			—			(6,489	)		109,320
Deferred tax Assets relating to Inventories		5,941				5,941		(378	)		—			(31	)		5,532
Deferred tax Assets relating to Provisions for Income		21,354				21,354		(13,910	)		—			(1	)		7,443
Deferred tax Assets relating to Allowance for Doubtful Accounts		5,149		918		6,067		(843	)		—			(223	)		5,001
Intangible revaluation differences		10,389				10,389		(1,244	)		—			(1,494	)		7,651
Deferred tax Assets relating to Other Deductible Temporary Differences		27,364				27,364		(3,838	)		—			(2,418	)		21,108
Total Deferred Tax Assets		186,884		1,627		188,511		29,772			4,707			(10,966	)		212,024


	Opening Balance 01-01-2018 IAS 39		Amounts restated		Opening Balance 01-01-2018 IFRS 9		Deferred tax Expenses (Income)			Deferred tax of items charged to other comprehensive income			Increase (decrease) Net exchange differences			Closing balance 12-31-2018
Deferred Tax Liabilities	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S$
Deferred tax Liabilities relating to Property, Plant and Equipment		860,498		—		860,498		(23,428	)		—			(7,782	)		829,288
Deferred tax Liabilities relating to Financial Instruments		12,684		—		12,684		1,542			—			(1	)		14,225
Deferred tax Liabilities relating to Biological Assets		676,876		—		676,876		2,060	��		—			(17,354	)		661,582
Deferred tax Liabilities relating to Inventory		32,580		—		32,580		6,445			—			—			39,025
Deferred tax Liabilities relating to Prepaid Expenses		41,600		—		41,600		(3,703	)		—			—			37,897
Deferred tax Liabilities relating to Intangible		22,014		—		22,014		(562	)		—			(1,212	)		20,240
Deferred tax Liabilities relating to Other Taxable Temporary Differences		17,731		—		17,731		6,450			—			(1,391	)		22,790
Total Deferred Tax Liabilities		1,663,983		—		1,663,983		(11,196	)		—			(27,740	)		1,625,047

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:

09-30-2019

12-31-2018

Deductible

Taxable

Deductible

Taxable

Difference

Detail of classes of Deferred Tax Temporary Differences

ThU.S.$

Deferred Tax Assets

155,702

104,887

Deferred Tax Assets - Tax loss carryforward

131,795

109,320

Deferred Tax Liabilities

1,652,719

1,627,230

Total

287,497

1,652,719

214,207

1,627,230

January - September

July - September

2019

2018

2019

Detail of Temporary Difference Income and Loss Amounts

ThU.S.$

Deferred Tax Assets

49,920

(15,313

)

19,326

8,143

Deferred Tax Assets - Tax loss carryforward

23,755

23,230

(1,982

)

5,456

Deferred Tax Liabilities

(32,401

)

14,822

(10,611

)

9,763

Total

41,274

22,739

6,733

23,362

Income Tax Expense

Income tax expense consists of the following:


	January - September						July - September
Income Tax composition	2019 ThU.S.$			2018 ThU.S.$			2019 ThU.S.$			2018 ThU.S.$
Current income tax expense		(79,617	)		(222,204	)		2,082			(98,495	)
Tax benefit arising from unrecognized tax assets previously used to reduce current tax expense		3,771			2,934			—			220
Prior period current income tax adjustments		(2,923	)		(1,733	)		(52	)		33
Other current benefit tax (expenses)		859			(1,662	)		1,566			(350	)
Current Tax Expense, Net		(77,910	)		(222,665	)		3,596			(98,592	)
Deferred tax expense relating to origination and reversal of temporary differences		17,519			(491	)		8,715			17,906
Tax benefit arising from previously unrecognized tax loss carryforward		23,755			23,230			(1,982	)		5,456
Total deferred Tax benefit (expense), Net		41,274			22,739			6,733			23,362
Income Tax benefit (expense), Total		(36,636	)		(199,926	)		10,329			(75,230	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The following table presents the current income tax expense detailed by foreign and domestic (Chile) companies at September 30, 2019 and 2018:


	January - September						July - September
	2019 ThU.S.$			2018 ThU.S.$			2019 ThU.S.$			2018 ThU.S.$
Foreign current income tax expense		(9,662	)		(18,931	)		7,674			(6,264	)
Domestic current income tax expense		(68,248	)		(203,734	)		(4,078	)		(92,328	)
Total current income tax expense		(77,910	)		(222,665	)		3,596			(98,592	)
Foreign deferred tax benefit (expense)		19,949			(3,935	)		(12,149	)		(2,186	)
Domestic deferred tax benefit (expense)		21,325			26,674			18,882			25,548
Total deferred tax benefit (expense)		41,274			22,739			6,733			23,362
Total income tax benefit (expense)		(36,636	)		(199,926	)		10,329			(75,230	)

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	2019 ThU.S.$			2018 ThU.S.$			2019 ThU.S.$			2018 ThU.S.$
Statutory domestic (Chile) income tax rate		27.0	%		27.0	%		27.0	%		27.0	%
Tax Expense at statutory tax rate		(51,453	)		(231,272	)		10,780			(79,899	)
Tax effect of foreign tax rates		1,596			1,498			738			(1,329	)
Tax effect of revenues exempt from taxation		35,737			55,792			(8,714	)		24,607
Tax effect of not deductible expenses		(32,509	)		(23,687	)		11,726			(14,273	)
Tax rate effect of tax loss carry forwards		43			437			43			63
Tax effect of Previously Unrecognized Tax Benefit in the Income Statement		—			108			—			—
Tax effect of a new evaluation of assets for deferred not recognized taxes		17,021			—			980			—
Tax rate effect of adjustments for current tax of prior periods		(2,923	)		(1,733	)		(52	)		33
Other tax rate effects		(4,148	)		(1,069	)		(5,172	)		(4,432	)
Total adjustments to tax expense at applicable tax rate		14,817			31,346			(451	)		4,669
Tax benefit (expense) at effective tax rate		(36,636	)		(199,926	)		10,329			(75,230	)

Current tax assets and liabilities

The current tax assets and liabilities balances are as follow:


Current tax Assets	09-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Monthly Provisional Payments (MPP)		137,389			1,662
Income tax receivable		26,155			19,538
Provision tax income		(70,907	)		(1,371	)
Other tax receivables		14,158			16,684
Total		106,795			36,513


Current tax Liabilities	09-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Provision tax income (First category)		8,497			260,538
Monthly Provisional Payments (MPP)		(7,316	)		(107,023	)
Other tax payables		756			127
Total		1,937			153,642

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 6. INVENTORIES


	09-30-2019		12-31-2018
Components of Inventory	ThU.S.$		ThU.S.$
Raw materials		130,473		111,483
Production supplies		133,108		122,794
Work in progress		58,965		66,432
Finished goods		557,460		554,933
Spare Parts		194,754		174,554
Total Inventories		1,074,760		1,030,196

Inventories recognized as cost of sales at September 30, 2019 were ThU.S.$2,921,766 (ThU.S.$2,470,336 at September 30, 2018).

In order to have the inventories recorded at net realizable value at September 30, 2019, a net decrease of inventories was recognized associated with a higher provision of obsolescence of ThU.S.$5,622 (ThU.S.$1,259 at September 30, 2018). As of September 30, 2019, the amount of obsolescence provision is ThU.S.$31,925 (ThU.S.$26,303 at December 31, 2018).

At September 30, 2019, there were inventory write-offs of ThU.S.$1,133 (ThU.S.$ 1,617 at September 30, 2018).

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, there are no inventories pledged as security to report.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 7. PROPERTY, PLANT AND EQUIPMENT


	09-30-2019		12-31-2018
Property, Plant and Equipment	ThU.S.$		ThU.S.$
Property, Plant and Equipment		7,487,468		7,174,693
Property, Plant and Equipment by right of use		285,623		—
Total		7,773,091		7,174,693

Property, Plant and Equipment


	09-30-2019			12-31-2018
Property, Plant and Equipment, Net	ThU.S.$			ThU.S.$
Construction work in progress		1,397,870			1,030,730
Land		967,570			972,143
Buildings		2,095,860			2,062,887
Plant and equipment		2,869,722			2,921,462
Information technology equipment		20,469			23,292
Fixtures and fittings		10,106			15,906
Motor vehicles		13,895			14,916
Other property, plant and equipment		111,976			133,357
Total Net		7,487,468			7,174,693


Property, Plant and Equipment, Gross
Construction work in progress		1,397,870			1,030,730
Land		967,570			972,143
Buildings		4,096,752			3,959,186
Plant and equipment		6,572,749			6,388,843
Information technology equipment		89,650			86,558
Fixtures and fittings		41,712			44,694
Motor vehicles		55,118			53,507
Other property, plant and equipment		131,018			157,301
Total Gross		13,352,439			12,692,962


Accumulated depreciation and impairment
Buildings		(2,000,892	)		(1,896,299	)
Plant and equipment		(3,703,027	)		(3,467,381	)
Information technology equipment		(69,181	)		(63,266	)
Fixtures and fittings		(31,606	)		(28,788	)
Motor vehicles		(41,223	)		(38,591	)
Other property, plant and equipment		(19,042	)		(23,944	)
Total		(5,864,971	)		(5,518,269	)

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

As of September 30, 2019, 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.


	09-30-2019		12-31-2018
	ThU.S.$		ThU.S.$
Amount committed for the acquisition of property, plant and equipment		1,322,495		798,631

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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, 2019 and December 31, 2018:


	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 01-01-2019		1,030,730			972,143			2,062,887			2,921,462			23,292			15,906			14,916			133,357			7,174,693
Increase (decrease) for changes in accounting policies		—			—			—			(55,015	)		—			—			—			(17,237	)		(72,252	)
Restated opening balance		1,030,730			972,143			2,062,887			2,866,447			23,292			15,906			14,916			116,120			7,102,441
Changes
Additions		612,886			6,722			7,981			18,364			676			307			2,599			8,035			657,570
Acquisitions through business combinations		12,839			3,915			27,057			92,468			241			197			313			6,272			143,302
Disposals		—			(1,800	)		(4,484	)		(1,530	)		(3	)		(41	)		(10	)		—			(7,868	)
Withdrawals		(5,910	)		(504	)		(1,722	)		(7,078	)		(5	)		(6	)		(13	)		(9,467	)		(24,705	)
Depreciation		—			—			(96,529	)		(224,724	)		(4,665	)		(1,996	)		(3,136	)		(887	)		(331,937	)
Impairment loss recognized in profit or loss		—			—			(7,548	)		(9,757	)		(152	)		(9	)		(37	)		—			(17,503	)
Increase (decrease) through net exchange differences		(3,485	)		(14,170	)		(2,311	)		(13,648	)		(56	)		(64	)		(55	)		(1,606	)		(35,395	)
Reclassification to assets held for sale		—			—			—			(101	)		—			—			21			—			(80	)
Increase (decrease) through transfers from construction in progress		(249,190	)		1,264			110,529			147,648			1,141			(4,188	)		(713	)		(6,491	)		—
Reclassification from lease to Property, plant and equipment		—			—			—			1,633			—			—			10			—			1,643
Total changes		367,140			(4,573	)		32,973			3,275			(2,823	)		(5,800	)		(1,021	)		(4,144	)		385,027
Closing balance09-30-2019		1,397,870			967,570			2,095,860			2,869,722			20,469			10,106			13,895			111,976			7,487,468

	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 01-01-2018		597,351			1,008,310			2,135,201			3,112,755			22,665			12,297			15,959			129,761			7,034,299
Changes
Additions		660,918			3			6,949			42,467			1,125			1,146			2,352			15,516			730,476
Acquisitions through business combinations		—			3,900			—			4,887			—			—			—			—			8,787
Disposals		(1,994	)		(448	)		(770	)		(702	)		(42	)		—			(129	)		(528	)		(4,613	)
Withdrawals		(6,269	)		(4,466	)		(1,656	)		(17,680	)		(42	)		(28	)		(84	)		(5,599	)		(35,824	)
Depreciation		—			—			(125,407	)		(316,118	)		(5,791	)		(2,870	)		(3,920	)		(3,660	)		(457,766	)
Impairment loss recognized in profit or loss		—			—			(654	)		(356	)		(5	)		(20	)		—			—			(1,035	)
Increase (decrease) through net exchange differences		(4,115	)		(34,204	)		(15,444	)		(42,059	)		(175	)		(210	)		(217	)		(6,332	)		(102,756	)
Reclassification to assets held for sale		—			(2,193	)		(5	)		5,323			—			—			—			—			3,125
Increase (decrease) through transfers from construction in progress		(215,161	)		1,241			64,673			132,945			5,557			5,591			955			4,199			—
Total changes		433,379			(36,167	)		(72,314	)		(191,293	)		627			3,609			(1,043	)		3,596			140,394
Closing balance12-31-2018		1,030,730			972,143			2,062,887			2,921,462			23,292			15,906			14,916			133,357			7,174,693

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The depreciation expense for the period ending September 30, 2019 and 2018 is as follows:


	January - September					July - September
Depreciation for the year	2019 ThU.S.$			2018 ThU.S.$		2019 ThU.S.$		2018 ThU.S.$
Cost of sales		307,685			288,713		109,547		96,370
Administrative expenses		11,431			11,385		3,911		3,616
Other expenses		1,284			1,147		518		467
Total		320,400			301,245		113,976		100,453
			��

Depreciation charged to profit or loss 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 the Inventories. Furthermore, this deviation is also affected by the conversion differences of the companies with 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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Property, Plant and Equipment by Right of Use


	09-30-2019
	ThU.S.$
Property, Plant and Equipment by right of use, Net
Land		66,625
Buildings		17,623
Plant and equipment		46,991
Information technology equipment		471
Fixtures and fittings		1,261
Motor vehicles		134,370
Other property, plant and equipment		18,282
Total Net		285,623


Property, Plant and Equipment by right of use, Gross
Land		71,903
Buildings		21,873
Plant and equipment		67,562
Information technology equipment		580
Fixtures and fittings		1,595
Motor vehicles		162,160
Other property, plant and equipment		19,580
Total Gross		345,253


Accumulated depreciation and impairment by right of use
Land		(5,278	)
Buildings		(4,250	)
Plant and equipment		(20,571	)
Information technology equipment		(109	)
Fixtures and fittings		(334	)
Motor vehicles		(27,790	)
Other property, plant and equipment		(1,298	)
Total		(59,630	)

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, 2019:


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 01-01-2019		—			—			—			—			—			—			—			—
Increase (decrease) for changes in accounting policies		65,363			20,837			76,258			310			—			143,361			17,237			323,366
Restated opening balance		65,363			20,837			76,258			310			—			143,361			17,237			323,366
Changes
Additions		6,648			1,173			1,286			291			1,595			19,178			4,745			34,916
Business combination		906			67			1,848			—			—			—			—			2,821
Withdrawals		—			—			(11,340	)		—			—			(55	)		—			(11,395	)
Depreciation		(5,278	)		(4,250	)		(20,571	)		(109	)		(334	)		(27,790	)		(2,057	)		(60,389	)
Increase (decrease) through net exchange differences		(1,014	)		(112	)		—			(21	)		—			(113	)		—			(1,260	)
Increase (decrease) through others		—			(92	)		(490	)		—			—			(211	)		—			(793	)
Reclassification from lease to Property, plant and equipment		—			—			—			—			—			—			(1,643	)		(1,643	)
Total changes		1,262			(3,214	)		(29,267	)		161			1,261			(8,991	)		1,045			(37,743	)

Closing balance09-30-2019		66,625			17,623			46,991			471			1,261			134,370			18,282			285,623

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The following table set forth the composition of the initial impact of the IFRS 16 enactment on Property, Plant and Equipment by right of use:


	January 01, 2019
	ThU.S.$
Right of use assets under IFRS 16		251,114
Assets from leasings under IAS 17		72,252
Increase (decrease) for changes in accounting policies		323,366

The depreciation expense for the period ending September 30, 2019 Property, Plant and Equipment by right of use is as follows:


	January - September				July - September
	2019		2018		2019		2018
Depreciation for the period	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Cost of sales		48,008		—		11,538		—
Distribution costs		1,354		—		434		—
Administrative expenses		7,442		—		4,155		—
Total		56,804		—		16,127		—

Depreciation charged to profit or loss 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 concepts excluded from the application of IFRS 16:


	January - September
	2019
Depreciation for the year	ThU.S.$
Expenses from payments of variable leases		121,626
Expenses from low value leases		4,360
Expenses from short-term leases		23,273
Total		149,259

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 8. LEASES

Arauco acting as lessee

Arauco has adopted IFRS 16 - Leases, the effects of initial application of the standard have been disclosed in Note 2 - Changes in policies and accounting estimates. Assets by rights of use and lease liabilities have been included in Notes 7 and 23, respectively.

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:


	09-30-2019
	Gross		Interest		Present Value
Periods	ThU.S.$		ThU.S.$		ThU.S.$
Less than one year		939		1		938
Between one and five years		349		—		349
More than five years		—		—		—
Total		1,288		1		1,287


	12-31-2018
	Gross		Interest		Present Value
Periods	ThU.S.$		ThU.S.$		ThU.S.$
Less than one year		1,180		49		1,131
Between one and five years		837		—		837
More than five years		—		—		—
Total		2,017		49		1,968

Financial lease receivables are presented in the interim consolidated statements of financial position in line items “Trade and other current receivable” and “Trade and othernon-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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 9. REVENUE

January - September

July - September

Classes of revenue

2019
ThU.S.$

2018
ThU.S.$

2019
ThU.S.$

2018
ThU.S.$

Revenue from sales of goods

4,057,979

4,489,669

1,353,893

1,524,600

Revenue from rendering of services

68,932

84,242

33,262

25,320

Total

4,126,911

4,573,911

1,387,155

1,549,920

The reportable segments revenues by business area and by geographical area are presented in Note 24.

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

January - September

July - September

2019
ThU.S.$

2018
ThU.S.$

2019
ThU.S.$

2018
ThU.S.$

Employee expenses

499,843

467,524

166,910

159,579

Wages and salaries

485,144

447,525

161,577

155,628

Severance indemnities

14,699

19,999

5,333

3,951


	09-30-2019			12-31-2018
Discount rate		5.91	%		5.91	%
Inflation		3.00	%		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 SVS (currently Chilean Commission for the Financial Market). The most recent table is theRV-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		(5,036	)
Decrease in 100 bps		5,369
Wage growth rates
Increase in 100 bps		4,910
Decrease in 100 bps		(4,645	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The following tables set forth the balances and the reconciliation of the present value of severance indemnities obligations as of September 30, 2019 and December 31, 2018:


	09-30-2019			12-31-2018
	ThU.S.$			ThU.S.$
Current		5,621			5,656
Non-current		65,118			64,895
Total		70,739			70,551


Reconciliation of the present value of severance indemnities obligations	09-30-2019 ThU.S.$			12-31-2018 ThU.S.$
Opening balance		70,551			71,763
Bussines combinations		462			—
Current service cost		3,947			5,201
Interest cost		2,973			3,723
(Gains) losses from changes in actuarial assumptions		—			(172	)
Actuarial gains and losses arising from experience		(1,174	)		(1,685	)
Benefits paid		(2,853	)		(4,773	)
Costs from past services		—			4,710
Increase (decrease) for foreign currency exchange rates changes		(3,167	)		(8,216	)
Closing balance		70,739			70,551

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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, 2019	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		843,032		45,586		48,854		1,206		12,122		4,701		186,729		—		1,142,230
Other current financial assets		214		—		—		—		—		154		—		—		368
Other currentnon-financial assets		80,380		83		21,756		5,544		606		11,035		49,505		—		168,909
Trade and other current receivables		561,572		69		63,220		20,460		35,043		8,278		80,936		3,943		773,521
Accounts receivable due from related companies		1,515		—		330		—		—		—		3,868		498		6,211
Current Inventories		968,944		—		75,217		—		30,599		—		—		—		1,074,760
Current biological assets		257,322		—		67,052		—		—		—		—		—		324,374
Current tax assets		9,655		108		6,169		3,290		1,946		1,767		83,860		—		106,795
Non-current assets or disposal groups classified as held for sale		2,722,634		45,846		282,598		30,500		80,316		25,935		404,898		4,441		3,597,168
Non-current assets or disposal groups classified as held for sale		4,905		—		554		—		48		—		—		—		5,507

Total Current Assets		2,727,539		45,846		283,152		30,500		80,364		25,935		404,898		4,441		3,602,675


Non Current Assets
Othernon-current financial assets		31,272		—		—		—		—		—		—		—		31,272
Othernon-currentnon-financial assets		84,111		—		4,933		1,146		913		90		2,054		—		93,247
Trade and othernon-current receivables		3,882		—		439		—		—		24		3,607		3,304		11,256
Accounts receivable due from related companies,non-current		—		—		—		—		—		—		—		—		—
Investments accounted for using equity method		77,085		165,815		39,182		—		—		—		2,733		—		284,815
Intangible assets other than goodwill		94,739		—		1,901		—		103		—		—		—		96,743
Goodwill		51,862		—		21,659		—		—		—		—		—		73,521
Property, plant and equipment		7,159,120		—		487,249		—		126,352		—		370		—		7,773,091
Non-current biological assets		2,941,306		—		367,288		—		—		—		—		—		3,308,594
Deferred tax assets		5,625		—		833		—		131		—		—		—		6,589

Total Non Current Assets		10,449,002		165,815		923,484		1,146		127,499		114		8,764		3,304		11,679,128

Total Assets		13,176,541		211,661		1,206,636		31,646		207,863		26,049		413,662		7,745		15,281,803


September 30, 2019	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		345,395		1,255		13,495		—		1,404		222		52,785		291,715		706,271
Trade and other current payables		221,405		12,514		64,508		10,043		25,168		8,893		322,300		31,984		696,815
Accounts payable to related companies		346		—		—		—		—		—		4,166		—		4,512
Other current provisions		449		—		—		—		815		—		—		—		1,264
Current tax liabilities		1,482		—		—		—		92		—		363		—		1,937
Current provisions for employee benefits		—		—		5		—		—		—		5,616		—		5,621
Other currentnon-financial liabilities		71,446		49		17,404		1,681		3,374		7,663		13,590		—		115,207

Total Liabilities, current		640,523		13,818		95,412		11,724		30,853		16,778		398,820		323,699		1,531,627


Non-Current Liabilities
Othernon-current financial liabilities		5,546,096		118,991		29,154		—		2,471		323		97,485		1,569,842		7,364,362
Other non current payables		2,230		—		—		—		—		—		—		—		2,230
Othernon-current provisions		11		—		5,303		26,516		—		—		—		—		31,830
Deferred tax liabilities		1,288,268		—		81,041		—		2,502		—		—		—		1,371,811
Non-current provisions for employee benefits		436		—		—		—		178		—		64,504		—		65,118
Othernon-currentnon-financial liabilities		22		—		110,268		23		—		—		6		—		110,319

Totalnon-current liabilities		6,837,063		118,991		225,766		26,539		5,151		323		161,995		1,569,842		8,945,670

Total Liabilities		7,477,586		132,809		321,178		38,263		36,004		17,101		560,815		1,893,541		10,477,297

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


December 31, 2018	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		834,513		8,295		44,605		2,854		1,461		3,914		180,300		—		1,075,942
Other current financial assets		497		—		—		—		—		—		—		—		497
Other currentnon-financial assets		49,170		125		19,018		5,855		42		5,283		50,361		—		129,854
Trade and other current receivables		631,047		7,399		66,500		15,044		8,576		6,882		99,950		3,786		839,184
Accounts receivable due from related companies		591		—		83		—		—		—		6,169		481		7,324
Current Inventories		957,529		—		72,667		—		—		—		—		—		1,030,196
Current biological assets		253,672		—		62,252		—		—		—		—		—		315,924
Current tax assets		16,042		262		4,978		—		102		1,399		13,730		—		36,513
Non-current assets or disposal groups classified as held for sale		2,743,061		16,081		270,103		23,753		10,181		17,478		350,510		4,267		3,435,434
Non-current assets or disposal groups classified as held for sale		5,152		—		574		—		—		—		—		—		5,726

Total Current Assets		2,748,213		16,081		270,677		23,753		10,181		17,478		350,510		4,267		3,441,160

Non Current Assets
Othernon-current financial assets		20,346		—		—		—		—		—		—		—		20,346
Othernon-currentnon-financial assets		79,615		—		4,946		1,427		640		90		230		—		86,948
Trade and othernon-current receivables		7,733		—		1,040		—		—		27		3,267		3,082		15,149
Accounts receivable due from related companies,non-current		—		—		—		—		—		—		—		481		481
Investments accounted for using equity method		135,805		177,548		42,052		—		—		—		2,648		—		358,053
Intangible assets other than goodwill		87,729		—		2,364		—		—		—		—		—		90,093
Goodwill		42,573		—		23,278		—		—		—		—		—		65,851
Property, plant and equipment		6,675,290		—		498,993		—		—		—		410		—		7,174,693
Non-current biological assets		2,924,266		—		412,073		—		—		—		—		—		3,336,339
Deferred tax assets		4,558		—		36		—		41		—		—		—		4,635

Total Non Current Assets		9,977,915		177,548		984,782		1,427		682		116		6,555		3,563		11,152,588

Total Assets		12,726,128		193,629		1,255,459		25,180		10,862		17,595		357,065		7,830		14,593,748


December 31, 2018	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		445,076		—		6,828		—		—		—		5,017		80,675		537,596
Trade and other current payables		184,989		7,450		64,873		15,590		1,378		8,272		348,886		28,180		659,618
Accounts payable to related companies		1,777		—		—		—		—		—		8,452		—		10,229
Other current provisions		413		—		—		—		—		—		—		—		413
Current tax liabilities		88		7		—		16,730		102		0		136,715		—		153,642
Current provisions for employee benefits		—		—		51		—		—		—		5,605		—		5,656
Other currentnon-financial liabilities		188,346		49		12,340		3,037		2,761		1,343		4,734		—		212,610

Total Liabilities, current		820,689		7,506		84,092		35,357		4,240		9,616		509,409		108,855		1,579,764

Non-Current Liabilities
Othernon-current financial liabilities		2,769,505		—		7,827		—		—		—		5,821		1,845,904		4,629,057
Other non current payables		2,230		—		—		—		—		—		—		—		2,230
Othernon-current provisions		9		—		5,839		28,035		—		—		1		—		33,884
Deferred tax liabilities		1,327,291		—		90,367		—		—		—		—		—		1,417,658
Non-current provisions for employee benefits		—		—		—		—		159		—		64,736		—		64,895
Othernon-currentnon-financial liabilities		19		—		111,841		29		—		—		178		—		112,067

Totalnon-current liabilities		4,099,054		—		215,874		28,064		159		—		70,736		1,845,904		6,259,791

Total Liabilities		4,919,743		7,506		299,966		63,421		4,399		9,616		580,145		1,954,759		7,839,555

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


	09-30-2019							12-31-2018
	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		996,171		535,456			1,531,627		1,160,815		418,949		1,579,764

Other current financial liabilities		187,898		518,373			706,271		121,606		415,990		537,596
U.S Dollar		124,985		220,410			345,395		110,329		334,747		445,076
Euros		600		655			1,255		—		—		—
Brazilian Real		3,382		10,113			13,495		1,880		4,948		6,828
Mexican Pesos		279		1,125			1,404		—		—		—
Other currencies		64		158			222		—		—		—
Chilean Pesos		14,418		38,367			52,785		1,334		3,683		5,017
U.F.		44,170		247,545			291,715		8,063		72,612		80,675

Bank Loans		77,186		129,841			207,027		84,778		130,271		215,049
U.S Dollar		74,995		124,377			199,372		82,898		125,323		208,221
Euros		562		609			1,171		—		—		—
Brazilian Real		1,629		4,855			6,484		1,880		4,948		6,828

Financial Leases		22,231		61,704			83,935		7,265		23,651		30,916
U.S Dollar		2,975		9,063			12,038		—		—		—
Euros		38		46			84		—		—		—
Brazilian Real		1,753		5,258			7,011		—		—		—
Mexican Pesos		279		1,125			1,404		—		—		—
Other currencies		64		158			222		—		—		—
Chilean Pesos		14,418		38,367			52,785		1,334		3,683		5,017
U.F.		2,704		7,687			10,391		5,931		19,968		25,899

Other Loans		88,481		326,828			415,309		29,563		262,068		291,631
U.S Dollar		47,015		86,970			133,985		27,431		209,424		236,855
U.F.		41,466		239,858			281,324		2,132		52,644		54,776

Trade and other current payables		693,036		3,779			696,815		659,618		—		659,618
U.S Dollar		221,403		2			221,405		184,989		—		184,989
Euros		12,514		—			12,514		7,450		—		7,450
Brazilian Real		64,508		—			64,508		64,873		—		64,873
Argentine Pesos		10,043		—			10,043		15,590		—		15,590
Mexican Pesos		21,391		3,777			25,168		1,378		—		1,378
Other currencies		8,893		—			8,893		8,272		—		8,272
Chilean Pesos		322,300		—			322,300		348,886		—		348,886
U.F.		31,984		—			31,984		28,180		—		28,180

Accounts payable to related companies		4,512		—			4,512		10,229		—		10,229
U.S Dollar		346		—			346		1,777		—		1,777
Chilean Pesos		4,166		—			4,166		8,452		—		8,452

Other current provisions		1,264		—			1,264		413		—		413
U.S Dollar		449		—			449		413		—		413
Mexican Pesos		815		—			815		—		—		—

Current tax liabilities		1,574		363			1,937		152,994		648		153,642
U.S Dollar		1,482		—			1,482		88		—		88
Euros		—		—			—		7		—		7
Argentine Pesos		—		—	��		—		16,730		—		16,730
Mexican Pesos		92		—			92		102		—		102
Chilean Pesos		—		363			363		136,067		648		136,715

Current provisions for employee benefits		5,595		26			5,621		4,923		733		5,656
Brazilian Real		5		—			5		51		—		51
Chilean Pesos		5,590		26			5,616		4,872		733		5,605

Other currentnon-financial liabilities		102,292		12,915			115,207		211,032		1,578		212,610
U.S Dollar		70,807		639			71,446		187,740		606		188,346
Euros		49		—			49		49		—		49
Brazilian Real		5,133		12,271			17,404		12,340		—		12,340
Argentine Pesos		1,681		—			1,681		3,037		—		3,037
Mexican Pesos		3,374		—			3,374		2,761		—		2,761
Other currencies		7,663		—			7,663		1,343		—		1,343
Chilean Pesos		13,585		5			13,590		3,762		972		4,734

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


	09-30-2019								12-31-2018
	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		2,125,758		1,510,331		5,309,581		8,945,670		2,108,658		943,090		3,208,043		6,259,791

Othernon-current financial liabilities		1,231,968		1,462,150		4,670,244		7,364,362		1,053,859		943,090		2,632,108		4,629,057
U.S Dollar		960,228		1,250,543		3,335,325		5,546,096		659,086		773,989		1,336,430		2,769,505
Euros		15,592		28,357		75,042		118,991		—		—		—		—
Brazilian Real		11,638		7,402		10,114		29,154		6,612		1,215		—		7,827
Mexican Pesos		2,392		79		—		2,471		—		—		—		—
Other currencies		253		70		—		323		—		—		—		—
Chilean Pesos		76,616		20,663		206		97,485		5,354		467		—		5,821
U.F.		165,249		155,036		1,249,557		1,569,842		382,807		167,419		1,295,678		1,845,904

Bank Loans		206,112		536,064		75,042		817,218		229,263		387,669		203,906		820,838
U.S Dollar		187,632		507,593		—		695,225		222,651		386,454		203,906		813,011
Euros		15,566		28,357		75,042		118,965		—		—		—		—
Brazilian Real		2,914		114		—		3,028		6,612		1,215		—		7,827

Financial Leases		125,312		49,068		66,041		240,421		26,296		10,975		—		37,271
U.S Dollar		21,940		16,535		54,621		93,096		—		—		—		—
Euros		26		—		—		26		—		—		—		—
Brazilian Real		8,724		7,288		10,114		26,126		—		—		—		—
Mexican Pesos		2,392		79		—		2,471		—		—		—		—
Other currencies		253		70		—		323		—		—		—		—
Chilean Pesos		76,616		20,663		206		97,485		5,354		467		—		5,821
U.F.		15,361		4,433		1,100		20,894		20,942		10,508		—		31,450

Other Loans		900,544		877,018		4,529,161		6,306,723		798,300		544,446		2,428,202		3,770,948
U.S Dollar		750,656		726,415		3,280,704		4,757,775		436,435		387,535		1,132,524		1,956,494
U.F.		149,888		150,603		1,248,457		1,548,948		361,865		156,911		1,295,678		1,814,454

Othernon-current payables		2,230		—		—		2,230		2,230		—		—		2,230
U.S Dollar		2,230		—		—		2,230		2,230		—		—		2,230

Othernon-current provisions		31,830		—		—		31,830		33,884		—		—		33,884
U.S Dollar		11		—		—		11		9		—		—		9
Brazilian Real		5,303		—		—		5,303		5,839		—		—		5,839
Argentine Pesos		26,516		—		—		26,516		28,035		—		—		28,035
Chilean Pesos		—		—		—		—		1		—		—		1

Deferred tax liabilities		751,048		11,997		608,766		1,371,811		841,723		—		575,935		1,417,658
U.S Dollar		679,502		—		608,766		1,288,268		751,356		—		575,935		1,327,291
Brazilian Real		69,044		11,997		—		81,041		90,367		—		—		90,367
Mexican Pesos		2,502		—		—		2,502		—		—		—		—

Non-current provisions for employee benefits		64,682		436		—		65,118		64,895		—		—		64,895
U.S Dollar		—		436		—		436		—		—		—		—
Mexican Pesos		178		—		—		178		159		—		—		159
Chilean Pesos		64,504		—		—		64,504		64,736		—		—		64,736

Othernon-currentnon-financial liabilities		44,000		35,748		30,571		110,319		112,067		—		—		112,067
U.S Dollar		22		—		—		22		19		—		—		19
Brazilian Real		43,949		35,748		30,571		110,268		111,841		—		—		111,841
Argentine Pesos		23		—		—		23		29		—		—		29
Chilean Pesos		6		—		—		6		178		—		—		178

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 do Brasil S.A.	Brazil	Brazilian Real
Arauco Forest Brasil S.A.	Brazil	Brazilian Real
Arauco Florestal Arapoti S.A.	Brazil	Brazilian Real
Arauco Industria de Paineis Ltda.	Brazil	Brazilian Real
Empreendimentos Florestais Santa Cruz Ltda.	Brazil	Brazilian Real
Mahal Empreendimentos e Participacoes S.A.	Brazil	Brazilian Real
Novo Oeste Gestao de Ativos Florestais S.A.	Brazil	Brazilian Real
Consorcio Protección Fitosanitaria Forestal S.A.	Chile	Chilean Pesos
Forestal Nuestra Señora del Carmen S.A.	Argentina	Argentine pesos
Forestal Talavera S.A.	Argentina	Argentine pesos
Greenagro S.A.	Argentina	Argentine pesos
Leasing Forestal S.A.	Argentina	Argentine pesos
Savitar S.A.	Argentina	U.S. Dollar
Arauco Industria de Mexico, S.A. de C.V. (ex Maderas y Sintéticos de México, S.A. de C.V.)	Mexico	Mexican pesos
Araucomex Servicios, S.A. de C.V. (ex Maderas y Sintéticos Servicios, S.A. de C.V.)	Mexico	Mexican pesos
Arauco Serviquimex, S.A. de C.V. (ex Masisa Manufactura, S.A. de C.V.)	Mexico	Mexican pesos
Arauco Quimica S.A. de C.V. (ex Masnova Química, S.A. de C.V.)	Mexico	Mexican pesos
Tablered Araucomex, S.A. de C.V. (ex Placacentro Masisa México S.A. de C.V.)	Mexico	Mexican pesos
Arauco Canada Ltd. (ex Flakeboard Company Ltd.)	Canada	Canadian Dollar

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

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
	2019			2018			2019			2018
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Arauco do Brasil S.A.		(28,739	)		(83,231	)		(33,262	)		(14,919	)
Arauco Forest Brasil S.A.		(26,850	)		(77,719	)		(30,951	)		(14,277	)
Arauco Florestal Arapoti S.A.		(6,339	)		(20,050	)		(7,367	)		(3,626	)
Sonae Arauco S.A.		(8,426	)		(6,909	)		(7,369	)		(1,005	)
Arauco Argentina S.A.		(1,054	)		(6,535	)		(1,737	)		(1,336	)
Arauco Canada Ltd.		2,687			(2,727	)		(1,845	)		1,664
Others		(6,150	)		(165	)		(5,637	)		(94	)

Total reserve of exchange differences on translation		(74,871	)		(197,336	)		(88,168	)		(33,593	)

Effect of foreign exchange rates changes


	January - September						July - September
	2019			2018			2019			2018
	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		(19,509	)		(22,267	)		(12,290	)		(6,037	)
Reserve of exchange differences on translation (withNon-controlling interests)		(76,473	)		(202,229	)		(89,952	)		(34,369	)

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) project in Chile and to the Grayling project in the United States.


	January - September						July - September
	2019			2018			2019			2018
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Property, plant and equipment capitalized cost
Property, plant and equipment capitalized interest cost rate		4.43	%		3.83	%		4.35	%		3.87	%
Amount of the capitalized interest cost, property, plant and equipment		17,547			10,096			5,012			2,518

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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 Mrs. Maria Noseda Zambra de Angelini (who passed away on April 15, 2018), 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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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 09-30-2019						% Ownership interest 12-31-2018
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		9.9753		90.0048		99.9801		9.9753		90.0048		99.9801
-	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		1.9999		99.9999		98.0000		1.9999		99.9999
-	Arauco Canada Ltd. (ex Flakeboard Company 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		0.5493		99.4497		99.9990		0.5689		99.4301		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		9.7714		90.2278		99.9992		9.7714		90.2278		99.9992
-	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. (ex Flakeboard America Ltd.)	USA	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		—		99.9484		99.9484
-	Arauco Perú S.A.	Peru	U.S. Dollar		0.0013		99.9977		99.9990		0.0013		99.9977		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
96657900-5	Consorcio Protección Fitosanitaria Forestal S.A.	Chile	Chilean Pesos		—		57.0831		57.0831		—		57.0831		57.0831
-	Empreendimentos Florestais Santa Cruz Ltda.	Brazil	Brazilian Real		—		99.9985		99.9985		—		99.9985		99.9985
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		—		98.5644		98.5644		—		98.5479		98.5479
78049140-K	Forestal Los Lagos S.A.	Chile	U.S. Dollar		—		79.9587		79.9587		—		79.9587		79.9587
-	Forestal Nuestra Señora del Carmen S.A.	Argentina	Argentine pesos		—		99.9805		99.9805		—		99.9805		99.9805
-	Forestal Talavera S.A.	Argentina	Argentine pesos		—		99.9942		99.9942		—		99.9942		99.9942
-	Greenagro S.A.	Argentina	Argentine pesos		—		97.9805		97.9805		—		97.9805		97.9805
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	Chilean Pesos		1.0000		98.9489		99.9489		1.0000		98.9489		99.9489
-	Leasing Forestal S.A.	Argentina	Argentine pesos		—		99.9801		99.9801		—		99.9801		99.9801
96510970-6	Maderas Arauco S.A.	Chile	U.S. Dollar		99.0000		0.9995		99.9995		99.0000		0.9995		99.9995
-	Maderas Arauco Costa Rica S.A.	Costa Rica	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco Industria de México, S.A.de C.V. (ex Maderas y Sintéticos de México, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Araucomex Servicios, S.A. de C.V. (ex Maderas y Sintéticos Servicios, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Mahal Empreendimentos e Participacoes S.A.	Brazil	Brazilian Real		—		99.9991		99.9991		—		99.9991		99.9991
-	Arauco Serviquimex, S.A. de C.V. (ex Masisa Manufactura, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Arauco Química S.A. de C.V. (ex Masnova Química, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Novo Oeste Gestao de Ativos Florestais S.A.	Brazil	Brazilian Real		—		99.9991		99.9991		—		99.9991		99.9991
	Prime-Line, Inc.	USA	U.S. Dollar		—		99.9990		99.9990		—		—		—
-	Tablered Araucomex, S.A. de C.V. (ex Placacentro Masisa México, S.A. de C.V.)	Mexico	Mexican pesos		—		99.9990		99.9990		—		—		—
-	Savitar S.A.	Argentina	Argentine pesos		—		99.9841		99.9841		—		99.9841		99.9841
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

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

There are no 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.

Employee Benefits for Key Management Personnel


	January - September				July - September
	2019		2018		2019		2018
	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Salaries and bonuses		49,711		54,676		16,186		19,701
Per diem compensation to members of the Board of Directors		1,825		1,949		600		623
Termination benefits		2,908		8,326		1,543		626
Total		54,444		64,951		18,329		20,950

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Related Party Receivables, Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

09-30-2019
ThU.S.$

12-31-2018
ThU.S.$

Forestal Mininco S.A.

91.440.000-7

Common Stockholder

Chile

Chilean pesos

30 days

Eka Chile S.A.

99.500.140-3

Joint Venture

Chile

Chilean pesos

30 days

1,626

2,362

Forestal del Sur S.A.

79.825.060-4

Associate of a
subsidiary’s minority
shareholder

Chile

Chilean pesos

—

3,740

Unilin Arauco Pisos Ltda.

—

Joint Venture

Brazil

Brazilian Real

30 days

330

Colbún S.A.

96.505.760-9

Common Stockholder

Chile

Chilean pesos

30 days

219

CMPC Maderas S.A.

95.304.000-K

Common Stockholder

30 days

—

CMPC Pulp S.A.

96.532.330-9

Common Stockholder

Chile

Chilean pesos

30 days

Fundación Educacional Arauco

71.625.000-8

Parent company is
founder and
contributor

Chile

Chilean pesos

30 days

1,190

—

Fundación Acerca Redes

65.097.218-K

Parent company is
founder and
contributor

Chile

U.S. Dollar

30 days

1,149

221

Sonae Arauco Portugal S.A.

—

Subsidiary of a Joint
Venture

Portugal

U.S. Dollar

30 days

367

370

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of an
Associate

Chile

U.F.

Jan-20

498

481

E2E S.A.

76.879.577-0

Associate

Chile

Chilean pesos

30 days

826

—

TOTAL

6,211

7,324

Related Party Receivables,Non-Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

09-30-2019
ThU.S.$

12-31-2018
ThU.S.$

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of
an Associate

Chile

U.F.

—

481

TOTAL

—

481

Related Party Payables, Current


Name of Related Party	Tax ID No.	Nature of Relationship	Country	Currency	Maturity	09-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Compañía de Petróleos de Chile S.A.	99.520.000-7	Common controlling parent	Chile	Chilean pesos	30 days		3,856		7,019
Abastible S.A.	91.806.000-6	Common controlling parent	Chile	Chilean pesos	30 days		245		601
Fundación Educacional Arauco	71.625.000-8	Parent company is founder and contributor	Chile	Chilean pesos	—		—		616
Red to Green S.A.	86.370.800-1	Common Stockholder	Chile	Chilean pesos	30 days		2		14
Empresa Nacional de Telecomunicaciones S.A.	92.580.000-7	Common Stockholder	Chile	Chilean pesos	30 days		60		123
Servicios Corporativos Sercor S.A.	96.925.430-1	Associate	Chile	Chilean pesos	30 days		2		11
Puerto Lirquén S.A.	96.959.030-1	Subsidiary of an associate	Chile	U.S. Dollar	—		—		1,003
Compañía Puerto de Coronel S.A.	79.895.330-3	Subsidiary of an associate	Chile	U.S. Dollar	30 days		331		772
Depósitos Portuarios Lirquén S.A.	96.871.870-3	Subsidiary of an associate	Chile	U.S. Dollar	—		—		2
Adm.Estaciones de Servicio Serco Ltda.	79.689.550-0	Common controlling parent	Chile	Chilean pesos	—		—		1
Colbún Transmisión S.A.	76.218.856-2	Common director	Chile	Chilean pesos	30 days		15		—
Adm. de Ventas al Detalle Arco Prime Ltda.	77.215.640-5	Common controlling parent	Chile	Chilean pesos	—		—		1
Empresa Distrib. Papeles y Cartones S.A.	88.566.900-k	Common Stockholder	Chile	Chilean pesos	—		—		8
Elemental S.A.	76.659.730-0	Associate of controlling parent	Chile	Chilean pesos	—		—		1
Woodtech S.A.	76.724.000-7	Associate of controlling parent	Chile	Chilean pesos	—		—		28
Orizon S.A.	96.929.960-7	Common controlling parent	Chile	Chilean pesos	30 days		1		1
Vía Limpia SPA	79.874.200-0	Common controlling parent	Chile	Chilean pesos	—		—		9
Air BP Copec	96.942.120-8	Joint venture of controlling parent	Chile	Chilean pesos	—		—		19

TOTAL							4,512		10,229

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

09-30-2019
ThU.S.$

12-31-2018
ThU.S.$

Abastible S.A.

91.806.000-6

Common controlling
parent

Chile

Chilean pesos

Fuel

2,178

3,668

Compañía de Petróleos de Chile S.A.

99.520.000-7

Common controlling
parent

Chile

Chilean pesos

Fuel and
other

48,005

75,328

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of the
Associate

Chile

U.S. Dollar

Transport and
stowage

8,143

10,607

Puerto Lirquén S.A.

96.959.030-1

Subsidiary of the
Associate

Chile

U.S. Dollar

Port services

2,206

8,488

EKA Chile S.A.

99.500.140-3

Joint Venture

Chile

Chilean pesos

Sodium
chlorate

31,005

47,209

Forestal del Sur S.A.

79.825.060-4

Associate of a
subsidiary’s
minority
shareholder

Chile

Chilean pesos

Wood and
ships

3,358

1,675

Portaluppi, Guzman y Bezanilla Asesorías Ltda.

78.096.080-9

Common director

Chile

Chilean pesos

Legal
services

633

897

Empresa Nacional de Telecomunicaciones S.A.

92.580.000-7

Common
Stockholder

Chile

Chilean pesos

Telephone
services

311

617

CMPC Maderas S.A.

95.304.000-K

Common
Stockholder

Chile

Chilean pesos

Wood and
logs

102

644

Forestal Mininco S.A.

91.440.000-7

Common
Stockholder

Chile

Chilean pesos

Wood and
logs

—

261

Colbún Transmisión S.A.

76.218.856-2

Common director

Chile

Chilean pesos

Electrical
Power

200

453

Woodtech S.A.

76.724.000-7

Indirect associate of
controlling parent

Chile

Chilean pesos

Wood
volumen
measurement
services

1,472

2,449

Inversiones Siemel S.A.

94.082.000-6

Common
Stockholder

Chile

Chilean pesos

Rentals

196

326

Vía Limpia SPA

79.874.200-0

Common controlling
parent

Chile

Chilean pesos

Other
purchases

177

257

Sales

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Transaction
Descriptions

09-30-2019
ThU.S.$

12-31-2018
ThU.S.$

Colbún S.A.

96.505.760-9

Common director

Chile

Chilean pesos

Electrical Power

324

277

EKA Chile S.A.

99.500.140-3

Joint venture

Chile

Chilean pesos

Electrical Power

14,543

24,857

Forestal del Sur S.A.

79.825.060-4

Associate of a
subsidiary’s
minority
shareholder

Chile

Chilean pesos

Harvesting
services, Wood
and chips

20,704

26,308

Unilin Arauco Pisos Ltda.

—

Joint venture

Brazil

Brazilian
Real

Wood

2,549

1,474

E2E S.A.

76.879.577-0

Associate

Chile

Chilean pesos

Wood, plywood
and boards

413

—

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 14. CONSOLIDATED FINANCIAL STATEMENTS

On September 1, 2019, the corporation Prime-Line, Inc. was acquired through the subsidiary Arauco North America, Inc. The price paid was ThU.S.$19,839.

On January 31, 2019, Arauco’s subsidiaries Inversiones Arauco Internacional Limitada and Araucomex, S.A. de C.V., closed the purchase of all of the shares of Masisa’s Mexican subsidiaries, namely Maderas y Sintéticos de México, S.A. de C.V. (currently Arauco Industria de Mexico, S.A. de C.V.), Maderas y Sintéticos Servicios, S.A. de C.V. (currently Araucomex Servicios, S.A. de C.V.), Masisa Manufactura, S.A. de C.V. (currently Arauco Serviquimex, S.A. de C.V.), Placacentro Masisa México, S.A. de C.V. (currently Tablered Araucomex, S.A. de C.V.) y Masnova Química, S.A. de C.V. (currently Arauco Química S.A. de C.V.).

The final price of the transaction was ThU.S.$168,680 and was paid in this period.

The main assets acquired, consist of two industrial complexes located in Durango and Zitácuaro, that jointly have three Particleboard (PB) lines with an annual installed capacity of 339,000 m3; a MDF line of with an annual installed capacity of 220,000 m3; melamine (or TFL) lines with an annual total installed capacity of 309,000 m3 ; a chemical plant with an installed capacity of 60,000 tons of resins and 60,600 tons of formaldehyde; and impregnation lines with an aggregate annual installed capacity of 28.9 million of m2.

Arauco carried out the initial recognition of the acquisition of these companies 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. The measurement period will not exceed the term of one year as from the acquisition date.

The table below shows the fair values of assets and liabilities at the date of the transaction:


Masisa Mexico Group	01-31-2019 ThU.S.$
Cash and cash equivalent		9,152
Other current non-		599
Trade and other current receivables		29,971
Accounts receivable from related companies		27,484
Inventories		31,692
Current tax assets		1,567
Investments accounted for using equity method		1,571
Intangible assets other than goodwill		223
Property, plant and equipment		128,693
Non-Current Assets or disposal groups classified as held for sale		49

Total assets		231,001

Trade and other current payables		45,650
Accounts payable to related companies		12,692
Other current provisions		902
Current tax liabilities		1,388
Deferred tax liabilities		1,227
Non-current provisions for employee benefits		462

Total liabilities		62,321

Total equity		168,680

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The following table shows revenue and net profit recognized at the acquisition day:


Masisa Mexico Group	02-01-2019 to 30-09-2019 ThU.S.$
Revenue		104,780
Net loss		404

If the acquisition had occurred on January 1, 2019, consolidatedpro-forma revenue and profit for the year ended September 30, 2019 would have been:


CELULOSA ARAUCO Y CONSTITUCIÓN S.A. AND SUBSIDIARIES	January-September 2019 (Pro-forma) ThU.S.$
Revenue		4,153,438
Net profit		148,338

On December 31, 2018, Arauco Wood Products Inc and Arauco Panels USA, LLC merged into Arauco North America, Inc (ex Flakeboard America Limited). This transaction had no effect on Arauco’s profit or loss.

On May 7, 2018, the company Maderas Arauco Costa Rica S.A. was created through the subsidiary Inversiones Arauco Internacional Ltda., with a capital of 10,000 colones (equivalent to U.S.$ 18). On December 24, 2018 Inversiones Arauco Internacional Ltda. made a capital contribution of ThU.S.$ 300 to the company Maderas Arauco Costa Rica S.A.

On August 3, 2018, the company Arauco Wood (China) Company Limited was created through the subsidiary Inversiones Arauco Internacional Ltda. with a capital of ThU.S.$ 500, out of which ThU.S.$100 have been paid to date.

The details of the subsidiaries included in the consolidation of Arauco are disclosed in Note 13.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 15. INVESTMENTS IN ASSOCIATES

At September 30, 2019, there were no new investments in associates to report.

On April 5, 2019 Celulosa Arauco y Constitución S.A. sold its participation in Puertos y Logística S.A. to DP World Group for a total amount of ThU.S.$ 101,972. This operation generated a profit of ThU.S$ 18,875.

On May 2, 2018, the company E2E S.A. was incorporated through the subsidiary Maderas Arauco S.A., with a total capital of ThU.S.$ 6,000, under 50% ownership of Arauco. As of the date of these interim consolidated financial statements, ThU.S.$ 2,711 have been contributed.

On January 19, 2018, the company Parque Eólico Ovejera Sur SpA was incorporated through the subsidiary Arauco Bioenergía S.A., under 50% ownership of Arauco. The capital contributed by Arauco was ThU.S.$ 892.

The following tables set forth information about Investments in associates.


Name	Puertos y Logística S.A.
Country	Chile
Functional Currency	U.S. Dollar
Corporate purpose	Docking and warehousing operations for proprietary and third party use, cargo of all classes of goods, as well, as warehousing and transport operations.
Ownership interest (%)	20.2767%
	09-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$ -	ThU.S.$ 62,511

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%
	09-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$54,207	ThU.S.$51,760

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%
	09-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$ 206	ThU.S.$ 193

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


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%
	09-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$(2)	ThU.S.$(1)

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%
	09-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$7	ThU.S.$7

Name	Vale do Corisco S.A.
Country	Brazil
Functional Currency	Brazilian Real
Corporate purpose	Management of forestry activities.
Ownership interest (%)	49.0000%
	09-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$35,847	ThU.S.$38,497

Name	E2E S.A.
Country	Chile
Functional Currency	Chilean pesos
Corporate purpose	Development of construction solutions
Ownership interest (%)	50.0000%
	09-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$1,992	ThU.S.$2,044

Name	Parque Eólico Ovejera Sur SpA
Country	Chile
Functional Currency	Chilean pesos
Corporate purpose	Electrical power projects
Ownership interest (%)	50.0000%
	09-30-2019	12-31-2018
Carrying amount accounted for using equity method	ThU.S.$734	ThU.S.$597

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Summarized Financial Information of Associates


												Assets
09-30-2019	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			E2E S.A. ThU.S.$			Parque Eólico Ovejera del Sur SpA. 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		—			29		4,232			1,771			75			8,286			2			25			14,420
Non-current		—			110,232		894			3,329			1,426			97,169			36			19			213,105
Total		—			110,261		5,126			5,100			1,501			105,455			38			44			227,525



	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			E2E S.A. ThU.S.$			Liabilities Parque Eólico Ovejera del Sur SpA. 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		—			83		3,418			1,115			33			147			—			9			4,805
Non-current		—			—		676			—			—			24,401			5			42			25,124
Equity		—			110,178		1,032			3,985			1,468			80,907			33			(7	)		197,596
Total		—			110,261		5,126			5,100			1,501			105,455			38			44			227,525


09-30-2019
Revenues		42,362			—		3,631			170			—			5,297			—			—			51,460
Expenses		(42,350	)		4,878		(3,521	)		(1,143	)		(84	)		(2,356	)		—			(2	)		(44,578	)
Profit or loss (continuing operations)		12			4,878		110			(973	)		(84	)		2,941			—			(2	)		6,882

Other comprehensive income		7,540			—		—			—			—						—			—			7,540
Comprehensive income		7,552			4,878		110			(973	)		(84	)		2,941			—			(2	)		14,422
Dividends		6,060			—		—			—			—						—			—			6,060


12-31-2018	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			E2E S.A. ThU.S.$			Assets Parque Eólico Ovejera del Sur SpA. 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		97,866			29		22,870			680			1,246			4,295			2			25			127,013
Non-current		566,484			105,354		907			3,600			703			105,836			36			19			782,939
Total		664,350			105,383		23,777			4,280			1,949			110,131			38			44			909,952



	Puertos y Logística S.A. ThU.S.$			Inversiones Puerto Coronel S.A. ThU.S.$		Serv.Corporativos Sercor S.A. ThU.S.$			E2E S.A. ThU.S.$			Liabilities Parque Eólico Ovejera del Sur SpA. 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		28,938			82		22,192			192			754			81			—			7			52,246
Non-current		327,124			—		619			—			—			31,485			5			42			359,275
Equity		308,288			105,301		966			4,088			1,195			78,565			33			(5	)		498,431
Total		664,350			105,383		23,777			4,280			1,949			110,131			38			44			909,952


09-30-2018
Revenues		115,489			3,909		3,845			—			—			3,253			—			38			126,534
Expenses		(115,592	)		—		(3,474	)		(175	)		(197	)		(3,588	)		(2	)		(29	)		(123,057	)
Profit or loss (continuing operations)		(103	)		3,909		371			(175	)		(197	)		(335	)		(2	)		9			3,477

Other comprehensive income		3,937			—					—			—						—			—			3,937
Comprehensive income		3,834			3,909		371			(175	)		(197	)		(335	)		(2	)		9			7,414
Dividends		—			—		—			—			—			749			—			—			749

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Reconciliation of Investment in Associates and Joint Ventures


	09-30-2019			12-31-2018
	ThU.S.$			ThU.S.$
Opening balance as of January 1		358,053			368,772
Changes
Investment in joint ventures, Additions		580			3,028
Disposals, investment in associates and joint ventures (*)		(56,492	)		—
Share of profit (loss) in investment in associates		1,935			3,043
Share of profit (loss) in investment in joint ventures		1,946			14,203
Dividends Received, Investments in Associates		(13,191	)		(11,307	)
Increase (Decrease) in foreign exchange currency on translation of Associates and Joint Ventures		(11,356	)		(17,287	)
Other increase (decrease) in investment and associates and joint ventures		3,340			(2,399	)
Total changes		(73,238	)		(10,719	)
Closing balance		284,815			358,053

(*)	Carrying amount of investment in Puertos y Logística S.A., which was sold on April 5, 2019.


	09-30-2019		12-31-2018
	ThU.S.$		ThU.S.$
Carrying amount of associates accounted for using equity method		93,003		155,609
Carrying amount of joint ventures accounted for using equity method		191,812		202,444
Total investment accounted for using equity method		284,815		358,053

NOTE 16. INTERESTS IN JOINT ARRANGEMENTS

Investments and contributions made

As of September 30, 2019 and December 31, 2018, Arauco has not carried out any 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 interest in Unilin Arauco Pisos Laminados Ltda., a Brazilian company, and in Eka Chile S.A. (“Eka”), a company that sells sodium chlorate to cellulose plants in Chile. There is a contractual agreement with these companies whereby Arauco has engaged in an economic activity subject to common control, which is classified as a joint venture.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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:


	09-30-2019				12-31-2018
Celulosa y Energía Punta Pereira S.A. (Uruguay)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		338,355		227,504		220,699		204,455
Non-current		2,167,229		439,332		2,044,534		441,010
Equity		—		1,838,748		—		1,619,768
Total Joint Arrangement		2,505,584		2,505,584		2,265,233		2,265,233

Investment		919,374				809,884


	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Income		666,862			714,838
Expenses		(446,350	)		(480,186	)
Joint Arrangement Net Income (Loss)		220,512			234,652


	09-30-2019				12-31-2018
Forestal Cono Sur S.A. (consolidated)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		32,506		2,269		23,528		1,668
Non-current		169,980		7,291		170,443		1,957
Equity		—		192,926		—		190,346
Total Joint Arrangement		202,486		202,486		193,971		193,971

Investment		96,463				95,173


	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Income		12,703			16,274
Expenses		(10,123	)		(10,110	)
Joint Arrangement Net Income (Loss)		2,580			6,164


	09-30-2019				12-31-2018
Eufores S.A.(consolidated)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		215,441		244,554		160,708		159,988
Non-current		771,183		111,926		638,832		8,282
Equity		—		630,144		—		631,270
Total Joint Arrangement		986,624		986,624		799,540		799,540

Investment		315,072				315,635


	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Income		189,188			209,519
Expenses		(189,574	)		(194,432	)
Joint Arrangement Net Income (Loss)		(386	)		15,087


	09-30-2019				12-31-2018
Zona Franca Punta Pereira S.A. (Uruguay)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		6,536		118,059		5,482		106,676
Non-current		466,579		12,516		472,539		27,863
Equity		—		342,540		—		343,482
Total Joint Arrangement		473,115		473,115		478,021		478,021

Investment		171,270				171,741


	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Income		13,620			13,378
Expenses		(14,562	)		(17,293	)
Joint Arrangement Net Income (Loss)		(942	)		(3,915	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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:


	09-30-2019				12-31-2018
Unilin Arauco Pisos Ltda.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		6,275		3,741		6,165		3,591
Non-current		4,167		50		4,574		37
Equity		—		6,651		—		7,111
Total Joint Arrangement		10,442		10,442		10,739		10,739

Investment		3,326				3,556


	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Income		12,095			11,297
Expenses		(11,931	)		(11,352	)
Joint Arrangement Net Income (Loss)		164			(55	)
Other comprehensive income		—			—
Comprehensive income		164			(55	)
Dividends		—			—


	09-30-2019				12-31-2018
Eka Chile S.A.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		21,257		3,878		19,840		4,443
Non-current		32,764		4,799		32,363		5,078
Equity		—		45,344		—		42,682
Total Joint Arrangement		54,021		54,021		52,203		52,203

Investment		22,672				21,341


	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Income		34,668			38,272
Expenses		(31,014	)		(33,727	)
Joint Arrangement Net Income (Loss)		3,654			4,545
Other comprehensive income		—			—
Comprehensive income		3,654			4,545
Dividends		496			—

09-30-2019

12-31-2018

Sonae Arauco S.A.

Assets
ThU.S.$

Liabilities
ThU.S.$

Assets
ThU.S.$

Liabilities
ThU.S.$

Current

227,774

236,712

272,030

221,393

Non-current

665,387

324,819

655,856

351,397

Equity

—

331,630

—

355,096

Total Joint Arrangement

893,161

927,886

Net assets

136,570

146,762

Net asset adjustment (Goodwill)

29,245

30,786

Investment

165,815

177,548


	09-30-2019 ThU.S.$			09-30-2018 ThU.S.$
Income		677,741			795,902
Expenses		(677,534	)		(747,816	)
Joint Arrangement Net Income (Loss)		207			48,086
Other comprehensive income		—			—
Comprehensive income		207			48,086
Dividends		6,634			—

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 17. IMPAIRMENT OF ASSETS

Provisions for impairment of property, plant and equipment due to technical obsolescence have been recorded as of September 30, 2019 and December 31, 2018, respectively, as shown below:


Disclosure of Asset Impairment
Principal classes of Assets affected by Impairment and Reversal of Losses	Machinery and Equipment
Principal Facts and Circumstances that lead to Recognizing Impairment and Reversal of losses	Technical Obsolescence and Claim

	09-30-2019	12-31-2018
Provisions for impairment of property, plant and equipment	ThU.S.$19,120	ThU.S.$18,465

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.$73,521 (ThU.S.$ 65,851 at December 31, 2018), as shown below:


	09-30-2019			12-31-2018
	ThU.S.$			ThU.S.$
Arauco Canada Ltd. (Flakeboard Company Ltd)		40,723			40,661
Arauco do Brasil S.A. (Pien mill)		21,659			23,278
Arauco North America, Inc. (Prime-Line, Inc.)		9,350			—
Arauco Argentina S.A. (Forestal Nuestra Señora del Carmen S.A.)		1,104			1,227
Forestal Arauco S.A. (Forestal Los Lagos S.A.)		685			685
Saldo final		73,521			65,851


	09-30-2019			12-31-2018
Goodwill	ThU.S.$			ThU.S.$
Opening balance at January 1		65,851			69,922
Increase (decrease) due to business combination		9,350			—
Increase (decrease) in foreign currency exchange		(1,680	)		(4,071	)
Closing balance		73,521			65,851

Of the total of goodwill, ThU.S.$40,723 (ThU.S.$ 40,661 as of December 31, 2018) are generated by the acquisition of “Flakeboard”, 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 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 a5-year term, applying a real discount rate of 6.7% 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.$21,659 (ThU.S.$ 23,278 as of December 31, 2018).

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

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 based on the operational plan approved by the Administration, covering a5-year term, applying a 7% real discount rate that reflects current evaluations for the panel segment in Brazil.

As of September 30, 2019 and December 31, 2018, 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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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 (equal to ThU.S.$6,278 as of September 30, 2019). 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 (equal to ThU.S.$1,661 as of September 30, 2019), resulting in a total disputed amount of $3,362,265,453 (equal to ThU.S.$4,617 as of September 30, 2019) 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. RUC14-9-0002087-3. On March 20, 2015, the SII responded to the allegations submitted by Arauco against Liquidations No. 184 and 185 of 2005. On June 19, 2017, the Court issued the evidence production ruling, which resolution was notified via certified letter on July 23 of 2017. Arauco lodged a motion for reconsideration and a supplementary appeal, requesting the terms of the evidence production ruling be modified. On July 7, 2017, the Court upheld the motion for reconsideration. 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. The case is pending.

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.

Currently, the case before the Supreme Court is suspended by order of the Constitutional Court.

On September 25, 2019, the case about the inapplicability appeal presented by Celulosa Arauco y Constitución S.A. was heard at the Constitutional Court. The case is in agreement status.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

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.$ 6,296 as of September 30, 2019). 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 status, and Minister Sibel Villalobos Volpi was designated to draft the resolution. The case is 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, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

3. Through Exempted Resolution No. 1/FileF-031-2016, dated September 15, 2016, the SMA formulated three charges against the company due to certain alleged breaches of certain Environmental Qualification Resolutions of the Constitución Plant, and an alleged contravention of Law No. 19,300 resulting from a purported circumvention of the Environmental Assessment System. The SMA classified the three charges as follows: 1 severe and 2 minor.

On October 17, 2016, the company filed a Compliance Program containing 7 actions and objectives. On January 3, 2017, the SMA served its resolution approving the compliance program submitted by the Company. If the compliance program is executed satisfactorily, the proceedings would conclude without the application of any sanctions.

The final report regarding the Compliance Program was submitted on October 2, 2017, and further supplemented on December 11, 2017, evidencing the complete and comprehensive performance of all the actions and measures envisaged in said program.

Finally, on July 29, 2019, the SMA issued its opinion regarding the satisfactory performance of the Compliance Program, concluding the proceeding.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Celulosa Arauco y Constitución S.A., Forestal Arauco S.A., Maderas Arauco S.A. y 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 Forestal Arauco S.A., Servicios Logísticos Arauco S.A., Celulosa Arauco y Constitución S.A. and Maderas 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 $575,000,000 (equal to ThU.S.$ 790 as of September 30, 2019) in compensation for damages. In the alternative, it claims (a) $11,189,270,050 (equivalent to ThU.S.$ 15,365 as of September 30, 2019), 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) $5,000,000,000 (equivalent to ThU.S.$ 6,866 as of September 30, 2019) 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.; service is pending on Servicios Logísticos Arauco S.A. (RolC-757-2018 with the Civil Court of Constitución).

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, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

Forestal Arauco S.A.

1. On April 28, 2015, the company was notified of and answered the action for recovery submitted in ordinary proceedings by Mr. Rodrigo Huanquimilla Arcos and Mr. Mario Andrades Rojas, attorneys at law, on behalf of 24 members of the Arcos succession, who claiming to be owners of the estate that they identify as Hacienda Quivolgo, of 5,202 hectares, request that Forestal Celco S.A., currently Forestal Arauco S.A., be sentenced to return the above mentioned real property plus civil and natural fruits or revenues as well as any estates adhered to it, along with any damages that the real property may have suffered, with litigation costs. They base their claim in that Forestal Celco S.A., currently Forestal Arauco S.A., would be a supposed possessor and not owner of this estate.

The company proceeded to answer the claim requesting that it be completely rejected, arguing that Forestal Celco S.A., currently Forestal Arauco S.A., is the sole and legitimate owner of the real property.

The Court ordered that this trial be joined with Case FileC-54-2015.

On December 9, 2016, the Court summoned the parties for the issuance of the ruling. On February 24, 2017, the first instance final ruling was notified, which ruling dismissed the claim in its entirety.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

On March 8, 2017, the claimant appealed against the first instance decision. On May 25, 2018, the first instance ruling was confirmed by the Court of Appeals, with litigation costs. (Court of Appeals of Talca Case FileNo. 949-2017).

On June 12, 2018, the plaintiff challenged the decision of the Court of Appeals, filing a cassation appeal based on substantial flaws before the Supreme Court. Pending case to be heard. (Case File16,583-2018).

On October 14. 2019, the Supreme Court rejected the cassation appeal based on substantial flaws. The case is ended.

2. On April 6, 2015, the company was notified through a rogatory letter regarding the claim submitted by Mr. Gustavo Andrés Ochagavía Urrutia, attorney at law, acting on behalf of 23 members of the Arcos succession, who claim to be the owners of the estate that they identify as Hacienda Quivolgo, of 5,202 hectares, requesting that Forestal Celco S.A., currently Forestal Arauco S.A., be ordered to return the above mentioned real property plus civil and natural fruits or revenues as well as any estates adhered to it, along with any damages that the real property may have suffered, with litigation costs. They base their claim in that Forestal Celco S.A., currently Forestal Arauco S.A., is allegedly in possession but does not own the real property in question.

On April 28, 2015, the company proceeded to answer the claim requesting that it be completely rejected, arguing that Forestal Celco S.A., currently Forestal Arauco S.A., is the sole and legitimate owner of the real property.

On January 8, 2016, the defendant requested a consolidation of the proceedings with Case file334-2014. The Court ordered the requested consolidation.

On February 24, 2017, the final ruling of the lower court was notified, completely dismissing the claim, with litigation costs.

On March 8, 2017, the plaintiff filed an appeal against the lower court final ruling. On May 25, 2018, the Court of Appeals of Talca upheld the first instance final ruling with litigation costs. (Court of Appeals of Talca Case FileNo. 949-2017).

On October 14. 2019, the Supreme Court rejected the cassation appeal based on substantial flaws. The case is ended.

3. On July 11, 2017, the company was notified of a civil claim for recovery in ordinary proceedings, filed by Mrs. Carmen Muñoz Domínguez on behalf of Forestal Ezrece S.A. The plaintiff argues that its client would be the rightful owner – as a result of an assignment and sale – of 87.5% of the hereditary rights in the rural real estate property called “Pino Huacho,” located in the boroughs of Los Alamos and of Cañete, province of Lebu, Eighth Region, for a surface area amounting to 5,144.22 hectares, which actions would be under the possession of Forestal Arauco S.A. The claimant has requested the court to order Forestal Arauco S.A. to be sentenced to restitute these actions and rights. Forestal Arauco S.A. answered the claim, requesting its total dismissal, with litigation costs, and further filing a counterclaim based on the ordinary prescription and, in lieu thereof, based on extraordinary prescription.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

On July 30, 2019, the final ruling was issued down rejecting both the main and the reconventional lawsuits in all of its parts (Case FileC-109-2017 First Instance and Guarantee Court of Lebu).

On August 12, 2019, the plaintiff filed an appeal against the final ruling.

On September 2, 2019, Forestal Arauco S.A. adhered to the appeal, which resolution is pending in the Court of Appeals.

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, 2019, Arauco has not made any provision whatsoever in connection with this contingency.

4. Mrs. Estela Jaramillo, filed a lawsuit in a special indigenous procedure, before the First Civil Court of Osorno (CaseC-2540-2018), requesting the absolute nullity of the contract of sale signed in 1999, by which Consorcio Forestal S.A. sold to Forestal Valdivia S.A., today Forestal Arauco S.A., 1,505.6 hectares under the name of Fundo San Nicolás Dos Lote Uno Norte. It also demands compensation for damages for the exploitation and use of indigenous lands against Forestal Arauco S.A.

On November 10, 2018, Forestal Arauco SA was notified of the lawsuit. On January 16, 2019, the Court dismissed the lawsuit regarding Consorcio Forestal S.A., who was not notified of the complaint.

On March 18, 2019, the answer and settlement hearing took place, and, during such hearing, the court decided to proceed to the production of evidence stage. Currently, the term for the production of evidence has expired, and the only pending act is the submission of a report by the Court regarding the debated issue to the National Institute of Indigenous Development (Corporación Nacional de Desarrollo Indígena) for a legal, technical, social and economic report about the matter.

5. 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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Currently the discussion period is over, and is awaiting the Court to summon the parties to a conciliation hearing.

6. 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 (RoleC-2215-2019). In the lawsuit, the plantiff 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 $3,486,187,431 (equivalent to ThU.S.$ 4,787 as of September 30, 2019) plus interests, readjusments and litigation costs.

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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Arauco Argentina S.A.

Pursuant to law No. 25,080, the former Secretary of Agriculture, Livestock, Fishing and Foodstuffs, the enforcement agency referred to in the law approved, by Res. No. 952/2000, the forestry and industrial-forestry projects submitted by Arauco Argentina S.A. In the context of these projects, the Company afforested: 1) 4,777 hectares during 2000, in observance of its committed yearly plan; and 2) 23,012 hectares between 2000 and 2006 as a part of the multi-year afforestation plan. Likewise, a sawmill was built with installed capacity to produce 250,000 m3 of sawn timber per year.

On January 11, 2001, Arauco Argentina S.A. submitted an expansion for the approved industrial-forestry project. The expansion was approved via Res. No. 84/03 issued by the former Secretary of Agriculture, Livestock, Fishing and Foodstuffs. In accordance with the assumed obligations, the Company built a MDF board (panels) plant and afforested 8,089 hectares between 2001 and 2006.

Additionally, the Company has filed yearly forestry plans between years 2007 and 2017 for its local operations in the provinces of Misiones and Buenos Aires.

On March 25, 2019, the Secretary of Agriculture, Livestock and Fishing approved the resolution No. 2019-55-APN-SECAGYP#MPYT, approving the annual forestry plan for 2007. In addition, said organism through the resolution No. 2019-114-APN-SECAGYP#MPYT approved the annual forestry plan for 2009 on June 12, 2019. For this reason, Arauco Argentina S.A. may compute the exemption in the income tax related to the forest appraisal on 7,836 and 6,598 hectares planted in those years, respectively, as of this period.

In March 2005, Note No. 145/05 of the Subsecretary of Agriculture, Livestock and Afforestation suspended the benefit that exempted Arauco Argentina S.A. from paying export duties under Law No. 25,080. This measure is currently under discussion by the Company. On November 8, 2006, the V Chamber of the National Appeals Court for Adversarial Administrative and Federal Matters issued a ruling ordering Arauco Argentina S.A. to continue to enjoy an exemption from paying the exportation duties, in the same manner and scope it had prior to the suspension ordered by Note No. 145/05, if the clearance of merchandise is performed pursuant to the guarantee regime established in article 453, subsection a) of the Customs Code, for the exempted tax obligation. The judicial measure became effective beginning on March of 2007 by collateralization through the granting of bond (caución) policies for each shipment permits exempted from payment of export duty. The company maintains an assignment of funds equivalent to $1,352,720,500 Argentine Pesos (ThU.S.$ 23,488 as of September 30, 2019) for guaranteed export duties, which appears under not current provisions. Additionally, the Company filed a restitution claim for a total amount of US$6,555,207, plus interests accrued from the service of the claim, corresponding to export duties between March 2005 and March 2007, as a result of the application of Note 145/05 issued by the Undersecretary of Agriculture, Livestock and Afforestation. Both the underlying issue and the restitution claim have yet to be resolved.

On the other hand, in April 2016, the Secretary of Agriculture, Livestock and Fishing issued Resolution No.154 – E/2016, that requires that the holders of enterprises that have received the fiscal benefits envisaged by Law No. 25,080, establish collateral to cover a third of the duration of the project, with a minimum term of five years. During May of 2018, the Company modified the duly established collateral in accordance to the terms of said Resolution, for which reason the security was ultimately established at an amount of $384,317,563 Argentine Pesos (ThU.S.$6,673 as of September 30, 2019).

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Arauco Argentina S.A. believes that it has complied with all of the obligations imposed upon it by the system set forth under Law No. 25,080.

Arauco do Brasil S.A.

On November 8, 2012, the Brazilian tax authorities issued an Infringement Notice against one of our Brazilian subsidiaries, Arauco do Brasil S.A., for allegedly unpaid taxed owed by said company during the period from 2006 to 2010. Specifically, the tax authorities (i) objected to the deductibility of certain payments made, and expenses incurred (including the amortization of premiums, interest and litigation costs) by Arauco do Brasil between 2005 and 2010, and, (ii) argued that Arauco do Brasil made certain insufficient payments regarding the Brazilian Corporate Tax (“IRPJ”) and the Corporate Contribution over Net Profits (“CSLL”) during 2010.

On July 20, 2015, Arauco do Brasil was notified of the first-level administrative ruling which partially upheld the Infringement, at the estimated amount of R$164,159,000 (ThU.S.$39,473 as of September 30, 2019). Against this ruling, a Voluntary Appeal was filed seeking to revoke the Infringement Notice before the Brazilian Administrative Tax Council (Conselho Administrativo de Recursos Fiscais de Brasil or “CARF”), which is the second administrative level. The CARF’s decision was issued on May 16, 2017, and took into consideration certain arguments presented by the Company regarding the premium, but preserving other charges. On September 27, 2018, Arauco do Brasil was notified of the CARF’s decision, representing the final amount of this case R$57,556,262 (ThU.S.$ 13,840 as of September 30, 2019), and interests and readjustments will be added to that value until the discussion is over. Arauco do Brasil S.A. filed an appeal for declaration embargoes, to elicit clarifications from the CARF regarding certain points of the decision. On January 25, 2019, the CARF ruled that there were no clarifications or omissions to be made and, consequently, granted a term for filing the last remedy within the administrative realm. This Special Remedy was submitted before the Upper Chamber of Fiscal Remedies of the CARF (CSRF) on February 11, 2019, reiterating the Company’s defense allegations regarding the matters and charges that remained in such process; we are currently expecting the decision on such Special Remedy.

Based on the last decision of the declaratory liens, the CARF submitted that the current value under discussion would amount to R$58,059,580.30 (ThU.S.$ 13,961 as of September 30, 2019), with basis as of January 31, 2019. Interests and adjustments must be added to the aforesaid amount as from January 31, 2019 and until the discussion concludes.

The company believes that its challenge against the Infringement Notice is based on sound legal grounds and that a reasonable possibility exists that this matter will be resolved in favor of the company. Otherwise, as the next step, the Company will discuss the Infringement Notice before the Brazilian Justice Courts.

At the closing date, there are no other contingencies in which the Companies act as obligor, that may significantly affect their financial, economic or operational conditions.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Provisions recorded as of September 30, 2019 and December 31, 2018 are as follows:


Classes of Provisions	09-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Provisions, Current		1,264		413
Provisions for litigations		1,264		413
Provisions,non-Current		31,830		33,884
Provisions for litigations		8,338		10,384
Other provisions		23,492		23,500

Total Provisions		33,094		34,297


	09-30-2019
Movements in Provisions	Litigations (*) ThU.S.$			Other Provisions (**) ThU.S.$			Total ThU.S.$
Opening balance		10,797			23,500			34,297
Changes in provisions
Increase in existing provisions		1,465			—			1,465
Increase through business combinations		815			—			815
Used provisions		(1,441	)		—			(1,441	)
Increase (decrease) in foreign currency exchange		(2,015	)		(8	)		(2,023	)
Other Increases (Decreases)		(19	)		—			(19	)
Total Changes		(1,195	)		(8	)		(1,203	)
Closing balance		9,602			23,492			33,094

(*)	The increase in legal claims is composed mainly of ThU.S.$798 and ThU.S.$587 (Brazilian and Argentine subsidiaries respectively) in connection with civil and labor lawsuits.

(**)	Increase through business combinations is due to Maderas y sintéticos de México S.A. ThU.S.$ 815 where there is a resolution against the company for a lawsuit related to trademark.


	12-31-2018
Movements in Provisions	Litigations (*) ThU.S.$			Other Provisions (**) ThU.S.$			Total ThU.S.$
Opening balance		13,172			25,564			38,736
Changes in provisions
Increase in existing provisions		1,660			2			1,662
Used provisions		(887	)		—			(887	)
Increase (decrease) in foreign currency exchange		(5,262	)		—			(5,262	)
Other Increases (Decreases)		2,114			(2,066	)		48
Total Changes		(2,375	)		(2,064	)		(4,439	)
Closing balance		10,797			23,500			34,297

(*)	The increase in legal claims is composed mainly of ThU.S.$886 and ThU.S.$776 (Brazilian and Argentine subsidiaries respectively) in connection with civil and labor lawsuits.

(**)	The decrease in Other Increases (Decreases) in Other provisions is due to legal claims from Arauco Industrias de Paineis which were classified as Other provisions in 2017 and were included as Litigations in December 2018

Provisions for litigations are related to labor and tax claims whose payment period is uncertain. Other provisions mainly include the recognition of a liability related to investments in associates and joint ventures accounted under the equity method with net asset deficiency at the end of the reporting period, and the constitution of provision for the lawsuit of export duties (see Arauco Argentina’s contingent liability set forth in this note).

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 19. INTANGIBLE ASSETS


	09-30-2019			12-31-2018
Classes of Intangible Assets, Net	ThU.S.$			ThU.S.$
Intangible assets, net		96,743			90,093
Computer software		23,895			26,545
Water rights		5,966			5,966
Customer		38,258			41,634
Other identifiable intangible assets		28,624			15,948

Classes of intangible Assets, Gross		204,738			185,895
Computer software		93,542			88,177
Water rights		5,966			5,966
Customer		71,923			71,443
Other identifiable intangible assets		33,307			20,309

Classes of accumulated amortization and impairment
Total accumulated amortization and impairment		(107,996	)		(95,802	)
Accumulated amortization and impairment, intangible assets		(107,996	)		(95,802	)
Computer software		(69,647	)		(61,632	)
Customer		(33,665	)		(29,809	)
Other identifiable intangible assets		(4,684	)		(4,361	)

Reconciliation of the carrying amount of intangible assets at the beginning and end of each reporting period balances


	09-30-2019
	Computer Software			Water Rights		Customer			Others			TOTAL
Reconciliation of intangible assets	ThU.S.$			ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance		26,545			5,966		41,634			15,948			90,093
Changes
Additions		2,856			—		—			11,969			14,825
Additions through business combination		223			—		—			—			223
Disposals		(67	)		—		—			(1	)		(68	)
Amortization		(5,871	)		—		(3,577	)		(270	)		(9,717	)
Increase (Decrease) related to foreign currency translation		209			—		201			(92	)		318
Other Increases (Decreases)		0			—		—			1,068			1,068
Changes Total		(2,650	)		—		(3,376	)		12,676			6,650
Closing Balance		23,895			5,966		38,258			28,624			96,743


	12-31-2018
Reconciliation of intangible assets	Computer Software ThU.S.$			Water Rights ThU.S.$		Customer ThU.S.$			Others ThU.S.$			TOTAL ThU.S.$
Opening Balance		26,747			5,697		47,144			9,027			88,615
Changes
Additions		6,369			269		—			7,424			14,062
Disposals		(1	)		—		—			—			(1	)
Amortization		(7,132	)		—		(4,808	)		(409	)		(12,349	)
Increase (Decrease) related to foreign currency translation		(287	)		—		(702	)		(31	)		(1,020	)
Other Increases (Decreases)		849			—		—			(63	)		786
Changes Total		(202	)		269		(5,510	)		6,921			1,478
Closing Balance		26,545			5,966		41,634			15,948			90,093


	Years of Useful life (Average)
Computer Software		5
Customer		15
Brands		7

The amortization of customer and computer software is presented in the Interim Consolidated Statements of Profit or Loss under the “Administrative Expenses” line item.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 20. BIOLOGICAL ASSETS

Biological assets comprise forestry plantations, mainly radiata and taeda pine, and to a lesser extent eucalyptus. The plantations are located in Chile, Argentina, Brazil and Uruguay, with a total surface of 1.7 million hectares as of September 30, 2019 out of which 1 million hectares are used for forestry planting, 436 thousand hectares are native forest, 183 thousand hectares are used for other purposes and 113 thousand hectares not yet planted.

For the period ended September 30, 2019, the production volume of logs totaled 15.6 million m3 (17.4 million m3 as of September 30, 2018).

Measurements of fair value of Arauco’s biological assets are classified as Level 3, due to the fact that inputs are not observable. However, this information reflects the assumptions that market participants would use in pricing the asset, including assumptions about risk.

These unobservable inputs were developed using the best information available and includes internal data from Arauco. These unobservable inputs can be adjusted if the available information indicates that other market participants would use different information or there is something specific in Arauco that is not available to other market participants.

The main considerations in determining the fair value of biological assets include the following:

•

Arauco uses discounted expected future cash flows of its forest plantations, which are based on a harvest projection date for all existing plantations.

•

Current forestry plantations are projected based on a net volume that will not decrease, with a minimum growth equivalent to the current supply demand.

•

Future plantations are not considered.

•

The harvest of forestry plantations supplies raw materials for all other products that Arauco produces and trades. By directly controlling the development of forests that will be processed, Arauco ensures high quality timber for each of its products.

•

Expected cash flows are determined in terms of harvest and expected sale of forestry products, associated with the demand from the Company’s own industrial centers and sales to third parties at market prices. Sales margin of the different products that are harvested in the forest is also considered in the valuation. The changes in the value of the plantations pursuant to the criteria defined above are accounted for in the results for the fiscal year, as established in IAS 41. These changes are presented in the Interim Consolidated Statements of Profit or Loss under the line item Other income per function, which as of September 30, 2019 amounted to ThU.S.$110,500 (ThU.S.$ 78,298 as of September 30, 2018). The appraisal of biological assets resulted in a greater cost of the lumber sold in comparison to the real incurred cost, which is presented included in the cost of sales which as of September 30, 2019 amounted to ThU.S.$147,888 (ThU.S.$ 154,952 as of September 30, 2018).

•

Forestry plantations are harvested according to the needs of Arauco’s production plants.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

•

The discount rates used are 6.4% in Chile, 7.9% Brazil, 10.5% in Argentina and 6.9% in Uruguay.

•

It is expected that prices of harvested timber are constant in real terms based on market prices.

•

Cost expectations with respect to the lifetime of the forests are constant based on estimated costs included in the projections made by Arauco.

•

The average crop age by species and country is:


	Chile		Argentina		Brazil		Uruguay
Pine		24		15		15		—
Eucalyptus		12		10		7		10

The following table sets forth changes in fair value of biological assets considering variations in significant assumptions considered in calculating the fair value of the assets:


		ThU.S.$
Discount rate	0,5		(131,041	)
	-0,5		138,895
Margins (%)	10		387,524
	-10		(387,524	)

The adjustment to fair value of biological assets is recorded in the Interim Consolidated Statements of Profit or Loss, under the line item Other Income or Other Expenses, depending on whether it corresponds to profits or losses.

Forestry plantations classified as current Biological assets are those to be harvested and sold within twelve months after the reporting period.

The Company has contracted fire insurance policies for its forestry plantations, which in conjunction with the Company’s resources, allow risks to be minimized.

Detail of Biological Assets Pledged as Security

As of September 30, 2019, there are no forestry plantations pledged as security.

Detail of Biological Assets with Restricted Ownership

As of the date of these interim consolidated financial statements, there are no biological assets with restricted ownership.

No significant government grants have been received.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Current andNon-Current Biological Assets

As of the date of these interim consolidated financial statements, the Current andNon-current biological assets are as follows:


	09-30-2019		12-31-2018
	ThU.S.$		ThU.S.$
Current		324,374		315,924
Non-current		3,308,594		3,336,339
Total		3,632,968		3,652,263

Reconciliation of carrying amount of biological assets


	09-30-2019
Movement	Current ThU.S.$			Non-current ThU.S.$			Total ThU.S.$
Opening Balance		315,924			3,336,339			3,652,263
Changes in real incurred cost		18,856			4,894			23,750
Additions through acquisition and costs of new plantations		7,740			151,171			158,911
Sales		—			(1,609	)		(1,609	)
Harvest		(98,318	)		—			(98,318	)
Increases (decreases) in Foreign Currency Translation		(3,925	)		(28,642	)		(32,567	)
Loss of forest due to fires		—			(2,529	)		(2,529	)
Transfers fromnon-current to current		113,511			(113,511	)		—
Other Increases (decreases)		(152	)		14			(138	)
Changes in fair value		(10,406	)		(32,639	)		(43,045	)
Gain (losses) arising from changes in fair value minus sale costs		(4,941	)		115,441			110,500
Sales		—			(2,061	)		(2,061	)
Harvest		(147,804	)		—			(147,804	)
Loss of forest due to fires		—			(3,680	)		(3,680	)
Transfers fromnon-current to current		142,339			(142,339	)		—
Total Changes		8,450			(27,745	)		(19,295	)
Closing balance		324,374			3,308,594			3,632,968


	12-31-2018
Movement	Current ThU.S.$			Non-current ThU.S.$			Total ThU.S.$
Opening Balance		307,796			3,459,146			3,766,942
Changes in real incurred cost		34,684			(27,174	)		7,510
Additions through acquisition and costs of new plantations		2,105			205,353			207,458
Sales		(52	)		(315	)		(367	)
Harvest		(117,729	)		—			(117,729	)
Increases (decreases) in Foreign Currency Translation		(5,424	)		(76,672	)		(82,096	)
Loss of forest due to fires		—			(8,702	)		(8,702	)
Transfers fromnon-current to current		155,789			(155,789	)		—
Other Increases (decreases)		(5	)		8,951			8,946
Changes in fair value		(26,556	)		(95,633	)		(122,189	)
Gain (losses) arising from changes in fair value minus sale costs		(8,684	)		93,160			84,476
Sales		—			(445	)		(445	)
Harvest		(203,164	)		—			(203,164	)
Loss of forest due to fires		—			(3,056	)		(3,056	)
Transfers fromnon-current to current		185,292			(185,292	)		—
Total Changes		8,128			(122,807	)		(114,679	)
Closing balance		315,924			3,336,339			3,652,263

As of the date of these interim consolidated financial statements, there are no committed disbursements related to the acquisition of biological assets.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 21. ENVIRONMENTAL MATTERS

Environment Management

For Arauco, sustainability means management strategy. This strategy incorporates values, commitments and standards, that together with the adoption of best practices as well as the use of the latest available technologies, seek to continuously improve the Company’s environmental management. It is the environmental department and each of its specialists that ensure these guidelines are met and are put in to practice in everyday company operations.

All of Arauco’s production units have certified environmental management systems, which reinforce the Company’s commitment to environmental performance and ensure the traceability of all raw materials used.

Arauco uses several supplies in its productive processes such as wood, chemical products, and water, etc., which in turn produce liquid and gas emissions. As a way to make the Company’s environmental management more efficient, significant progress has been made to reduce consumption and emissions.

Environmental investments have been made related to the control of atmospheric emissions, process improvements, water and waste management, as well as effluent treatment, in order to improve the environmental performance of all of Arauco’s business units.

These investments are reflected in the Interim Consolidated Financial Statements as Properties, Plants and Equipment when they refer to disbursements in major works executed and are reflected in Expenses when they refer to improvements or management not directly associated with investment projects.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Detail information of disbursements related to the environment

As of September 30, 2019, and December 31, 2018 Arauco has made and / or has committed the following disbursements in major environmental projects:

09-30-2019

Disbursements undertaken 2019

Committed
Disbursements

Company

Name of project

State of

project

Amount
ThU.S.$

Asset

Expense

Asset/expense

destination item

Amount
ThU.S.$

Estimated
date

Arauco do Brasil S.A.

Environmental improvement studies

In process

4,656

Assets

Property, plant and equipment

9,883

2019

Celulosa Arauco y Constitución S.A.

Investment projects for the control and management of gas emissions from industrial process

In process

132

Assets

Property, plant and equipment

1,424

2019

Celulosa Arauco y Constitución S.A.

Environmental improvement studies

In process

22,609

Assets

Property, plant and equipment

72,895

2019

Celulosa Arauco y Constitución S.A.

Investment projects for the control and management of gas emissions from industrial process

In process

303

Expense

Operating cost

109

2019

Celulosa Arauco y Constitución S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

3,302

Assets

Property, plant and equipment

6,364

2019

Celulosa Arauco y Constitución S.A.

Environmental improvement studies

In process

12,656

Expense

Operating cost

3,457

2019

Celulosa Arauco y Constitución S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

346

Assets

Property, plant and equipment

3,551

2019

Celulosa Arauco y Constitución S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

5,618

Expense

Operating cost

2,089

2019

Arauco Argentina S.A.

Construction emisario

In process

Assets

Property, plant and equipment

697

2019

Arauco Argentina S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

1,117

Assets

Property, plant and equipment

1,873

2019

Arauco Argentina S.A.

Investment projects for the control and management of gas emissions from industrial process

In process

471

Assets

Property, plant and equipment

859

2019

Maderas Arauco S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

518

Expense

Operating cost

2019

Maderas Arauco S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

305

Expense

Operating cost

173

2019

Maderas Arauco S.A.

Environmental improvement studies

In process

518

Assets

Property, plant and equipment

—

2019

Forestal Arauco S.A.

Environmental improvement studies

In process

483

Expense

Administration expenses

629

2019

Celulosa y Energía Punta Pereira S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

351

Assets

Property, plant and equipment

2,935

2019

Celulosa y Energía Punta Pereira S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

310

Assets

Property, plant and equipment

190

2019

Celulosa y Energía Punta Pereira S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

Finished

412

Assets

Property, plant and equipment

—

Forestal Los Lagos S.A.

Environmental improvement studies

In process

149

Expense

Operating cost

123

2019

TOTAL

54,296

107,316

12-31-2018

Disbursements undertaken 2018

Committed
Disbursements

Company

Name of project

State of

project

Amount
ThU.S.$

Asset

Expense

Asset/expense

destination item

Amount
ThU.S.$

Estimated
date

Arauco do Brasil S.A.

Environmental improvement studies

In process

5,055

Assets

Property, plant and equipment

6,724

2019

Celulosa Arauco y Constitucion S.A.

Investment projects for the control and management of gas emissions from industrial process

In process

6,467

Assets

Property, plant and equipment

8,271

2019

Celulosa Arauco y Constitucion S.A.

Environmental improvement studies

In process

29,419

Assets

Property, plant and equipment

63,035

2019

Celulosa Arauco y Constitucion S.A.

Investment projects for the control and management of gas emissions from industrial process

Finished

563

Expense

Operating cost

—

Celulosa Arauco y Constitucion S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

21,978

Assets

Property, plant and equipment

9,233

2019

Celulosa Arauco y Constitucion S.A.

Environmental improvement studies

Finished

25,684

Expense

Operating cost

—

Arauco Argentina S.A.

Construction emisario

In process

1,454

Assets

Property, plant and equipment

797

2019

Maderas Arauco S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

499

Expense

Operating cost

—

Maderas Arauco S.A.

Expansion of solid industrial waste dumpsite for management of these in the future

In process

1,471

Expense

Operating cost

—

Maderas Arauco S.A.

Environmental improvement studies

In process

—

Assets

Property, plant and equipment

291

2019

Forestal Arauco S.A.

Environmental improvement studies

In process

1,547

Expense

Administration expenses

1,957

2019

Celulosa y Energía Punta Pereira S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

In process

Assets

Property, plant and equipment

3,266

2019

Celulosa y Energía Punta Pereira S.A.

Investment projects for the control and management of hazardous liquids and water energy optimization of industrial plants

Finished

281

Assets

Property, plant and equipment

—

Forestal Los Lagos S.A.

Environmental improvement studies

In process

236

Expense

Operating cost

273

2019

TOTAL

94,706

93,847

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 22.NON-CURRENT ASSETS HELD FOR SALE

Arauco decided to sell assets in previous years corresponding mainly to sawmills in Chile and remains committed to its sales plan.

The following table sets forth information on the main types ofnon-current assets held for sale:


	09-30-2019 ThU.S.$		12-31-2018 ThU.S.$
Land		2,420		2,352
Buildings		1,256		1,284
Property, plant and equipment		1,831		2,090
Total		5,507		5,726

As of September 30, 2019, and December 31, 2018, there were no significant effects on results related to the sale of assets held for sale.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 23. FINANCIAL INSTRUMENTS

23.1 Classification

Arauco’s financial instruments as of September 30, 2019 and December 31, 2018, are displayed in the table below. Regarding those instruments valued at an amortized cost, a estimation of their fair value is displayed for informational purposes.


	September 2019				December 2018
Financial Instruments *Thousands of dollars*	Carrying amount		Fair Value		Carrying amount		Fair Value

Financial assets at fair value through profit or loss (held for trading)		420,787		420,787		270,110		270,110
Derivatives (1)		220		220		75		75
Mutual funds (2)		420,567		420,567		270,035		270,035
Financial assets at amortized cost		1,512,651		1,512,651		1,669,587		1,669,587
Cash and cash equivalents (amortized cost)		721,663		721,663		805,907		805,907
Cash		372,040		372,040		327,132		327,132
Time deposits		349,623		349,623		478,775		478,775
Accounts Receivable (net)		784,777		784,777		854,333		854,333
Trade and other receivables		668,117		668,117		751,158		751,158
Lease receivable		1,287		1,287		1,968		1,968
Other receivables		115,373		115,373		101,207		101,207
Accounts receivable due from related parties		6,211		6,211		7,805		7,805
Other financial assets		4		4		1,542		1,542
Hedging assets		31,416		31,416		19,226		19,226

Financial liabilities at amortized cost (3)		6,098,984		6,608,097		5,182,353		5,206,334
Bonds issued denominated in U.S. Dollars		2,791,194		2,913,500		2,062,044		1,948,482
Bonds issued denominated in U.F. (4)		1,384,705		1,685,796		1,439,610		1,544,813
Bank Loans in U.S. Dollars		824,601		887,817		925,780		962,866
Bank borrowing denominated in U.S. Dollars		121,618		144,118		14,655		14,655
Lease liabilities		273,309		273,309		68,187		63,441
Trade and other payables		699,045		699,045		661,848		661,848
Accounts payable to related parties		4,512		4,512		10,229		10,229
Financial liabilities at fair value through profit or loss		18		18		289		289
Hedging Liabilities		113,265		113,265		71,310		71,310

(1)	The derivatives are presented in the line item “other financial assets” in the consolidated statements of financial position.

(2)	Although mutual funds are measured at fair value through profit or loss for purposes of the consolidated statements of financial position mutual funds are classified as “Cash and cash equivalents” due to the are highly liquid short-term investment.

(3)

Financial liabilities measured at amortized cost, other than “Trade and other payables”, “Accounts payable to related parties” and derivatives are presented in the consolidated statements of financial position in the line item “Other financial liabilities” as current andnon-current based on their maturity.

(4)	The Unidad de Fomento (“U.F.”) is a unit of account that is linked to, and is adjusted daily to reflect changes in the Chilean consumer price index.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

23.2 Fair Value Hierarchy of Financial Assets and Liabilities

The assets and liabilities measured at fair value in the interim consolidated statements of financial position as of September 30, 2019, have been measured based on the valuation methodologies provided in IFRS 13. The methodologies applied for each financial instrument are classified according to their hierarchy as follows:

•

Level 1: Securities or quoted prices in active markets for identical assets and liabilities

•

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

•

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).


Fair Value	September 2019 ThU.S.$		Level 1 ThU.S.$		Level 2 ThU.S.$		Level 3 ThU.S.$

Financial assets at fair value
Derivatives		220				220
Mutual Funds		420,567		420,567

Hedging assets		31,416				31,416

Financial liabilities at fair value through profit or loss		18				18
Hedging liabilities		113,265				113,265

23.3 Explanation of the valuation of Financial Instruments.

Cash and cash equivalent and accounts receivable

The carrying amount of accounts receivable, cash and cash equivalents (including mutual funds), and other financial assets and liabilities approximate their fair value due to the short-term nature of such instruments.

Derivative financial instruments

Interest rate and currency swaps are valued under the cash flow discount method at the rate applicable according to the transaction’s and counterparties’ risk, using an internal methodology based on the information obtained from Bloomberg. In this particular case, given that cross currency swaps correspond to future flows in UF, U.S. dollars and Euros, Arauco calculates the current value of such flows by using discount curves: the UF zero coupon curve, Dollar zero coupon and the Euro zero coupon.

The fair value of the interest rate swap contracts is calculated by reference to the rate differential between the agreed upon rate and the market rate as of the end date of these financial statements.

The fair value of the currency forward contracts is calculated by reference to the current forward exchange rates of contracts with similar maturity profiles.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The counterparty risk, for the 3 cases, uses theZ-Spread obtained from the curve of the bonds issued by counterparties, and they are deducted from each flow as appropriate.

Financial Liabilities

The fair value of bonds issued was determined with reference to quoted market prices as they have standard terms and conditions.

The fair value of bank borrowings and lease liabilities (the latter one with respect to 2018 figures) was determined based on discounted cash flow analysis applying the corresponding discount yield curves to the remaining term to maturity.

Disclosures of the fair value of financial liabilities at amortized cost are determined via the use of discounted cash flows, calculated over variables of the observable markets as of the date of informing the interim consolidated financial statements, and correspond to Level 2 of the fair value hierarchy.

The following table shows the compliance with the financial covenants (level of indebtedness, detailed in section 23.9.3), for the bonds issued prior to the year 2015, as required by domestic indentures (Chile):


	September 2019		December 2018
	ThU.S.$		ThU.S.$
Interest bearing loans, current (a)		555,667		535,836
Other financial liabilities, current		557,453		537,596
Hedging liabilities current + Financial liabilities at fair value through profit or loss current		1,786		1,760
Interest bearing loans,non-current (b)		4,839,760		3,974,440
Other financial liabilities,non-current		4,951,257		4,044,279
Hedging liabilitiesnon-current + Financial liabilities at fair value through profit or lossnon-current		111,497		69,839
Financial debt total (c)		5,395,427		4,510,276
Cash and cash equivalents		1,142,230		1,075,942
Other financial assets current		368		497
Total Cash (d)		1,142,598		1,076,439
Net Financial Debt (e)		4,252,829		3,433,837
Non-controlling interests		7,330,770		7,301,779
Equity attributable to owners of parent		35,659		37,192
Total Equity (f)		7,366,429		7,338,971
Debt to equity ratio (g)		0.58		0.47

(a)	Other Current Financial Liabilities – (Current Hedge Liabilities + Financial Liabilities with changes in current results)

(b)	OtherNon-Current Financial Liabilities –(Non-current Hedge Liabilities + Financial Liabilities with changes innon-current results)

(c)	Interest bearing loans, current + Interest bearing loans,non-current

(d)	Cash and Cash Equivalents + Other Current Financial Assets

(e)	Total Financial Debt – Total Cash

(f)	Equity attributable to owners of controlling parent +Non-controlling interests

(g)	Net Financial Debt / Total Equity

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The following table shows the compliance with the financial covenants (level of indebtedness, detailed in section 23.9.3), for the bonds issued after year 2015, as required by domestic indentures (Chile):


	September 2019 ThU.S.$		December 2018 ThU.S.$
Other financial liabilities (a)		5,508,710		4,581,875
Other financial liabilities, current		557,453		537,596
Other financial liabilities,non-current		4,951,257		4,044,279
Financial liabilities at fair value through profit or loss		18		289
Hedging liabilities (b)		113,265		71,310
Swaps		111,089		69,085
Forward		2,176		2,225
Financial debt total (c)		5,395,427		4,510,276
Cash and cash equivalents		1,142,230		1,075,942
Total Cash (d)		1,142,230		1,075,942
Net Financial Debt (e)		4,253,197		3,434,334
Non-controlling interests		7,330,770		7,301,779
Equity attributable to owners of parent		35,659		37,192
Total Equity (f)		7,366,429		7,338,971
Debt to equity ratio (g)		0.58		0.47

(a)	Other Financial Liabilities current + Other Financial Liabilitiesnon-current

(b)	Swaps + Forwards + Options

(c)	Other financial liabilities +Financial liabilities at fair value through profit or loss + Hedging liabilities

(d)	Cash and Cash Equivalents + Other Current Financial Assets

(e)	Total Financial Debt – Total Cash

(f)	Equity attributable to owners of controlling parent +Non-controlling interests

(g)	Net Financial Debt / Total Equity

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The following table sets forth a reconciliation between the financial liabilities and the consolidated statements of financial position as of September 30, 2019 and December 31, 2018:


Thousands of dollars	September 2019
Thousands of dollars	Up to 90 days		From 91 days to 1 year		Other current financial liabilities, Total		From 13 months to 3 years		From 3 years to 5 years		More than 5 years		Other non-current financial liabilities, Total		Total
Bonds obligations		76,531		223,027		299,558		467,329		579,155		2,829,857		3,876,341		4,175,899
Bank borrowing		75,463		110,180		185,643		175,051		516,278		69,247		760,576		946,219
Lease liabilities		19,407		51,059		70,466		114,589		43,528		44,726		202,843		273,309
Swap and Forward		1,786		—		1,786		111,497		—		—		111,497		113,283

Other Financial Liabilities, Total (a)		173,187		384,266		557,453		868,466		1,138,961		2,943,830		4,951,257		5,508,710


Thousands of dollars	September 2019
Thousands of dollars	Up to 90 days		From 91 days to 1 year		Total Current		From 13 months to 3 years		From 3 years to 5 years		More than 5 years		Total non-current		Total
Trades and other payables		693,036		3,779		696,815		2,230		—		—		2,230		699,045
Accounts payable to related companies		4,512		—		4,512		—		—		—		—		4,512

Accounts Payable, Total (b)		697,548		3,779		701,327		2,230		—		—		2,230		703,557

Financial Liabilities, Total (a) + (b)		870,735		388,045		1,258,780		870,696		1,138,961		2,943,830		4,953,487		6,212,267


Thousands of dollars	December 2018
Thousands of dollars	Up to 90 days		From 91 days to 1 year		Other current financial liabilities, Total		From 13 months to 3 years		From 3 years to 5 years		More than 5 years		Other non-current financial liabilities, Total		Total
Bonds obligations		27,803		262,068		289,871		478,441		340,275		2,393,067		3,211,783		3,501,654
Bank borrowings		84,778		130,271		215,049		177,504		348,558		199,324		725,386		940,435
Lease liabilities		7,265		23,651		30,916		26,296		10,975		—		37,271		68,187
Swap and Forward		1,760		—		1,760		69,839		—		—		69,839		71,599

Other Financial Liabilities, Total (a)		121,606		415,990		537,596		752,080		699,808		2,592,391		4,044,279		4,581,876


Thousands of dollars	December 2018
Thousands of dollars	Up to 90 days		From 91 days to 1 year		Total Current		From 13 months to 3 years		From 3 years to 5 years		More than 5 years		Total non-current		Total
Trades and other payables		659,618		—		659,618		2,230		—		—		2,230		661,848
Accounts payable to related companies		10,229		—		10,229		—		—		—		—		10,229

Accounts Payable, Total (b)		669,847		—		669,847		2,230		—		—		2,230		672,077

Financial Liabilities, Total (a) + (b)		791,453		415,990		1,207,443		754,310		699,808		2,592,391		4,046,509		5,253,952

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

23.4 Derivative Instruments

Hedging instruments recorded as of September 30, 2019 are cash flow hedges. Arauco uses derivatives for hedging purposes, such as cross currency swaps, currency and commodity forwards, interest rate swaps, and options. Depending on the fair value of each instrument, the position could be either an asset or a liability, and they are listed in the Statements of Financial Position under OtherNon-Current Financial Assets or OtherNon-current Financial Liabilities, respectively. The effects for the period are presented under Equity as Other Comprehensive Income or the Statements of Comprehensive Income as Finance Income or Finance Costs, net of differences in exchange rate of the hedged items and the deferred tax.

A summary of the derivative financial instruments included in the interim statements of financial position as of the end of this period, is presented below:


Financial Instruments	September 2019 Fair Value ThU.S.$			December 2018 Fair Value ThU.S.$
Assets at fair value through profit or loss (held for trading)		220			75
Derivatives (1)		66			75
Forward (2)		154			—

Hedging Assets		31,416			19,226
Derivatives (1)		170			1,357
Cross Currency Swaps		31,246			17,869

Financial liabilities at fair value through profit or loss		(18	)		(289	)
Forward (2)		—			(2	)
Derivatives (1)		(18	)		(287	)

Hedging Liabilities		(113,265	)		(71,310	)
Cross Currency Swaps		(111,089	)		(69,086	)
Derivatives (1)		(2,176	)		(2,224	)

(1)

Includes Swap and Forward from Uruguay tables.

(2)

Includes Forwards from Colombia and Chile.

23.4.1. Chile

Cross currency swaps

Arauco is exposed to the risk of variability in cash flows from changes in foreign exchange rates and inflation, mainly due to balances of assets denominated in U.S. Dollars and other currencies different from the functional currency, which causes mismatches that could affect operating results.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Below are the cross currency swaps that Arauco has as of September 30, 2019 and December 31, 2018 to cover the exposure to the exchange rate risk generated from bonds denominated in U.F.:


Bond	Institution	Amount U.S.$		Amount U.F.		Starting date		Ending date		September 2019 Fair Value ThU.S.$			December 2018 Fair Value ThU.S.$
F	Deutsche - England		41,635,657		954,545		10-30-2011		10-30-2021		(3,874	)		(3,105	)
F	JP Morgan - N.A.		41,635,657		954,545		10-30-2011		10-30-2021		(3,819	)		(3,039	)
F	Deutsche - England		—		—		04-30-2014		04-30-2019		—			1,707
F	Scotiabank - Chile		36,679,778		954,545		10-30-2014		04-30-2023		1,497			2,041
F	Scotiabank - Chile		36,633,966		954,545		10-30-2014		04-30-2023		1,712			2,273
F	Santander - Chile		36,250,835		954,545		10-30-2014		04-30-2023		2,154			2,715
F	BCI - Chile		35,911,491		954,545		10-30-2014		04-30-2023		2,583			3,148
F	Banco de Chile - Chile		36,250,835		954,545		04-30-2019		10-30-2029		1,602			155
J	Itau - Chile		42,864,859		1,000,000		09-01-2010		09-01-2020		(3,870	)		(3,289	)
J	Scotiabank - Chile		42,864,859		1,000,000		09-01-2010		09-01-2020		(3,870	)		(3,289	)
J	Deutsche - England		42,864,859		1,000,000		09-01-2010		09-01-2020		(3,879	)		(3,313	)
J	Santander - Spain		42,873,112		1,000,000		09-01-2010		09-01-2020		(3,865	)		(3,273	)
J	Scotiabank - Chile		42,864,257		1,000,000		09-01-2010		09-01-2020		(3,822	)		(3,197	)
P	Itau - Chile		46,474,122		1,000,000		05-15-2012		11-15-2021		(6,107	)		(4,978	)
P	JP Morgan - N.A.		47,163,640		1,000,000		11-15-2012		11-15-2021		(6,337	)		(5,102	)
P	Scotiabank - Chile		42,412,852		1,000,000		11-15-2013		11-15-2023		(1,296	)		(882	)
P	Santander - Chile		41,752,718		1,000,000		11-15-2013		11-15-2023		(462	)		(89	)
P	Deutsche - England		41,752,718		1,000,000		11-15-2013		11-15-2023		(500	)		(92	)
Q	BCI - Chile		21,592,612		500,000		10-01-2014		04-01-2021		(1,960	)		(1,679	)
Q	BCI - Chile		21,598,348		500,000		10-01-2014		04-01-2021		(1,945	)		(1,655	)
R	Santander - Chile		128,611,183		3,000,000		10-01-2014		04-01-2024		(7,782	)		(7,016	)
R	JP Morgan - England		43,185,224		1,000,000		10-01-2014		04-01-2024		(2,311	)		(1,996	)
R	Itau - Chile		43,277,070		1,000,000		10-01-2014		04-01-2024		(2,334	)		(2,015	)
S	Santander - Chile		201,340,031		5,000,000		11-15-2016		11-15-2026		7,619			5,830
W	Goldman Sachs		40,521,750		1,000,000		10-10-2018		10-10-2028		(2,042	)		(2,392	)
W	Scotiabank - Chile		40,537,926		1,000,000		10-10-2018		10-10-2028		(1,540	)		(2,294	)
W	Goldman Sachs		40,066,555		1,000,000		10-10-2018		10-10-2028		(1,456	)		(1,861	)
X	Santander - Chile		118,400,504		3,000,000		10-10-2018		10-10-2038		8,432			(7,976	)
X	Santander - Chile		97,971,786		2,500,000		10-10-2018		10-10-2038		5,647			(6,554	)

											(31,825	)		(51,217	)

Additionally, as of September 30, 2019, Arauco maintains cross currency swaps contracts to cover the exposure to the risk of the exchange rate for bank contracts in Euro, as shown in the following table:


Institution	Amount U.S.$		Amount EUR		Starting date		Ending date		September 2019 Fair Value ThU.S.$			December 2018 Fair Value ThU.S.
Santander - Chile		118,670,000		100,000,000		06-15-2021		12-15-2029		(6,337	)		—
Banco de Chile		59,335,000		50,000,000		06-15-2021		12-15-2029		(3,145	)		—
MUFG - N.A.		118,670,000		100,000,000		06-15-2021		12-15-2029		(6,324	)		—
JP Morgan - N.A.		237,340,000		200,000,000		06-15-2021		12-15-2029		(12,760	)		—
HSBC - N.A.		59,335,000		50,000,000		06-15-2021		12-15-2029		(3,224	)		—

										(31,790	)

Arauco needs to minimize the risk of the exchange rate, as it holds debt in other currencies different from U.S. dollars. The objective of this position in the swap is to eliminate the uncertainty of the exchange rate, exchanging the flows derived from obligations expressed in other currencies of the liabilities described above, with flows in U.S. dollars (Arauco’s functional currency), at a fixed and determined exchange rate as of the agreement’s execution date.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Forward

Arauco maintains, as of September 30, 2019, forward contracts to hedge the exchange rate risk exposure in connection with construction company contracts in local currency, as follows:


Institution	Amount U.S.$		Amount CLP		Starting date		Ending date		September 2019 Fair Value ThU.S.$			December 2018 Fair Value ThU.S.$
Banco de Chile - Chile		63,372,059		43,707,709,077		10-11-2019		12-11-2020		(2,906	)		—
Banco de Chile - Chile		63,289,472		43,707,709,077		10-11-2019		12-11-2020		(2,825	)		—
BCI - Chile		63,188,823		43,707,709,077		10-11-2019		12-11-2020		(2,727	)		—
ITAU - Chile		63,243,683		43,707,709,077		10-11-2019		12-11-2020		(2,781	)		—
ITAU - Chile		62,888,790		43,707,709,077		10-11-2019		12-11-2020		(2,434	)		—
ITAU - Chile		63,627,774		44,521,625,736		10-11-2019		12-11-2020		(2,047	)		—
BCI - Chile		62,051,046		44,521,625,736		10-11-2019		12-11-2020		(508	)		—

										(16,228	)

Through an effectiveness test, and pursuant to IFRS 9, we were able to validate that the aforementioned hedging instruments are highly effective within an acceptable range for Arauco, for the purposes of eliminating the uncertainty of the exchange rate in the commitments derived from the hedged object.

23.4.2. Colombia

Forward contracts that are in force and effect, executed by Arauco Colombia as of September 30, 2019 and December 31, 2018, are detailed in the following table:


Exchange rate	Institution		Amount ThU.S.$		Starting date		Ending date		September 2019 Fair Value ThU.S.$
USDCOP		Corpbanca Colombia		2,100		07-11-2019		10-09-2019		154
USDCOP		Corpbanca Colombia		1,700		08-27-2019		11-13-2019		—

										154


Exchange rate	Institution		Amount ThU.S.$		Starting date		Ending date		December 2018 Fair Value ThU.S.$
USDCOP		Corpbanca Colombia		1,500		10-31-2018		01-09-2019		(2	)
USDCOP		Corpbanca Colombia		1,700		11-26-2018		02-12-2019		—
USDCOP		Corpbanca Colombia		1,600		12-20-2018		03-12-2019		—

										(2	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

23.4.3. Uruguay

Forward

As of September 30, 2019 and December 31, 2018, Arauco through its subsidiaries as a joint operation (50%) in Uruguay maintains the following forward contracts in force and effect for the purposes of ensuring an exchange rate for sale of dollars:


Exchange rate	Institution		Notional ThU.S.$		September 2019 Fair Value ThU.S.$
UYUUSD		Banco Santander Uruguay		7,285		(339	)
UYUUSD		HSBC Uruguay		13,015		(489	)
UYUUSD		Citibank U.K.		4,900		(319	)
UYUUSD		Banco Itaú Uruguay		1,580		(110	)
EURUSD		Citibank U.K.		833		(36	)

						(1,294	)


Exchange rate	Institution		Notional ThU.S.$		December 2018 Fair Value ThU.S.$
UYUUSD		Banco Santander Uy		14,880		(586	)
UYUUSD		HSBC Uruguay		11,610		(56	)
UYUUSD		Citibank U.K.		4,425		29

						(613	)

Arauco Uruguay’s profits and through its subsidiaries as a joint operation (50%), also face exposure to the price variation of certain fuels, as occurs with Fuel Oil N°6, which is used during the cellulose manufacturing process. In order to minimize this risk, the volatility of future flows associated to the purchase of Fuel Oil No. 6 for years 2018, 2019 and part of 2020 has been limited, through forwards of this commodity. The agreements that are in force and effect as of September 30, 2019 and December 31, 2018, are detailed below:


Commodity	Institution		Notional ThU.S.$		September 2019 Fair Value ThU.S.$
Fuel Oil N°6		JPMorgan Chase Bank, N.A.		6,612		(293	)
Fuel Oil N°6		Citibank U.K.		241		15
Fuel Oil N°6		DNB Bank ASA		5,260		(307	)

						(585	)


Commodity	Institution		Notional ThU.S.$		December 2018 Fair Value ThU.S.$
Fuel Oil N°6		JPMorgan Chase Bank, N.A.		6,189		(800	)
Fuel Oil N°6		Citibank U.K.		401		(34	)
Fuel Oil N°6		DNB Bank ASA		4,837		(568	)

						(1,402	)

100

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Interest Rate Swap

In addition, Arauco through its subsidiaries as a joint operation (50%) in Uruguay maintains an Interest Rate Swap in force and effect, a derivative instrument which purpose is to set the interest rate of a variable rate debt in the same currency (USD). The valuation off this instrument as of September 30, 2019 and December 31, 2018 is shown below:


Exchange rate	Institution	Notional ThU.S.$		September 2019 Fair Value ThU.S.$
USD	DNB Bank ASA		33,758		(79	)

Exchange rate	Institution	Notional ThU.S.$		December 2018 Fair Value ThU.S.$
USD	DNB Bank ASA		42,198		936

23.5 Loans and Receivables

Loans and receivables arenon-derivative financial assets with fixed or determinable payments that are not quoted in an active market. In the interim consolidated statements of financial position, they are included in line items “Cash and cash equivalents” (certain components of cash and cash equivalents), “Trade and OtherCurrent/Non-Current Receivables” and “Accounts receivable from related parties”.

Loans and receivables are measured at amortized cost using the effective interest method and are tested for impairment. Financial assets that are classified as loans and receivables are: cash and cash-equivalents, time deposits, repurchase agreements, trade and othercurrent/non-current receivables, and accounts receivable from related parties

As of September 30, 2019, and December 31, 2018, there are provisions for impairment for ThU.S.$ 16,538 and ThU.S.$ 15,147, respectively.

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


	September 2019		December 2018
	ThU.S.$		ThU.S.$
Financial assets at amortized cost		1,512,655		1,669,587
Cash and cash equivalents		721,663		805,907
Cash		372,040		327,132
Time Deposits		349,623		478,775
Trade and other receivables (net)		790,988		862,138
Trade and other receivables		668,117		751,158
Lease receivable		1,287		1,968
Other receivables		115,373		101,207
Accounts receivable from related parties		6,211		7,805
Other financial assets		4		1,542

23.5.1. Cash and Cash Equivalents

Includes cash on hand, bank checking account balances and time deposits and other short term highly liquid investments with an original maturity of three months or less. They are short-term, highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value.

The composition of cash and cash equivalents (including the balance of mutual funds displayed in this note as valuation, instruments at fair value with profit or loss) at September 30, 2019 and December 31, 2018, classified by origin coins is as follows:


	09-30-2019		12-31-2018
	ThU.S.$		ThU.S.$
Cash and Cash Equivalents		1,142,230		1,075,942
U.S. Dollars		843,032		834,513
Euro		45,586		8,295
Mexican pesos		12,122		1,461
Other currencies		54,761		51,373
Chilean pesos		186,729		180,300

23.5.2 Time Deposits and Repurchase Agreements:The investment objective of time deposits and repurchase agreements is to maximize in the short-term the amounts of cash surpluses. These instruments are authorized by 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.

23.5.3 Trade and Other Receivables:Theserepresent enforceable rights for Arauco resulting from the normal course of the business.

23.5.4 Other Receivables: These correspond to receivables from sales, services or loans that are not considered within the normal course of the business.

The allowance for doubtful accounts is presented as a deduction of trade and other receivables. The provision for doubtful accounts is established based on an analysis of the age of the portfolio and considering the insurance coverage on accounts receivable. Other conditions are assessed for example when there is objective evidence that Arauco will not receive payments under the original sale terms and when the customer is a party to a bankruptcy court agreement or cessation of payments, and iswritten-off when Arauco has exhausted all levels of recovery of the receivable in a reasonable time.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

23.5.5 Accounts receivable from related parties: Represent enforceable rights for Arauco resulting from the normal course of business, calling normal to the line of business, activity or purpose of exploitation and financing, and which Arauco owns anon-controlling ownership of the counterparty.

The following table sets forth trade and othercurrent/non-current receivables classified by currencies as of September 30, 2019 and December 31, 2018:


	09-30-2019		12-31-2018
	ThU.S.$		ThU.S.$
Trades and other current receivables		773,521		839,184

U.S. Dollars		561,572		631,047
Euros		69		7,399
Mexican pesos		35,043		—
Other currencies		91,958		97,002
Chilean pesos		80,936		99,950
U.F.		3,943		3,786

Accounts receivable from related parties, current		6,211		7,324
U.S. Dollars		1,515		591
Other currencies		330		83
Chilean pesos		3,868		6,169
U.F.		498		481

Trade and othernon-current receivables		11,256		15,149
U.S. Dollars		3,882		7,733
Other currencies		463		1,067
Chilean pesos		3,607		3,267
U.F.		3,304		3,082

Accounts receivable from related parties,non-current		—		481
U.F.		—		481

23.6 Financial Liabilities

Arauco’s financial liabilities to the date of these interim consolidated financial statements are as follows:


Financial Liabilities	September 2019 ThU.S.$		December 2018 ThU.S.$
Total Financial Liabilities		6,212,267		5,253,952
Financial liabilities at fair value through profit or loss (held for trading)		18		289
Hedging Liabilities		113,265		71,310
Financial Liabilities Measured at Amortized Cost		6,098,984		5,182,353

The following table sets forth the current portion of thenon-current bank borrowings and debt issued as of September 30, 2019 and December 31, 2018.


	September 2019 ThU.S.$		December 2018 ThU.S.$
Bank borrowings - current portion		64,279		99,397
Bonds issued - current portion		106,481		81,060
Total		170,760		180,457

103

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

23.7 Financial Liabilities Measured at Amortized Cost

Financial liabilities correspond tonon-derivative financial instruments with contractual cash-flow payments that can be either fixed or variable.

Also, this category includes thosenon-derivative financial liabilities for services or goods delivered to Arauco at the end of each reporting period that have not yet been paid. These amounts are not insured and are generally paid within thirty days after being recognized.

At the end of each reporting period, Arauco includes in this category bank borrowings, bonds issued denominated in U.S. Dollars and in U.F., lease liabilities, and trade and other payables.


			*09-30-2019*		*12-31-2018*		*09-30-2019*		*12-31-2018*
	*Currency*		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
	*Currency*		*Amortized Cost*				*Fair Value*
Total Financial Liabilities				6,098,984		5,182,353		6,608,097		5,206,334
Bonds Issued		U.S. Dollar		2,791,194		2,062,044		2,913,500		1,948,482
Bonds Issued		U.F.		1,384,705		1,439,610		1,685,796		1,544,813
Bank borrowings		U.S. Dollar		824,601		925,780		887,817		962,866
Bank borrowings		Euro		112,805		—		144,118
Bank borrowings		Other currencies		8,813		14,655		—		14,655
Lease liabilities		U.F.		5,387		57,349		5,387		53,593
Lease liabilities		Chilean pesos		113,101		10,838		113,101		9,848
Lease liabilities		Mexican pesos		2,326		—		2,326		—
Lease liabilities		U.S. Dollar		122,507		—		122,507		—
Lease liabilities		Euro		88		—		88		—
Lease liabilities		Other currencies		29,900		—		29,900		—
Trades and Other Payables		U.S. Dollar		223,635		187,219		223,635		187,219
Trades and Other Payables		Euro		12,514		7,450		12,514		7,450
Trades and Other Payables		Mexican pesos		25,168		—		25,168		—
Trades and Other Payables		Other currencies		83,444		90,113		83,444		90,113
Trades and Other Payables		Chilean pesos		322,300		348,886		322,300		348,886
Trades and Other Payables		U.F.		31,984		28,180		31,984		28,180
Accounts payable to related parties		U.S. Dollar		346		1,777		346		1,777
Accounts payable to related parties		Chilean pesos		4,166		8,452		4,166		8,452

The financial liabilities at amortized cost presented in the interim consolidated statements of financial positions as of September 30, 2019 and December 31, 2018 are as follows:

September 2019

ThU.S.$

Current

Non Current

Total

Other financial liabilities

555,667

4,839,760

5,395,427

Trade and other payables

696,454

2,591

699,045

Accounts payable to related parties

4,512

—

4,512

Total Financial Liabilities Measured at Amortized Cost

1,256,633

4,842,351

6,098,984

December 2018

ThU.S.$

Current

Non Current

Total

Other financial liabilities

535,836

3,974,440

4,510,276

Trade and other payables

659,618

2,230

661,848

Accounts payable to related parties

10,229

—

10,229

Total Financial Liabilities Measured at Amortized Cost

1,205,683

3,976,670

5,182,353

104

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

23.8 Cash Flow Hedges Reserve Reconciliation

The following table sets forth the reconciliation balances of cash flow hedges presented in the interim consolidated statements of comprehensive income:


	2019
	January - September			July - September
	ThU.S.$			ThU.S.$
Opening balance		13,395			27,727
Gains (losses) on cash flow hedges		35,516			3,118
Recycle of cash flow hedges to profit or loss		(15,465	)		(2,558	)
Income tax relating cash flow hedges		(4,458	)		701
Closing balance		28,988			28,988


	2018
	January - September			July - September
	ThU.S.$			ThU.S.$
Opening balance - Caculated under IAS 39 and IFRS 9, respectively		4,752			35,813
Amounts restated through Reserve of cash flow hedges		(1,918	)		—
Opening balance - Caculated in accordance with IFRS 9		2,834			35,813
Gains (losses) on cash flow hedges		63,363			11,972
Recycle of cash flow hedges to profit or loss		(8,558	)		(2,438	)
Income tax		(17,283	)		(3,338	)
Recycle of income tax		2,312			659
Closing balance		42,668			42,668

23.9 Capital Disclosures

23.9.1 Information on Objectives, Policies and Processes applied by the Company regarding Capital Management

Arauco’s policies on capital management have the objective of:

a)	Ensuring business continuity and normal operations in the long term;

b)	Ensuring funding for new investments to achieve sustainable growth over time;

c)	Keeping adequate capital structure considering all economic cycles that impact the business and the nature of the industry; and

d)	Maximizing the Company’s value and providing an adequate return to shareholders.

23.9.2 Qualitative Information on Objectives, Policies and Processes applied by the Company regarding Capital Management

Arauco determines and manages its capital structure based on its carrying amount of equity plus its financial debt (bank borrowings and bonds issued).

23.9.3 Quantitative Information on Capital Management

The following table sets forth the financial covenants that the Company has to comply with as part of the terms of certain of its obligations:

Instrument

Interest
coverage
>= 2,0x

Debt level
(1) <=
1,2x

September 2019

December 2018

ThU.S.$

Domestic bonds (Chile)

1,384,705

1,439,610

N/A

✓

Syndicate Loan Scotiabank

199,031

200,563

✓

Syndicate Loan Banco Estado - Grayling

304,251

287,565

✓

Syndicate ECA Banco BNP Paribas

112,805

—

✓

N/R: Not required for the financial obligation

(1)

Debt to equity ratio (financial debt divided by equity plusnon-controlling interests)

105

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

As of September 30, 2019 and December 31, 2018, Arauco has complied with all of its financial covenants.

The following table sets forth the credit ratings of our debt instruments as of September 30, 2019 and December 31, 2018, are as follows:


Instrument	Standard & Poor’s	Fitch Ratings	Moody’s	Feller Rate
Local bonds	—	AA-	—	AA-
Foreign bonds	BBB-	BBB	Baa3	—

Capitalization requirements are established based on the Company’s financial needs and on maintaining an adequate liquidity level and complying with financial covenants established in current debt arrangements. The Company manages its capital structure and makes adjustments based on the prevailing economic conditions in order to mitigate the risks associated with adverse market conditions, and based on opportunities that may arise to improve the Company’s level of liquidity.

The capitalization of Arauco as of September 30, 2019 and December 31, 2018 is as follows:


	September 2019		December 2018
	ThU.S.$		ThU.S.$
Equity		7,366,429		7,338,971
Bank borrowings		946,219		940,435
Lease liabilities		273,309		68,187
Bonds issued		4,175,899		3,501,654

Capitalization		12,761,856		11,849,247

23.10 Risk Management

Arauco’s financial instruments are exposed to various financial risks: credit risk, liquidity risk and market risk (including exchange rate risks, interest rate risks and price risks).

Arauco’s overall risk management program focuses on uncertainty in financial markets and aims to minimize potential adverse effects on Arauco’s financial profitability.

Arauco’s financial risk management is overseen by the Corporate Finance Department. This department identifies, assesses and hedges financial risks in close collaboration with Arauco’s operational units.

23.10.1 Type of Risk: Credit Risk

Description

Credit risk refers to financial uncertainty at different periods of time relating to the fulfillment of obligations with counterparties, at the time of exercising the contract rights to receive cash or other financial assets on behalf of Arauco.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Explanation of Credit Risk Exposure and How This Risk Arises

Arauco’s exposure to credit risk is directly related to each of its customer’s individual abilities to fulfill their contractual commitments, reflected in trade receivables.

Accounts exposed to credit risk are: trade receivable, financial lease debtors and other debtors.

Arauco does not have a securitized portfolio.


	September 2019		December 2018
	ThU.S.$		ThU.S.$
Current Receivables

Trade receivables		664,818		747,258
Financial lease receivables		938		1,131
Other debtors		107,765		90,795
Net subtotal		773,521		839,184

Trade receivables		674,035		755,809
Financial lease receivables		938		1,131
Other debtors		111,290		93,370
Gross subtotal		786,263		850,310

Provision for doubtful trade receivables		9,217		8,551
Provision for doubtful lease receivables		—		—
Provision for doubtful other debtors		3,525		2,575
Subtotal Bad Debt		12,742		11,126

Non-Current Receivables

Trade receivables		3,299		3,900
Financial lease receivables		349		837
Other debtors		7,608		10,412
Net Subtotal		11,256		15,149

Trade receivables		7,095		7,921
Financial lease receivables		349		837
Other debtors		7,608		10,412
Gross subtotal		15,052		19,170

Provision for doubtful trade receivables		3,796		4,021
Provision for doubtful lease receivables		—		—
Provision for doubtful other debtors		—		—
Subtotal Bad Debt		3,796		4,021

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

The Credit and CollectionsSub-Division, dependent from the Treasury Division, is the area entrusted with minimizing the credit risk of the accounts receivable, supervising the delinquency of the accounts. The regulations and procedures applicable for the control and administration of the Arauco Group can be found in the Corporate Credit Policy.

As of September 30, 2019, Arauco’s balance for commercial Debtors was ThU.S.$ 681,130 of which, according to the agreed sales conditions, 63.62% corresponded to sales on credit (open account), 35.45% to sales with letters of credit and 0.93% to other types of sales, distributed in 2,772 debtors. The client with the largest Open Account debt represented 2.91% of the total accounts receivable as of that date.

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Below we provide detail regarding accounts receivable, classified in tranches:


September 30, 2019

Age of trade receivables
Days	Non-past due			1 to 30			31 to 60			61 to 90			91 to 120			121 to 150			151 to 180			181 to 210			211 to 250			More than 250			Total
ThU.S.$		631,351			32,050			589			1,778			1,328			1,184			704			53			77			12,016			681,130
%		92.69	%		4.71	%		0.09	%		0.26	%		0.19	%		0.17	%		0.10	%		0.01	%		0.01	%		1.76	%		100	%

December 31, 2018

Age of trade receivables
Days	Non-past due			1 to 30			31 to 60			61 to 90			91 to 120			121 to 150			151 to 180			181 to 210			211 to 250			More than 250			Total
ThU.S.$		688,024			59,844			854			36			111			43			141			127			69			14,481			763,730
%		90.09	%		7.84	%		0.11	%		0.00	%		0.01	%		0.01	%		0.02	%		0.02	%		0.01	%		1.89	%		100	%

Arauco applies the simplified approach regarding the expected losses from commercial debtors, which allows for the use of an estimate of expected credit losses over the instrument’s lifespan for all commercial accounts receivable. In order to establish this estimate, the commercial debtors have been grouped in relation to the corresponding risks for sales conditions as well as for tranches, including clients that areup-to-date or in default.


Days	Non-past due			1 to 30			31 to 60			61 to 90			91 to 120			121 to 150			151 to 180			181 to 210			211 to 250			More than 250			Total
Letters of credit		241,370			83			19			—			—			2			—			—			—			7			241,481
Loss allowance provision		—			—			—			—			—			—			—			—			—			—			—
Expected loss rate		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%

Credit line		385,487			30,638			1,568			663			1,220			1,155			646			30			59			11,877			433,343
Loss allowance provision		—			—			16			66			281			266			148			30			59			11,877			12,743
Expected loss rate		0.00	%		0.00	%		0.99	%		10.00	%		23.00	%		23.00	%		23.00	%		100.00	%		100.00	%		100.00	%

Others		4,494			1,328			117			—			108			27			59			24			18			131			6,306
Loss allowance provision		—			—			1			—			54			13			29			24			18			131			270
Expected loss rate		0.00	%		0.00	%		0.99	%		10.00	%		50.00	%		50.00	%		50.00	%		100.00	%		100.00	%		100.00	%

Trade receivables, total (ThU.S.$)		631,351			32,049			1,704			663			1,328			1,184			705			54			77			12,015			681,130
Allowance for doubtful accounts, total (ThU.S.$)		—			—			17			66			335			279			177			54			77			12,008			13,013

Arauco does not conduct rescheduling or renegotiations with its clients that imply an amendment to the maturity of the invoices and, should it be necessary, any debt renegotiation with a client shall be analyzed on acase-by-case basis and subjected to the approval of the Corporate Finance Division.

Regarding the loss allowance provision for trade receivables and others, below we provide detail for the movements as of September 30, 2019 and December 31, 2018:


	September 2019			December 2018
	ThU.S.$			ThU.S.$
Opening balance at January 1 - under IAS 39		(15,147	)		(17,785	)
Amounts restated through opening retained earnings		—			(2,875	)

Opening loss allowance as at January 1, 2018 - under IFRS 9		(15,147	)		(20,660	)
Increase in loan loss allowance recognised in profit or loss during the year		(2,129	)		(5,027	)
Receivables written off during the year as uncollectible		45			8,620
Unused amount reversed		693			1,920
Closing balance		(16,538	)		(15,147	)

Currently there is a policy for provisions for doubtful accounts receivable under IFRS for all the Arauco group companies.

108

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Explanation regarding the Sales Risk with Letters of Credit

The sales with letters of credit mainly occur in markets in Asia and the Middle East. Periodically, a credit assessment is conducted regarding the banks that issue the letters of credit with the purpose of obtaining their score over the basis of risk-qualification ratings, country-specific risk and financial statements. The decision of approving the issuing bank or asking for confirmation of the letter of credit is made in consideration to this assessment.

Explanation of the Sales Risk with Credit Line

Sales on credit are subject to the credit limit for each customer. The approval or rejection of a credit limit for all term sales is conducted by the Corporate CreditSub-Division, as well as by the Credit and Collections area for North America, Brazil and Argentina, which report to the Corporate Finance Division. The regulations and procedures applicable for the correct control and risk management over the sales on credit are ruled by the Credit Policy.

A procedure that must be applied by all the companies of the Arauco group has been established for the approval and/or modification of client credit lines. Credit line requests are entered to the SAP that analyzes all available information. Afterwards, the same are either approved or rejected in each one of the internal committees of each company belonging to the Arauco group, depending on the maximum amount authorized by the Credit Policy. Lines of credit are renewed during this internal process on a yearly basis.

All sales are automatically controlled by a credit verification system, which has been configured to block any orders from clients who are delinquent in a given percentage of a debt and/or from clients whose line of credit, as of the time of the product’s shipping, has been exceeded or is overdue.

In order to minimize the credit risk for term or Open Account sales, it is Arauco’s policy to take out insurance to cover the export sales of companies Celulosa Arauco y Constitución S.A., Maderas Arauco S.A., Forestal Arauco S.A., and Arauco do Brasil S.A., as well as the domestic sales of Arauco México S.A. de C.V., Arauco Colombia S.A., Arauco Perú S.A., Arauco North America, Inc., Arauco Canada Limited, Celulosa Arauco y Constitución S.A., Maderas Arauco S.A., Arauco Florestal Arapoti, Arauco Forest Brasil S.A., Arauco do Brasil S.A., Arauco Industria de Paineis Ltda. and Arauco Nutrientes S.P.A., Arauco works with credit insurance company Euler Hermes World Agency (Aa3 rating, as per risk rating companies Moody’s and AA by S&P). The company grant a 90% coverage over the amount of each invoice, without deductibles, for registered clients and of 90% fornon-registered clients (*).

(*)Non-registered clients are those whose lines are under ThU.S.$ 100 (equivalent currency of their invoicing) of the local sales of companies Arauco Perú S.A., Arauco Colombia S.A., Arauco México S.A. de C.V., Arauco Do Brasil S.A., Arauco Argentina S.A. and Maderas Arauco S.A. Lines in excess of the aforesaid amounts correspond to registered clients.

As another way of minimizing risk and supporting a line of credit approved by the Credit Committee, Arauco holds guarantees such as mortgages, pledges, Standby letters of credit, bank performance bonds, checks, promissory notes, loans or any other that could be required under the laws of each country. The total amount held in guarantees amounts to ThU.S.$125,988, effective as of September 2019, as summarized in the following chart. The procedure for guarantees is regulated by Arauco’s Policy on Guarantees, whose purpose is to control their accounting, due date and custody.

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CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


Guarantees Arauco Group (ThU.S.$)
Guarantees Debtors (received from clients)
Certificate of deposits	7,107	5.6	%
Standby	12,836	10.2	%
Promissory notes	95,001	75.4	%
Finance	4,538	3.6	%
Mortgage	3,121	2.5	%
Pledge	1,985	1.6	%
Promissory notes	1,400	1.1	%
Total Guarantees	125,988	100.0	%

The maximum exposure to credit risk is limited to the value at amortized cost of the Debtors’ account for sales registered as of the date of this report, minus the percentage of sales insured by the aforementioned credit insurance companies and the guarantees granted in favor of Arauco.

In summary, the open account debt covered by the various insurance policies and guarantees amounts to 93.2% and, therefore, Arauco’s portfolio exposure amounts to 6.8%.


Secured Open Accounts Receivable	ThU.S.$		%
Total open accounts receivable		433,341		100.0	%
Secured receivables (*)		403,874		93.2	%
Unsecured receivables		29,467		6.8	%

(*)	Insured Debt is deemed to be the portion of accounts receivable that is covered by a credit company or by guarantees such as standby letters of credit, mortgages, performance bonds, among others

Investment Policy:

Arauco has an Investment Policy which identifies and limits the financial instruments and the entities into which the Arauco companies, in particular Celulosa Arauco y Constitucion S.A., are authorized to invest. The Company’s Treasury Department is centralized with operations in Chile. The Head Office is responsible for carrying out investments, cash flow surplus investments, and short and long-term debt subscriptions. Exceptions to this rule apply to short and long-term debt, and will be for specific investments made through other companies where authorization is required from the Chief Financial Officer.

For financial instruments, the only permitted investments are fixed income investments with adequate liquidity. Each instrument has defined classifications and limits, depending on duration and type of issuer.

Regarding intermediaries (such as banks, securities brokers and dealers of mutual funds that are bank affiliates), a scoring methodology is used to determine the relative degree of risk of each intermediary based on their financial position and assign score points that result in a credit risk rating to each intermediary. Arauco uses this scoring system to determine its investment limits for each intermediary.

The required information to evaluate the various criteria are obtained from published financial statements from the banks under evaluation and from the credit risk ratings of short and long-term debt securities obtained from rating agencies authorized by the Superintendence of Banks and Financial Institutions (Fitch Ratings Chile, Humphreys and Feller Rate).

110

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Any necessary exceptions regarding investment limits in each particular instrument or entity must have the authorization from Arauco’s Chief Financial Officer.

23.10.2 Type of Risk: Liquidity Risk

Description

This risk corresponds to Arauco’s ability to fulfill its financial obligations upon maturity.

Explanation of Liquidity Risk Exposure and How This Risk Arises

Arauco’s exposure to liquidity risk is mainly from its obligations to bondholders, banks and financial institutions, creditors and other payables. Liquidity risk may arise if Arauco is unable to meet the net cash flow requirements, which sustain its operations under both normal and exceptional circumstances.

Explanation of Objectives, Policies and Processes for Risk Management, and Measurement Methods

The Financial Management Department monitors on an ongoing basis the Company’s cash flow forecasts based on short and long-term forecasts and available financing alternatives. In order to manage the risk level of financial assets, Arauco follows its investment policy.

111

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The following tables detail Arauco’s liquidity analysis for its financial liabilities as of September 30, 2019 and December 31, 2018. The tables have been drawn up based on the contractual undiscounted cash outflows and their remaining contractual maturities:


September 30, 2019				Maturity														Total
Tax ID	Name	Currency	Name - Country Loans with banks	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Effective rate		Nominal rate
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Scotiabank		—		6,325		6,242		6,242		206,242		—		—		6,325		218,726		3.15%	Libor 6M + 1,1%
93.458.000-1	Celulosa Arauco y Constitución S.A.	Euros	BNP paribas /ECA		562		609		1,199		14,367		14,246		14,111		75,042		1,171		118,965		1.06%	1.06%
—	Zona Franca Punta Pereira	U.S. Dollars	Banco Interamericano de Desarrollo - Tramo A		—		8,172		2,325		2,239		2,152		—		—		8,172		6,716		4.10%	Libor 6M + 2,05%
—	Zona Franca Punta Pereira	U.S. Dollars	Banco Interamericano de Desarrollo - Tramo B		—		29,049		—		—		—		—		—		29,049		—		3.85%	Libor 6M + 1,8%
—	Celulosa y Energía Punta Pereira	U.S. Dollars	Finnvera/Finnish Export Credit		—		52,375		50,823		49,286		24,065		—		—		52,375		124,174		3.20%	3.20%
—	Eufores S.A.	U.S. Dollars	BBVA		14,243		—		—		—		—		—		—		14,243		—		3.52%	Libor 6M + 1,3%
—	Eufores S.A.	U.S. Dollars	Banco República Oriental del Uruguay		27,428		—		—		—		—		—		—		27,428		—		3.89%	Libor 6M + 1,3%
—	Eufores S.A.	U.S. Dollars	Citibank		4,578		—		—		—		—		—		—		4,578		—		3.56%	Libor 6M + 1,25%
—	Eufores S.A.	U.S. Dollars	ITAU		12,712		—		—		—		—		—		—		12,712		—		3.51%	Libor 6M + 1,3%
—	Eufores S.A.	U.S. Dollars	Heritage		1,362		—		—		—		—		—		—		1,362		—		3.46%	Libor 6M + 1,3%
—	Eufores S.A.	U.S. Dollars	Santander		—		20,328		—		—		—		—		—		20,328		—		3.29%	Libor 6M + 1,3%
—	Eufores S.A.	U.S. Dollars	Santander		5,096		—		—		—		—		—		—		5,096		—		3.89%	Libor 6M + 1,3%
—	Eufores S.A.	U.S. Dollars	Scotiabank		2,547		—		—		—		—		—		—		2,547		—		3.82%	Libor 6M + 1,3%
—	Arauco do Brasil S.A.	Brazilian Real	Banco Santander		2		7		8		—		—		—		—		9		8		9.95%	TJLP+2%+Spread 2%
—	Arauco do Brasil S.A.	Brazilian Real	Banco Santander		19		38		—		—		—		—		—		57		—		9.50%	9.50%
—	Arauco do Brasil S.A.	Brazilian Real	Banco Alfa		18		52		64		20		—		—		—		70		84		9.70%	TJLP+2%+ Spread 1,75%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Votorantim		—		26		282		269		—		—		—		26		551		5.00%	5.00%
—	Arauco Forest Brasil S.A.	Brazilian Real	BNDES Subcrédito A		7		21		184		170		—		—		—		28		354		8.86%	TJLP+2,91%
—	Arauco Forest Brasil S.A.	Brazilian Real	BNDES Subcrédito B		5		14		112		102		—		—		—		19		214		9.86%	TJLP+3,91%
—	Arauco Forest Brasil S.A.	U.S. Dollars	BNDES Subcrédito C		6		16		153		151		12		—		—		22		316		7.58%	Cesta+2,91%
—	Arauco Forest Brasil S.A.	Brazilian Real	BNDES Subcrédito D		6		17		126		114		—		—		—		23		240		11.06%	TJLP+5,11%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Bradesco		7		20		25		20		—		—		—		27		45		9.75%	TJLP+2,1%+ Spread 1,7%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Santander		5		8		—		—		—		—		—		13		—		9.50%	9.50%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Santander		—		55		50		23		—		—		—		55		73		10.50%	10.50%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Santander		11		61		117		109		52		—		—		72		278		7.50%	7.50%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Santander		4		10		13		6		—		—		—		14		19		9.70%	TJLP+2%+ Spread 1,75%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Santander		1		4		4		4		—		—		—		5		8		9.65%	TJLP+2,1%+ Spread 1,6%
—	Arauco Forest Brasil S.A.	U.S. Dollars	Banco Alfa		3		7		7		—		—		—		—		10		7		8.47%	Cesta+2%+Spread 1,8%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Alfa		5		15		14		—		—		—		—		20		14		9.75%	TJLP+2%+Spread 1,8%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Safra		6		18		15		—		—		—		—		24		15		10.00%	10.00%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Votorantim		—		29		318		303		—		—		—		29		621		5.00%	5.00%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Bradesco		3		—		—		—		—		—		—		3		—		6.00%	6.00%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Santander		7		7		—		—		—		—		—		14		—		9.00%	9.00%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Santander		2		3		—		—		—		—		—		5		—		9.50%	9.50%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Santander		2		2		—		—		—		—		—		4		—		10.00%	10.00%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Santander		—		53		48		44		—		—		—		53		92		10.50%	10.50%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Santander		14		73		140		131		62		—		—		87		333		7.50%	7.50%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Santander		3		8		9		—		—		—		—		11		9		9.95%	TJLP+2%+Spread 2%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Santander		1		4		4		4		—		—		—		5		8		9.65%	TJLP+2,1%+ Spread 1,6%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	BNDES Subcrédito E-I		651		1,878		—		—		—		—		—		2,529		—		8.86%	TJLP+2,91%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	BNDES Subcrédito F-J		394		1,131		—		—		—		—		—		1,525		—		9.86%	TJLP+3,91%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	BNDES Subcrédito H-L		442		1,262		—		—		—		—		—		1,704		—		11.06%	TJLP+5,11%
—	Mahal Empreendimentos e Participações S.A.	U.S. Dollars	BNDES Subcrédito G-K		547		1,583		171		—		—		—		—		2,130		171		7.58%	Cesta+2,91%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	Banco Santander		7		19		24		6		—		—		—		26		30		9.95%	TJLP+2%+Spread 2%
—	Mahal Empreendimentos e Participações S.A.	U.S. Dollars	Banco Santander		4		11		13		3		—		—		—		15		16		8.67%	Cesta+2%+Spread 2%
—	Novo Oeste Gestão de Ativos Florestais S.A.	Brazilian Real	Banco Santander		7		20		24		8		—		—		—		27		32		9.95%	TJLP+2%+Spread 2%
—	Novo Oeste Gestão de Ativos Florestais S.A.	U.S. Dollars	Banco Santander		4		11		14		4		—		—		—		15		18		8.67%	Cesta+2%+Spread 2%
—	Arauco North America, Inc.	U.S. Dollars	Banco del Estado de Chile - NY Branch		6,465		6,500		27,965		41,994		40,697		234,425		—		12,965		345,081		4.26%	Libor 6M + 1,65%

			Total		77,186		129,841		90,493		115,619		287,528		248,536		75,042		207,027		817,218

112

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


September 30, 2019				Maturity														Total
Tax ID	Name	Currency	Name - Country Bonds	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Effective rate		Nominal rate
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-F		17,668		17,410		34,047		33,016		31,985		30,954		151,819		35,078		281,821		4.25%		4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-J		—		198,794		—		—		—		—		—		198,794		—		3.96%		3.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-P		3,814		3,814		7,628		16,382		24,616		23,922		175,340		7,628		247,888		3.96%		4.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-Q		10,203		10,059		19,689		—		—		—		—		20,262		19,689		2.96%		3.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-R		3,436		3,436		6,872		6,872		6,872		6,872		268,176		6,872		295,664		3.57%		3.60%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-S		2,297		2,297		4,595		4,595		4,595		4,595		204,072		4,594		222,452		2.43%		2.40%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-W		1,207		1,207		2,414		2,414		2,414		2,414		126,414		2,414		136,070		2.12%		2.10%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-X		2,841		2,841		5,682		5,682		5,682		5,682		322,636		5,682		345,364		2.70%		2.70%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2021		—		6,756		138,499		—		—		—		—		6,756		138,499		5.02%		5.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2022		—		12,153		12,153		261,932		—		—		—		12,153		274,085		4.77%		4.75%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2024		—		22,500		22,500		22,500		22,500		522,500		—		22,500		590,000		4.52%		4.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2027		9,688		9,688		19,375		19,375		19,375		19,375		567,813		19,376		645,313		3.90%		3.88%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2047		11,000		11,000		22,000		22,000		22,000		22,000		917,000		22,000		1,005,000		5.50%		5.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2029		10,625		10,625		21,250		21,250		21,250		21,250		606,250		21,250		691,250		4.27%		4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2049		13,750		13,750		27,500		27,500		27,500		27,500		1,187,500		27,500		1,297,500		5.51%		5.50%
—	Prime-Line, Inc.	U.S. Dollars	Bond ADFA 2014		128		384		512		512		512		504		2,141		512		4,181		4.84%		4.84%
—	Prime-Line, Inc.	U.S. Dollars	Bond ADFA 2013		38		114		153		148		149		—		—		152		450		4.00%		4.00%

					86,695		326,828		344,869		444,178		189,450		687,568		4,529,161		413,523		6,195,226

113

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


September 30, 2019				Maturity														Total
Tax ID	Name	Currency	Underlying asset class	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$
85.805.200-9	Forestal Arauco S.A.	U.F.	Vehículos de motor		466		1,457		1,986		1,604		1,196		604		764		1,923		6,154
85.805.200-9	Forestal Arauco S.A.	U.F.	Otras Propiedades planta y equipo		1,395		3,842		3,554		2,649		304		—		—		5,237		6,507
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Terrenos		14		7		17		17		17		17		206		21		274
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Otras Propiedades planta y equipo		5,538		11,763		7,077		2,373		410		—		—		17,301		9,860
—	Arauco Argentina S.A.	U.S. Dollars	Edificios y construcciones		122		367		460		140		—		—		—		489		600
—	Arauco Argentina S.A.	U.S. Dollars	Otras Propiedades planta y equipo		96		288		384		384		96		—		—		384		864
—	Arauco Argentina S.A.	U.S. Dollars	Vehículos de motor		310		750		747		595		595		446		—		1,060		2,383
—	Arauco Industria de Paineis S.A.	Brazilian Real	Edificios y construcciones		35		104		58		47		—		—		—		139		105
—	Arauco Industria de Paineis S.A.	Brazilian Real	Vehículos de motor		165		498		639		413		—		—		—		663		1,052
—	Arauco Forest Brasil S.A.	Brazilian Real	Equipos computacionales		6		17		20		15		—		—		—		23		35
—	Arauco Forest Brasil S.A.	Brazilian Real	Terrenos		843		2,528		3,090		3,371		3,371		3,371		10,114		3,371		23,317
—	Novo Oeste Gestao de Ativos Florestais S.A.	Brazilian Real	Terrenos		576		1,729		192		—		—		—		—		2,305		192
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Equipos computacionales		6		17		18		6		—		—		—		23		24
—	Arauco do Brasil S.A.	Brazilian Real	Edificios y construcciones		122		365		463		392		364		182		—		487		1,401
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Edificios y construcciones		415		1,244		1,619		1,534		1,476		—		—		1,659		4,629
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Vehículos de motor		213		613		719		592		383		154		132		826		1,980
93.458.000-1	Celulosa Arauco y Constitución S.A.	Chilean pesos	Edificios y construcciones		20		60		74		72		36		—		—		80		182
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Otras Propiedades planta y equipo		—		1,612		1,612		—		—		—		—		1,612		1,612
93.458.000-1	Celulosa Arauco y Constitución S.A.	Chilean pesos	Vehículos de motor		4,935		14,805		19,741		19,741		11,457		317		—		19,740		51,256
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Vehículos de motor		45		136		181		75		—		—		—		181		256
—	Arauco North America, Inc.	U.S. Dollars	Terrenos		25		74		99		99		8		—		—		99		206
—	Arauco North America, Inc.	U.S. Dollars	Edificios y construcciones		336		968		1,258		1,205		1,178		1,208		4,004		1,304		8,853
—	Arauco North America, Inc.	U.S. Dollars	Vehículos de motor		10		47		29		80		1		—		—		57		110
—	Arauco Canada Limited	Canadian dollar	Edificios y construcciones		36		91		111		64		—		—		—		127		175
—	Arauco Canada Limited	Canadian dollar	Vehículos de motor		28		67		49		29		70		—		—		95		148
—	Celulosa y Energía Punta Pereira	U.S. Dollars	Otras Propiedades planta y equipo		262		787		673		417		373		373		7,369		1,049		9,205
—	Eufores S.A.	U.S. Dollars	Terrenos		1,324		2,560		5,225		5,136		4,996		4,817		39,274		3,884		59,448
—	Eufores S.A.	U.S. Dollars	Otras Propiedades planta y equipo		306		917		1,222		1,222		1,222		1,222		3,974		1,223		8,862
96.510.970-6	Maderas Arauco S.A.	Chilean pesos	Vehículos de motor		3,911		11,732		14,537		12,967		7,288		1,121		—		15,643		35,913
96.510.970-6	Maderas Arauco S.A.	U.F.	Vehículos de motor		135		376		447		342		164		33		11		511		997
96.510.970-6	Maderas Arauco S.A.	U.F.	Terrenos		5		—		5		5		5		5		60		5		80
—	Arauco Colombia S.A.	U.S. Dollars	Edificios y construcciones		10		39		49		—		—		—		—		49		49
—	Arauco Colombia S.A.	U.S. Dollars	Instalaciones fijas y Accesorios		129		518		648		—		—		—		—		647		648
—	Arauco Europe Cooperatief U.A.	Euros	Edificios y construcciones		31		25		—		—		—		—		—		56		—
—	Arauco Europe Cooperatief U.A.	Euros	Vehículos de motor		7		21		17		9		—		—		—		28		26
—	Araucomex S.A. de C.V.	Mexican pesos	Edificios y construcciones		160		171		—		—		—		—		—		331		—
—	Araucomex S.A. de C.V.	Mexican pesos	Edificios y construcciones		119		366		80		—		—		—		—		485		80
—	Araucomex Servicios S.A. de C.V.	Mexican pesos	Edificios y construcciones		—		170		452		236		79		—		—		170		767
—	Araucomex Servicios S.A. de C.V.	Mexican pesos	Vehículos de motor		—		66		140		5		—		—		—		66		145
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Vehículos de motor		—		241		827		—		—		—		—		241		827
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Edificios y construcciones		—		11		17		11		—		—		—		11		28
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Terrenos		—		100		624		—		—		—		—		100		624
96.637.330-K	Servicios Logisticos Arauco S.A.	U.F.	Vehículos de motor		22		68		87		69		31		—		—		90		187
79.990.550-7	Investigaciones Forestales Bioforest S.A.	U.F.	Terrenos		22		—		22		22		22		22		133		22		221
79.990.550-7	Investigaciones Forestales Bioforest S.A.	U.F.	Vehículos de motor		31		87		69		36		26		8		—		118		139

			Total		22,231		61,704		69,338		55,974		35,168		13,900		66,041		83,935		240,421

As part of the policy of Arauco, it considers compliance with all Accounts Payable, whether with related (see Note 13) or third parties, within a period not exceeding 30 days.

114

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


December 31, 2018					Maturity														Total
Tax ID	Name	Currency		Name - Country Loans with banks	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Effective rate		Nominal rate
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Scotiabank- Chile		—		1,930		7,951		7,951		7,951		206,584		—		1,930		230,437		3.70%		Libor + 1.10%
—	Arauco Argentina S.A.		U.S. Dollars	Banco Bice		5,040		—		—		—		—		—		—		5,040		—		2.10%		2.10%
—	Arauco Argentina S.A.		U.S. Dollars	Banco Macro		10,054		—		—		—		—		—		—		10,054		—		6.00%		6.00%
—	Arauco Argentina S.A.		U.S. Dollars	BBVA		—		13,071		—		—		—		—		—		13,071		—		5.90%		5.90%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Interamerican Development Bank		1,184		1,032		2,435		2,335		2,233		2,126		—		2,216		9,129		4.62%		Libor + 2.05%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Interamerican Development Bank		2,940		2,786		5,701		—		—		—		—		5,726		5,701		4.37%		Libor + 1.80%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	BBVA		—		14,103		—		—		—		—		—		14,103		—		4.06%		Libor + 1.30%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Citibank		—		4,517		—		—		—		—		—		4,517		—		4.19%		Libor + 1.25%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Scotiabank		—		2,509		—		—		—		—		—		2,509		—		4.39%		Libor + 1.50%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo		4,770		4,179		9,826		9,411		9,008		8,605		—		8,949		36,850		4.62%		Libor + 2.05%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo		11,871		11,274		23,035		—		—		—		—		23,145		23,035		4.37%		Libor + 1.80%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Finnish Export Credit		24,850		21,578		49,484		47,930		47,207		23,562		—		46,428		168,183		3.20%		3.20%
—	Eufores S.A.		U.S. Dollars	Banco Republica Oriental de Uruguay		8		27,073		—		—		—		—		—		27,081		—		4.12%		Libor + 1.3%
—	Eufores S.A.		U.S. Dollars	Citibank		3		—		—		—		—		—		—		3		—		3.43%		Libor + 2%
—	Eufores S.A.		U.S. Dollars	Banco Itau - Uruguay		24		12,511		—		—		—		—		—		12,535		—		4.17%		Libor + 1.75%
—	Eufores S.A.		U.S. Dollars	Heritage		1,352		—		—		—		—		—		—		1,352		—		4.30%		Libor + 1.75%
—	Eufores S.A.		U.S. Dollars	Banco Santander		20,235		5,021		—		—		—		—		—		25,256		—		3.86%		Libor + 1.3%
—	Arauco Do Brasil S.A.		Brazilian Real	Banco Santander		21		64		48		6		—		—		—		85		54		9.50%		9.50%
—	Arauco Do Brasil S.A.		Brazilian Real	Banco Alfa		17		48		64		64		5		—		—		65		133		10.35%		Tljp+2%+ spread 1.75%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Itau		3		—		—		—		—		—		—		3		—		7.00%		3.50%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Bradesco		9		22		—		—		—		—		—		31		—		6.00%		6.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Votorantim		14		—		—		310		310		—		—		14		620		5.00%		5.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Safra		18		—		—		—		—		—		—		18		—		6.00%		6.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Safra		6		17		23		10		—		—		—		23		33		10.00%		10.00%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Santander		3		14		136		44		44		—		—		17		224		8.38%		8.38%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Santander		34		33		50		129		129		—		—		67		308		10.32%		10.32%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Santander		4		11		14		11		2		—		—		15		27		10.47%		10.49%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bradesco		21		23		24		24		14		—		—		44		62		9.00%		9.00%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Alfa		2		7		9		5		—		—		—		9		14		17.00%		Cesta+2%+spread 1.8%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Alfa		5		14		19		10		—		—		—		19		29		0.22%		Tljp+2%+Spread 1.8%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Votorantim - Brazil		162		198		—		276		276		—		—		360		552		16.00%		Tljp+1.8%+Spread 2%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Votorantim - Brazil		34		45		—		—		—		—		—		79		—		10.40%		Cesta+1.3%+spread 2%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bndes Subcrédito A-B-D		3		—		98		394		295		—		—		3		787		21.78%		Tljp + 2.91%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Bndes Subcrédito C		5		—		24		145		120		—		—		5		289		15.22%		Cesta+2.91%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Santander		43		58		181		173		138		—		—		101		492		8.67%		8.67%
—	Mahal Emprendimientos Pat. S.A.		Brazilian Real	Bndes Subcrédito E-I		663		1,946		1,946		—		—		—		—		2,609		1,946		19.78%		Tljp + 2.91%
—	Mahal Emprendimientos Pat. S.A.		Brazilian Real	Bndes Subcrédito F-J		399		1,167		1,167		—		—		—		—		1,566		1,167		21.78%		Tljp + 3.91%
—	Mahal Emprendimientos Pat. S.A.		U.S. Dollars	Bndes Subcrédito G-K		520		1,528		1,697		—		—		—		—		2,048		1,697		15.22%		Cesta + 2.91%
—	Mahal Emprendimientos Pat. S.A.		Brazilian Real	Bndes Subcrédito H-L		444		1,297		1,297		—		—		—		—		1,741		1,297		24.18%		Tljp + 5.11%
—	Mahal Emprendimientos Pat. S.A.		Brazilian Real	Banco Santander		6		18		23		23		—		—		—		24		46		21.96%		Tljp+2%+Spread 2%
—	Mahal Emprendimientos Pat. S.A.		U.S. Dollars	Banco Santander		3		9		13		12		—		—		—		12		25		17.40%		Cesta+2%+Spread 2%
—	Novo Oeste Gestao de Ativos Florestais S.A.		Brazilian Real	Banco Santander		5		18		24		24		2		—		—		23		50		21.96%		Tljp+2%+Spread 2%
—	Novo Oeste Gestao de Ativos Florestais S.A.		U.S. Dollars	Banco Santander		3		9		13		13		2		—		—		12		28		17.40%		Tljp+2%+Spread 2%
—	Flakeboard Company Ltd.		U.S. Dollars	Banco del Estado de Chile		—		2,141		13,164		41,497		40,184		38,872		203,906		2,141		337,623		3.00%		Libor + 1.65%

				Total		84,778		130,271		118,466		110,797		107,920		279,749		203,906		215,049		820,838


December 31, 2018					Maturity														Total
Tax ID	Name	Currency		Name - Country Bonds	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$		Effective rate		Nominal rate
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-F		—		19,425		25,413		24,656		23,899		23,143		116,673		19,425		213,784		4.24%		4.21%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-F		—		7,770		10,189		9,884		9,579		9,274		47,339		7,770		86,265		4.25%		4.21%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-J		2,132		—		204,731		—		—		—		—		2,132		204,731		3.23%		3.22%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-P		—		1,004		7,857		7,857		25,713		24,999		193,697		1,004		260,123		3.96%		3.96%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-Q		—		20,207		20,576		10,398		—		—		—		20,207		30,974		2.96%		2.98%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-R		—		1,770		7,079		7,079		7,079		7,079		278,892		1,770		307,208		3.57%		3.57%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-S		—		592		4,733		4,733		4,733		4,733		204,991		592		223,923		2.44%		2.40%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-W		—		559		2,487		2,487		2,487		2,487		127,578		559		137,526		2.12%		2.09%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-X		—		1,317		5,853		5,853		5,853		5,853		326,508		1,317		349,920		2.70%		2.68%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee Bonds 2019		6,168		202,643		—		—		—		—		—		208,811		—		7.26%		7.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2021		4,422		—		10,013		204,527		—		—		—		4,422		214,540		5.02%		5.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2022		5,705		—		12,153		12,153		259,785		—		—		5,705		284,091		4.77%		4.75%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2024		9,375		—		22,500		22,500		22,500		22,500		527,024		9,375		617,024		4.52%		4.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2027		—		3,175		19,375		19,375		19,375		19,375		77,500		3,175		155,000		3.90%		3.88%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2047		—		3,607		22,000		22,000		22,000		22,000		528,000		3,607		616,000		5.50%		5.50%

				Total		27,802		262,069		374,959		353,502		403,003		141,443		2,428,202		289,871		3,701,109

115

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


December 31, 2018					Maturity														Total
Tax ID	Name	Currency		Name - Country Lease	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco Santander		148		410		599		599		—		—		—		558		1,198
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco Scotiabank		1,288		3,158		2,368		2,368		478		478		—		4,446		5,692
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco Estado		639		1,885		989		989		—		—		—		2,524		1,978
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco de Chile		1,998		8,891		3,618		3,618		1,556		1,556		—		10,889		10,348
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco BBVA		545		273		—		—		—		—		—		818		—
85.805.200-9	Forestal Arauco S.A.		U.F.	Banco Credito e Inversiones		1,313		5,351		2,897		2,897		3,220		3,220		—		6,664		12,234
85.805.200-9	Forestal Arauco S.A.		Chilean pesos	Banco Chile		284		690		520		520		—		—		—		974		1,040
85.805.200-9	Forestal Arauco S.A.		Chilean pesos	Banco Credito e Inversiones		679		2,036		1,484		1,484		—		—		—		2,715		2,968
85.805.200-9	Forestal Arauco S.A.		Chilean pesos	Banco Scotiabank		371		957		673		673		233		234		—		1,328		1,813

				Total		7,265		23,651		13,148		13,148		5,487		5,488		—		30,916		37,271

As part of the policy of Arauco, it considers compliance with all Accounts Payable, whether with related (see Note 13) or third parties, within a period not exceeding 30 days.

116

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Guarantees

As of the date of these interim consolidated financial statements, Arauco has financial assets of approximately MU.S.$45 that have been pledged to third parties (beneficiaries), as direct guarantee. If Arauco does not fulfill its obligations, the guarantors could execute the guarantees.

As of September 30, 2019, the total assets pledged as an indirect guarantee were MU.S.$545. In contrast to direct guarantees, indirect guarantees are given to secure obligations assumed by a third party.

On September 29, 2011, Arauco entered into a Security Agreement under which it granted anon-joint guarantee limited to 50% of the obligations of the Uruguayan companies (joint ventures) Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A., under the IDB Facility Agreement in the amount of up to MU.S.$454 and the Finnevera Guaranteed Facility Agreement in the amount of up to MU.S.$900. Both loan agreements were signed with the International Development Bank. Such guarantee is included in the table below, under indirect guarantees.

Direct and indirect guarantees granted by Arauco:

DIRECT

Subsidiary

Guarantee

Assets
Pledged

Currency

ThU.S.$

Guarantor

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean Pesos

488

Directorate General of Maritime Territory and Merchant Marine

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean Pesos

313

Directorate General of Maritime Territory and Merchant Marine

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean Pesos

230

Directorate General of Maritime Territory and Merchant Marine

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean Pesos

209

Directorate General of Maritime Territory and Merchant Marine

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean Pesos

120

National Customs Service

Forestal Arauco S.A.

Guarantee
letter

—

Chilean Pesos

5,006

Transelec S.A.

Arauco Forest Brasil S.A.

Mortgage
Industrial
Plant of
Jaguariaíva of
Arauco do
Brasil

Property
plant and
equipment

Brazilian Real

36,815

BNDES

Arauco Forest Brasil S.A.

Endorsement
of Arauco do
Brasil

—

Brazilian Real

512

Bank Votorantim S.A.

Arauco Forest Brasil S.A.

Equipment

Property
plant and
equipment

Brazilian Real

178

Bank Santander S.A.

Arauco Forest Brasil S.A.

Equipment

Property
plant and
equipment

Brazilian Real

Bank Bradesco S.A.

Arauco do Brasil S.A.

Equipment

Property
plant and
equipment

Brazilian Real

166

Bank Santander S.A.

Arauco do Brasil S.A.

Equipment

Property
plant and
equipment

Brazilian Real

164

Bank Alpha S.A.

Arauco Florestal Arapoti S.A.

Endorsement
of Arauco do
Brasil

—

Brazilian Real

577

Bank Votorantim S.A.

Arauco Florestal Arapoti S.A.

Equipment

Property
plant and
equipment

Brazilian Real

Bank Bradesco S.A.

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean Pesos

488

Directorate General of Maritime Territory and Merchant Marine

Total

44,944

INDIRECT

Subsidiary

Guarantee

Assets
Pledged

Currency

ThU.S.$

Guarantor

Celulosa Arauco y Constitución S.A.

Suretyship not
supportive and
cumulative

—

U.S. Dollar

236,117

Joint Ventures (Uruguay)

Celulosa Arauco y Constitución S.A.

Full Guarantee

—

U.S. Dollar

300,000

Arauco North America, Inc. (USA)

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

U.S. Dollar

2,507

Arauco Forest Brasil y Mahal (Brasil)

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Brazilian Real

6,244

Arauco Forest Brasil y Mahal (Brasil)

Total

544,868

23.10.3 Type of Risk: Market Risk – Exchange Rate

Description

Market risk arises from the probability of being affected by losses from fluctuations in currencies exchange rates in which assets and liabilities are denominated, in a functional currency other than the functional currency of Arauco.

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September 30, 2019

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

Explanation of Currency Risk Exposure and How This Risk Arises

Arauco is exposed to the foreign currency risk from currency fluctuations arising from sales, purchases and obligations undertaken in foreign currencies, such as the Chilean Peso, Euro, Brazilian Real or other foreign currencies. In the case of significant exchange rate variations, the Chilean Peso is the currency that represents the main currency risk. See Note 11 for details assets and liabilities classified by currency.

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

Arauco performs sensitivity analyses to measure the effect of this variable on equity and net result.

Sensitivity analysis considers a variation of +/- 10% of the exchange rate over the Chilean Peso. This fluctuation range is considered possible given current market conditions as of the date of these financial statements. With all other variables at a constant rate, a U.S. Dollar exchange rate variation of +/- 10% in relation to the Chilean Peso would mean a change in the net income year after tax +/- 6.52% (equivalent to ThU.S.$ -/+ 13,378), and +/- 0.11% of equity (equivalent to ThU.S.$ -/+ 8,027).

Additionally, a sensitivity analysis is carried out assuming a variation of +/- 10% in the closing exchange rate on the Brazilian Real, which is considered a possible range of fluctuation given the market conditions as of the date of these financial statements. With all the other variables constant, a variation of +/- 10% in the exchange rate of the dollar on the Brazilian Real would mean a variation on the net income after tax +/- 1.28% (equivalent to ThU.S.-/+$2,631) and a change on the equity of +/- 1.41% (equivalent to ThU.S. -/+$103,905).

23.10.4 Type of Risk: Market Risk – Interest rate risk

Description

Interest rate risk refers to the sensitivity of the value of financial assets and liabilities in terms of interest rate fluctuations.

Explanation of Interest Rate Risk Exposure and How This Risk Arises

Arauco is exposed to risks due to interest rate fluctuations for bonds issued, bank borrowings and financial instruments that bear interest at a variable rate.

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

Arauco completes its risk analysis by reviewing its exposure to changes in interest rates. As of September 30, 2019, 10.7% our financial debt accrues interest at variable rates. A change of +/- 10% in the interest rate is considered a possible range of fluctuation. Such market conditions would affect the income after tax at rate of +/- 0.59% (equivalent to ThU.S.$-/+ 1,217) and +/- 0.01% (equivalent to ThU.S.$-/+ 730) on equity.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


*Thousands of dollars*	September 2019 ThU.S.$		Total
Fixed rate		4,811,913		89.2	%
Bonds issued		4,175,899
Bank borrowings (*)		362,705
Lease liabilities		273,309
Variable rate		583,514		10.8	%
Bonds issued		—
Loans with Banks		583,514
Total		5,395,427		100.0	%


*Thousands of dollars*	December 2018 ThU.S.$		Total
Fixed rate		3,807,932		84.4	%
Bonds issued		3,501,654
Bank borrowings (*)		238,091
Lease liabilities		68,187
Variable rate		702,344		15.6	%
Bonds issued		—
Loans with Banks		702,344
Total		4,510,276		100.0	%

(*)	Includes variable rate bank borrowings changed by fixed rate swaps.

23.10.5 Type of Risk: Market Risk – Price of Pulp Risks

Description

Pulp prices are determined by world and regional market conditions. Prices fluctuate based on demand, production capacity, commercial strategies adopted by large-scale forestry companies, pulp and paper producers and by the availability of substitutes.

Explanation of Price Risk Exposure and How This Risk Arises

Pulp prices are reflected in revenue from sales and directly affect the net income for the period.

As of September 30, 2019, revenue due to pulp sales accounted for 44.7% of total sales. Pulp prices are fixed on a monthly basis in accordance with the market. Forward contracts or other financial instruments are not used for pulp sales.

Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods

This risk is approached in different ways. Arauco has a team of specialists who perform periodic market and competition analyses, providing tools to analyze and evaluate trends and adjust forecasts. Similarly, Arauco performs price financial sensitivity analysis in order to take the necessary safeguards to confront different scenarios in the best possible manner.

Sensitivity analysis considers a variation of +/- 10% in the average pulp price, a possible fluctuation range given current market conditions at the date of the closing balance. With all other variables constant, a variation of +/- 10% in the average pulp price would mean a variation of +/- 70.75% (equivalent to ThU.S.$-/+ 145,203) on the income for the year after tax and +/- 1.18% (equivalent to ThU.S.$87,122) on equity.

119

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 24. REPORTABLE SEGMENTS

The main products that generate revenue for each reportable segment are described as follows:

•

Pulp: The main products sold by this reportable segment are long fiber bleached pulp (BSKP), short fiber bleached pulp (BHKP), long fiber raw pulp (UKP), and pulp fluff.

•

Wood products: The range of products sold by this reportable segment are plywood panels, MDF panels (medium density fiberboard), Hardboard Panels, PB Panels (agglomerated) different sizes of sawn wood and remanufactured products such as moldings, precut pieces and finger joints.

•

Forestry: This reportable segment produces and sells sawn logs, pulpable logs, posts and chips made from owned forests of Radiata and Taeda pine, eucalyptus globulus and nitens forests. Additionally, purchases logs and woodchip from third parties, which it sells to its other reportable segment.

Pulp

The Pulp reportable segment uses wood exclusively from pine and eucalyptus plantations for the production of different classes of wood cellulose or pulp. Bleached pulp is mainly used as raw material for producing printing and writing paper, as well as toilet paper and high-quality wrapping paper. Unbleached pulp is used to produce packing paper, filters, fiber cement products, dielectric paper and others. On the other hand, fluff pulp is mainly used in the production of diapers and female hygiene products.

Arauco has seven plants, five in Chile, one in Argentina and one in Uruguay (50% property of Arauco) and they have a total production capacity of approximately 4 million tons per year. Pulp is sold in more than 33 countries, mainly in Asia and Europe.

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Wood products

The Panels area produces a wide range of panel products and several kinds of moldings aimed at the furniture, decoration and construction industries. It consists of 23 industrial plants: 5 in Chile, 2 in Argentina, 4 in Brazil, 2 in Mexico, and 10 plants around USA and Canada. The Company has a total annual production capacity of 8.7 million cubic meters of PBO, MDF, Hardboard, plywood and moldings.

Through the joint venture Sonae Arauco (see note 16), Arauco produces and sells 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. In total, Sonae Arauco’s production capacity is approximately 1.5 million m3 of MDF, 2.3 million m3 of PB, 516,000 m3 of OSB and 50,000 m3 of sawn lumber.

Including Sonae Arauco at 50%, Arauco totalize a capacity of 4.8 million m3 of MDF, 4.9 million m3 of PB and 258,000 m3 of OSB in its plants.

The Sawn Timber area produces a wide range of wood and remanufactured products with different kinds of uses and appearances, which include a wide variety of uses in the furniture, packing, construction and refurbishing industries.

With 8 saw mills in operation (7 in Chile and 1 in Argentina), the Company has a production capacity of 3.1 million m3 of sawn wood.

Furthermore, the Company has 5 remanufacturing plants, 4 in Chile and 1 in Argentina. These plants reprocess sawn wood and produce high quality remanufactured products, such as finger joint and solid moldings as well as precut pieces.

Forestry

The Forestry reportable segment is Arauco’s core business. It provides raw materials for all products manufactured and sold by the Company. By directly controlling the growth of the forests to be processed, Arauco guarantees itself quality wood for each of its products.

Arauco holds forestry assets distributed throughout Chile, Argentina, Brazil and Uruguay, reaching 1.7 million hectares as of September 30, 2019, of which 1 million hectares are used for plantations, 436 thousand hectares for native forests, 183 thousand hectares for other uses and 113 thousand hectares are to be planted.

Arauco’s principal plantations consist of radiata and taeda pine and eucalyptus to a lesser degree. These are species that have fast growth rates and short harvest cycles compared with other long fiber commercial woods.

Arauco has no customers representing 10% or more of its revenues.

Below, please find summarized information concerning the assets, liabilities and profits and losses at the end of each period, by segments. The profit (loss) of each segment informed takes into consideration that taxes and income and financial costs have not

121

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

been allocated to the various segments, and are shown as part of the Corporate’s segment:


Period ended September 30, 2019	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$			Total ThU.S.$

Revenues from goods sale		1,782,744		97,627		2,177,608		—			—			4,057,979						4,057,979
Revenues from services sale		63,006		5,555		73		298			—			68,932						68,932

Revenues from external customers		1,845,750		103,182		2,177,681		298			—			4,126,911						4,126,911
Revenues from transactions with other operating segments		30,407		812,124		20,411		27,994			—			890,936			(890,936	)		—


Finance income		—		—		—		—			22,328			22,328						22,328
Finance costs		—		—		—		—			(192,718	)		(192,718	)					(192,718	)
Net finance costs		—		—		—		—			(170,390	)		(170,390	)					(170,390	)


Depreciation and amortizations		200,078		35,008		143,847		965			7,023			386,921						386,921
Sum of significant income accounts		5,839		118,348		7,778		82			41,505			173,552						173,552
Sum of significant expense accounts		32,831		18,804		27,350		16			8,183			87,184						87,184



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

Associates		—		37		—		—			1,898			1,935						1,935
Joint ventures		—		—		119		—			1,827			1,946						1,946

Income tax expense		—		—		—		—			(36,636	)		(36,636	)					(36,636	)


Profit (loss) of each reportable segment		368,206		2,696		67,544		(1,743	)		(282,771	)		153,932						153,932

Geographical information on revenues
Revenue – Chilean entities		1,344,752		42,684		558,064		298			—			1,945,798						1,945,798
Revenue – Foreign entities		500,998		60,498		1,619,617		—			—			2,181,113						2,181,113
Total Ordinary Income		1,845,750		103,182		2,177,681		298			—			4,126,911						4,126,911


Period ended September 30, 2019	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			SubTotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Amounts of additions tonon-current assets

Acquisition of property, plant and equipment and biological assets		508,032		205,158		129,946		619			1,737			845,492			—			845,492
Acquisition and contribution of investments in associates and joint venture		—		—		—		—			172,291			172,291			—			172,291


Period ended September 30, 2019	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$		Others ThU.S.$		Corporate ThU.S.$		Sub Total ThU.S.$		Elimination ThU.S.$			Total ThU.S.$
Segment assets		5,486,915		5,168,941		3,168,462		21,035		1,479,681		15,325,034		(43,231	)		15,281,803
Segments assets (excluding deferred tax assets)		5,486,915		5,168,941		3,168,462		21,035		1,473,092		15,318,445		(43,231	)		15,275,214
Deferred tax assets										6,589		6,589		—			6,589

Investments accounted through equity method
Associates		—		35,857		—		—		57,146		93,003					93,003
Joint Ventures		—		—		169,141		—		22,671		191,812					191,812
Segment liabilities		207,070		168,182		466,855		7,784		7,065,483		7,915,374					7,915,374
Segment liabilities (excluding deferred tax liabilities)		207,070		168,182		466,855		7,784		5,693,672		6,543,563					6,543,563
Deferred tax liabilities										1,371,811		1,371,811					1,371,811

Geographical information onnon-current assets
Chile		3,080,499		3,229,359		661,575		20,420		282,762		7,274,615		(3,523	)		7,271,092
Foreign countries		1,610,089		1,316,635		1,393,173		—		88,139		4,408,036					4,408,036
Non-current assets, Total		4,690,588		4,545,994		2,054,748		20,420		370,901		11,682,651		(3,523	)		11,679,128

122

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


Quarter July - September 2019	Pulp ThU.S.$		Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from goods sale		578,808		36,191			738,895			—						1,353,894						1,353,894
Revenues from services sale		31,735		1,516			(71	)		81						33,261						33,261

Revenues from external customers		610,543		37,707			738,824			81						1,387,155						1,387,155
Revenues from transactions with other operating segments		10,033		266,823			4,848			9,398						291,102			(291,102	)		—


Finance income		—		—			—			—			7,483			7,483						7,483
Finance costs		—		—			—			—			(65,778	)		(65,778	)					(65,778	)
Net finance costs		—		—			—			—			(58,295	)		(58,295	)					(58,295	)

Depreciation and amortizations		70,437		7,377			53,069			326			2,369			133,578						133,578
Sum of significant income accounts		1,418		37,765			2,042			(62	)		437			41,600						41,600
Sum of significant expense accounts		20,892		5,647			8,417			(48	)		2,270			37,178						37,178


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

Associates		—		12			—			—			779			791						791
Joint ventures		—		—			(7,213	)		—			646			(6,567	)					(6,567	)

Income tax expense		—		—			—			—			10,329			10,329						10,329

Profit (loss) of each reportable segment		59,599		(6,872	)		7,915			(603	)		(89,634	)		(29,595	)					(29,595	)

Geographical information on revenues
Revenue – Chilean entities		450,331		9,699			173,069			81						633,180						633,180
Revenue – Foreign entities		160,212		28,008			565,755			—						753,975						753,975
Total Ordinary Income		610,543		37,707			738,824			81						1,387,155						1,387,155


Quarter July - September 2019	Pulp ThU.S.$		Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			SubTotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$

Amounts of additions tonon-current assets

Acquisition of property, plant and equipment and biological assets		164,948		56,623			38,377			(200	)		268			260,016						260,016
Acquisition and contribution of investments in associates and joint venture		—		—			—			—			20,959			20,959						20,959


Period ended September 30, 2018	Pulp ThU.S.$		Forestry ThU.S.$			Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from goods sale		2,290,117		77,344			2,122,207		—						4,489,668						4,489,668
Revenues from services sale		77,045		6,590			—		608						84,243						84,243

Revenues from external customers		2,367,162		83,934			2,122,207		608						4,573,911						4,573,911
Revenues from transactions with other operating segments		32,468		777,203			5,196		28,937						843,804			(843,804	)		—


Finance income		—		—			—		—			12,843			12,843						12,843
Finance costs		—		—			—		—			(159,319	)		(159,319	)					(159,319	)
Net finance costs		—		—			—		—			(146,476	)		(146,476	)					(146,476	)


Depreciation and amortizations		179,471		14,594			110,204		922			5,262			310,453						310,453
Sum of significant income accounts		6,146		85,802			10,607		194			424			103,173						103,173
Sum of significant expense accounts		16,177		12,805			17,873		26			5,955			52,836						52,836

Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—		—			—		—			2,457			2,457						2,457
Joint ventures		—		—			23,959		—			2,273			26,232						26,232

Income tax expense		—		—			—		—			(199,926	)		(199,926	)					(199,926	)

Profit (loss) of each reportable segment		958,087		(54,495	)		191,022		(833	)		(437,144	)		656,637						656,637

Geographical information on revenues
Revenue – Chilean entities		1,785,415		38,803			998,730		607						2,823,555						2,823,555
Revenue – Foreign entities		581,747		45,131			1,123,477		1						1,750,356						1,750,356
Total Ordinary Income		2,367,162		83,934			2,122,207		608						4,573,911						4,573,911


Period ended September 30, 2018	Pulp ThU.S.$		Forestry ThU.S.$			Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Amounts of additions tonon-current assets

Acquisition of property, plant and equipment and biological assets		131,387		187,509			240,106		409			2,173			561,584						561,584
Acquisition and contribution of investments in associates and joint venture												17,552			17,552						17,552

123

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


Period ended December 31, 2018	Pulp ThU.S.$		Forestry ThU.S.$			Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Segment assets		5,252,765		5,114,163			2,905,670		49,588			1,317,041			14,639,227			(45,479	)		14,593,748
Segments assets (excluding deferred tax assets)		5,252,765		5,114,163			2,905,670		49,588			1,312,406			14,634,592			(45,479	)		14,589,113
Deferred tax assets		—		—			—		—			4,635			4,635						4,635

Investments accounted through equity method
Associates		—		38,497			—		—			117,112			155,609						155,609
Joint Ventures		—		—			181,103		—			21,341			202,444						202,444
Segment liabilities		396,332		180,259			405,551		13,727			6,258,908			7,254,777						7,254,777
Segments liabilities (excluding deferred tax liabilities)		396,332		180,259			405,551		13,727			4,841,250			5,837,119						5,837,119
Deferred tax liabilities		—		—			—		—			1,417,658			1,417,658						1,417,658

Geographical information onnon-current assets
Chile		2,667,179		3,259,801			806,253		20,382			120,231			6,873,846			(3,842	)		6,870,004
Foreign countries		1,657,532		1,304,390			1,247,008		19,507			54,147			4,282,584			—			4,282,584
Non-current assets, Total		4,324,711		4,564,191			2,053,261		39,889			174,378			11,156,430			(3,842	)		11,152,588


Quarter July - September 2018	Pulp ThU.S.$		Forestry ThU.S.$			Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$			Total ThU.S.$

Revenues from goods sale		787,205		19,817			717,576		—						1,524,598						1,524,598
Revenues from services sale		23,040		2,211			—		71						25,322						25,322
Revenues from external customers		810,245		22,028			717,576		71						1,549,920						1,549,920

Revenues from transactions with other operating segments		10,392		259,596			1,768		9,925						281,681			(281,681	)		—


Finance income		—		—			—		—			5,498			5,498						5,498
Finance costs		—		—			—		—			(56,238	)		(56,238	)					(56,238	)
Net finance costs		—		—			—		—			(50,740	)		(50,740	)					(50,740	)


Depreciation and amortizations		60,690		4,713			36,243		309			1,772			103,727						103,727
Sum of significant income accounts		2,400		28,779			5,470		19			46			36,714						36,714
Sum of significant expense accounts		3,352		4,389			9,395		16			2,065			19,217						19,217


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

Associates		—		—			—		—			934			934						934
Joint ventures		—		—			2,667		—			1,079			3,746						3,746

Income tax expense		—		—			—		—			(75,230	)		(75,230	)					(75,230	)

Profit (loss) of each reportable segment		334,347		(21,176	)		67,133		(394	)		(159,217	)		220,693						220,693

Geographical information on revenues
Revenue – Chilean entities		618,624		8,011			337,563		70						964,268						964,268
Revenue – Foreign entities		191,621		14,017			380,013		1						585,652						585,652
Total Ordinary Income		810,245		22,028			717,576		71						1,549,920						1,549,920


Quarter July - September 2018	Pulp ThU.S.$		Forestry ThU.S.$			Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$			Total ThU.S.$

Amounts of additions tonon-current assets
Acquisition of property, plant and equipment and biological assets		32,544		56,074			103,707		232			880			193,437						193,437
Acquisition and contribution of investments in associates and joint venture												269			269						269

The following table shows information related to cash flows by segments which is presented as a complementary information as required by our regulatory entities:


Period ended September 30, 2019	Pulp ThU.S.$			Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		604,013			145,034			195,906			3,381			(442,454	)		505,880			—		505,880
Cash flows (used in) investing activities		(498,140	)		(198,692	)		(141,722	)		(619	)		(52,022	)		(891,195	)		—		(891,195	)
Cash flows from (used in) Financing Activities		527,821			(29,172	)		(3,504	)		(48	)		(29,891	)		465,206			—		465,206
Net increase (decrease) in Cash and Cash Equivalents		633,694			(82,830	)		50,680			2,714			(524,367	)		79,891			—		79,891


Period ended September 30, 2018	Pulp ThU.S.$			Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		671,083			67,004			260,857			9,046			(140,898	)		867,092			—		867,092
Cash flows (used in) investing activities		(132,994	)		(169,012	)		(302,172	)		(1,658	)		47,081			(558,755	)		—		(558,755	)
Cash flows from (used in) Financing Activities		(78,494	)		(5,236	)		(113	)		—			(54,109	)		(137,952	)		—		(137,952	)
Net increase (decrease) in Cash and Cash Equivalents		459,595			(107,244	)		(41,428	)		7,388			(147,926	)		170,385			—		170,385

124

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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


Quarter July – September 2019	Pulp ThU.S.$			Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		277,863			85,013			107,948			2,390			(99,369	)		373,845			—		373,845
Cash flows (used in) investing activities		(164,849	)		(54,269	)		(49,892	)		200			(3,156	)		(271,966	)		—		(271,966	)
Cash flows from (used in) Financing Activities		(164,115	)		(7,497	)		(7,831	)		(20	)		(10,934	)		(190,397	)		—		(190,397	)
Net increase (decrease) in Cash and Cash Equivalents		(51,101	)		23,247			50,225			2,570			(113,459	)		(88,518	)		—		(88,518	)


Quarter July – September 2018	Pulp ThU.S.$			Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Sub Total ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		267,901			55,832			130,950			3,551			(73,012	)		385,222			—		385,222
Cash flows (used in) investing activities		(36,428	)		(52,223	)		(148,738	)		(607	)		55,467			(182,529	)		—		(182,529	)
Cash flows from (used in) Financing Activities		(39,222	)		(2,475	)		(36	)		0			5,144			(36,589	)		—		(36,589	)
Net increase (decrease) in Cash and Cash Equivalents		192,251			1,134			(17,824	)		2,944			(12,401	)		166,104			—		166,104

125

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

Information required by geographic area:


	Geographical area
2019	Local country		Foreign country
	Chile		Argentina		Brazil		USA/Canada		Uruguay		Mexico			Total
Disclosure of geographical areas	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$			ThU.S.$
Revenues from sales of goods		1,900,241		297,025		387,753		1,068,070		313,230		91,660			4,057,979
Revenues from sales of services		45,557		—		—		—		23,302		73			68,932

Revenues at09-30-2019		1,945,798		297,025		387,753		1,068,070		336,532		91,733			4,126,911

Revenues from sales of goods		622,167		98,813		141,794		370,970		85,650		34,500			1,353,894
Revenues from sales of services		11,013		—		—		—		22,250		(2	)		33,261

Revenues at Quarter July – September 2019		633,180		98,813		141,794		370,970		107,900		34,498			1,387,155

Non-current Assets at09-30-2019 other than deferred tax		7,266,089		799,370		920,229		850,542		1,708,519		127,790			11,672,539


	Geographical area
2018	Local country		Foreign country
	Chile		Argentina		Brazil		USA/Canada		Uruguay		Mexico		Total
Disclosure of geographical areas	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Revenues from sales of goods		2,759,952		368,762		377,450		622,110		361,395		—		4,489,669
Revenues from sales of services		63,603		—		—		—		20,639		—		84,242

Revenues at09-30-2018		2,823,555		368,762		377,450		622,110		382,034		—		4,573,911

Revenues from sales of goods		945,176		121,832		128,660		215,614		113,317		—		1,524,599
Revenues from sales of services		19,092		—		—		—		6,229		—		25,321

Revenues at July – September 2018		964,268		121,832		128,660		215,614		119,546		—		1,549,920

Non-current Assets at09-30-2018 other than deferred tax		6,784,798		918,538		966,622		734,751		1,659,812		—		11,064,521

126

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Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 25. OTHERNON-FINANCIAL ASSETS ANDNON-FINANCIAL LIABILITIES


	09-30-2019		12-31-2018
Current non-financial assets	ThU.S.$		ThU.S.$
Roads to amortize current		52,078		41,456
Prepayment to amortize (insurance and others)		24,243		14,020
Recoverable taxes (GST and others)		84,787		67,778
Other currentnon-financial assets		7,801		6,600
Total		168,909		129,854


	09-30-2019		12-31-2018
Non-currentnon-financial assets	ThU.S.$		ThU.S.$
Roads to amortize,non-current		82,913		78,418
Guarantee values		4,328		3,295
Recoverable taxes		1,345		1,519
Othernon-currentnon-financial assets		4,661		3,716
Total		93,247		86,948


	09-30-2019		12-31-2018
Currentnon-financial liabilities	ThU.S.$		ThU.S.$
Provision of minimum dividend (1)		76,248		182,890
ICMS tax payable		15,918		9,109
Other tax payable		21,861		14,034
Other Currentnon-financial liablities		1,180		6,577
Total		115,207		212,610

(1)	Provision includes a minimum dividend of subsidiary minority.



	09-30-2019		12-31-2018
Non-currentnon-financial liabilities	ThU.S.$		ThU.S.$
ICMS tax payable		109,870		111,134
Othernon-currentnon-financial liablities		449		933
Total		110,319		112,067

127

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 26. DISTRIBUTABLE NET PROFIT AND EARNINGS PER SHARE

Distributable net profit

As a general policy, the Board of Directors of Arauco agreed that the net profit to be distributed as dividend is determined based on realized net gains/(losses) of any relevant variations in the value of unrealized assets and liabilities, which are excluded from the calculation of net profit during the period such changes are made.

As a result of the foregoing, for purposes of determining the distributable net profit of the Company, which is the same considered for calculating the minimum dividend required and additional dividend, the following unrealized gains/losses are excluded from the net profit for the year:

Unrealized gains/losses relating to the fair value recorded for forestry assets under IAS 41, adding them back to distributable net profit when they are realized through sale or disposed of by other means.

Those generated through the acquisition of entities. These results will be added back to net profit when they are realized through sale.

The deferred taxes associated with the amounts described in 1) and 2) above are also excluded.

The following table details the adjustments made for the determination of distributable net profit as of September 30, 2019 and 2018 in order to determine the provision of 40% of the distributable net profit for each period:


	Distributable Net Profit ThU.S.$
Net profit attributable to owners of parent at09-30-2019		153,682
Adjustments:
Biological Assets
Unrealized gains/losses		(109,587	)
Realized gains/losses		151,290
Deferred income taxes		(9,886	)

Total adjustments		31,817

Distributable Net Profit at09-30-2019		185,499


	Distributable Net Profit ThU.S.$
Net profit attributable to owners of parent at 09-30-2018		657,075
Adjustments:
Biological Assets
Unrealized gains/losses		(78,492	)
Realized gains/losses		153,013
Deferred income taxes		(20,318	)

Total adjustments		54,203

Distributable Net Profit at09-30-2018		711,278

128

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

The Company expects to maintain its policy of distributing 40% of its net distributable profit as dividends for all future fiscal years, but will also consider the alternative of distributing a provisional dividend at year end.

As of September 30, 2019, in the interim consolidated statements of financial position, under the line item Other currentnon-financial liabilities, ThU.S.$74,200 correspond to a provision for the minimum dividend for the 2019 period of the Parent Company.

Basic and diluted earnings per share

Basic and diluted earnings per share are calculated by dividing the profit or loss attributable to ordinary equity holders of parent by the weighted average number of ordinary shares outstanding. Arauco does not have any shares with potential dilutive effect.


	January - September				July - September
	2019		2018		2019			2018
	ThU.S.$		ThU.S.$		ThU.S.$			ThU.S.$

Profit or loss attributable to ordinary equity holder of parent		153,682		657,075		(29,477	)		220,840
Weighted average of number of shares		113,159,655		113,159,655		113,159,655			113,159,655
Basic and diluted earnings per share (in U.S.$ per share)		1.3581		5.8066		(0.2605	)		1.9516

129

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

NOTE 27. SUBSEQUENT EVENTS

1) On October 28, 2019, the Extraordinary Shareholders Meeting of the Company approved to amend article Thirty-Sixth of the bylaws, in order to establish that the Ordinary Shareholders Meeting will be the one determining on an annual basis the distribution of profits of the year without, in such determination, being subject to the 30% minimum distributable indicated in the Corporations Law.

2) On October 24, 2019, Celulosa Arauco y Constitución S.A. has proceeded to fix the price and conditions of two series of “sustainable” bonds (i.e. related to environmental and social projects) that were issued in the United States of America on October 29, 2019, one series with maturity on January 29, 2030 (the10-year term Series), and the other with maturity on January 29, 2050 (the30-year term Series).

The amount of the issuance for the10-year Series is US$500,000,000, as well as for the30-year Series, which amount is also US$500,000,000, being the total amount of the issuance US$1,000,000,000. The interest rate is 4.20% per annum for the10-year Series and 5.15% per annum for the30-year Series. The principal shall be paid on the respective maturity dates of the abovementioned series of bonds, while interest shall be paid semi-annually.

The funds resulting from the issuance will be used for the following:

1.- To partially finance the project for the modernization and expansion of the Arauco Mill (Proyecto Modernización y Ampliación de la Planta Arauco), or MAPA project.

2.- To pay the repurchase price of (i) bonds issued by the Company at a rate of 5.000% due 2021 and (ii) bonds issued by Arauco at a rate of 4.750% due 2022; that were validly tendered by the bondholders of such securities and which repurchase was accepted by Arauco, all by virtue of the tender offers that the Company has carried out in the previous days. An amount of approximately US$175,000,000 will be allocated to such repurchases.

3.- For other capital management activities of the Company, with the remainder to be held in cash and/or cash equivalents and/or invested in other short-term liquid investments.

As stated, the bonds to be issued are classified as “sustainable”, since regardless of the use of the proceeds described in the previous paragraph, Arauco will allocate an amount equivalent to the resources obtained from such issuance and placement to finance or refinance, in whole or in part, one or more green (environmental) and social projects selected for the purposes of the issuance in accordance with the Sustainability Bond Framework to be adopted by the Company and to be published on its website.

The above mentioned green and social projects may include: (i) projects with disbursements made within the 36 months preceding the proposed bonds issuance and (ii) projects with disbursements to be made after the referred issuance and up to the maturity date of the bonds.

130

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2019

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

3) The authorization for the issuance and publication of these interim consolidated financial statements for the period ended September 30, 2019 was approved by the Board of Directors of Arauco at the Extraordinary Session No.620 held on November 8, 2019.

Subsequent to September 30, 2019 and until the date of issuance of these interim consolidated financial statements, there have been no events, other than those discussed above, that could materially affect the presentation of these financial statements.

131

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Press Release 3Q 2019

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3Q 2019 RESULTS Highlights For more details on ARAUCO?s financial statements please visit www.cmfchile.cl or www.arauco.com Readers are referred to the documents filed by ARAUCO with the United States Securities and Exchange Commission, specifically the most recent filing on Form 20-F that identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements. All forward-looking statements are based on information available to ARAUCO on the date hereof and ARAUCO does not assume any obligation to update such statements. References herein to ?U.S.$? are to United States dollars. Discrepancies in any table between totals and sums of the amounts listed are due to rounding. This report is unaudited. REVENUES US$1,387.2 million ARAUCO?s revenues reached US$1,387.2 million during the third quarter of 2019, a 2.6% increase compared to the US$1,351.6 million obtained in the second quarter of 2019 and a 10.5% decrease compared to the same period of 2018. NET INCOME -US$29.6 million The company?s net income was of -US$29.6 million, a 151.5% decrease, equivalent to US$87 million, compared to the US$57.4 million net income obtained during the second quarter of 2019, and a 113.4% or US$250.3 million decrease compared to the same period of 2018. ADJUSTED EBITDA US$238.2 million Adjusted EBITDA reached US$238.2 million, a 30.6% or US$105.1 million decrease compared to the US$343.3 million obtained during the second quarter of 2019, and a 53.8% or US$277.1 million decrease compared to the same period of 2018. NET DEBT TO EBITDA 3.3x Net Financial Debt decreased by US$201.6 million or 4.5% compared to the last quarter. Net Financial Debt / LTM Adjusted EBITDA ratio reached 3.3x in this quarter, an increase compared to 2.9x in the second quarter of 2019 and to the 1.9x reached in the third quarter of 2018. CAPEX US$281.0 million CAPEX reached US$281.0 million during this quarter, 17.0% or US$40.9 million higher than the US$240.1 million from the previous quarter.

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3Q 2019 RESULTS Overview ARAUCO?s third quarter 2019 net income was -US$29.6 million, which translates to a US$87.0 million decrease compared to the second quarter of 2019. This is mainly explained by a decrease in average pulp prices of 19.0%, partially offset by an increase in pulp sales volume of 25.3% and higher wood products sales volume by 6.8%. Our Adjusted EBITDA was 30.6% lower than the second quarter, reaching US$238.2 million. Adjusted EBITDA margin decreased to 17.2% compared to the 25.4% of the second quarter. Net Financial Debt decreased by US$201.6 million or 4.5% compared to the last quarter. Our Net Debt/LTM EBITDA ended up in 3.3x, higher than the 2.9x reached in the second quarter of 2019. In US$ Million Q3 2019 Q2 2019 Q3 2018 QoQ YoY YTD 2019 YTD 2018 YoY Acum Revenue 1,387.2 1,351.6 1,549.9 2.6% -10.5% 4,126.9 4,573.9 -9.8% Net income (29.6) 57.4 220.7 -151.5% -113.4% 153.9 656.6 -76.6% Adjusted EBITDA (*) 238.2 343.3 515.3 -30.6% -53.8% 936.4 1,510.6 -38.0% Adjusted EBITDA 17.2% 25.4% 33.2% -32.4% -48.4% 22.7% 33.0% -31.3% Margin LTM Adj. EBITDA 1,276.3 1,553.4 1,848.8 -17.8% -31.0% 1,276.3 1,848.8 -31.0% CAPEX 281.0 240.1 193.7 17.0% 45.1% 915.7 579.1 58.1% Net Financial Debt 4,253.2 4,454.8 3,431.7 -4.5% 23.9% 4,253.2 3,431.7 23.9% Net Financial Debt / 3.3x 2.9x 1.9x 16.2% 79.5% 3.3x 1.9x 79.5% LTM Adj. EBITDA Adjusted EBITDA and EBITDA Margin (in US$ Million) FY 2017 FY 2018 YTD 2019 1,353.2 1,850.5 936.4

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3Q 2019 RESULTS Income Statement Net income decreased by 151.5% during the third quarter of 2019 reaching -US$29.6 million. This is explained mostly by the pulp division, because of lower average prices of 19.0% compared with the last quarter and higher sales volume. Additionally, Other Income decreased compared to the second quarter when we had the sale of our shares in Puertos y Log?stica S.A. In US$ Million Q3 2019 Q2 2019 QoQ Revenues 1,387.2 1,351.6 2.6% Cost of sales (1,054.3) (966.0) 9.1% Distribution costs (160.4) (143.3) 12.0% Administrative expenses (140.4) (146.2) -4.0% Other income 41.6 86.4 -51.9% Other expenses (37.2) (27.7) 34.3% Financial income 7.5 8.1 -7.6% Financial costs (65.8) (69.5) -5.4% Share of profit (loss) of associates and joint ventures (5.8) 5.3 -209.1% accounted for using equity method Exchange rate differences (12.3) (9.3) 31.5% Income before income tax (39.9) 89.3 -144.7% Income tax 10.3 (31.9) -132.4% Net income (29.6) 57.4 -151.5%

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3Q 2019 RESULTS Revenues ARAUCO?s revenues reached US$1,387.2 million in the third quarter, remaining stable when compared to the last quarter with only a 2.6% increase. This variation is mainly explained by higher pulp revenues due to a 25.3% increase in sales volume, partially offset by a 19.0% decrease in average prices. The following table shows a revenue?s breakdown by business segment: In US$ Million Q3 2019 Q2 2019 QoQ Pulp(*) 610.5 583.0 4.7% Wood Products(*) 738.8 733.8 0.7% Forestry 37.7 34.7 8.6% Others 0.1 0.0 88.4% Total 1,387.2 1,351.6 2.6% 3Q 2019 Revenue?s breakdown (*) Pulp and Wood products division sales include energy.

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3Q 2019 RESULTS Cost of sales Increased by 9.1% or US$88.3 million compared to the second quarter. This is explained by an increase in Timber and Maintenance costs, both of them associated with higher sales volume in our pulp and wood products divisions. This was offset by the decrease of the Depreciation for right of use due to a reversal of provisions on some lease contracts. In US$ Million Q3 2019 Q2 2019 QoQ Timber 246.9 211.2 16.9% Forestry labor costs 148.8 147.5 0.9% Depreciation and amortization 109.5 101.5 7.9% Depreciation for right of use 11.5 17.9 -35.7% Maintenance costs 80.5 65.4 23.1% Chemical costs 151.1 137.6 9.8% Sawmill services 33.3 39.7 -16.3% Other raw materials and indirect costs 103.3 89.4 15.6% Energy and fuel 60.3 51.2 17.7% Cost of electricity 8.5 9.5 -10.5% Wage, salaries and severance indemnities 100.6 95.1 5.8% Cost of Sales 1,054.3 966.0 9.1% Administrative expenses Decreased by 4.0% or US$5.8 million compared to the second quarter, mainly due to lower Computer services expenses because of software licenses paid last quarter. This was partially offset by an increase in Depreciation for the right of use due to the signing of new IFRS 16 lease contracts. In US$ Million Q3 2019 Q2 2019 QoQ Wages, salaries and severance indemnities 60.5 62.6 -3.4% Marketing, advertising, promotion and publications expenses 3.9 4.7 -17.3% Insurance 5.2 4.6 13.6% Depreciation and amortization 7.4 6.7 9.7% Depreciation for the right of use 4.2 1.2 259.5% Computer services 6.4 11.6 -45.0% Lease rentals (offices, warehouses and machinery) 1.3 0.8 -59.8% Donations, contributions, scholarships 1.6 2.5 -36.7% Fees (legal and technical advisories) 13.1 12.5 4.9% Property taxes, patents and municipality rights 4.5 5.0 -10.1% Other administration expenses 32.4 34.0 -4.6% Administrative Expenses 140.4 146.2 -4.0%

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3Q 2019 RESULTS Distribution costs Increased by 12% or US$17.1 million compared to the last quarter, mainly due to an increase in Freight costs explained by higher sales volume. In US$ Million Q3 2019 Q2 2019 QoQ Commissions 4.5 3.2 39.9% Insurance 1.5 1.3 10.5% Other selling costs 5.1 5.9 -13.1% Port services 10.5 8.6 22.1% Freights 128.2 114.6 11.9% Depreciation for the 0.4 0.9 -52.8% right of use Other shipping and 10.1 8.7 16.6% freight costs Distribution Costs 160.4 143.3 12.0% Other income Decreased by 51.9% equivalent to US$44.8 million, mainly explained by the sale of our shares of Puertos y Log?stica S.A. in the second quarter. In US$ Million Q3 2019 Q2 2019 QoQ Gain from changes in fair 36.1 37.4 -3.6% value of biological assets Net income from 0.2 0.5 -63.0% insurance compensation Leases received 0.3 0.7 -51.6% Gains on sales of assets 2.2 5.1 -56.3% Gain on sales of —40.8 -100% associates Other operating results 2.8 1.9 45.6% Other Income 41.6 86.4 -51.9%

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3Q 2019 RESULTS Other expenses Increased by US$9.5 million or 34.3% compared to the previous quarter, mainly due to higher Impairment provision property, plant and equipment and others related to the Line 1 at the Arauco Mill. This was partially offset by a decrease in the Provision for forestry fire losses, because no new provisions were added. In US$ Million Q3 2019 Q2 2019 QoQ Legal payments (0.1) 1.9 -104.0% Impairment provision property, plant and 19.9 6.2 221.8% equipment and others Operating expenses related to plant 4.5 0.6 642.5% stoppages Project expenses 0.4 1.7 -74.3% Loss (gain) from asset 4.5 3.0 52.5% sales Provision for forestry fire — 6.2 -100.0% losses Other taxes 3.2 4.1 -20.9% Research and 1.3 1.1 19.7% development expenses Other expenses (donations, repayments 3.4 3.0 13.5% insurance) Other expenses 37.2 27.7 34.3% Foreign exchange differences Showed a loss of US$12.3 million, a US$2.9 million difference when compared to the second quarter that ended with a US$9.3 million loss. During the third quarter, the exchange rate of the Chilean peso against the US dollar depreciated by 3.1% compared to the previous quarter. Additionally, the Argentine peso depreciated by 15.0% against the US dollar compared to the last quarter. These currency variations affected our cash and cash equivalents as measured in US dollar. Income tax For the third quarter, income tax reached a gain of US$10.3 million, US$42.2 million higher than the US$31.9 million loss in the second quarter. This gain is mainly due to this quarter?s negative income before tax.

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3Q 2019 RESULTS Adjusted Ebitda Adjusted EBITDA for the third quarter of 2019 was US$238.2 million. In terms of Adjusted EBITDA by business, the most significant variations were in our pulp and wood products divisions, with a decrease of 25.1% and 26.7%, respectively. Additionally, Consolidation Adjustments and Other?s Adjusted EBITDA decreased by US$32.3 million mainly due to the gains in the sale Puertos y Log?stica S.A. during the past quarter. In US$ Million Q3 2019 Q2 2019 Q3 2018 QoQ YoY Net Income (29.6) 57.4 220.7 -151.5% -113.4% Financial costs 65.8 69.5 56.2 -5.4% 17.0% Financial income (7.5) (8.1) (5.5) -7.6% 36.1% Income tax (10.3) 31.9 75.2 -132.4% -113.7% EBIT 18.4 150.7 346.7 -87.8% -94.7% Depreciation & amortization 133.6 128.7 103.7 3.8% 28.8% EBITDA 151.9 279.4 450.4 -45.6% -66.3% Fair value cost of timber harvested 90.1 79.6 83.1 13.3% 8.4% Gain from changes in fair value of (36.1) (37.4) (26.4) -3.6% 36.6% biological assets Exchange rate differences 12.3 9.3 6.0 31.5% 103.6% Others (*) 19.9 12.4 2.1 60.5% 832.7% Adjusted EBITDA 238.2 343.3 515.3 -30.6% -53.8% (*) Includes provision from property, plants and equipment, and others Adjusted EBITDA variation by business segment (in US$ million)

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3Q 2019 RESULTS Forestry Business The Adjusted EBITDA for our forestry business was US$55.1 million for the third quarter, which translates to a US$0.6 million decrease compared to the previous quarter. The production during the third quarter was 5.1 million m3, 7.8% down compared to the second quarter. On the other hand, sales volume reached 7.8 million m3, a decrease of 1.6% compared to the last quarter. Production, Purchase and Sales Volume (in thousand m3) 8,189 7,772 7,660 7,895 7,549 7,143 1,680 2,649 2,005 5,869 5,539 5,138 Q3 2018 Q2 2019 Q3 2019 Production Purchases Sales

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3Q 2019 RESULTS During the third quarter of 2019, no significant changes were seen regarding the market situation and compared to the second quarter results: the demand didn?t recover significantly and prices suffered even more deterioration. Only by the end of the quarter, a few markets showed stability in prices, but this was not yet enough to signal a trend reversal. High inventory levels, economic uncertainty, the ongoing trade war and the lower demand from the northern hemisphere in the summer season affected the market recovery. Global Pulp Demand variation Last 8 months North America 2.1% West Europe -10.5% China 6.4% Others -0.5% Total -1.0% Source: World-20 Bleached Chemical Pulp Demand. Hawkins Wright Report In China and the rest of the Asian markets, paper production showed a slight recovery, as the high demand season started (usually between September and December). Even though prices for softwood stabilized, prices for hardwood continued falling during the third quarter. With this scenario for both fibers, the gap between them increased. Paper producers have been increasing their margins due to pulp prices and a slight recovery in paper demand. In Europe, the paper market?s situation was different, characterized by lower consumption and low economic activity. All of these factors pushed some companies into reducing their production and to some lines shutdowns. This situation offset all positive margins that could have been generated by the fall in pulp prices. Additionally, European paper exporters had to deal with Chinese competitors mainly in the Middle East and Africa. Our production, during the third quarter, showed a slight increase compared to the last quarter, mainly due to less programmed maintenance stoppages. Compared to the same period of 2018 production increased by 1.1%. Sales volume increased by 25.3%, as our total stock decreased by approximately 75 thousand tonnes. Production and Sales Volume (In thousand tonnes) + 25.3% 1,064 978 963 966 849 989 Q3 2018 Q2 2019 Q3 2019 Production Sales

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3Q 2019 RESULTS The Adjusted EBITDA for our pulp business reached US$148.2 million during this quarter, which translates to a 25.1% or US$49.6 million decrease compared to the second quarter 2019. Pulp EBITDA Mg reached 24.3%, 9.7% down from the last quarter. Days of Maintenance Stoppages 2019 2020 Mill 1Q 2Q 3Q 4Q 1Q Arauco—Line 1 10 Arauco—Line 2 13 Constituci?n 18 7 Licancel 11 10 Nueva Aldea 11 Valdivia 5 43 Alto Paran? 22 Montes del Plata 10 Finished In progress Planned

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3Q 2019 RESULTS Wood Product Business Panels Sales increased compared to the previous quarter, with sales volume going up 11.0%, slightly offset by a decrease in price of 3.8%. During the third quarter, the Latin American market remained stable showing a close fit between supply and demand, except in Brazil and Argentina. The Brazilian market didn?t show any significant improvement, mainly due to a weak economy and oversupply, particularly in MDF. In contrast, the Argentine market has been showing signs of improvement which have resulted in higher sales volume and better prices. Despite that, US$ denominated income has been affected by the depreciation of the Argentine Peso. In US and Canada, sales have remained healthy, mainly due to a decrease in local supply and higher sales from our Grayling mill. +11.0% Production and Sales Volume: Panels (1) (In thousand m3) Sawn timber During the third quarter, the demand for sawn timber was affected mainly by the ongoing US-China trade war and due to oversupply, particularly in Asia and Oceania, which are one of our main markets. Sales volume decreased by 5.1%. In remanufactured wood products, North America, which is one of our main markets, showed positive results due to the introduction of new products and less competition from Chinese producers because of the tariffs imposed by the US. -5.1% Production and Sales Volume: Sawn Timber (2) (In thousand m3) Plywood Sales volume increased 15.1%, with the US demand remaining positive. The oversupply from Brazil, Chile and China and a generalized low global demand led to some price decreases. Production and Sales Volume: Plywood (In thousand m3)

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3Q 2019 RERERESSSUUULTS SS Adjusted EBITDA for our wood products business reached US$62.2 million during the third quarter of 2019, which means a 26.7% or US$22.6 million decrease, compared to the second quarter. Wood products EBITDA Mg was 8.4%, lower than the 11.6% reached in the second quarter.

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3Q 2019 RESULTS Capital Expenditures During this quarter, capital expenditures reached US$281.0 million, US$40.9 million or 17.0% higher than the second quarter. Purchase and sale of property, plant and equipment decreased compared to the second quarter. The main expenditures during the quarter were: MAPA Project: US$93.7 million Dissolving Pulp Project: US$21.7 million The second quarter of 2019 showed a positive effect due to the proceeds from the sale of Puertos y Log?stica S.A. Additionally, during the third quarter we paid approximately US$12.3 million for the acquisition of Prime Line. US$ Million Q3 2019 Q2 2019 Q3 2018 YTD 2019 YTD 2018 Cash flow used to obtain control of 21.0 (102.0) 0.0 69.7 16.6 subsidiaries or other businesses Cash flow used to purchase in — 0.2 0.5 1.0 associates Purchase and sale of property, plant 208.9 277.8 143.5 652.5 392.7 and equipment Purchase and sale of intangible assets 6.5 5.2 0.3 15.3 0.8 Purchase of other long-term assets 44.7 59.2 49.6 177.7 168.1 Total CAPEX 281.0 240.1 193.7 915.7 579.1

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3Q 2019 RESULTS Free Cash Flow During the third quarter, Free Cash Flow increased by US$499.3 million compared to the second quarter of 2019, ending up in a surplus of US$62.6 million. Cash provided by operating activities increased by US$372.1 million mainly due to (i) an increase in working capital variation and (ii) a decrease in income tax paid, because during the second quarter we paid the annual taxes. Cash used by investment activities increased due to higher Capex. Cash used by financing activities decreased compared to the last quarter because of dividends paid during that quarter. US$ Million Q3 2019 Q2 2019 Q3 2018 Adjusted EBITDA 238.2 343.3 515.3 Working Capital Variation 152.2 (27.6) (74.5) Interest paid and received (39.8) (55.9) (39.4) Income tax paid (50.9) (210.0) (40.8) Other cash inflows (outflows) 74.1 (47.9) 24.7 Cash from Operations 373.8 1.8 385.2 Capex (281.0) (240.1) (193.7) Proceeds from investment activities 2.5 3.2 3.4 Other inflows of cash, net 6.5 0.7 7.8 Cash from (used in) Investment Activities (272.0) (236.3) (182.5) Dividends paid—(182.1) (0.2) Other inflows of cash, net (19.1) (27.3) (5.2) Cash from (used in) Financing Activities—Net of Proceeds and Repayments (19.1) (209.4) (5.4) Effect of exchange rate changes on cash and cash equivalents (20.1) 7.3 (3.1) Free Cash Flow 62.6 (436.7) 194.1 3 19 (*) The total amount corresponds to leasing variation.

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3Q 2019 RESULTS Financial Debt and Cash ARAUCO ‘s total financial debt as of September 30, 2019 reached US$5,395.4 million, a decrease of 5.4% or US$ 310.3 million compared to the end of June 2019, mainly due to a US bond maturity on July 2019. Our consolidated net financial debt decreased 4.5% or US$201.6 million. Cash and cash equivalents decreased by US$108.6 million. Our leverage, measured as Net Financial Debt/LTM Adjusted EBITDA was 3.3x, an increase compared to the 2.9x in the last quarter due to a decrease of the LTM Adjusted EBITDA of 17.8%. In US$ Million Sept 2019 June 2019 Sept 2018 Short term financial debt 557.7 543.3 502.2 Long term financial debt 4,839.8 5,162.3 3,664.3 TOTAL FINANCIAL DEBT 5,395.4 5,705.7 4,166.5 Cash and cash 1,142.2 1,250.9 734.8 equivalents NET FINANCIAL DEBT 4,253.2 4,454.8 3,431.7 LTM Adjusted EBITDA 1,276.3 1,553.4 1,848.8 Net Financial Debt and Leverage (In US$ Million) Debt by Currency Debt by Instrument Other Currencies Leasing 6% Banks 5% 18% UF (*) swapped to U.S. Dollar 26% U.S.Dollar 68% Bonds 77%

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3Q 2019 RESULTS Cash Our cash position was US$1,142.2 million at the end of the third quarter, which translates to US$108.6 million or a 8.7% decrease compared to the last quarter. Cash provided from operating activities increased by US$372.1 million, mainly due to less income tax paid and less payments of suppliers and personnel. Additionally, inventories and trade and other receivables decreased by approximately US$78 million each. Cash used in investing activities increased by 15.1% explained by higher capital expenditures incurred during the third quarter. On the other hand, cash used by financing activities decreased, reaching US$190.4 million, because (i) during the second quarter we issued an international bond and (ii) dividends paid during the last quarter. Cash by Currency Cash by Instrument Financial Debt Profile For the last quarter of 2019, bank and bonds obligations (which include accrued interest) sum up US$189.7 million. Bank obligations include the following maturities: US$67.6 million in loans in Montes del Plata, US$37.7 million of leasing, US$5.5 million of credit loans in the United States, US$2.0 million in our Brazilian subsidiaries and US$0.4 million from loans in Chile. Bond obligations for the remainder of the year sum up US$ 113.2 million. These include interest and amortization payments for local bonds, and interest payments for US$ denominated bonds. Amortization payments for local bonds include US$12.2 million for the BARAU-F and US$9.6 million for the BARAU-Q. Debt Amortization Profile as of September 30, 2019 (In US$ Million) 1,329 827 544 538 454 439 537 308 339 245 43 241 190 170 297 72 531 168 524 77 296 290 42 228 209 138 141 154 113 30 13 13 13 13 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Bank Loans Bonds & thereafter

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3Q 2019 RESULTS Third quarter, subsequent events and News Dissolving Pulp Project update The Dissolving Pulp Project had a 98% advance as of September 2019. The start-up is expected by the beginning of 2020. Total investment for this brownfield project is approximately US$195 million. MAPA Project update MAPA Project progress goes as expected with a 22% accumulated advance. During this quarter, civil and electromechanical works started. Additionally, contracts for the construction of the administration building and others were awarded. The start-up of the new Line 3 is expected to take place during the second quarter of 2021. At that point Line 1 will shut down. Sustainable Bond On October 24, ARAUCO completed an offering of US$500 million principal amount of 4.200% notes due 2030 and US$500 million principal amount of 5.150% notes due 2050. Both bonds are sustainable, a category which encompasses green and social projects. ARAUCO is the first forestry company in Latin America to ever issue sustainable bonds. We also achieved the lowest coupon rate in ARAUCO?s history for a 30-year bond. The use of proceeds for these bonds are (i) to finance part of the MAPA project, (ii) to pay the purchase price to holders of our notes due 2021 and 2022 that are validly tendered and accepted to be purchased by us pursuant to the terms of the cash tender offers being concurrently conducted by us and (iii) other capital management activities, with the remainder to be held in cash and/or cash equivalents and/or invested in other short-term liquid investments. Regarding the tender offer, the following amounts were validly tendered: US$43.3 million for the principal amount of our 5.000% notes due 2021 and US$129.3 million for the principal amount of our 4.750% notes due 2022.

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3Q 2019 RESULTS UPCOMING EVENTS CONFERENCE CALL Nov. 19, 2019 11:00 Santiago Time 09:00 Eastern Time (New York) Dial in: +1 (844) 450 3845 from USA +56 (44) 208 1274 from Chile +1 (412) 317 6368 from other countries Conference ID: Arauco For further information, please contact: Marcelo Bennett, Treasurer marcelo.bennett@arauco.com Phone: +56 2 2461 7309 Mar?a Jos? Ulloa, Investor Relations maria.ulloa@arauco.com Phone: +56 2 2461 7494 investor_relations@arauco.cl

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3Q 2019 RESULTS Financial Statements Income Statement In US$ Million Q3 2019 Q2 2019 Q3 2018 YTD 2019 YTD 2018 Revenues 1,387.2 1,351.6 1,549.9 4,126.9 4,573.9 Cost of sales (1,054.3) (966.0) (938.5) (2,960.2) (2,796.5) Gross profit 332.9 385.6 611.4 1,166.7 1,777.4 Other income 41.6 86.4 36.7 173.6 103.2 Distribution costs (160.4) (143.3) (147.1) (448.6) (414.8) Administrative expenses (140.4) (146.2) (133.8) (427.9) (416.3) Other expenses (37.2) (27.7) (19.2) (87.2) (52.8) Financial income 7.5 8.1 5.5 22.3 12.8 Financial costs (65.8) (69.5) (56.2) (192.7) (159.3) Share of profit (loss) of associates and joint (5.8) 5.3 4.7 3.9 28.7 ventures accounted for using equity method Other income (loss) 0.0 0.0 0.0 0.0 0.0 Exchange rate differences (12.3) (9.3) (6.0) (19.5) (22.3) Income before income tax (39.9) 89.3 295.9 190.6 856.6 Income tax 10.3 (31.9) (75.2) (36.6) (199.9) Net income (29.6) 57.4 220.7 153.9 656.6 Profit attributable to parent company (29.5) 57.3 220.8 153.7 657.1 Profit attributable to non-parent company (0.1) 0.1 (0.1) 0.3 (0.4)

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3Q 2019 RESULTS Balance Sheet In US$ Million 30-09-2019 30-06-2019 30-09-2018 Cash and cash equivalents 1,142.2 1,250.9 734.8 Other financial current assets 0.4 1.0 2.2 Other current non-financial assets 168.9 192.9 135.2 Trade and other receivables-net 773.5 852.0 989.8 Related party receivables 6.2 4.4 5.6 Inventories 1,074.8 1,153.7 948.5 Biological assets, current 324.4 308.6 296.1 Tax assets 106.8 60.7 20.7 Non-Current Assets classified as held for sale 5.5 5.7 5.7 Total Current Assets 3,602.7 3,829.9 3,138.5 Other non-current financial assets 31.3 49.2 52.6 Other non-current and non-financial assets 93.2 114.2 139.3 Non-current receivables 11.3 11.3 18.7 Investments accounted through equity method 284.8 305.0 369.0 Intangible assets 96.7 96.7 84.9 Goodwill 73.5 66.3 65.1 Property, plant and equipment 7,773.1 7,810.2 6,971.4 Biological assets, non-current 3,308.6 3,374.6 3,363.6 Deferred tax assets 6.6 6.2 8.5 Total Non-Current Assets 11,679.1 11,833.7 11,073.0 TOTAL ASSETS 15,281.8 15,663.6 14,211.5 Other financial liabilities, current 557.5 544.4 504.6 Trade and other payables 696.8 696.7 584.3 Related party payables 4.5 8.1 10.9 Other provisions, current 1.3 1.3 0.4 Tax liabilities 1.9 7.2 143.2 Current provision for employee benefits 5.6 6.0 6.1 Other non-financial liabilities, current 115.2 118.3 314.8 Total Current Liabilities 1,382.8 1,381.9 1,564.3 Other non-current financial liabilities 4,951.3 5,191.2 3,676.2 Trade and Other payables non-current 2.2 2.6 0.0 Other provisions, non-current 31.8 34.1 32.7 Deferred tax liabilities 1,371.8 1,390.0 1,443.4 Non-current provision for employee benefits 65.1 69.0 70,1 Other non-financial liabilities, non-current 110.3 120.3 106.2 Total Non-Current Liabilities 6,532.6 6,807.1 5,328.6 Non-parent participation 35.7 37.7 36.5 Net equity attributable to parent company 7,330.8 7,436.9 7,282.1 TOTAL LIABILITIES AND EQUITY 15,281.8 15,663.6 14,211.5

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3Q 2019 RESULTS Cash Flow Statement US$ Million Q3 2019 Q2 2019 Q3 2018 YTD 2019 YTD 2018 Receipts from sales of goods and rendering of 1,536.2 1,549.4 1,517.8 4,462.7 4,442.1 services Other cash receipts (payments) 124.8 52.0 51.3 241.1 124.2 Payments of suppliers and personnel (less) (1,195.2) (1,332.0) (1,101.3) (3,780.7) (3,513.7) Interest paid and received (39.8) (55.9) (39.4) (138.9) (121.4) Income tax paid (50.9) (210.0) (40.8) (273.5) (60.2) Other (outflows) inflows of cash, net (1.3) (1.7) (2.4) (4.8) (3.9) Net Cash Provided by (Used in) Operating 373.8 1.8 385.2 505.9 867.1 Activities Capital Expenditures (281.0) (240.1) (193.7) (915.7) (579.1) Other investment cash flows 9.0 3.8 11.2 24.5 20.4 Net Cash Provided by (Used in) Investing Activities (272.0) (236.3) (182.5) (891.2) (558.8) Proceeds from borrowings 58.2 1,081.9 163.8 1,146.2 445.5 Repayments of borrowings (229.5) (141.2) (194.9) (431.2) (462.8) Dividends paid 0.0 (182.1) (0.2) (182.1) (114.7) Other inflows of cash, net (19.1) (27.3) (5.2) (67.7) (6.0) Net Cash Provided by (Used in) Financing Activities (190.4) 730.4 (36.6) 465.2 (138.0) Total Cash Inflow (Outflow) of the Period (88.5) 495.8 166.1 79.9 170.4 Effect of exchange rate changes on cash and cash (20.1) 7.3 (3.1) (13.6) (25.5) equivalents Cash and Cash equivalents at beginning of the 1,250.9 747.8 571.8 1,075.9 589.9 period Cash and Cash Equivalents at end of the Period 1,142.2 1,250.9 734.8 1,142.2 734.8

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Accounting Policies: IFRS 16 IFRS 16 includes changes in ARAUCO?s accounting as lessee, by requiring a similar treatment than that of financial leases for all the leases that are currently classified as operational with an effective term exceeding 12 months. This means, in general terms, that it will be necessary to acknowledge an asset that represents the right of use over the goods that are subject to operational leasing agreements as well as a liability, equal to the present value of the payments associated to the agreement. Regarding the effects over the results, the payment of monthly leases shall be replaced by the depreciation for the asset?s right of use and the acknowledgement of a financial expense. ARAUCO recognized leases retroactively with the cumulative effect of the initial application of the standard recognized as of January 1, 2019, consistently with all leases where it acts a lessee. ARAUCO has chosen not to recognize a liability and an asset for right-of-use for low value leases or whose term of the contract is 12 months or less.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Celulosa Arauco y Constitución, S.A.
	(Registrant)

Date: November 26, 2019	By:	/s/ Matías Domeyko Cassel
	Name:	Matías Domeyko Cassel
	Title:	Chief Executive Officer

Arauco & Constitution Pulp 6-KCurrent report (foreign)