Arauco & Constitution Pulp 6K Current report

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of August 2021

Commission File Number 33-99720

ARAUCO AND CONSTITUTION PULP INC.

(Translation of registrant’s name into English)

El Golf 150

Fourteenth Floor

Santiago, Chile

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ☑ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ☐ No ☑

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

ARAUCO AND CONSTITUTION PULP INC

TABLE OF CONTENTS


Item		Page
1.	Ratio Analysis of the Interim Consolidated Financial Statements		1
2.	Unaudited Interim Consolidated Statements of Financial Position		6
3.	Unaudited Interim Consolidated Statements of Profit or Loss		8
4.	Unaudited Interim Consolidated Statements of Comprehensive Income		9
5.	Unaudited Interim Consolidated Statements of Changes in Equity		10
6.	Unaudited Interim Consolidated Statements of Cash Flow		11
7.	Unaudited Notes to the Interim Consolidated Financial Statements		12
	Annex: Press Release

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

June 30, 2021

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

1. ANALYSIS OF FINANCIAL POSITION

Interim Statement of Financial Position

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


Assets	06-30-2021 ThU.S.$		12-31-2020 ThU.S.$		Variation ThU.S.$
Current assets		3,790,907		3,544,325		246,582
Non-current assets		12,633,449		12,483,994		149,455

Total assets		16,424,356		16,028,319		2.47	%


Liabilities	06-30-2021 ThU.S.$		12-31-2020 ThU.S.$		Variation ThU.S.$
Current liabilities		1,304,458		1,097,593		206,865
Non-current liabilities		7,216,056		7,515,091		(299,035	)
Non–parent participation		26,926		30,913		(3,987	)
Net equity attributable to parent company		7,876,916		7,384,722		492,194

Total net equity and liabilities		16,424,356		16,028,319		2.47	%

As of June 30, 2021, total assets increased MU.S.$ 396 compared to December 31, 2020, equivalent to a 2.47% variation. This variation was driven mainly by an increase in property, plants & equipment resulting from the investment in the MAPA project, accounts receivable from sales to national and foreign customers, cash in banks, term deposit and assets held for sale (which are mainly biological assets from the forestry lands sale contract), which was partially offset by decreases in current tax assets and biological assets.

In turn, total liabilities decreased by MU.S.$ 92 principally due to a decrease in long term debt to banks.

The main financial and operational indicators related to the Statement of Financial position as of the dates and for the periods indicated below are as follows:


Liquidity ratios	06-30-2021		12-31-2020
Current Liquidity (current assets / current liabilities)		2.91		3.23
Acid ratio ((current assets-inventories, biological assets) / current liabilities)		1.90		2.10


Debt indicators	06-30-2021		12-31-2020
Debt to equity ratio (total liabilities / equity)		1.08		1.16
Short-term debt to total debt (current liabilities / total liabilities)		0.15		0.13
Long-term debt to total debt (non-current liabilities / total liabilities)		0.85		0.87

	06-30-2021		06-30-2020
Financial expenses coverage ratio (earnings before taxes + interest expense / interest expense)		4.98		0.17


Activity ratio	06-30-2021		12-31-2020
Inventory turnover-time (cost of sales / inventories + current biological assets)		2.79		2.68
Inventory turnover-time (excluding biological assets) (Cost of sales /inventory)		3.65		3.46
Inventory permanence-days ((inventories + biological assets) /cost of sales)		129.01		134.30
Inventory permanence-days (excluding biological assets) (inventory / cost of sales)		98.73		104.08

As of June 30, 2021, the short-term debt to total debt ratio represented 15% of total liabilities (13% as of December 31, 2020).

Our financial expenses coverage ratio increased from 0.17 to 4.98, mainly due to the profits before taxes generated for the period ended June 30, 2021, compared to a loss before taxes generated in the same period of 2020.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

June 30, 2021

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

Interim Statement of Profit or Loss

Profit before income tax

We recorded a profit before income tax of approximately MU.S.$ 470 compared to a loss of approximately MU.S.$ 115 in the same period of 2020. The variation of MU.S.$ 585 is explained by the factors described in the following table:


Item	MU.S.$
Gross margin		584
Distribution and Administrative Expenses		(77	)
Other income and expenses		35
Others		43

Net change in profit (loss) before income tax		585

The main indicators related to the accounts in our statements of profit or loss and the details of revenues and operation costs are as follows:


Revenues	06-30-2021 ThU.S.$		06-30-2020 ThU.S.$
Pulp		1,287,128		1,010,235
Wood		1,614,979		1,166,723
Other		174		82

Total revenues		2,902,281		2,177,040

On January 1, 2021 we discontinued the reporting of our forestry operations as a business segment, and included those operations as part of the pulp segment. This is in line with Arauco’s current reality and with the way in which the management views the progress of business. The new segments reported are Pulp and wood products, consistent with Arauco’s focus on its end customers. For more information, see Notes 2 and 24 to the Interim Consolidated Financial Statements Report as of June 30, 2021.


Sales costs	06-30-2021 ThU.S.$		06-30-2020 ThU.S.$
Wood		410,047		390,392
Forestry work and other services		256,172		215,475
Depreciation and amortization		226,164		229,250
Other operating costs		892,574		808,497

Total sales costs		1,784,957		1,643,614


Profitability index	06-30-2021		12-31-2020
Profitability on equity		7.93		0.34
Profitability on assets		3.74		0.16
Return on operating assets		7.52		(3.90	)


Profitability ratios	06-30-2021			06-30-2020
Income per share (U.S.$) (1)		2.5597			(0.7554	)
Profit after tax (ThU.S.$) (2)		303,787			(85,643	)
Gross margin (ThU.S.$)		1,117,324			533,426
Finance costs (ThU.S.$)		(118,180	)		(137,704	)

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

(2)	Includes non-controlling interest.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

June 30, 2021

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


EBITDA	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Profit (loss)		303,787			(85,643	)
Finance costs		118,180			137,704
Finance income		(14,434	)		(19,519	)
Income tax expense		166,006			(29,111	)
EBIT		573,539			3,431
Depreciation and amortization		249,102			250,842
EBITDA		822,641			254,273
Cost at fair value of the harvest		148,021			142,284
Gain from changes in fair value of biological assets		(83,080	)		(88,143	)
Exchange difference		13,696			30,084
Others*		28,813			61,854
Adjusted EBITDA		930,091			400,352

*	Considers loss of forest due to fires and theft and impairment provision for industrial property, plant and equipment.

2. MAIN SOURCES OF FINANCING

Arauco’s financing needs are mainly covered through the capital markets, with bond issuances and credits obtained from banks and financial institutions serving as the main sources of financing. For short-term borrowing, Arauco follows a liquidity policy which indicates the amounts and institutions from which it can borrow according to several conditions defined in the policy. In the case of long-term debt, corporate bond issuances in the local market and also in the international markets are used as sources of new resources. Another source of long-term financing corresponds to borrowings from banks and financial institutions around the world.

3. MARKET SITUATION

In the second quarter of 2021 the billing was higher in 3.7% than then same period of 2020. It was for the sale average price increase in 54.7% offseted in a portion for the sale volume in 11.1%. The accumulated billing in the first semester of 2021 increase in 30.3%, as a result of a better average price, offseted for a decrease of sale volume of 5.2%.

During the second quarter, pulp demand remained stable, with some markets more solid and requesting additional volumes. Prices increased in some markets and were stable in others. On the other hand, sales started to be affected by the logistic issues that are affecting all industries worldwide. World inventories for both fibers increased between March and May 2021, long fiber increased by 1 day and short fiber by two days.

In China, pulp demand remained relatively stable, even though during the second quarter the low demand season begins in the northern hemisphere. The tissue industry has lowered its operating rate due to high prices of raw materials and the difficulties to pass such high prices onto their final products. The P&W industry remained more stable, with some producers decreasing supply and inventories, and trying to maintain prices of final products. During the second quarter, the Chinese government implemented measures to try to stop the rise in commodity prices, these measures impacted negatively upon the pulp futures market. Short fiber price reached its highest level at the beginning of the quarter and then remained stable, however, long fiber prices after increasing and reaching its highest level slightly decreased towards the end of the quarter. The spread between the long and short fiber decreased reaching US$130 at the end of the quarter, a decrease of US$40 compared to end of the first quarter.

In Europe there was good pulp demand during the quarter. The P&W and specialty industries experienced good demand for their final products, and they have been able to confirm price increases transferring the higher costs of raw material to their final products. The tissue industry came under increased pressure because of (i) pulp prices, (ii) prices for final

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

June 30, 2021

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

products did not increase, and (iii) demand for their products remained stable. Pulp prices, as in the first quarter, continued to rise throughout the second quarter.

The dissolving pulp market remained stable and prices kept at high levels. The viscose market started to decline so some local dissolving pulp producers in China switched to producing paper grade pulp, anticipating the pressure in the dissolving pulp market.

Production during the second quarter was lower by 3.5% compared to the same period of 2020. During the second quarter of this year, we had the programmed maintenance stoppage of the Esperanza mill, in Argentina, and the Line 2 of the Arauco mill.

Wood Products Business

Panels

Revenues increased when compared to the first quarter, mainly as a result of a 9.7% increase in average prices. Sales volumes increased 1.6%.

During the second quarter, the market demand continued to rise. The foregoing is explained by an increase in demand for products of home improvement and remodeling, the reactivation of construction projects and by government measures that have favored consumption.

Sawn timber

During the second quarter sales volume decreased by 2.0% while average prices increased by 7.2%.

During the second quarter prices for sawn timber and remanufactured wood products continued to rise compared to the first quarter mainly due to an increase in demand. However, logistics problems have also continued throughout the quarter leading to low availability and rising costs.

Plywood

Sales volume decreased by 21.2% during the second quarter, partially offset by an increase in average prices of 14.7%. There has been an increase in demand in markets such as Chile, Europe, Oceania and the US, despite some effects arising from logistical issues leading to some invoice delays.

4. ANALYSIS OF INTERIM CASH FLOW

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


	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Positive (negative) Cash flow
Net cash flows from operating activities		854,838			249,238
Cash flows from (used in) financing activities:
Issuance of shares		200,000			—
Obtaining and paying loans and bonds		(267,643	)		312,991
Payment of lease liabilities		(36,238	)		(37,582	)
Dividends paid		(167	)		(110	)
Others		457			(8,591
Cash flows from (used in) investment activities:
Purchase and sale of property, plant and equipment		(595,793	)		(680,196	)
Purchase and sale of biological assets		(127,534	)		(114,471	)
Purchase and sale of intangible assets		(2,471	)		(11,565	)
Additions (disposals), investments in subsidiaries, joint ventures and associates		43,183			(15,212	)
Dividends received		1,454			4,042
Others		(429	)		667

Positive (negative) net cash flow		69,657			(300,789	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

June 30, 2021

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

Our cash flow from operating activities increased to MU.S.$ 855 for the current period (compared to the positive balance of MU.S.$ 249 for the same period in 2020), resulting mainly from higher revenue from customer collections and tax refund in the current period.

The cash flow from financing activities shows a negative balance of MU.S.$ 104 for the current period (compared to the positive balance of MU.S.$ 267 for the same period in 2020). The decrease is attributable to prepayment of bank loans in the current period of MU.S.$ 200 and due to the effect of the increase in financial debts in the previous period offset by the capital increase of the parent company for MU.S.$ 200 made by the shareholders in the current period.

Regarding the cash flow from investment activities, the balance decreased to MU.S.$ 682 (compared to MU.S.$ 817 for the same period of 2020), mainly due to lower disbursements made for the purchase of property, plant and equipment and the sale of the participation in the subsidiary Forestal Los Lagos SpA of MU.S.$ 48 in the current period.

5. MARKET RISK ANALYSIS

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

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

The Company and most of its subsidiaries maintain their accounting records and prepare their financial statements in U.S. dollars. Most of their revenues (and accordingly accounts receivable) are denominated in U.S. dollars, and most financial liabilities are either denominated in U.S. dollars or are covered by exchange rate swaps. As a result, exposure to exchange rate fluctuations has decreased significantly.

In the Interim Consolidated Financial Statements as of June 30, 2021, a detailed analysis of the risks associated with the business of Arauco (see Note 23).

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


			06-30-2021		12-31-2020
	Note		ThU.S.$		ThU.S.$
Assets
Current Assets
Cash and cash equivalents		5-23		1,133,729		1,064,714
Other current financial assets		23		3,309		1,763
Other current non-financial assets		25		208,044		168,597
Trade and other current receivables		23		878,628		737,381
Accounts receivable from related companies		13		5,812		6,274
Current inventories		4		1,019,753		938,279
Current biological assets		20		297,890		302,710
Current tax assets		6		111,782		320,730
Total Current Assets other than assets or disposal groups classified as held for sale				3,658,947		3,540,448
Non-Current Assets or disposal groups classified as held for sale		22		131,960		3,877
Non-Current Assets or disposal groups classified as held for sale or as held for distribution to owners				131,960		3,877
Total Current Assets				3,790,907		3,544,325
Non-Current Assets
Other non-current financial assets		23		16,670		28,982
Other non-current non-financial assets		25		117,911		113,214
Trade and other non-current receivables		23		15,673		16,606
Investments accounted for using equity method		15-16		324,391		316,939
Intangible assets other than goodwill		19		97,140		102,090
Goodwill		17		59,617		59,567
Property, plant and equipment		7		8,605,407		8,325,304
Right of use assets		8		201,244		219,134
Non-current biological assets		20		3,189,681		3,296,117
Deferred tax assets		6		5,715		6,041
Total Non-Current Assets				12,633,449		12,483,994
Total Assets				16,424,356		16,028,319

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

June 30, 2021

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

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)


			06-30-2021			12-31-2020
	Note		ThU.S.$			ThU.S.$
Equity and Liabilities
Liabilities
Current Liabilities
Other current financial liabilities		23		429,426			307,136
Current lease liabilities		8-23		58,225			63,640
Trade and other current payables		23		700,226			626,504
Accounts payable to related companies		13		3,862			3,739
Other current provisions		18		385			386
Current tax liabilities		6		56,011			44,672
Current provisions for employee benefits		10		6,365			6,786
Other current non-financial liabilities		25		49,958			44,730

Total Current Liabilities other than assets included in disposal groups classified as held for sale				1,304,458			1,097,593
Total Current Liabilities				1,304,458			1,097,593
Non-Current Liabilities
Other non-current financial liabilities		23		5,380,494			5,714,728
Non-current lease liabilities		8-23		137,037			148,115
Other non-current provisions		18		29,277			30,450
Deferred tax liabilities		6		1,509,315			1,463,886
Non-current provisions for employee benefits		10		73,925			74,609
Other non-current non-financial liabilities		25		86,008			83,303
Total Non-Current Liabilities				7,216,056			7,515,091
Total Liabilities				8,520,514			8,612,684
Equity
Issued capital		3		803,618			603,618
Retained earnings				8,192,300			7,889,901
Other reserves				(1,119,002	)		(1,108,797	)
Equity attributable to parent company				7,876,916			7,384,722
Non-controlling interests				26,926			30,913
Total Equity				7,903,842			7,415,635
Total Equity and Liabilities				16,424,356			16,028,319

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

June 30, 2021

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

INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS


			January-June						April-June
			2021			2020			2021			2020
	Note		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Statements of profit or loss
Revenue		9		2,902,281			2,177,040			1,555,578			1,049,874
Cost of sales		3		(1,784,957	)		(1,643,614	)		(887,183	)		(800,054	)
Gross profit				1,117,324			533,426			668,395			249,820
Other income		3		120,376			122,844			45,379			67,598
Distribution costs		3		(304,070	)		(260,245	)		(159,276	)		(122,816	)
Administrative expenses		3		(287,155	)		(253,728	)		(150,653	)		(130,225	)
Other expense		3		(70,456	)		(108,294	)		(32,978	)		(57,356	)
Profit from operating activities				576,019			34,003			370,867			7,021
Finance income		3		14,434			19,519			7,600			12,312
Finance costs		3		(118,180	)		(137,704	)		(57,187	)		(65,922	)
Share of profit of associates and joint ventures accounted for using equity method		3-15		11,216			(488	)		8,718			(2,041	)
Gains (losses) on exchange differences on translation				(13,696	)		(30,084	)		(5,217	)		(26,657	)
Profit before income tax				469,793			(114,754	)		324,781			(75,287	)
Income Tax		6		(166,006	)		29,111			(123,362	)		19,350
Net Profit				303,787			(85,643	)		201,419			(55,937	)

Net profit attributable to
Net profit attributable to parent company				302,912			(85,477	)		201,004			(56,017	)
Net profit attributable to non-controlling interests				875			(166	)		415			80
Net Profit				303,787			(85,643	)		201,419			(55,937	)

Basic and diluted earnings per share (in U.S.$ per share)
Basic and diluted earnings per share from continuing operations				2.5597414			(0.7554	)		1.6724083			(0.4950	)
Basic and diluted earnings per share				2.5597414			(0.7554	)		1.6724083			(0.4950	)

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

June 30, 2021

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

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


			January-June						April-June
			2021			2020			2021			2020
	Note		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Net profit				303,787			(85,643	)		201,419			(55,937	)
Components of other comprehensive income that will not be reclassified to profit or loss before tax:
Other comprehensive income before tax gains losses on remeasurements of defined benefit plans		10		1,229			(454	)		(1,172	)		(563	)
Other Comprehensive Income that will not be reclassified to profit or loss before tax				1,229			(454	)		(1,172	)		(563	)
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		24,736			(281,392	)		106,553			(17,003	)
Other Comprehensive Income before tax exchange differences on translation				24,736			(281,392	)		106,553			(17,003	)
Cash flow hedges
Gains (losses) on cash flow hedges, before tax		23		(49,740	)		(66,873	)		(82,658	)		36,593
Recycle of cash flow hedges to profit or loss before tax		23		(10,137	)		(20,854	)		(9,862	)		(18,057	)
Other Comprehensive Income before tax Cash flow hedges				(59,877	)		(87,727	)		(92,520	)		18,536
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				2,187			(5,922	)		752			107
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				2,187			(5,922	)		752			107
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				(32,954	)		(375,041	)		14,785			1,640
Income tax relating to components of other comprehensive income that will not be reclassified to profit or loss before tax
Income tax relating to remeasurements of defined benefit plans of other comprehensive income				(293	)		119			316			183
Income tax relating to components of other comprehensive income that will not be reclassified to profit or loss before tax				(293	)		119			316			183
Income tax relating to components of other comprehensive income that will be reclassified to profit or loss before tax
Income tax relating to cash flow hedges of other comprehensive income		6		17,132			21,427			24,184			(6,359	)
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				(470	)		1,237			(162	)		(27	)
Income tax relating to components of other comprehensive income that will be reclassified to profit or loss				16,662			22,664			24,022			(6,386	)
Other comprehensive income (loss)				(15,356	)		(352,712	)		37,951			(5,126	)
Comprehensive income (loss)				288,431			(438,355	)		239,370			(61,063	)

Comprehensive Income (loss) attributable to
Comprehensive income (loss), attributable to Owners of parent company				292,338			(432,797	)		236,633			(60,352	)
Comprehensive income (loss), attributable to Non-controlling interests				(3,907	)		(5,558	)		2,737			(711	)
Total comprehensive income (loss)				288,431			(438,355	)		239,370			(61,063	)

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

June 30, 2021

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

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


06-30-2021	Issued Capital ThU.S.$		Reserve of exchange differences on translation ThU.S.$			Reserve of cash flow hedges ThU.S.$			Reserve of actuarial losses on defined benefit plans ThU.S.$			Other Reserves ThU.S.$			Total other Reserves ThU.S.$			Retained Earnings ThU.S.$			Equity attributable to owners of parent ThU.S.$			Non - controlling interests ThU.S.$			Total Equity ThU.S.$
Opening balance at 01-01-2021		603,618		(1,081,320	)		(37,007	)		(19,725	)		29,255			(1,108,797	)		7,889,901			7,384,722			30,913			7,415,635
Changes in Equity:
Comprehensive income
Net profit		—		—			—			—			—			—			302,912			302,912			875			303,787
Other comprehensive income, net of tax		—		29,518			(42,745	)		936			1,717			(10,574	)		—			(10,574	)		(4,782	)		(15,356	)
Comprehensive income		—		29,518			(42,745	)		936			1,717			(10,574	)		302,912			292,338			(3,907	)		288,431
Issue of equity		200,000		—			—			—			—			—			—			200,000			—			200,000
Dividends		—		—			—			—			—			—			—			—			(80	)		(80	)
Increase (decrease) from transfers and other changes		—		—			—			—			369			369			(513	)		(144	)		—			(144	)
Changes in equity		200,000		29,518			(42,745	)		936			2,086			(10,205	)		302,399			492,194			(3,987	)		488,207
Closing balance at 06-30-2021		803,618		(1,051,802	)		(79,752	)		(18,789	)		31,341			(1,119,002	)		8,192,300			7,876,916			26,926			7,903,842


06-30-2020	Issued Capital ThU.S.$		Reserve of exchange differences on translation ThU.S.$			Reserve of cash flow hedges ThU.S.$			Reserve of actuarial losses on defined benefit plans ThU.S.$			Other Reserves ThU.S.$			Total other Reserves ThU.S.$			Retained Earnings ThU.S.$			Equity attributable to owners of parent ThU.S.$			Non - controlling interests ThU.S.$			Total Equity ThU.S.$
Opening balance at 01-01-2020		353,618		(902,387	)		9,010			(19,511	)		20,024			(892,864	)		7,873,650			7,334,404			35,011			7,369,415
Changes in Equity:		—		—			—			—			—			—			—			—			—			—
Comprehensive income		—		—			—			—			—			—			—			—			—			—
Net profit		—		—			—			—			—			—			(85,477	)		(85,477	)		(166	)		(85,643	)
Other comprehensive income, net of tax		—		(276,008	)		(66,300	)		(327	)		(4,685	)		(347,320	)		—			(347,320	)		(5,392	)		(352,712	)
Comprehensive income		—		(276,008	)		(66,300	)		(327	)		(4,685	)		(347,320	)		(85,477	)		(432,797	)		(5,558	)		(438,355	)
Dividends		—		—			—			—			—			—			—			—			(62	)		(62	)
Increase (decrease) from transfers and other changes		—		—			—			—			—			—			—			—			—			—
Changes in equity		—		(276,008	)		(66,300	)		(327	)		(4,685	)		(347,320	)		(85,477	)		(432,797	)		(5,620	)		(438,417	)
Closing balance at 06-30-2020		353,618		(1,178,395	)		(57,290	)		(19,838	)		15,339			(1,240,184	)		7,788,173			6,901,607			29,391			6,930,998

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

June 30, 2021

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

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS


	January-June
	2021			2020
	ThU.S.$			ThU.S.$

STATEMENTS OF CASH FLOWS

Cash Flows from (used in) Operating Activities

Classes of cash receipts from operating activities

Receipts from sales of goods and rendering of services		2,832,390			2,298,271
Other cash receipts from operating activities		260,189			392,745
Classes of cash payments
Payments to suppliers for goods and services		(1,878,961	)		(1,843,706	)
Payments to and on behalf of employees		(313,747	)		(292,009	)
Other cash payments from operating activities		(60,675	)		(209,130	)
Interest paid		(125,848	)		(131,775	)
Interest received		13,784			9,420
Income taxes paid		130,029			27,539
Other inflows (outflows) of cash, net		(2,323	)		(2,117	)
Net Cash flow from Operating Activities		854,838			249,238


Cash flows from (used in) Investing Activities
Cash flow used in obtaining control of subsidiaries and other businesses		47,988			—
Cash flow used in the purchase of non-controlling interests		(5	)		(15,212	)
Other cash payments to acquire interests in joint ventures		(4,800	)		—
Loans to related entities		(427	)		—
Proceeds from sale of property, plant and equipment		7,330			2,634
Purchase of property, plant and equipment		(603,123	)		(682,830	)
Purchase of intangible assets		(2,471	)		(8,511	)
Proceeds from sales of other long-term assets		3,805			5,600
Purchase of other non-current assets		(131,339	)		(123,125	)
Dividends received		1,454			4,042
Other inflows (outflows) of cash, net		(2	)		667
Cash flows used Investing Activities		(681,590	)		(816,735	)


Cash flows from (used in) Financing Activities
Total issuance of shares		200,000			—
Total loanss obtained		5,000			378,836
Debt obtained in long-term		—			228,836
Debt obtained in short-term		5,000			150,000
Repayments of loans		(272,643	)		(65,845	)
Payments of lease liabilities		(36,238	)		(37,582	)
Dividends paid		(167	)		(110	)
Other outflows of cash, net		457			(8,591	)
Cash flows from (used in) Financing Activities		(103,591	)		266,708

Net increase (decrease) in Cash and Cash Equivalents before effect of exchange rate changes		69,657			(300,789	)
Effect of exchange rate changes on cash and cash equivalents		(642	)		(29,232	)

Net increase (decrease) of Cash and Cash Equivalents		69,015			(330,021	)
Cash and cash equivalents, at the beginning of the period		1,064,714			1,560,012
Cash and cash equivalents, at the end of the period		1,133,729			1,229,991

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

June 30, 2021

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

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

NOTE 1. PRESENTATION OF INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Entity Information

Celulosa Arauco y Constitución S.A. and subsidiaries, (hereafter “Arauco” or the “Company”), tax identification number 93,458,000-1, is a closely held corporation, that was registered in the Securities Registry (the “Registry”) of the Chilean Commission for the Financial Market (“CMF”) as No. 042 on June 14, 1982. Additionally, the Company is registered as a non-accelerated filer in the Securities and Exchange Commission (SEC) of the United States of America.

The Company’s head office address is El Golf Avenue 150, 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 and wood productos.

As of June 30, 2021, Arauco is controlled by Empresas Copec S.A., tax identification number 90,690,000-9, which owns 99,978048% of Arauco, and is registered in the Securities Registry as No. 0028. Each of the above mentioned companies is subject to the oversight of the CMF.

Moreover, Empresas Copec S.A. is controlled by the public corporation AntarChile S.A., tax identification number 96,556,310-5, which owns 60,8208% of Empresas Copec S.A. Furthermore, the ultimate shareholders of AntarChile S.A. and, consequently, of Empresas Copec S.A., are Mr. Roberto Angelini Rossi, tax identification number 5,625,652-0, and Mrs. Patricia Angelini Rossi, tax identification number 5,765,170-9.

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

Presentation of Interim Consolidated Financial Statements

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

•

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

•

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

•

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

•

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

•

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

•

Explanatory disclosures (notes)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Period Covered by the Interim Consolidated Financial Statements

Periods ended June 30, 2021 and 2020.

Date of Approval of the Interim Consolidated Financial Statements

These interim consolidated financial statements were approved by the Board of Directors of the Company (the “Board”) at the Extraordinary Meeting No. 654 on August 16, 2021.

Abbreviations used in this report:

IFRS - International Financial Reporting Standards

IASB - International Accounting Standards Board

IAS - International Accounting Standards

IFRIC - International Financial Reporting Standards Interpretations Committee

MU.S.$ - Millions of U.S. dollars

ThU.S.$ - Thousands of U.S. dollars

U.F. - Inflation index-linked units of account

UTA - Annual Tax Unit

ICMS - Tax movement of inventories and services (Brazil)

ThCLP$ - Thousands of Chilean Pesos

Functional and Presentation Currency

Arauco and most of its subsidiaries determined the United States (“U.S.”) Dollar as its functional currency since the majority of its revenues from sales of its products are derived from exports denominated in U.S. Dollars, while their costs of sales are to a large extent related or indexed to the U.S. Dollar.

For the pulp reportable segment, most of the sales are exports denominated in U.S. Dollars and costs are mainly related to plantation costs which are settled in U.S. Dollars.

For the wood operating segment, although total sales include a mix of domestic and exports sales, prices of the products are established in U.S. Dollars, which is also the case for the cost structure of the related raw materials.

In relation to the cost of sales, although labor and services costs are generally billed and paid in local currency, these costs are not as significant as the costs of raw materials, which are driven mainly by global markets and therefore, influenced mostly by the U.S. Dollar.

The currency used to finance operations is mainly the U.S. Dollar.

The presentation currency of the consolidated financial statements is the U.S. Dollar. Figures on these interim consolidated financial statements are presented in thousands of U.S. Dollar (ThU.S.$).

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Summary of significant accounting policies

a) Basis for preparation of the interim consolidated financial statements

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

The interim consolidated financial statements have been prepared on a historical cost basis, except for biological assets and certain derivative financial instruments which are measured at revalued amounts or fair value at the end of each period as explained in the following significant accounting policies.

b) Critical accounting estimates and judgments

The preparation of these interim consolidated financial statements, in accordance with IFRS, requires management to make estimates and assumptions that affect the carrying amounts reported. These estimates are based on historical experience and various other assumptions that are considered to be reasonable. Actual results may differ from these estimates. Management believes that the accounting policies below are the critical judgments that have the most significant effect on the amounts recognized in the consolidated financial statements.

- Biological Assets

The recovery of forest plantations is based on discounted cash flow models which means that the fair value of biological assets is calculated using cash flows from continuing operations on a discounted basis, based on our sustainable forest management plans and the estimated growth of forests.

The measurement of the fair value of the biological assets is determined using a discounted cash flow model. Our cash flow projections include significant judgments and assumptions relating to discount rates, estimated growth of the forests and sales margins. This valuation is performed on the basis of each identifiable farm block and for each type of tree. The main considerations used to calculate the valuation of forest plantations and a sensitivity analysis are presented in Note 20.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

- Litigation and Contingencies

Arauco and its subsidiaries are subject to certain litigation proceedings. Future impact on Arauco’s financial condition derived from such litigations is estimated by management, in collaboration with its legal advisors. Arauco applies judgment when interpreting the reports of its legal advisors who provide updated estimates of the legal contingencies at each reporting period and/or at each time a modification is determined to be necessary. For a description of current litigations see Note 18.

c) Consolidation

The interim consolidated financial statements include all entities over which Arauco has the power to direct the relevant financial and operating activities. Subsidiaries are consolidated from the date on which control is obtained and up to the date that control ceases.

Specifically, a company controls an investee or subsidiary if, and only if, they have all of the following:

(a) power over the investee, i.e. the investor has existing rights which give it the ability to direct the relevant activities (the activities that significantly affect the investee’s returns);

(b)	exposure or rights to variable returns from involvement with the investee; and

(c)	the ability to use power over the investee to affect the amount of the investor’s returns.

When Arauco holds less than the majority of the voting rights in a company in which it participates, it nonetheless has the power over said company - when these voting rights are enough - to grant it in practice the ability to unilaterally direct said company’s relevant activities. Arauco takes into account all facts and circumstances in order to assess if the voting rights in a company in which it participates are enough for granting it the power, including:

a) the size of the investor’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

b) potential voting rights held by the investor, other vote holders or other parties;

c) rights arising from other contractual arrangements; and

d) any additional facts and circumstances that indicate the investor has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

The Company will reevaluate whether or not it holds control of a company in which participates if the facts and circumstances indicate that changes have occurred in one or more of the three elements of control mentioned above.

Consolidation of an investee shall begin from the date the investor obtains control of the investee and cease when the investor loses control of the investee. An entity includes the income and expenses of an acquired or sold subsidiary in the interim consolidated financial statements from the date it gains control until the date when the entity ceases to control the subsidiary.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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

If a subsidiary uses accounting policies other than those adopted in the interim consolidated financial statements for transactions and other events in similar circumstances, appropriate adjustments are made to the interim consolidated financial statements of subsidiaries in order to ensure compliance with Arauco’s accounting policies.

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

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

Certain consolidated subsidiaries have Brazilian Real, Mexican Pesos, Canadian Dollars, Chilean Pesos and Argentine Pesos as their functional currencies. For consolidation purposes, the financial statements of those subsidiaries have been prepared in accordance with IFRS and translated as indicated in Note 1 (e) (ii).

A parent company will present non-controlling interests in the interim consolidated statement of financial position within equity, separately from the equity of the owners of the parent company.

d) Segments

Arauco has defined its reportable segments according to its business areas, based on the products and services sold to its customers. This definition is consistent with the management, resource allocation and performance assessment made by key personnel responsible for making relevant decisions related to the Company’s operation. The personnel responsible for making such decisions are the Executive Vice-president and the Chief Executive Officer who are the highest authorities for making decisions and are supported by the Vice-presidents of each segment.

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

•

Pulp

•

Wood products

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

e)	Functional currency

(i)	Functional currency

All items in the financial statements of Arauco and each of its subsidiaries, associates and jointly controlled entities are measured using the currency of the primary economic environment in which each entity operates (the functional currency). The interim consolidated financial statements are presented in U.S. dollars, which is Arauco’s functional and presentation currency.

(ii)	Translation to the presentation currency of Arauco

For the purposes of presenting interim consolidated financial statements, assets and liabilities of Arauco’s operations in a functional currency different from Arauco’s are translated into U.S. dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange rate differences are recognized in other comprehensive income and accumulated in “Other reserves” within–equity.

(iii)

Foreign Currency Transactions

Transactions in currencies other than the functional currency are recognized at the exchange rates prevailing at the dates of the transactions. Profit or loss on transactions in currencies other than the functional currency resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognized in the interim consolidated statements of profit or loss, except those which are recorded in other comprehensive income and accumulated in equity such as cash flows hedging derivatives.

f)	Cash and cash equivalents

Cash and cash equivalents include cash-on-hand, deposits held on demand at financial entities and other short term highly liquid investments with an original maturity of three months or less and which are subject to an insignificant risk of changes in value.

g)	Financial Instruments

Financial assets

Initial classification

Arauco classifies its financial assets into the following categories: fair value through profit or loss and amortized cost.

Arauco does not have financial assets at fair value through other comprehensive income.

The classification is based on the business model used to manage the assets and the characteristics of their contractual cash flows.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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

(a) Financial assets at fair value through profit or loss: these instruments are initially measured at fair value. Net income and losses, including any income from interest or dividends, are registered in the profit or loss of the period. Financial assets are classified in the category of financial assets at fair value through profit or loss when they are maintained for negotiation or designated in their initial registration as assets at fair value through profit or loss. A financial asset can be classified in this category if it is acquired mainly for the purposes of being sold in the short-term. Gain or losses of assets held for negotiations are registered in the consolidated statements of Profit or Loss, and the related interest is registered independently as financial income. Derivatives are classified as acquired for negotiation also unless they are designated as hedging instruments.

(b) Assets measured at amortized cost: they are initially registered at the fair value of the transaction, adding or subtracting the transaction costs that are directly attributable to the issuance of the financial asset or financial liability. The financial asset is maintained within a business model, the objective of which is to maintain financial assets to obtain contractual cash flows and the contractual conditions of the asset give rise, on specified dates, to cash flows that are solely payments of principal and interests (“SPPI”) over the amount of the outstanding principal.

Subsequent measurement

Financial instruments are subsequently measured at fair value through profit or loss or amortized cost.

The classification is based on two criteria: i) the Company’s business model for the management of financial instruments, and ii) whether the contractual cash flows related to the financial instruments represent “Solely Payments of Principal and Interests”.

a) Financial assets at fair value through profit or loss: these instruments are subsequently measured at fair value. Net earnings and losses, including income from interests and dividends, are registered as profits or losses for the period. These instruments are held for negotiation and they are mainly acquired to be sold in the short term. Derivatives are also classified as held for negotiation, unless they are registered as hedging instruments. Financial instruments of this type are classified as Other Current and Non-Current Financial Assets. They are subsequently valuated by determining their fair value, registering changes in value in the interim interim consolidated statements of Profit or Loss, in the items of Financial Income or Financial Costs.

b) Financial assets measured at amortized cost: These instruments are subsequently measured at amortized cost minus accumulated amortizations, using the effective interest method and adjusted by loss allowance and volume discounts, in the case of financial assets. Financial income and expenses, foreign exchange income and losses, and impairment are registered in results. Any earnings or losses due to initial or subsequent reductions of the value of the asset are registered in the statement of profit or loss of the period. Loans and receivables are non-derivative financial instruments with fixed or determinable payments not traded in any active market. They are registered at amortized cost, registering accrued conditions directly in profit or loss.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Arauco measures accumulated losses in a quantity equivalent to expected credit losses during the lifelong commitment. Expected credit losses are based on contractual cash flow differences based on the allowance of each contract and the cash flows that Arauco expects. The difference is then discounted based on an approximation of the asset’s original effective interest rate. The asset’s carrying value is reduced as the allowance is used, and the loss is recognized in sales expenses in the interim consolidated statements of profit or loss. When an account receivable cannot be collected, it is regularized against the allowance account for receivables. Subsequent recoveries of previously impaired amounts are recognized as a debit in 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 a write-off of the original liability, with a new liability being recognized, and the difference between the respective carrying amounts is recognized in the interim consolidated statement of profit or loss.

Financial liabilities are initially recognized at fair value, and in the case of loans, they include the costs directly attributable to the transaction. The subsequent measurement of the financial liabilities depends on their classification:

Financial Liabilities at fair value through profit or loss

Financial liabilities are included in the category of financial liabilities at fair value through profit or loss when they are held for trading or originally designated at fair value through profit or loss. Income and losses from liabilities held for trading are recognized in profit or loss. This category includes non-designated derivatives for hedging accounting.

Financial Liabilities at amortized cost

Other financial liabilities are subsequently valued at their amortized cost based on the effective interest rate method. The amortized cost is calculated taking into account any premium or acquisition discount and includes the costs of transactions that are an integral part of the effective interest rate. This category includes Commercial Accounts Payable and Other Accounts Payable, lease liabilities, as well as the loans included in Other Current and Non-Current Financial Liabilities.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

h) Derivative financial instruments

(i) Derivative Financial Instruments—The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts, interest rate swaps, currency swaps and zero cost collar contracts. The Company’s policy is to enter into derivatives contracts only for economic hedging purposes and there are no instruments with speculation objectives.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured at fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss unless the derivative is designated as a hedging instrument and complies with hedge accounting requirements, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

(ii) Embedded derivatives

The Company assesses the existence of embedded derivatives in financial instrument contracts. Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at FVTPL as a whole. Arauco has determined that no embedded derivatives currently exist.

(iii) Hedge accounting

The Company designates certain hedging instruments as either fair value hedges or cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, Arauco documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.

-Fair Value Hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

-Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, and is included in the Finance costs line item in the interim consolidated statement of profit or loss. Amounts previously recognized in other comprehensive income are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognized hedged item.

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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.

i)	Inventories

Inventories are measured at the lower of cost or net realizable value. Cost is determined using the weighted average cost method.

The cost of finished and in process products includes the cost of raw materials, direct labor, other direct costs and manufacturing overhead expenses.

Initial costs of harvested wood are determined at fair value less cost of sale at the point of harvest.

Biological assets are transferred to inventories when forests are harvested.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When market conditions result in the production costs of a product exceeding its net realizable value, the inventories are written-down to their net realizable value. This write-down also includes obsolescence amounts resulting from slow moving inventories and technical obsolescence.

Spare parts that will be consumed in a period of less than twelve months are presented in inventories and recognized as an expense when they are consumed.

j)	Non-current assets held for sale

Arauco classifies certain property, plant and equipment, intangible assets, investments in associates and disposal groups (groups of assets to be sold together with their directly associated liabilities) as non-current assets held for sale which as of the date of the interim consolidated statements of financial position are the subject of active sale efforts which are estimated to be highly probable.

These assets or disposal groups are measured at the lower of the carrying amount or the fair value less the costs to sell, and are no longer depreciated or amortized from the time they are classified as non-current assets held for sale.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

k)	Business Combinations

Arauco applies the acquisition method to account for a business combination. This method requires the identification of the acquirer, determination of the acquisition date, recognition and measurement of the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; and recognition and measurement of goodwill or a gain from a bargain purchase. Identifiable assets acquired and liabilities assumed and any contingent liabilities in a business combination are initially measured at fair value at the acquisition date, except:

-Deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12 Income Taxes and IAS 19 respectively;

-liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 3 at the acquisition date; and

-assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with such standard.

Acquisition-related costs are accounted for as expenses when they are incurred, except for costs to issue debt or equity securities which are recognized in accordance with IAS 32 and IFRS 9.

A parent will present non-controlling interests in the interim consolidated statement of financial position within equity, separately from the equity of the owners of the parent company.

Changes in the ownership interest of a parent in its subsidiary that do not result in a loss of control are treated as equity transactions. Any difference between the amount by which non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the parent company. No adjustment is made to the carrying amount of goodwill, neither gains nor losses are recognized in the statement of profit or loss.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may initially be measured either at fair value or at the present ownership instruments’ proportionate share of non-controlling interests, in the recognized amounts of the acquirer’s identifiable net assets. The choice is made on a transaction-by-transaction basis.

Arauco measures the fair value of the acquired company in the business combination achieved in each stage (“step acquisition”), recognizing the effects of remeasurement of previously held equity in the acquiree in the interim consolidated statements of profit or loss.

If the initial accounting for a business combination is not completed by the end of the reporting period in which the combination occurs, Arauco reports preliminary amounts for the items for which the accounting is incomplete. During the measurement period (no more than one year), these preliminary amounts are retrospectively adjusted, or

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June 30, 2021

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

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.

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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

m)	Intangible assets other than goodwill

After initial recognition, intangible assets with finite useful lives are carried at cost less any accumulated amortization and impairment losses.

Amortization of an intangible asset with a finite useful life is allocated over the asset’s useful life. Amortization begins when the asset is available for use, i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

(i)	Computer Software

Computer software licenses are capitalized in terms of the costs incurred to acquire and make them compatible with existing software. These costs are amortized over the estimated useful lives of the software.

(ii)	Water Rights, Easements and Other Rights

This item includes water rights, easements and other acquired rights recognized at historical cost which have indefinite useful lives as there is no foreseeable limit to the period over which these assets are expected to generate future cash flows. These rights are not amortized, but are tested for impairment at least annually, or when there is any indication that the assets might be impaired.

(iii)

Customers and trade relations with customers

Correspond to the valuation over the time of the established relationship with customers, from the sale of products and services through its sales team. These relations will materialize in sales orders, which generate revenue and cost of sales. The useful life has been determined to be 15 years.

n)	Goodwill

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquired company, and the fair value of the acquirer’s previously held equity interest in the acquired company (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the statements of profit or loss.

Goodwill is not amortized but tested for impairment on annual basis.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For purposes of impairment testing, goodwill in a business combination is allocated as of the acquisition date to the cash generating unit or a group of cash generating units expected to benefit from the synergies of the combination irrespective of whether other assets or liabilities of the acquired company are allocated to those units or group of units.

The goodwill generated on acquisitions of foreign companies, is expressed in the functional currency of such foreign company.

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Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Goodwill recognized in subsidiaries Arauco Canada Ltd. and Arauco do Brasil S.A., generated on subsidiaries acquisitions whose functional currency is different from the functional currency of the parent company and presentation of these financial statements, are translated into U.S. Dollars at the closing exchange rate.

o)	Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment. The cost includes expenditures that are directly attributable to the acquisition of the assets.

Subsequent costs, such as improvements and replacement of components, are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Arauco and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized from property, plant and equipment. All other repairs and maintenance costs are expensed in the period in which they are incurred.

Arauco capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets as part of the cost of those assets, until the assets are ready for their intended use (See Note 12).

Depreciation is calculated by components using the straight-line method.

The useful lives of the items of property, plant and equipment is estimated according to the expected use of the assets. The residual values and useful lives of assets are reviewed and adjusted, if appropriate, annually.

p)	Leases

Arauco applies IFRS 16 for recognizing leases in a manner consistent with contracts with similar features and akin circumstances.

At the beginning of a contract, Arauco assesses whether the contract is, or if it contains, a lease. A contract is, or contains, a lease if it transfers the right to control the use of a given asset for a certain period of time, in exchange for consideration.

As of the initial date for recording a lease, Arauco, as lessee, recognizes an asset by the right of use at cost.

The cost of the asset for right of use comprises:

The amount of the initial measurement of the lease liability. This measurement is at present value of the payments for leases that have not been disbursed as of that date. Payments for leases are discounted using the incremental interest rate for financial loans;

Payments for leases performed prior to or as of the initiation date, minus the lease incentives that have been received;

The initial direct costs incurred by the lessee; and

An estimation of the costs to be incurred by the lessee when dismantling and eliminating the underlying asset, restoring the location where the same is located, or restoring the underlying asset to the condition required under the terms and conditions of the lease, unless such costs are incurred in order to produce inventories. The lessee assumes obligations stemming from such costs either at

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June 30, 2021

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

the commencement date, or as a result of having used the underlying asset during a specific period.

After the initial recognition date, Arauco, as lessee, recognizes its asset for right of use by applying the cost model, minus the accumulated depreciation and impairment losses, and adjusted for remeasurement of the liability for lease.

At the beginning, Arauco in the capacity of lessee, recognizes the lease liability at present value of the lease payments that have not been disbursed as of that date. Lease payments are discounted using the incremental interest rate for financial loans.

After the initial recognition date, Arauco, as lessee, recognizes a liability for leases by increasing the book value, so as to reflect the interest over the liability for lease, reducing the amount in order to reflect the payments for leases that have been performed and once again recognizing the book value, so as to reflect the remeasurement and also to reflect the essential fixed payments for leases that have been revised.

Arauco presents the assets by right of use in the Interim Consolidated Statement of Financial Position and are further disclosed in Note 8. Likewise, lease liabilities are presented in the Interim Consolidated Statement of Financial Position and further disclosed in Note 23.

IFRS 16 maintains substantially the accounting requirements of the lessor from IAS 17. Therefore, Arauco has continued to classify its leases as operational or financial, as the case may be.

Income from operating leases in which Arauco is the lessor are recognized on a straight-line basis during the term of the lease. Initial direct costs are added to the book value of the underlying asset and are recognized as expenses during the term of the lease on the same basis as the lease income. Leased assets are included within the statement of financial position, in property, plant and equipment. Arauco did not make adjustments with respect to assets that maintains as a lessor, as a result of IFRS 16 adoption.

When assets are leased under a financial lease, the present value of lease payments are recognized as financial accounts receivable. The difference between the gross receivable and the present value of such amount, is recognized as financial return on capital.

Arauco evaluates the economic nature of the contracts that grant the right to use certain assets, for the purposes of determining the existence of implied leases. In these cases, the Company separates, at the beginning of the contract and based on its relative reasonable values, payments and considerations associated with the lease, from the rest of the elements incorporated into the contract.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

q)	Biological Assets

IAS 41 requires that biological assets, such as standing trees, are measured at fair value less cost to sell in the interim statement of financial position. Forestry plantations are accounted for at fair value less costs to sell, based on the presumption that fair values of these assets can be measured reliably.

The measurement of new forestry plantations made during the current year is made at cost, which corresponds to the fair value at that date. After twelve months, the valuation methodology used is that explained in the preceding paragraph.

Biological assets shown as current assets correspond to those forestry plantations that will be harvested in the short term.

Biological growth and changes in fair value of forestry plantations are recognized in the line item “Other income” in the interim consolidated statements of profit or loss.

r)	Income taxes

The tax liabilities are recognized in the interim consolidated financial statements based on the determination of taxable income for the year and calculated using the tax rates in force in the countries where Arauco operates.

Deferred income tax is recognized using liability method, on the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated annual accounts. Deferred income tax is determined using tax rates contained in laws adopted as of the date of the financial statements and that are expected to be applicable when the related deferred tax asset is realized, or the deferred income tax liability is settled.

Deferred taxes are recognized in accordance with the standards established in IAS 12 - Income Tax.

The goodwill arising on business combinations does not give rise to deferred tax.

The deferred tax assets and tax credits are generally recognized for all deductible temporary differences to the extent that it is probable that future taxable profit will be available against which those deductible temporary differences can be utilized.

s)	Provisions

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of past events, under which, it is probable that an outflow of resources will be required to settle the obligation; and when a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period.

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Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

t)	Revenue recognition

Revenues are valued at fair value of the consideration received or to be received, derived from them. Arauco analyses and takes under consideration all relevant facts and circumstances to apply the five-step model established under IFRS 15 to customer contracts: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price, and (v) recognise revenue. Additionally, Arauco evaluates the incremental costs of obtaining a contract and the costs incurred to comply with a contract. Arauco recognizes revenues when the steps established in IFRS have been satisfactorily complied with.

Accounts receivable are recognized when control over goods or services has been transferred to the customer, because at this point of the time collection is unconditional and the passage of time is only needed to receive payment.

(i) Revenue recognition from the Sale of Goods

Revenue from the sale of goods is recognized when Arauco has transferred to the buyer the significant risks and rewards of ownership of the committed goods, when the amount of revenue can be reliably measured, when Arauco does not retain any managerial involvement over the goods sold and when it is probable that the economic benefits associated with the transaction will flow to Arauco and the costs incurred in respect of the transaction can be measured reliably. Revenue from the sale of goods are recognized when there is no obligation unsatisfied that could affect the customer’s acceptance of the product. The delivery is effective when the products are sent to the specific location, the risks of obsolescence and loss have been transferred to the customer and when Arauco has objective evidence that all acceptance criteria have been satisfied.

Sales are recognized in terms of the price agreed to in the sales contract, less any volume discounts and estimated product returns at the date of the sale. There is no significant financing component given that receivables from sales are collected within a short period, which is in line with market practices.

The structure for recognizing revenue from export sales is based on the 2010 Incoterms, which are the official rules for the interpretation of commercial terms issued by the International Chamber of Commerce.

The main Incoterms used by Arauco are the following:

“CFR (Cost and freight)”, where the company bears all costs including main transportation, until the products arrives at its port of destination. The risk is transferred to the purchaser once the products have been loaded onto the vessel, in the country of origin.

“CIF (Cost Insurance & Freight)”, where the Company organizes and pays for external freight services and some other expenses. Arauco is no longer responsible for the products once they have been delivered to the ocean carrier company.

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Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

(ii)	Revenue recognition from Rendering of Services

Revenue from the rendering of services is recognized as long as the performance obligation have been satisfied.

Revenue is recognized considering the stage of completion of the transaction at the date of the reporting period, when Arauco has the enforceable right of payment from the rendering of the services.

There is no significant financing component, given that sales are made with a reduced average collection period, which is in line with market practice.

Arauco mainly provides power supply services which are transacted principally in the spot market of the Sistema Eléctrico Nacional (SEN) (“National Electrical System”). According to current regulations, the prices on that market called “Marginal Costs” are calculated by the Coordinador Eléctrico Nacional (CEN) (“National Electrical Coordinator”) and are generally recognized in the period in which the services are rendered.

Electrical power is generated as a by-product of the pulp and wood process and is a complementary business to it, which is initially supplied to the group’s subsidiaries and any surplus is sold to the SEN.

Arauco provides other non-core services such as port services and pest control whose revenues are derived from fixed price service contracts are recognized considering the stage of completion of the services rendered at the date of reporting, generally during the period of the service contract on a straight-line basis over the term of the contract.

Revenues from reportable segments mentioned in Note 24 are measured in accordance with the policies indicated in the preceding paragraphs.

Revenues from inter-segment sales (which are made at market prices) are eliminated in the 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 the by-laws for preferred shares, if any, except where necessary to absorb accumulated losses from prior years.

On October 28, 2019, Arauco approved to amend the Company’s by-laws in order to establish that the Ordinary Shareholders’ Meeting will be determining, on an annually basis, the dividends to be distributed, without being subject to the 30% distributable minimum indicated by Chilean Corporations Law.

For the purposes of the annual distribution of the net profits on each period, it will be responsibility of the Ordinary Shareholders’ Meeting to determine the portion of such profits that will be distributed as dividend to the shareholders. Such determination will be made by the Shareholders’ meeting without being subject to the 30% minimum established in article 79 of Law No. 18,046 (regarding Corporations), who may agree on the distribution of a smaller percentage. In any case, the Board of Directors may, under

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June 30, 2021

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

the personal responsibility of the directors participating in the respective agreement, distribute dividends out of the profits of the corresponding year, provided there are no accumulated losses.

v)	Earning per share

Basic earnings per share are calculated by dividing the net profit for the period attributable to the parent company by the weighted average number of ordinary shares outstanding during the period, excluding the average number of shares in the Company held by a subsidiary, if such circumstance exists. Arauco has not performed any type of transaction with a potential dilutive effect that would cause diluted earnings per share to be different from basic earnings per share.

w)	Impairment

Non-financial Assets

The recoverable amount of property, plant and equipment and other long-term assets with finite useful lives are measured whenever there are any circumstances indicating that the assets have to recognize an impairment loss. Among the circumstances to consider as evidence of impairment are significant declines in the assets’ market value, significant adverse changes in the technological environment, obsolescence or physical damages of assets and changes in the manner in which the asset is used or expected to be used). Arauco evaluates at the end of each reporting period whether there is any evidence of the indications above mentioned.

A previously recognized impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount however a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

For the purposes of assessing impairment losses, assets are grouped at the lowest level for which there is identifiable cash flows separately for each cash-generating unit. Non-financial assets, other than goodwill, which had recognized an impairment loss, are reviewed at the end of each reporting period whether there are any circumstances indicating that an impairment loss previously recognized may no longer exists or has decreased.

“Cash-generating units” are the smallest identifiable groups of those cash inflows that are largely independent of the cash inflow from other assets or groups of assets.

Goodwill

Goodwill and intangible assets with indefinite useful life are tested annually for impairment or whenever circumstances indicate it. The recoverable amount of an intangible asset is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognized whenever the carrying amount exceeds the recoverable amount.

A cash-generating unit, for which goodwill has been allocated, is tested for impairment annually or more frequently when there are circumstances indicating that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to other assets pro rata based on the carrying

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Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

amount of each asset in the unit. Any impairment loss of goodwill is recognized directly in the interim consolidated statement of profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

Goodwill is allocated to cash-generating units for impairment testing purposes. The allocation is made between cash-generating units or groups of cash generating units expected to benefit from the synergies of the combination.

Financial Assets

At the end of each reporting period, an assessment is performed in order to identify whether there is any objective evidence that a financial asset or a group of financial assets may have been impaired.

An allowance for doubtful accounts is established based on a measurement of expected losses using a simplified approach.

The allowance for doubtful accounts is measured as the difference between the carrying amount of receivables and the present value of estimated future cash flows. The carrying amount of the receivable is reduced through the use of the allowance. If the impairment loss decreases in later periods, it is reversed either directly or by adjusting the provision for doubtful accounts, with effect in profit or loss.

x)	Employee Benefits

Arauco constitutes labor obligations for severance payable in all circumstances for certain of its employees with at least 5 years of work in the Company, based on the terms of the staff’s collective and individual bargaining agreements.

The related provision is an estimate of the years of service to be recognized as a future labor obligation liability, in accordance with contracts between Arauco and its employees and pursuant to actuarial valuation criteria for this type of liability. This post-employment benefit is considered a defined benefit plan.

The main factors considered for calculating the actuarial value of severance obligation for years of service are employee turnover, salary increases and life expectancy of the workers included in this benefit.

Actuarial gains and losses are recognized in other comprehensive income in the year they are incurred.

These obligations are related to post-employee benefits in accordance with current standards.

y)	Employee Vacations

Arauco recognizes the expense for employee vacation according to labor legislation in each country on an accrual basis.

This obligation is presented in line item “Trade and other current payables” in the interim consolidated statements of financial position.

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June 30, 2021

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

z)	Recent accounting pronouncements

a) Standards, interpretations and amendments that are mandatory for the first time for annual periods beginning on January 1, 2021:


Amendments and improvements	Content	Mandatory application for annual periods beginning on or after
IFRS 9, IAS 39, IFRS 7, IFRS 4 y IFRS 16	Reference interest rate reform (IBOR). These amendments provide specific simplifications regarding reference rate reform.The Phase 2 amendments address issues that arise from the implementation of the reforms, including the replacement of one benchmark with an alternative one.	January 1, 2021

IFRS 16	Lease concessions As a result of the coronavirus (COVID-19) pandemic, rent concessions have been granted to lessees. In May 2020, the IASB published an amendment to IFRS 16 that provided an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification. On 31 March 2021, the IASB published an additional amendment to extend the date of the practical expedient from 30 June 2021 to 30 June 2022. Lessees can elect to account for such rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concession as variable lease payments in the period(s) in which the event or condition that triggers the reduced payment occurs.	January 1, 2021

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

b) Standards, interpretations and amendments, the application of which is not yet mandatory, which have not been adopted in advance:

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


Amendments and improvements	Content	Mandatory application for annual periods beginning on or after
IFRS 10 y IAS 28- Amendments	Asset sale or contribution between an investor and an associate or joint venture.	Indeterminate
IAS 1	Presentation of Financial Statements Clarifies that liabilities will be classified as current or non-current depending on the rights at the end of the reporting period. The amendment also clarifies what IAS 1 means when it refers to the ‘settlement’ of a liability.	January 1, 2023
Reference to the Conceptual Framework - Amendments to IFRS 3	Business combinations. Minor amendments were made to IFRS 3 to update references to the conceptual framework for financial reporting and to add an exception for the recognition of liabilities and contingent liabilities.	January 1, 2022
IAS 16 Amendment	Properties, plant and equipments Prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss.	January 1, 2022
IAS 37 Amendment	Provisions, contingent liabilities and contingent Specify which costs a company includes when assessing whether a contract will be loss-making.	January 1, 2022
Annual Improvements to IFRS Standards 2018–2020	IFRS 9 Financial Instruments Addresses which fees should be included in the 10% test for derecognition of financial liabilities.	January 1, 2022
	IFRS 16 Leases Amendment to example 13 to remove the illustration of the lessor’s payments for lease improvements.
	NIIF 1: First-time Adoption of International Financial Reporting Standards Allows entities that have valued their assets and liabilities at their book values in their parent company’s accounts to also value cumulative translation differences using the amounts reported by the parent company.
	IAS 41 Agriculture Elimination of the requirement for entities to exclude tax cash flows when measuring fair value under IAS 41.
IAS 1 and IAS 8	Presentation of financial statements’, on classification of liabilities clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date (for example, the receipt of a waiver or a breach of covenant). The amendment also clarifies what IAS 1 means when it refers to the ‘settlement’ of a liability. To IAS 1, Practice statement 2 and IAS 8, aim to improve accounting policy disclosures and to help users of the financial statements to distinguish between changes in accounting estimates and changes in accounting policies.	January 1, 2023
IAS 12	Deferred tax related to assets and liabilities arising from a single transaction require companies to recognise deferred tax on transactions that, on initial recognition give rise to equal amounts of taxable and deduct able temporary differences.	January 1, 2023

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Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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

NOTE 2. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES

Changes to accounting policies

On January 1, 2021, we discontinued the reporting of our forestry operations as a business segment, and included those operations as part of the pulp segment. This is in line with Arauco’s current reality and with the way in which the management views the progress of the business. Thus, the new segments are: Pulp and and wood products, which demonstrates Arauco’s focus on its end custumers.

The comparative information in the tables in Note 24 Reportable Segments has been restated as of December 31, 2020 and June 30, 2020 due to the merger of the pulp and forestry businesses. This reformulation of the Company’s segments did not produce changes in Arauco’s Consolidated Financial Statements (Statement of Financial Position, Statement of Income, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows and Notes to the statements financial statements, except for the Note 24).

Changes to accounting estimates

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

NOTE 3. DISCLOSURE OF OTHER INFORMATION

a)	Disclosure of information on Issued Capital

Between April and May of 2021, a capital increase of ThU.S$ 200,000 which amounts to 3,250,975 shares was wholly subscribed and paid-in by the shareholders.

As of September 24, 2020, a capital increase of ThU.S.$ 250,000 which amounts to 4,063,720 shares was wholly subscribed and paid-in by the shareholders.

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


Shareholders	%
Empresas Copec S.A.		99.97804761	%
Chilur S.A.		0.02054047	%
Administradora Sintra Ltda.		0.00132808	%
AntarChile S.A.		0.00008384	%
		100.00000000	%

At the date of these interim consolidated financial statements the share capital of Arauco is ThU.S.$ 803,618.

100% of Capital corresponds to ordinary shares.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


	06-30-2021	12-31-2020
Description of Ordinary Capital Share Types	100% of Capital corresponds to ordinary shares
Number of Authorized Shares by Type of Capital in Ordinary Shares	120,474,350	117,223,375
Nominal Value of Shares by Type of Capital in Ordinary Shares	ThU.S.$ 6.6704 per share	ThU.S.$ 0.0051493 per share
Amount of Capital in Shares by Type of Ordinary Shares that Constitute Capital	ThU.S.$ 803,618	ThU.S.$ 603,618

	06-30-2021	12-31-2020
Number of Shares Issued and Fully Paid by Type of Capital in Ordinary Shares	120,474,350	117,223,375

b)	Dividends paid

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

As of June 30, 2021 according to the current dividends policy, it is not required to recognize a minimum dividend provision.

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

June 30, 2021

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

d)	Other items in the Consolidated Statements of Profit or Loss

The table below sets forth other income, other expenses, finance income, finance costs and share of profit (loss) of associates and joint ventures for the periods ended June 30, 2021 and 2020 are as follows:


	January - June						April - June
	2021 ThU.S.$			2020 ThU.S.$			2021 ThU.S.$			2020 ThU.S.$
Classes of Other Income
Other Income, Total		120,376			122,844			45,379			67,598
Gain from changes in fair value of biological assets (note 20)		83,080			88,143			41,771			36,126
Net income from insurance compensation		606			2,106			598			2,086
Revenue from export promotion		742			508			367			232
Lease income		725			784			191			438
Gain on sales of assets		3,648			2,216			1,675			728
Access easement		161			35			158			35
Recovery of tax credits		6			21,133			6			21,133
Compensations received		7,018			950			3			949
Gain on sales of associates		20,381			—			—			—
Other operating results		4,009			6,969			610			5,871

Classes of Other Expenses by activity
Total of Other Expenses by activity		(70,456	)		(108,294	)		(32,978	)		(57,356	)
Provision Legal expenses		(6,172	)		(2,819	)		(4,708	)		(1,429	)
Impairment provision for property, plant and equipment and others		(11,832	)		(52,523	)		(7,876	)		(34,464	)
Operating expenses related to staff restructuring or from plants stoppage or closed		(3,613	)		(21,070	)		(2,091	)		(7,959	)
Expenses related to projects		(11,397	)		(6,775	)		(6,139	)		(3,225	)
Loss of asset sales		(3,202	)		(3,210	)		(1,153	)		(2,262	)
Loss and repair of assets		(494	)		(4,155	)		(171	)		(1,643	)
Loss of forest due to fires		(17,503	)		(5,197	)		(605	)		(141	)
Other Taxes		(10,011	)		(8,520	)		(6,757	)		(4,604	)
Research and development expenses		(2,037	)		(1,278	)		(1,708	)		(777	)
Fines, readjustments and interests		(93	)		(677	)		(75	)		(106	)
Loss on sale of permanent investments		(431	)		—			—			—
Loss of tax credits		(255	)		—			(154	)		—
Other expenses		(3,416	)		(2,070	)		(1,541	)		(746	)

Classes of financing income
Financing income, total		14,434			19,519			7,600			12,312
Financial income from mutual funds - term deposits		13,205			8,067			6,963			2,736
Financial income resulting from swap - forward instruments		39			667			—			324
Other financial income		1,190			10,785			637			9,252

Classes of financing costs
Financing costs, Total		(118,180	)		(137,704	)		(57,187	)		(65,922	)
Interest expense, Banks loans		(10,672	)		(15,775	)		(4,805	)		(7,569	)
Interest expense, Bonds		(73,978	)		(87,692	)		(36,154	)		(44,034	)
Interest expense, other financial instruments		(10,963	)		(17,371	)		(4,831	)		(7,886	)
Interest expence for right-of-use		(4,412	)		(4,830	)		(1,753	)		(2,298	)
Other financial costs		(18,155	)		(12,036	)		(9,644	)		(4,135	)

Share of profit (loss) of associates and joint ventures accounted for using equity method
Total		11,216			(488	)		8,718			(2,041	)
Investments in associates		139			3,630			233			1,512
Joint ventures		11,077			(4,118	)		8,485			(3,553	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

The analysis of expenses by nature contained in these interim consolidated financial statements is presented below:


	January – June				April – June
	2021		2020		2021		2020
*Cost of sales ()**	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Timber		410,047		390,392		181,029		199,992
Forestry labor costs and other services		256,1172		215,475		136,547		109,119
Depreciation and amortization		204,257		199,164		100,306		100,896
Depreciation for right of use		21,907		30,086		10,221		15,140
Maintenance costs		127,669		112,781		63,190		53,497
Chemical costs		245,488		217,843		130,520		100,525
Sawmill Services		53,657		49,448		28,114		21,555
Other Raw Materials		109,581		99,599		55,215		46,325
Other Indirect costs		58,546		55,439		31,419		25,890
Energy and fuel		85,692		83,728		42,830		38,904
Cost of electricity		22,082		17,141		12,462		8,330
Staff expenses		189,859		172,518		95,330		79,881
Total		1,784,957		1,643,614		887,183		800,054

(*)	Total amount is comprised of the cost of inventory sales for ThU.S.$ 1,733,145 (ThU.S.$ 1,594,281 as of June 30, 2020) and the cost of rendering services for ThU.S.$ 51,812 (ThU.S.$ 49,333 as of June 30, 2020).


	January – June				April – June
	2021		2020		2021		2020
Distribution cost	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Selling costs		17,655		18,439		8,929		9,743
Commissions		7,197		6,396		3,603		3,286
Insurance		1,974		2,200		850		1,363
Provision for doubtful accounts		300		637		339		681
Other selling costs		8,184		9,206		4,137		4,413
Shipping and freight costs		286,415		241,806		150,347		113,073
Port services		23,547		18,532		11,839		9,913
Freights		241,332		201,489		128,235		91,146
Depreciation for right of use		1,211		825		639		412
Other shipping and freight costs (internment, warehousing, stowage, customs and other costs)		20,325		20,960		9,634		11,602
Total		304,070		260,245		159,276		122,816


	January – June				April – June
	2021		2020		2021		2020
Administrative expenses	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Wages and salaries		122,862		104,269		62,694		50,808
Marketing, advertising, promotion and publications expenses		5,972		4,964		3,339		1,579
Insurances		11,804		10,803		5,990		5,084
Depreciation and amortization		18,037		16,231		9,428		8,617
Depreciation for right of use		3,471		4,167		1,658		1,392
Computer services		18,300		16,912		9,648		11,610
Lease rentals (offices, other property and vehicles)		3,226		3,061		1,591		1,553
Donations, contributions, scholarships		3,063		8,751		1,174		6,152
Fees (legal and technical advisors)		18,216		18,208		9,327		8,883
Property taxes, city permits and rights		12,713		9,487		8,236		5,616
Cleaning services, security services and transportation		16,977		11,295		8,931		6,102
Third-party variable services (maneuvers, logistics)		21,927		18,277		11,586		10,082
Basic services (electricity, telephone)		11,559		3,598		6,468		1,841
Maintenance and repair		3,714		2,859		2,097		1,504
Seminars, courses, training materials		1,084		865		575		337
Travels, clothing and safety equipment, environmental expenses, audits and others		14,230		19,981		7,911		9,065
Total		287,155		253,728		150,653		130,225

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

e)	Auditor Fees and Number of Employees


Auditors fees	06-30-2021 ThU.S.$		06-30-2020 ThU.S.$
Audit services		1,039		1,318
Other services
Tax services		456		631
Others		58		84
TOTAL		1,553		2,033


Number of employees	N°
		17,551		18,119

NOTE 4. INVENTORIES


Components of Inventory	06-30-2021 ThU.S.$		12-31-2020 ThU.S.$
Raw materials		100,185		83,267
Production supplies		134,140		129,065
Work in progress		52,136		64,449
Finished goods		525,814		460,419
Spare Parts		207,478		201,079
Total Inventories		1,019,753		938,279

Inventories recognized as cost of sales as of June 30, 2021 were ThU.S.$ 1,733,145 (ThU.S.$ 1,594,281 as of June 30, 2020).

In order to have inventories recorded at net realizable value as of June 30, 2021, a net decrease of inventories was recognized associated with an higher provision of obsolescence of ThU.S.$ 395 (decrease of ThU.S.$ 12,663 as of June 30, 2020). As of June 30, 2021, the amount of obsolescence provision is ThU.S.$ 31,995 (ThU.S.$ 31,600 as of December 31, 2020).

As of June 30, 2021, there were inventory write-offs of ThU.S.$ 355 (ThU.S.$ 1,321 as of June 30, 2020) which are presented in the interim consolidated statements of profit or loss whithin Cost of sales.

The inventory obsolescence provision is calculated based on the sales conditions of products and age of inventory (inventory turnover).

As of the date of these interim consolidated financial statements, no inventories were pledged as security.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 5. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, bank checking account balances, time deposits and mutual funds. These are short-term highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

The investment objective of time deposits is to maximize the amounts of cash surpluses in the short-term. These instruments are permitted under Arauco’s Investment Policy which allows investing in fixed income securities. These instruments have a maturity of less than three months from the date of acquisition.

Arauco invests in local and international mutual funds in order to maximize the returns of cash surpluses denominated in Chilean Pesos or in foreign currencies such as U.S. Dollars or Euros. These instruments are permitted under Arauco’s Investment Policy.

As of the date of these interim consolidated financial statements, there are no amounts of cash and cash equivalents with restrictions on use.


Components of Cash and Cash Equivalents	06-30-2021 ThU.S.$		12-31-2020 ThU.S.$
Cash on hand		126		99
Bank checking account balances		453,245		357,354
Time deposits		614,357		507,519
Mutual funds		66,001		199,742
Total		1,133,729		1,064,714

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


	06-30-2021 ThU.S.$		12-31-2020 ThU.S.$
AAAfm		22,508		137,534
No classification		43,493		62,208
Total Mutual Funds		66,001		199,742

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Changes in Financial Liabilities


		06-30-2021
		Borrowings from banks			Hedging liabilities			Bonds and promissory notes			Other financial liabilities, Total
		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening balance January 1			1,274,260			39,660			4,707,944			6,021,864
Cash flows	(+) Borrowings obtained		5,000			—			—			5,000
	(-) Borrowings paid		(249,162	)		128			(23,609	)		(272,643	)
	(-) Interest paid		(7,096	)		(11,434	)		(102,470	)		(121,000	)
(+) Accrued interest			6,162			10,193			102,092			118,447
(+/-) Inflation adjustment			(19,606	)		—			(1,574	)		(21,180	)
(+/-) Changes in fair value			—			72,591			—			72,591
(+/-) Other non-cash movements			2,817			—			4,024			6,841
Closing balance			1,012,375			111,138			4,686,407			5,809,920


		12-31-2020
		Borrowings from banks			Hedging liabilities			Bonds and promissory notes			Other financial liabilities, Total
		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening balance January 1			947,022			134,275			4,831,743			5,913,040
Cash flows	(+) Borrowings obtained		412,077			—			—			412,077
	(-) Borrowings paid		(257,551	)		(37,127	)		(225,796	)		(520,474	)
	(-) Commissions paid		(9,113	)		—			—			(9,113	)
	(-) Interest paid		(29,515	)		(32,189	)		(194,512	)		(256,216	)
(+) Accrued interest			26,174			33,613			204,678			264,465
(+/-) Inflation adjustment			51,510			—			83,809			135,319
(+/-) Changes in fair value			—			(58,898	)		—			(58,898	)
(+/-) Other non-cash movements			133,656			(14	)		8,022			141,664
Closing balance			1,274,260			39,660			4,707,944			6,021,864


		Lease liabilities
		06-30-2021			12-31-2020
		ThU.S.$			ThU.S.$
Opening balance January 1			211,755			271,025
Cash flows	(-) Borrowings paid		(36,238	)		(75,233	)
Cash flows	(-) Interest paid		(4,848	)		(9,428	)
(+) Accrued interest			4,876			10,021
(+/-) Inflation adjustment			(3,583	)		4,394
(+) Increase due to new leases liabilities			20,003			16,760
(+/-) Other movements			3,297			(5,784	)
Closing balance			195,262			211,755

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 6. INCOME TAXES

The tax rates applicable in the countries in which Arauco operates are 27% in Chile, 35% in Argentina and Mexico, 34% in Brazil, 25% in Uruguay and 21% in the United States (federal tax).

In 2021, Argentinian Republic published in the Official Gazette of Argentina the law No. 27,630, which replaced the fixed rate paid by Argentine companies on their corporate income tax periods starting in 2021. It provides a progressive scale of rates, where a 25% rate will be applied to companies with a nex taxable income of up to 5,000,000Argentine pesos (AR$) (approximately US$ 52,235 as of June 30, 2021), a 30% rate will be applied to companies with a nex taxable income ranging between AR$ 5,000,000 and AR$ 50,000,000 (approximately US$ 522,350 as of June 30,2021), and a 35% rate will be applied to companies with a nex taxable incomes surpassing AR$ 50,000,000. This new regulationgenerated a loss of ThU.S.$ 49,000 in Arauco Argentina S.A. in income tax. The rate applied to Arauco Argentina S.A. in 2020 was 30%.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Deferred Tax Assets

The following table sets forth the deferred tax assets as of the dates indicated:


	06-30-2021			12-31-2020
Deferred Tax Assets	ThU.S.$			ThU.S.$
Deferred tax Assets relating to Provisions		4,881			5,042
Deferred tax Assets relating to Accrued Liabilities		8,111			8,107
Deferred tax Assets relating to Post-Employment benefits		21,837			22,026
Deferred tax Assets relating to Property, Plant and equipment		26,196			24,397
Deferred tax Assets relating to Impairment provision		10,766			14,193
Deferred tax Assets relating to Financial Instruments		96,476			79,765
Deferred tax Assets relating to Tax Loss Carryforward		224,800			126,405
Deferred tax Assets relating to Inventories		9,035			7,964
Deferred tax Assets relating to Provisions for Income		11,099			7,905
Deferred tax Assets relating to Allowance for Doubtful Accounts		2,182			2,427
Deferred tax Assets relating to Intangible revaluation		3,317			3,713
Deferred tax Assets relating to tax credits		14,974			20,898
Deferred tax Assets relating to Other Deductible Temporary Differences		29,521			20,018
Total Deferred Tax Assets		463,195			342,860

Offsetting presentation		(457,480	)		(336,819	)

Net Effect		5,715			6,041

Certain subsidiaries of Arauco mainly in Chile, Brazil, Argentina and USA, as of the date of these interim consolidated financial statements, present tax losses for which we record as deferred tax assets, given our the projection of future profits, will allow the recovery of these assets. The total amount of these tax losses is ThU.S.$ 1,045,185 (ThU.S.$ 622,621 at December 31, 2020).

In addition, as of the closing date of these interim consolidated financial statements there are ThU.S.$ 145,723 (ThU.S.$ 152,898 at December 31, 2020) of non-recoverable tax losses from subsidiaries in USA and from joint operations, for which deferred tax assets have not been recognized. The estimated recovery period exceeds the expiry date of such tax losses.

Deferred Tax Liabilities

The following table sets forth the deferred tax liabilities as of the dates indicated:


	06-30-2021			12-31-2020
Deferred Tax Liabilities	ThU.S.$			ThU.S.$
Deferred tax Liabilities relating to Property, Plant and Equipment		1,161,598			1,020,282
Deferred tax Liabilities relating to Financial Instruments		25,213			26,755
Deferred tax Liabilities relating to Biological Assets		658,019			644,348
Deferred tax Liabilities relating to Inventory		42,896			32,567
Deferred tax Liabilities relating to Prepaid Expenses		43,366			42,319
Deferred tax Liabilities relating to Intangible		14,556			14,826
Deferred tax Liabilities relating to Other Taxable Temporary Differences		21,147			19,608
Total Deferred Tax Liabilities		1,966,795			1,800,705

Offsetting presentation		(457,480	)		(336,819	)

Net Effect		1,509,315			1,463,886

The effect of this period in current and deferred tax liabilities related to financial hedging instruments corresponds to a credit of ThU.S.$ 17,132 as of June 30, 2021 (credit of ThU.S.$ 21,427 as of June 30, 2020), 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

June 30, 2021

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

Reconciliation of deferred tax assets and liabilities


	Opening Balance 01-01-2021		Deferred tax Income (Expenses)			Deferred tax of items charged to other comprehensive income			Decrease through loss of control in subsidiary			Increase (decrease) Net exchange differences			Closing balance 06-30-2021
Deferred Tax Assets	ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S$
Deferred tax Assets relating to Provisions		5,042		(208	)		—			—			47			4,881
Deferred tax Assets relating to Accrued Liabilities		8,107		27			—			(24	)		1			8,111
Deferred tax Assets relating to Post-Employment benefits		22,026		160			(293	)		(56	)		—			21,837
Deferred tax Assets relating to Property, Plant and equipment		24,397		1,7994	)		—			—			—			26,196
Deferred tax Assets relating to Impairment provision		14,193		(3,624	))		—			—			197			10,766
Deferred tax Assets relating to Financial Instruments		79,765		(604	)		17,086			—			229			96,476
Deferred tax Assets relating to Tax Loss Carryforward		126,405		97,941			—			(207	)		661			224,800
Deferred tax Assets relating to Inventories		7,964		1,060			—			—			11			9,035
Deferred tax Assets relating to Provisions for Income		7,905		3,191			—			—			3			11,099
Deferred tax Assets relating to Allowance for Doubtful Accounts		2,427		(246	)		—			—			1			2,182
Deferred tax Assets relating to Intangible revaluation		3,713		(495	)		—			—			99			3,317
Deferred tax Assets relating to tax credits		20,898		(5,924	)		—			—			—			14,974
Deferred tax Assets relating to Other Deductible Temporary Differences		20,018		8,628			—			—			871			29,521
Total Deferred Tax Assets		342,860		101,705			16,793			(283	)		2,120			463,195


	Opening Balance 01-01-2021		Deferred tax (Income) Expenses			Deferred tax of items charged to other comprehensive income			Decrease through loss of control in subsidiary			Increase (decrease) Net exchange differences			Closing balance 06-30-2021
Deferred Tax Liabilities	ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S$
Deferred tax Liabilities relating to Property, Plant and Equipment		1,020,282		139,748			—			(121	)		1,689			1,161,598
Deferred tax Liabilities relating to Financial Instruments		26,755		(1,490	)		(53	)		—			1			25,213
Deferred tax Liabilities relating to Biological Assets		644,348		13,788			—			(2,946	)		2,829			658,019
Deferred tax Liabilities relating to Inventory		32,567		11,690			—			(1,395	)		34			42,896
Deferred tax Liabilities relating to Prepaid Expenses		42,319		1,048			—			—			(1	)		43,366
Deferred tax Liabilities relating to Intangible		14,826		(607	)		—			—			337			14,556
Deferred tax Liabilities relating to Other Taxable Temporary Differences		19,608		1,063			—			(179	)		655			21,147
Total Deferred Tax Liabilities		1,800,705		165,240			(53	)		(4,641	)		5,544			1,966,795


	Opening Balance 01-01-2020		Deferred tax Income (Expenses)			Deferred tax of items charged to other comprehensive income		Increase (decrease) Net exchange differences			Closing balance 12-31-2020
Deferred Tax Assets	ThU.S.$		ThU.S.$			ThU.S.$		ThU.S.$			ThU.S$
Deferred tax Assets relating to Provisions		5,749		(267	)		—		(440	)		5,042
Deferred tax Assets relating to Accrued Liabilities		7,182		937			—		(12	)		8,107
Deferred tax Assets relating to Post-Employment benefits		20,378		1,598			68		(18	)		22,026
Deferred tax Assets relating to Property, Plant and equipment		16,609		7,788			—		—			24,397
Deferred tax Assets relating to Impairment provision		20,169		(4,598	)		—		(1,378	)		14,193
Deferred tax Assets relating to Financial Instruments		68,390		(1,641	)		13,685		(669	)		79,765
Deferred tax Assets relating to Tax Loss Carryforward		133,221		2,605			—		(9,421	)		126,405
Deferred tax Assets relating to Inventories		12,460		(4,363	)		—		(133	)		7,964
Deferred tax Assets relating to Provisions for Income		6,631		1,295			—		(21	)		7,905
Deferred tax Assets relating to Allowance for Doubtful Accounts		4,349		(1,545	)		—		(377	)		2,427
Deferred tax Assets relating to Intangible revaluation		6,044		(1,042	)		—		(1,289	)		3,713
Deferred tax Assets relating to tax credits		19,460		1,438			—		—			20,898
Deferred tax Assets relating to Other Deductible Temporary Differences		16,161		5,096			—		(1,239	)		20,018
Total Deferred Tax Assets		336,803		7,301			13,753		(14,997	)		342,860


	Opening Balance 01-01-2020		Deferred tax (Income) Expenses			Deferred tax of items charged to other comprehensive income		Increase (decrease) Net exchange differences			Closing balance 12-31-2020
Deferred Tax Liabilities	ThU.S.$		ThU.S.$			ThU.S.$		ThU.S.$			ThU.S$
Deferred tax Liabilities relating to Property, Plant and Equipment		900,415		128,933			—		(9,066	)		1,020,282
Deferred tax Liabilities relating to Financial Instruments		25,630		986			139		—			26,755
Deferred tax Liabilities relating to Biological Assets		642,221		20,239			—		(18,112	)		644,348
Deferred tax Liabilities relating to Inventory		38,251		(5,711	)		—		27			32,567
Deferred tax Liabilities relating to Prepaid Expenses		41,338		989			—		(8	)		42,319
Deferred tax Liabilities relating to Intangible		17,942		(1,118	)		—		(1,998	)		14,826
Deferred tax Liabilities relating to Other Taxable Temporary Differences		25,126		(2,846	)		—		(2,672	)		19,608
Total Deferred Tax Liabilities		1,690,923		141,472			139		(31,829	)		1,800,705

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:


	06-30-2021						12-31-2020
	Deductible			Taxable			Deductible			Taxable
	Difference			Difference			Difference			Difference
Detail of classes of Deferred Tax Temporary Differences	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Deferred Tax Assets		238,395			—			216,455			—
Deferred Tax Assets - Tax loss carryforward		224,800			—			126,405			—
Deferred Tax Liabilities		—			1,966,795			—			1,800,705
Total		463,195			1,966,795			342,860			1,800,705


	January - June						April - June
	2021			2020			2021			2020
Detail of Temporary Difference Income and Loss Amounts	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Deferred Tax Assets		3,764			14,747			(10,717	)		6,842
Deferred Tax Assets - Tax loss carryforward		97,941			31,108			44,871			21,414
Deferred Tax Liabilities		(165,240	)		(13,697	)		(96,202	)		7,112
Total		(63,535	)		32,158			(62,048	)		35,368

Income Tax Expense

Income tax expense consists of the following:


	January – June						April - June
Income Tax composition	2021			2020			2021			2020
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Current income tax expense		(101,556	)		(4,737	)		(61,140	)		(18,399	)
Tax benefit from tax credits, used to reduce current tax expense		5,026			3,552			5,026			3,552
Prior period current income tax adjustments		(2,729	)		1,302			(2,513	)		1,306
Other current benefit tax (expenses)		(3,212	)		(3,164	)		(2,687	)		(2,477	)
Current Tax Expense, Net		(102,471	)		(3,047	)		(61,314	)		(16,018	)
Deferred tax expense relating to origination and reversal of temporary differences		(161,476	)		1,050			(106,919	)		13,954
Tax benefit arising from tax credits used to reduce deferred tax expense		97,941			31,108			44,871			21,414
Total deferred Tax benefit (expense), Net		(63,535	)		32,158			(62,048	)		35,368
Income Tax benefit (expense), Total		(166,006	)		29,111			(123,362	)		19,350

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


	January – June						April - June
	2021			2020			2021			2020
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Foreign current income tax expense		(53,280	)		13,329			(33,423	)		(8,686	)
Domestic current income tax expense		(49,191	)		(16,376	)		(27,891	)		(7,332	)
Total current income tax expense		(102,471	)		(3,047	)		(61,314	)		(16,018	)
Foreign deferred tax benefit (expense)		(49,988	)		(14,582	)		(44,805	)		11,900
Domestic deferred tax benefit (expense)		(13,547	)		46,740			(17,243	)		23,468
Total deferred tax benefit (expense)		(63,535	)		32,158			(61,048	)		35,368
Total income tax benefit (expense)		(166,006	)		29,111			(123,362	)		19,350

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Reconciliation of income tax expense from statutory tax rate to the effective tax rate.

The reconciliation of income tax expense is as follows:


	January - June
Reconciliation of Income tax from Statutory Rate to Effective Tax Rate	2021			2020			2021			2020
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Statutory domestic (Chile) income tax rate		27.0	%		27.0	%		27.0	%		27.0	%
Tax Expense at statutory tax rate		(126,844	)		30,984			(87,691	)		20,328
Tax effect of foreign tax rates		(3,646	)		(1,641	)		(843	)		(1,460	)
Tax effect of revenues exempt from taxation		25,938			2,396			18,092			1,590
Tax effect of not deductible expenses		(14,938	)		(10,517	)		(5,576	)		4,730
Tax rate effect of previously unrecognized tax loss		—			11,066			—			(3,327	)
Tax effect of a new evaluation of deferred tax assets		4,454			(778	)		3,301			(404	)
Tax effect of changes in tax rates		(45,094	)		—			(45,094	)		—
Tax Effect of tax provided in excess in prior periods		(2,729	)		1,302			(2,513	)		1,306
Other tax rate effects		(3,147	)		(3,701	)		(3,038	)		(3,413	)
Total adjustments to tax expense at applicable tax rate		(39,162	)		(1,873	)		(35,671	)		(978	)
Tax benefit (expense) at effective tax rate		(166,006	)		29,111			(123,362	)		19,350

Current tax assets and liabilities

The current tax assets and liabilities balances are as follow:


Current tax Assets	06-30-2021 ThU.S.$			12-31-2020 ThU.S.$
Monthly Provisional Payments (MPP)		5,721			17,540
Income tax receivable		103,791			298,093
Fixed assets tax credits		—			10
Provision tax income		(23,195	)		(928	)
Other tax receivables		25,465			6,015
Total		111,782			320,730


Current tax Liabilities	06-30-2021 ThU.S.$			12-31-2020 ThU.S.$
Provision tax income (First category)		76,758			81,368
Monthly Provisional Payments (MPP)		(30,592	)		(43,232	)
Other tax payables		9,845			6,536
Total		56,011			44,672

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 7. PROPERTY, PLANT AND EQUIPMENT


Property, Plant and Equipment, Net	06-30-2021 ThU.S.$			12-31-2020 ThU.S.$
Construction work in progress		2,346,172			1,944,578
Land		892,384			930,372
Buildings		2,218,155			2,248,784
Plant and equipment		2,976,751			3,026,136
Information technology equipment		25,107			26,166
Fixtures and fittings		14,373			16,627
Motor vehicles		14,088			15,055
Other property, plant and equipment		118,377			117,586
Total Net		8,605,407			8,325,304

Property, Plant and Equipment, Gross
Construction work in progress		2,346,172			1,944,578
Land		892,384			930,372
Buildings		4,460,994			4,420,293
Plant and equipment		7,102,924			7,027,942
Information technology equipment		104,220			102,632
Fixtures and fittings		49,577			50,209
Motor vehicles		59,561			59,515
Other property, plant and equipment		135,697			135,199
Total Gross		15,151,529			14,670,740

Accumulated depreciation and impairment
Buildings		(2,242,839	)		(2,171,509	)
Plant and equipment		(4,126,173	)		(4,001,806	)
Information technology equipment		(79,113	)		(76,466	)
Fixtures and fittings		(35,204	)		(33,582	)
Motor vehicles		(45,473	)		(44,460	)
Other property, plant and equipment		(17,320	)		(17,613	)
Total		(6,546,122	)		(6,345,436	)

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

As of June 30, 2021, there are no significant assets pledged as collateral to be disclosed in these interim consolidated financial statements.

Disbursements commitments for the acquisition of property, plant and equipment and disbursements for property, plant and equipment under construction.


	06-30-2021 ThU.S.$		12-31-2020 ThU.S.$
Amount committed for the acquisition of property, plant and equipment		409,269		542,230

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Reconciliation of Property, Plant and Equipment

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment as of June 30, 2021 and as of December 31, 2020:


	Construction work in progress			Land			Buildings			Plant and equipment			IT Equipment			Fixtures and fittings			Motor vehicles			Other Property, Plant and Equipment			TOTAL
Reconciliation of Property, Plant and Equipment	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance 01-01-2021		1,944,578			930,372			2,248,784			3,026,136			26,166			16,627			15,055			117,586			8,325,304
Changes
Additions		523,923			45			1,137			3,846			268			99			100			1,828			531,246
Disposals		—			(123	)		(456	)		(11,626	)		(167	)		(1	)		(130	)		(206	)		(12,709	)
Withdrawals		(919	)		—			(1,171	)		(1,911	)		—			—			(10	)		(753	)		(4,764	)
Depreciation		—			—			(69,220	)		(143,570	)		(3,221	)		(1,576	)		(1,683	)		(591	)		(219,861	)
Impairment loss recognized in profit or loss		—			—			(2,372	)		8,766			(50	)		—			(12	)		—			6,332
Increase (decrease) through net exchange differences		1,390			4,126			2,198			8,014			134			172			134			796			16,964
Reclassification of assets held for sale		—			(26,538	)		(383	)		—			—			—			—			—			(26,921	)
Increase (decrease) through transfers from construction in progress		(122,800	)		822			39,685			81,058			1,977			(941	)		482			(283	)		—
Reclassification from lease to Property, plant and equipment		—			—			—			7,251			—			—			152			—			7,403
Decrease due to loss of control in subsidiary		—			(16,320	)		(47	)		(1,213	)		—			(7	)		—			—			(17,587	)
Total changes		401,594			(37,988	)		(30,629	)		(49,385	)		(1,059	)		(2,254	)		(967	)		791			280,103
Closing balance 06-30-2021		2,346,172			892,384			2,218,155			2,976,751			25,107			14,373			14,088			118,377			8,605,407


Reconciliation of Property, Plant and Equipment	Construction work in progress			Land			Buildings			Plant and equipment			IT Equipment			Fixtures and fittings			Motor vehicles			Other Property, Plant and Equipment			TOTAL
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance 01-01-2020		1,128,431			971,061			2,247,996			3,139,761			20,906			13,421			14,922			111,685			7,648,183
Changes
Additions		1,258,602			3,449			5,149			38,618			906			1,602			1,553			12,839			1,322,718
Disposals		—			(14,957	)		(545	)		(8,323	)		(5	)		(1	)		(197	)		(1,583	)		(25,611	)
Withdrawals		(418	)		(782	)		(1,540	)		(3,986	)		(97	)		(30	)		(6	)		(46	)		(6,905	)
Depreciation		—			—			(139,971	)		(286,740	)		(6,572	)		(3,009	)		(4,325	)		(1,149	)		(441,766	)
Impairment loss recognized in profit or loss		—			—			(22,176	)		(36,032	)		(480	)		—			(107	)		—			(58,795	)
Increase (decrease) through net exchange differences		(4,102	)		(28,405	)		(21,954	)		(55,349	)		(288	)		(190	)		(309	)		(4,709	)		(115,306	)
Increase (decrease) through transfers from construction in progress		(437,935	)		6			181,825			235,776			11,796			4,834			3,149			549			—
Reclassification from lease to Property, plant and equipment		—			—			—			2,411			—			—			375			—			2,786
Total changes		816,147			(40,689	)		788			(113,625	)		5,260			3,206			133			5,901			677,121
Closing balance 12-31-2020		1,944,578			930,372			2,248,784			3,026,136			26,166			16,627			15,055			117,586			8,325,304

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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

January - June

April - June

2021

2020

2021

2020

Depreciation for the year

ThU.S.$

Cost of sales

204,257

199,164

100,306

100,896

Administrative expenses

9,205

8,889

4,621

4,803

Other expenses

219

1,601

120

207

Total

213,681

209,654

105,047

105,906

Depreciation charged to profit or loss statement differs from the movement of the period for Property, Plant and Equipment. This is mainly due to the periodic cost processes in which a portion of the depreciation charge remains in Inventories. Furthermore, this deviation is also affected by the conversion differences corresponding to companies that use a functional currency other than U.S. dollars.

The useful lives of property, plant and equipment are estimated based on the expected use of the assets. The average useful lives by asset class are as follow:


	Years of Useful Life (Average)
Buildings		58
Plant and equipment		30
Information technology equipment		8
Fixtures and fittings		28
Motor vehicles		7
Other property, plant and equipment		14

See Note 12 for details of capitalized borrowing costs.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 8. LEASES

Arauco acting as lessee

In the application of IFRS 16, Arauco chose not to apply the requirements to recognize a liability and an asset for right of use for leases which term ends within 12 months from January 1, 2019 and for leases in which the underlying asset is of low value ThU.S.$ 5.

Lease liabilities and their maturity are presented in Notes 11 and 23.

Right of use assets


	06-30-2021			12-31-2020
	ThU.S.$			ThU.S.$

Property, Plant and Equipment by right of use, Net
Land		75,616			60,761
Buildings		15,738			19,954
Plant and equipment		20,465			24,035
Information technology equipment		241			380
Fixtures and fittings		396			698
Motor vehicles		73,690			92,951
Other property, plant and equipment		15,098			20,355
Total Net		201,244			219,134

Property, Plant and Equipment by right of use, Gross
Land		93,649			74,047
Buildings		28,781			30,443
Plant and equipment		32,813			67,662
Information technology equipment		815			798
Fixtures and fittings		1,563			1,636
Motor vehicles		169,014			168,808
Other property, plant and equipment		20,357			21,574
Total Gross		346,992			364,968

Accumulated depreciation and impairment by right of use
Land		(18,033	)		(13,286	)
Buildings		(13,043	)		(10,489	)
Plant and equipment		(12,348	)		(43,627	)
Information technology equipment		(574	)		(418	)
Fixtures and fittings		(1,167	)		(938	)
Motor vehicles		(95,324	)		(75,857	)
Other property, plant and equipment		(5,259	)		(1,219	)
Total		(145,748	)		(145,834	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Reconciliation of Property, Plant and Equipment by Right of Use

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment by right of use as of June 30, 2021 and as of December 31, 2020:


Reconciliation of Property, Plant and Equipment by right of use	Land ThU.S.$			Buildings ThU.S.$			Plant and equipment ThU.S.$			IT Equipment ThU.S.$			Fixtures and fittings ThU.S.$			Motor vehicles ThU.S.$			Other Property, Plant and Equipment ThU.S.$			TOTAL ThU.S.$
Opening Balance 01-01-2021		60,761			19,954			24,035			380			698			92,951			20,355			219,134
Changes
Additions		17,568			581			1,577			—			—			277			—			20,003
Withdrawals		—			—			—			—			—			(35	)		—			(35	)
Depreciation		(4,428	)		(2,719	)		(4,247	)		(134	)		(230	)		(19,538	)		(1,095	)		(32,391	)
Increase (decrease) through net exchange differences		1,715			18			(443	)		2			—			22			—			1,314
Increase (decrease) through others		—			—			—			—			—			—			(7,403	)		(7,403	)
Reclassification from lease to Property, plant and equipment		—			(2,096	)		(457	)		(7	)		(72	)		13			3,241			622
Total changes		14,855			(4,216	)		(3,570	)		(139	)		(302	)		(19,261	)		(5,257	)		(17,890	)
Closing balance 06-30-2021		75,616			15,738			20,465			241			396			73,690			15,098			201,244


Reconciliation of Property, Plant and Equipment by right of use	Land ThU.S.$			Buildings ThU.S.$			Plant and equipment ThU.S.$				IT Equipment ThU.S.$			Fixtures and fittings ThU.S.$			Motor vehicles ThU.S.$			Other Property, Plant and Equipment ThU.S.$			TOTAL ThU.S.$
Opening Balance 01-01-2020		67,804			25,940			44,753				574			1,138			126,587			17,583			284,379
Changes
Additions		5,543			1,601			—				203			—			5,663			3,750			16,760
Withdrawals		(474	)		(33	)		(5,087	)			—			—			(862	)		(435	)		(6,891	)
Depreciation		(7,032	)		(6,224	)		(17,455	)			(270	)		(481	)		(38,885	)		(2,802	)		(73,149	)
Increase (decrease) through net exchange differences		(5,080	)		200			540				(63	)		41			(297	)		—			(4,659	)
Increase (decrease) through others		—			(1,530	)		1,284				(64	)		—			745			5,045			5,480
Reclassification from lease to Property, plant and equipment		—			—			—		��		—			—			—			(2,786	)		(2,786	)
Total changes		(7,043	)		(5,986	)		(20,718	)			(194	)		(440	)		(33,636	)		2,772			(65,245	)
Closing balance 12-31-2020		60,761			19,954			24,035				380			698			92,951			20,355			219,134

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


	January - June				April - June
Depreciation for the period	2021 ThU.S.$		2020 ThU.S.$		2021 ThU.S.$		2020 ThU.S.$
Cost of sales		21,907		30,086		10,221		15,140
Distribution costs		1,211		825		639		412
Administrative expenses		3,471		4,167		1,658		1,392
Total		26,589		35,078		12,518		16,944

Depreciation charged to profit or loss statement differs from the movement of the period for Property, Plant and Equipment for right of use. This is mainly due to the periodic cost processes in which a portion of the depreciation charge remains in the Inventories. Furthermore, this deviation is also affected by the conversion differences of the companies with a functional currency other than U.S. dollars.

Additionally, Arauco has recognized directly in the interim consolidated statement of profit or loss, the following leases excluded from Right of use assets:


	January – June				April - June
	2021 ThU.S.$		2020 ThU.S.$		2021 ThU.S.$		2020 ThU.S.$
Expenses from payments of variable leases		73,813		65,320		37,438		33,272
Expenses from low value leases		1,546		2,345		694		974
Expenses from short-term leases		15,382		21,932		7,079		6,076
Total		90,741		89,597		45,211		40,322

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Arauco acting as lessor

IFRS 16 substantially maintains the accounting requirements of the lessor of IAS 17. Consequently, Arauco has continued to classify its leases as operating or financial.

Reconciliation of Financial Lease Minimum Payments:


	06-30-2021
Periods	Gross ThU.S.$		Interest ThU.S.$		Present Value ThU.S.$
Less than one year		88		6		82
Between one and five years		—		—		—
More than five years		—		—		—
Total		88		6		82


	12-31-2020
Periods	Gross ThU.S.$		Interest ThU.S.$		Present Value ThU.S.$
Less than one year		121		12		109
Between one and five years		26		—		26
More than five years		—		—		—
Total		147		12		135

Financial lease receivables are presented in the interim consolidated statements of financial position in line items “Trade and other current receivable” and “Trade and other non-current receivable” depending on their maturities stated above.

Arauco accounts for its lease contracts as financial leases. These lease contracts are for a term of less than five-years at market interest rates and leased assets are forestry machinery and equipment. They also include an early termination option, under general and special conditions stipulated in each contract.

Arauco holds leases as lessee and lessor, described in the previous tables, for which there are no impairment contingent payments or restrictions to report.

NOTE 9. REVENUE

January - June

April - June

Classes of revenue

2021
ThU.S.$

2020
ThU.S.$

2021
ThU.S.$

2020
ThU.S.$

Revenue from sales of goods

2,855,885

2,138,551

1,531,919

1,031,516

Revenue from rendering of services

46,396

38,489

23,659

18,358

Total

2,902,281

2,177,040

1,555,578

1,049,874

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

January - June

April - June

2021
ThU.S.$

2020
ThU.S.$

2021
ThU.S.$

2020
ThU.S.$

Employee expenses

331,039

290,559

166,005

137,850

Wages and salaries

320,506

283,799

160,896

134,749

Severance indemnities

10,533

6,760

5,109

3,101


	06-30-2021			12-31-2020
Discount rate		1.81	%		1.81	%
Inflation		3.40	%		3.00	%
Annual rate of wage growth		5.22	%		5.22	%
Mortality rate (1)		RV-2014			RV-2014

(1)

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


Sensitivities to assumptions	ThU.S.$
Discount rate
Increase in 100 bps		(6,418	)
Decrease in 100 bps		6,409
Wage growth rates
Increase in 100 bps		6,211
Decrease in 100 bps		(5,455	)

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


	06-30-2021 ThU.S.$			12-31-2020 ThU.S.$
Current		6,365			6,786
Non-current		73,925			74,609
Total		80,290			81,395


Reconciliation of the present value of severance indemnities obligations	06-30-2021 ThU.S.$			12-31-2020 ThU.S.$
Opening balance		81,395			75,429
Current service cost		3,088			6,298
Interest cost		1,899			3,802
(Gains) losses from changes in actuarial assumptions		(2,228	)		159
Actuarial gains and losses arising from experience		1,143			124
Benefits paid		(2,590	)		(8,323	)
Decrease due to sale of subsidiary		(393	)		—
Increase (decrease) for foreign currency exchange rates changes		(2,024	)		3,906
Closing balance		80,290			81,395

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 11. BALANCES IN FOREIGN CURRENCY AND FOREIGN CURRENCY EXCHANGE RATE IMPACT IN PROFIT OR LOSS.


June 30, 2021	U.S Dollar ThU.S.$		Euros ThU.S.$		Brazilian Real ThU.S.$		Argentine Pesos ThU.S.$		Mexican Pesos ThU.S.$		Other currencies ThU.S.$		Chilean Pesos ThU.S.$		U.F. ThU.S.$		Total ThU.S.$
Assets
Current Assets
Cash and Cash Equivalents		733,103		2,635		157,676		53,185		47,680		7,500		131,950		—		1,133,729
Other current financial assets		3,309		—		—		—		—		—		—		—		3,309
Other current non-financial assets		51,216		115		18,004		10,956		4,098		6,486		117,169		—		208,044
Trade and other current receivables		653,449		15,648		39,223		20,459		38,116		5,762		103,149		2,822		878,628
Accounts receivable due from related companies		—		—		—		—		—		—		5,812		—		5,812
Current Inventories		898,001		—		84,690		—		34,649		—		2,413		—		1,019,753
Current biological assets		247,802		—		50,088		—		—		—		—		—		297,890
Current tax assets		108,153		—		1,249		—		743		1,243		394		—		111,782
Non-current assets or disposal groups classified as held for sale		2,695,033		18,398		350,930		84,600		125,286		20,991		360,887		2,822		3,658,947
Non-current assets or disposal groups classified as held for sale		131,896		—		16		—		48		—		—		—		131,960

Total Current Assets		2,826,929		18,398		350,946		84,600		125,334		20,991		360,887		2,822		3,790,907

Non-Current Assets
Other non-current financial assets		16,670		—		—		—		—		—		—		—		16,670
Other non-current non-financial assets		1,679		—		22,391		268		657		18		92,898		—		117,911
Trade and other non-current receivables		12,926		—		4		—		—		—		2,743		—		15,673
Investments accounted for using equity method		77,625		191,767		30,587		—		—		—		24,412		—		324,391
Intangible assets other than goodwill		88,894		—		1,591		—		545		—		6,110		—		97,140
Goodwill		41,585		—		18,032		—		—		—		—		—		59,617
Property, plant and equipment		8,097,826		—		375,059		—		132,136		—		386		—		8,605,407
Right of use assets		164,564		—		36,680		—		—		—		—		—		201,244
Non-current biological assets		2,925,203		—		264,478		—		—		—		—		—		3,189,681
Deferred tax assets		5,090		—		222		—		403		—		—		—		5,715

Total Non-Current Assets		11,432,062		191,767		749,044		268		133,741		18		126,549		—		12,633,449

Total Assets		14,258,991		210,165		1,099,990		84,868		259,075		21,009		487,436		2,822		16,424,356


June 30, 2021	U.S Dollar ThU.S.$		Euros ThU.S.$		Brazilian Real ThU.S.$		Argentine Pesos ThU.S.$		Mexican Pesos ThU.S.$		Other currencies ThU.S.$		Chilean Pesos ThU.S.$		U.F. ThU.S.$		Total ThU.S.$
Liabilities
Current Liabilities
Other current financial liabilities		354,862		31,523		804		—		—		—		—		42,237		429,426
Current lease liabilities		10,050		95		5,279		—		601		112		31,210		10,878		58,225
Trade and other current payables		210,161		9,811		91,719		14,970		35,196		6,343		294,143		37,883		700,226
Accounts payable to related companies		193		—		—		—		—		—		3,669		—		3,862
Other current provisions		385		—		—		—		—		—		—		—		385
Current tax liabilities		22,385		8,339		9,150		12,582		3,478		24		53		—		56,011
Current provisions for employee benefits		—		—		—		—		—		—		6,365		—		6,365
Other current non-financial liabilities		6,494		52		26,391		3,347		6,335		1,950		5,389		—		49,958

Total Liabilities, current		604,530		49,820		133,343		30,899		45,610		8,429		340,829		90,998		1,304,458

Non-Current Liabilities
Other non-current financial liabilities		3,776,195		481,237		530		—		—		—		—		1,122,532		5,380,494
Non-current lease liabilities		72,506		214		21,855		—		4,303		133		28,651		9,375		137,037
Other non-current provisions		69		—		3,234		25,974		—		—		—		—		29,277
Deferred tax liabilities		1,427,320		—		75,691		—		6,304		—		—		—		1,509,315
Non-current provisions for employee benefits		—		—		—		—		912		—		73,013		—		73,925
Other non-current non-financial liabilities		15		—		85,973		13		—		—		7		—		86,008

Total non-current liabilities		5,276,105		481,451		187,283		25,987		11,519		133		101,671		1,131,907		7,216,056

Total Liabilities		5,880,635		531,271		320,626		56,886		57,129		8,562		442,500		1,222,905		8,520,514

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


December 31, 2020	U.S Dollar ThU.S.$		Euros ThU.S.$		Brazilian Real ThU.S.$		Argentine Pesos ThU.S.$		Mexican Pesos ThU.S.$		Other currencies ThU.S.$		Chilean Pesos ThU.S.$		U.F. ThU.S.$		Total ThU.S.$
Assets
Current Assets
Cash and Cash Equivalents		773,822		3,891		127,459		62,149		43,049		5,334		49,010		—		1,064,714
Other current financial assets		1,763		—		—		—		—		—		—		—		1,763
Other current non-financial assets		19,802		92		28,253		5,886		572		6,147		107,845		—		168,597
Trade and other current receivables		542,296		10,448		38,362		9,757		30,856		5,999		96,847		2,816		737,381
Accounts receivable due from related companies		369		—		829		—		—		—		5,076		—		6,274
Current Inventories		847,161		—		63,935		—		27,183		—		—		—		938,279
Current biological assets		246,637		—		56,073		—		—		—		—		—		302,710
Current tax assets		29,069		752		2,384		1,732		3,471		667		282,655		—		320,730
Non-current assets or disposal groups classified as held for sale		2,460,919		15,183		317,295		79,524		105,131		18,147		541,433		2,816		3,540,448
Non-current assets or disposal groups classified as held for sale		3,815		—		15		—		47		—		—		—		3,877

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

Non-Current Assets
Other non-current financial assets		28,982		—		—		—		—		—		—		—		28,982
Other non-current non-financial assets		1,739		—		17,346		431		692		102		92,904		—		113,214
Trade and other non-current receivables		13,637		—		40		—		—		—		2,859		70		16,606
Investments accounted for using equity method		78,108		184,191		32,402		—		—		—		22,238		—		316,939
Intangible assets other than goodwill		95,231		—		1,675		—		22		—		5,162		—		102,090
Goodwill		42,210		—		17,357		—		—		—		—		—		59,567
Property, plant and equipment		7,838,893		—		349,877		—		136,188		—		346		—		8,325,304
Right of use assets		190,252		—		28,882		—		—		—		—		—		219,134
Non-current biological assets		3,038,157		—		257,960		—		—		—		—		—		3,296,117
Deferred tax assets		4,449		—		1,168		—		424		—		—		—		6,041

Total Non-Current Assets		11,331,658		184,191		706,707		431		137,326		102		123,509		70		12,483,994

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


December 31, 2020	U.S Dollar ThU.S.$		Euros ThU.S.$		Brazilian Real ThU.S.$		Argentine Pesos ThU.S.$		Mexican Pesos ThU.S.$		Other currencies ThU.S.$		Chilean Pesos ThU.S.$		U.F. ThU.S.$		Total ThU.S.$
Liabilities
Current Liabilities
Other current financial liabilities		230,230		32,697		753		—		—		—		—		43,456		307,136
Current lease liabilities		13,687		84		3,292		—		426		148		32,554		13,449		63,640
Trade and other current payables		153,860		11,924		80,607		11,336		26,400		7,485		298,908		35,984		626,504
Accounts payable to related companies		236		—		—		—		—		—		3,503		—		3,739
Other current provisions		386		—		—		—		—		—		—		—		386
Current tax liabilities		152		—		5,298		—		190		24		39,008		—		44,672
Current provisions for employee benefits		—		—		—		—		—		—		6,786		—		6,786
Other current non-financial liabilities		6,616		58		25,726		4,118		2,382		1,319		4,511		—		44,730
Total Liabilities, current		405,167		44,763		115,676		15,454		29,398		8,976		385,270		92,889		1,097,593
Non-Current Liabilities
Other non-current financial liabilities		4,070,126		498,484		657		—		—		—		—		1,145,461		5,714,728
Non-current lease liabilities		74,135		230		14,833		—		218		171		44,604		13,924		148,115
Other non-current provisions		—		—		4,238		26,212		—		—		—		—		30,450
Deferred tax liabilities		1,388,713		—		68,788		—		6,385		—		—		—		1,463,886
Non-current provisions for employee benefits		—		—		—		—		1,069		—		73,540		—		74,609
Other non-current non-financial liabilities		29		—		83,249		14		—		—		11		—		83,303

Total non-current liabilities		5,533,003		498,714		171,765		26,226		7,672		171		118,155		1,159,385		7,515,091

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


	06-30-2021						12-31-2020
	Up to 90 days ThU.S.$		From 91 days to 1 year ThU.S.$		Total ThU.S.$		Up to 90 days ThU.S.$		From 91 days to 1 year ThU.S.$		Total ThU.S.$
Total Liabilities, current		873,576		430,882		1,304,458		765,176		332,417		1,097,593

Other current financial liabilities		62,408		367,018		429,426		63,605		243,531		307,136
U.S Dollar		61,833		293,029		354,862		63,509		166,721		230,230
Euros		—		31,523		31,523		—		32,697		32,697
Brazilian Real		575		229		804		96		657		753
U.F.		—		42,237		42,237		—		43,456		43,456

Bank Loans		30,356		183,281		213,637		30,774		184,660		215,434
U.S Dollar		29,781		151,529		181,310		30,678		151,306		181,984
Euros		—		31,523		31,523		—		32,697		32,697
Brazilian Real		575		229		804		96		657		753

Other Loans		32,052		183,737		215,789		32,831		58,871		91,702
U.S Dollar		32,052		141,500		173,552		32,831		15,415		48,246
U.F.		—		42,237		42,237		—		43,456		43,456

Current lease liabilities		15,774		42,451		58,225		18,631		45,009		63,640
U.S Dollar		3,044		7,006		10,050		4,675		9,012		13,687
Euros		24		71		95		23		61		84
Brazilian Real		1,501		3,778		5,279		823		2,469		3,292
Mexican Pesos		333		268		601		293		133		426
Other currencies		38		74		112		37		111		148
Chilean Pesos		7,671		23,539		31,210		8,578		23,976		32,554
U.F.		3,163		7,715		10,878		4,202		9,247		13,449

Trade and other current payables		681,418		18,808		700,226		585,428		41,076		626,504
U.S Dollar		210,161		—		210,161		153,856		4		153,860
Euros		9,811		—		9,811		11,924		—		11,924
Brazilian Real		72,995		18,724		91,719		39,596		41,011		80,607
Argentine Pesos		14,970		—		14,970		11,336		—		11,336
Mexican Pesos		35,112		84		35,196		26,339		61		26,400
Other currencies		6,343		—		6,343		7,485		—		7,485
Chilean Pesos		294,143		—		294,143		298,908		—		298,908
U.F.		37,883		—		37,883		35,984		—		35,984

Accounts payable to related companies		3,862		—		3,862		3,739		—		3,739
U.S Dollar		193		—		193		236		—		236
Chilean Pesos		3,669		—		3,669		3,503		—		3,503

Other current provisions		385		—		385		384		2		386
U.S Dollar		385		—		385		384		2		386
Current tax liabilities		54,037		1,974		56,011		42,580		2,092		44,672

U.S Dollar		22,383		2		22,385		152		—		152
Euro		8,339		—		8,339
Brazilian Real		7,178		1,972		9,150		5,298		—		5,298
Argentine Pesos		12,582		—		12,582
Mexican Pesos		3,478		—		3,478		190		—		190
Other currencies		24		—		24		24		—		24
Chilean Pesos		53		—		53		36,916		2,092		39,008
Current provisions for employee benefits		5,734		631		6,365		6,079		707		6,786

Chilean Pesos		5,734		631		6,365		6,079		707		6,786
Other current non-financial liabilities		49,958		—		49,958		44,730		—		44,730

U.S Dollar		6,494		—		6,494		6,616		—		6,616
Euros		52		—		52		58		—		58
Brazilian Real		26,391		—		26,391		25,726		—		25,726
Argentine Pesos		3,347		—		3,347		4,118		—		4,118
Mexican Pesos		6,335		—		6,335		2,382		—		2,382
Other currencies		1,950		—		1,950		1,319		—		1,319
Chilean Pesos		5,389		—		5,389		4,511		—		4,511

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


	06-30-2021								12-31-2020
	From 13 months to 3 years ThU.S.$		From 3 years to 5 years ThU.S.$		More than 5 years ThU.S.$		Total ThU.S.$		From 13 months to 3 years ThU.S.$		From 3 years to 5 years ThU.S.$		More than 5 years ThU.S.$		Total ThU.S.$
Total non-current liabilities		2,031,467		464,293		4,720,296		7,216,056		1,789,288		971,281		4,754,522		7,515,091

Other non-current financial liabilities		937,478		404,174		4,038,842		5,380,494		726,206		919,591		4,068,931		5,714,728
U.S Dollar		730,355		195,867		2,849,973		3,776,195		515,399		706,525		2,848,202		4,070,126
Euros		119,480		120,635		241,122		481,237		122,891		125,247		250,346		498,484
Brazilian Real		530		—		—		530		657		—		—		657
U.F.		87,113		87,672		947,747		1,122,532		87,259		87,819		970,383		1,145,461

Bank Loans		241,981		315,635		241,122		798,738		473,233		335,247		250,346		1,058,826
U.S Dollar		121,971		195,000		—		316,971		349,685		210,000		—		559,685
Euros		119,480		120,635		241,122		481,237		122,891		125,247		250,346		498,484
Brazilian Real		530		—		—		530		657		—		—		657

Other Loans		695,497		88,539		3,797,720		4,581,756		252,973		584,344		3,818,585		4,655,902
U.S Dollar		608,384		867		2,849,973		3,459,224		165,714		496,525		2,848,202		3,510,441
U.F.		87,113		87,672		947,747		1,122,532		87,259		87,819		970,383		1,145,461
Non-current lease liabilities		67,997		26,798		42,242		137,037		85,964		21,906		40,245		148,115
U.S Dollar		20,758		14,852		36,896		72,506		22,935		15,787		35,413		74,135
Euros		181		33		—		214		168		62		—		230
Brazilian Real		8,217		8,386		5,252		21,855		5,452		4,842	��	4,539		14,833
Mexican Pesos		3,278		1,025		—		4,303		218		—		—		218
Other currencies		121		12		—		133		141		30		—		171
Chilean Pesos		28,062		589		—		28,651		44,604		—		—		44,604
U.F.		7,380		1,901		94		9,375		12,446		1,185		293		13,924

Other non-current provisions		29,277		—		—		29,277		30,450		—		—		30,450
U.S Dollar		69		—				69
Brazilian Real		3,234		—		—		3,234		4,238		—		—		4,238
Argentine Pesos		25,974		—		—		25,974		26,212		—		—		26,212

Deferred tax liabilities		880,640		5,364		623,311		1,509,315		840,171		—		623,715		1,463,886
U.S Dollar		804,009		—		623,311		1,427,320		764,998		—		623,715		1,388,713
Brazilian Real		70,327		5,364		—		75,691		68,788		—		—		68,788
Mexican Pesos		6,304		—		—		6,304		6,385		—		—		6,385

Non-current provisions for employee benefits		73,883		42		—		73,925		74,336		273		—		74,609
Mexican Pesos		870		42		—		912		796		273		—		1,069
Chilean Pesos		73,013		—		—		73,013		73,540		—		—		73,540

Other non-current non-financial liabilities		42,192		27,915		15,901		86,008		32,161		29,511		21,631		83,303
U.S Dollar		15		—		—		15		29		—		—		29
Brazilian Real		42,157		27,915		15,901		85,973		32,107		29,511		21,631		83,249
Argentine Pesos		13		—		—		13		14		—		—		14
Chilean Pesos		7		—		—		7		11		—		—		11

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

The table below sets forth the subsidiaries that have determined a functional currency other than the U.S. Dollar as follows:


Subsidiary	Country	Functional Currency
Arauco Canada Ltd.	Canada	Canadian Dollar
Arauco do Brasil S.A.	Brazil	Brazilian Real
Arauco Florestal Arapoti S.A.	Brazil	Brazilian Real
Arauco Forest Brasil S.A.	Brazil	Brazilian Real
Arauco Industria de Mexico, S.A. de C.V.	Mexico	Mexican pesos
Arauco Industria de Paineis S.A.	Brazil	Brazilian Real
Arauco Quimica S.A. de C.V.	Mexico	Mexican pesos
Arauco Serviquimex, S.A. de C.V.	Mexico	Mexican pesos
Araucomex Servicios, S.A. de C.V.	Mexico	Mexican pesos
Consorcio Protección Fitosanitaria Forestal S.A.	Chile	Chilean Pesos
Empreendimentos Florestais Santa Cruz Ltda.	Brazil	Brazilian Real
Leasing Forestal S.A.	Argentina	Argentine pesos
Mahal Empreendimentos e Participacoes S.A.	Brazil	Brazilian Real
Novo Oeste Gestao de Ativos Florestais S.A.	Brazil	Brazilian Real
ODD Industries SpA	Chile	Chilean pesos
Tablered Araucomex, S.A. de C.V.	Mexico	Mexican pesos

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


	January - June						April - June
	2021			2020			2021		2020
	ThU.S.$			ThU.S.$			ThU.S.$		ThU.S.$
Arauco do Brasil S.A.		14,720			(107,725	)		45,050		(16,848	)
Arauco Forest Brasil S.A.		12,340			(99,354	)		39,613		(14,733	)
Sonae Arauco S.A.		(6,649	)		225			1,486		3,765
Arauco Florestal Arapoti S.A.		2,813			(25,057	)		8,809		(3,617	)
Arauco Industria México S.A. de C.V.		1,694			(36,176	)		6,733		7,218
Arauco Canada Ltd.		4,543			(7,002	)		1,896		7,675
Others		57			(919	)		644		321

Total reserve of exchange differences on translation		29,518			(276,008	)		104,231		(16,219	)

Effect of foreign exchange rates changes


	January - June						April - June
	2021			2020			2021			2020
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Exchange differences recognized in profit or loss, except for those arising on financial instruments measured at fair value through profit or loss		(5,288	)		(27,552	)		(2,709	)		(25,234	)
						��
Reserve of exchange differences on translation (with Non-controlling interests)		24,736			(281,392	)		106,553			(17,003	)

NOTE 12. BORROWING COSTS

Arauco capitalizes interest at effective rate on current investment projects.

At the date of issuance of these interim consolidated financial statements, Arauco has capitalized financial interest related to the modernization and extension of Planta Arauco (MAPA).


	January – June						April - June
	2021			2020			2021			2020
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Property, plant and equipment capitalized cost
Property, plant and equipment capitalized interest cost rate		4.65	%		4.65	%		4.64	%		4.67	%
Amount of the capitalized interest cost, property, plant and equipment		32,267			17,982			17,300			9,487

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 13. RELATED PARTIES

Related Party Disclosures

Related parties are those entities defined in IAS 24 and under the rules of the Chilean Commission for the Financial Market and the Chilean Corporations Law.

The receivable and payable amounts among related parties at the end of each period correspond to commercial and financing transactions denominated in Chilean Pesos, U.S. dollars and Brazilian Real, where collection or payment deadlines are shown in the following tables and in general do not bear interest, except for financing transactions.

As of the date of these interim consolidated financial statements, the main transactions with related parties are related to fuel purchases with Compañía de Petróleos de Chile S.A. and sodium chlorate purchases at EKA Chile S.A.

As of the date of these interim consolidated financial statements, there are neither provisions for accounts of doubtful collection nor any guarantees granted or received related to the balances with related parties.

Name of Group’s Main Shareholders

The ultimate shareholders of Arauco, direct and indirectly, are Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi.

Name of the Intermediate Controlling Entity that Produces Consolidated Financial Statements for Public Use

Empresas Copec S.A.

Compensation to Key Management Personnel

Compensation to key management personnel, including directors, managers and deputy managers, consist of a fixed monthly salary, and managers and deputy managers also receive an annual bonus subject to the results of the Company and the fulfillment of goals of the business as well as individual performance.

Pricing Strategy Terms and Conditions Corresponding to Transactions with Related Parties

Transactions carried out with related parties are intended to contribute to the corporate interest, are adjusted in price, terms and conditions to those prevailing in the market at the time of approval, and meet the requirements and procedures set forth in the law.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

The table below sets forth information about the Relationship between the Parent Company and its Subsidiaries


			Functional	% Ownership interest 06-30-2021						% Ownership interest 12-31-2020
ID N°	Company Name	Country	Currency	Direct		Indirect		Total		Direct		Indirect		Total
-	Agenciamiento y Servicios Profesionales S.A.	Mexico	U.S. Dollar		0.0020		99.9970		99.9990		0.0020		99.9970		99.9990
-	Arauco Argentina S.A.	Argentina	U.S. Dollar		9.9707		90.0093		99.9800		9.9707		90.0093		99.9800
-	Arauco Australia Pty Ltd.	Australia	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
96547510-9	Arauco Bioenergía S.A.	Chile	U.S. Dollar		98.0000		1.9990		99.9990		98.0000		1.9990		99.9990
-	Arauco Canada Ltd.	Canada	Canadian Dollar		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco Colombia S.A.	Colombia	U.S. Dollar		1.4778		98.5204		99.9982		1.4778		98.5204		99.9982
-	Arauco do Brasil S.A.	Brazil	Brazilian Real		1.0681		98.9309		99.9990		1.0681		98.9309		99.9990
-	Arauco Europe Cooperatief U.A.	Netherlands	U.S. Dollar		0.5215		99.4775		99.9990		0.5215		99.4775		99.9990
-	Arauco Florestal Arapoti S.A.	Brazil	Brazilian Real		—		79.9992		79.9992		—		79.9992		79.9992
-	Arauco Forest Brasil S.A.	Brazil	Brazilian Real		10.0809		89.9182		99.9991		10.0809		89.9182		99.9991
-	Arauco Industria de México, S.A.de C.V.	Mexico	Mexican pesos		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco Industria de Paineis Ltda.	Brazil	Brazilian Real		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco Middle East DMCC	Dubai	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco North America, Inc.	United States	U.S. Dollar		0.0001		99.9989		99.9990		0.0001		99.9989		99.9990
76620842-8	Arauco Nutrientes Naturales SPA	Chile	U.S. Dollar		—		—		—		—		99.9484		99.9484
-	Arauco Perú S.A.	Perú	U.S. Dollar		0.0013		99.9977		99.9990		0.0013		99.9977		99.9990
-	Arauco Química S.A. de C.V.	Mexico	Mexican pesos		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco Serviquimex, S.A. de C.V.	Mexico	Mexican pesos		—		99.9990		99.9990		—		99.9990		99.9990
-	Arauco Wood (China) Company Limited	China	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
-	Araucomex S.A. de C.V.	Mexico	U.S. Dollar		0.0005		99.9985		99.9990		0.0005		99.9985		99.9990
-	Araucomex Servicios, S.A. de C.V.	Mexico	Mexican pesos		—		99.9990		99.9990		—		99.9990		99.9990
96657900-5	Consorcio Protección Fitosanitaria Forestal S.A.	Chile	Chilean Pesos		—		56.4474		56.4474		—		57.0831		57.0831
-	Empreendimentos Florestais Santa Cruz Ltda.	Brazil	Brazilian Real		—		99.9984		99.9984		—		99.9984		99.9984
85805200-9	Forestal Arauco S.A.	Chile	U.S. Dollar		99.9484		—		99.9484		99.9484		—		99.9484
93838000-7	Forestal Cholguán S.A.	Chile	U.S. Dollar		—		98.5701		98.5701		—		98.5683		98.5683
78049140-K	Forestal Los Lagos S.A.	Chile	U.S. Dollar		—		—		—		—		79.9587		79.9587
96563550-5	Inversiones Arauco Internacional Ltda.	Chile	U.S. Dollar		98.0186		1.9804		99.9990		98.0186		1.9804		99.9990
79990550-7	Investigaciones Forestales Bioforest S.A.	Chile	U.S. Dollar		1.0000		98.9489		99.9489		1.0000		98.9489		99.9489
-	Leasing Forestal S.A.	Argentina	Argentine pesos		—		99.9800		99.9800		—		99.9800		99.9800
-	Maderas Arauco Costa Rica S.A.	Costa Rica	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
96510970-6	Maderas Arauco S.A.	Chile	U.S. Dollar		99.0000		0.9995		99.9995		99.0000		0.9995		99.9995
-	Mahal Empreendimentos e Participacoes S.A.	Brazil	Brazilian Real		—		99.9990		99.9990		—		99.9990		99.9990
-	Novo Oeste Gestao de Ativos Florestais S.A.	Brazil	Brazilian Real		—		99.9990		99.9990		—		99.9990		99.9990
76860724-9	ODD Industries SpA	Chile	Chilean Pesos		—		86.6151		86.6151		—		86.6151		86.6151
-	Prime-Line, Inc.	United States	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
76375371-9	Servicios Aéreos Forestales Ltda.	Chile	U.S. Dollar		0.0100		99.9890		99.9990		0.0100		99.9890		99.9990
96637330-K	Servicios Logísticos Arauco S.A.	Chile	U.S. Dollar		45.0000		54.9997		99.9997		45.0000		54.9997		99.9997
-	Tablered Araucomex, S.A. de C.V.	Mexico	Mexican pesos		—		99.9990		99.9990		—		99.9990		99.9990

The companies in the table below are classified as joint operations in accordance with IFRS 11. The assets, liabilities, income and expenses are recorded in relation to the Company’s ownership percentage in accordance with accounting standards applicable in each case.


Company Name	Country	Functional Currency
Eufores S.A.	Uruguay	U.S. Dollar
Celulosa y Energía Punta Pereira S.A.	Uruguay	U.S. Dollar
Zona Franca Punta Pereira S.A.	Uruguay	U.S. Dollar
Forestal Cono Sur S.A.	Uruguay	U.S. Dollar
Stora Enso Uruguay S.A.	Uruguay	U.S. Dollar
El Esparragal Asociación Agraria de R.L.	Uruguay	U.S. Dollar
Ongar S.A.	Uruguay	U.S. Dollar
Terminal Logística e Industrial M’Bopicua S.A.	Uruguay	U.S. Dollar

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Long-term debt with related entities - Mutual Agreement with Arauco Argentina S.A.

On June 5, 2017, Arauco signed a mutual agreement with its subsidiary Arauco Argentina S.A, pursuant to which this Company received an amount of U.S.$ 250,000,000, which accrues accrues a interest at the LIBOR interest rate for 180 days plus a fixed spread of 5.20%, with payments every six months on June 1 and December 1 of each year.

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

Employee Benefits for Key Management Personnel


	January - June				April – June
	2021		2020		2021		2020
	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Salaries and bonuses		39,700		27,770		22,603		12,786
Per diem compensation to members of the Board of Directors		1,242		1,087		625		374
Termination benefits		1,995		2,218		1,420		1,743
Total		42,937		31,075		24,648		14,903

Related Party Receivables, Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

06-30-2021
ThU.S.$

12-31-2020
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

1,843

1,251

Forestal del Sur S.A.

79.825.060-4

Associate of a subsidiary’s
minority shareholder

Chile

Chilean pesos

—

575

Unilin Arauco Pisos Ltda.

—

Joint Venture

Brazil

Brazilian
Real

30 days

—

829

CMPC Maderas S.A.

95.304.000-K

Common Stockholder

Chile

Chilean pesos

30 days

CMPC Pulp S.A.

96.532.330-9

Common Stockholder

Chile

Chilean pesos

30 days

900

866

Fundación Educacional Arauco

71.625.000-8

Parent company is founder
and contributor

Chile

Chilean pesos

30 days

426

—

Fundación Acerca Redes

65.097.218-K

Parent company is founder
and contributor

Chile

Chilean pesos

30 days

1,006

968

Parque Eólico Ovejera Sur SpA.

76.839.949-2

Associate

Chile

Chilean pesos

30 days

—

Sonae Arauco Portugal S.A.

—

Subsidiary of a Joint
Venture

Portugal

U.S. Dollar

—

369

E2E S.A.

76.879.577-0

Joint Venture

Chile

Chilean pesos

10-may-21

472

460

E2E S.A.

76.879.577-0

Joint Venture

Chile

Chilean pesos

27-Apr-21

430

—

E2E S.A.

76.879.577-0

Joint Venture

Chile

Chilean pesos

28-Oct-21

295

288

E2E S.A.

76.218.856-2

Joint Venture

Chile

Chilean pesos

30 days

335

639

TOTAL

5,812

6,274

Related Party Payables, Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

06-30-2021
ThU.S.$

12-31-2020
ThU.S.$

Compañía de Petróleos de Chile S.A.

99.520.000-7

Common controlling
parent

Chile

Chilean pesos

30 days

3,583

2,657

Abastible S.A.

91.806.000-6

Common controlling
parent

Chile

Chilean pesos

30 days

139

Fundación Educacional Arauco

71.625.000-8

Parent company is
founder and
contributor

Chile

Chilean pesos

—

694

Red to Green S.A.

86.370.800-1

Common
Stockholder

Chile

Chilean pesos

30 days

—

Empresa Nacional de Telecomunicaciones S.A.

92.580.000-7

Common
Stockholder

Chile

Chilean pesos

30 days

Servicios Corporativos Sercor S.A.

96.925.430-1

Associate

Chile

Chilean pesos

30 days

—

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of an
associate

Chile

U.S. Dollar

30 days

193

236

Colbpun Transmisión S.A.

76.218.856-2

Common
Stockholder

Chile

Chilean pesos

30 days

—

Adm. de Ventas al Detalle Arco Prime Ltda.

77.215.640-5

Common controlling
parent

Chile

Chilean pesos

30 days

Woodtech S.A.

76.724.000-7

Associate of
controlling parent

Chile

Chilean pesos

30 days

—

Air BP Copec S.A.

96.942.120-8

Joint venture of
controlling parent

Chile

Chilean pesos

30 days

TOTAL

3,862

3,739

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Related Party Transactions

Purchases

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Transaction
Descriptions

06-30-2021
ThU.S.$

12-31-2020
ThU.S.$

Abastible S.A.

91.806.000-6

Common controlling parent

Chile

Chilean
pesos

Fuel

1,163

2,113

Compañía de Petróleos de Chile S.A.

99.520.000-7

Common controlling parent

Chile

Chilean
pesos

Fuel and
other

38,650

48,983

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of the Associate

Chile

U.S. Dollar

Transport,
stowage and
port services

4,351

17,506

EKA Chile S.A.

99.500.140-3

Joint Venture

Chile

Chilean
pesos

Sodium
chlorate

19,910

38,633

Forestal del Sur S.A.

79.825.060-4

Associate of a subsidiary’s
minority shareholder

Chile

Chilean
pesos

Wood and
chips

433

4,495

Portaluppi, Guzman y Bezanilla Abogados Ltda.

78.096.080-9

Common director

Chile

Chilean
pesos

Legal
services

393

703

Empresa Nacional de Telecomunicaciones S.A.

92.580.000-7

Common Stockholder

Chile

Chilean
pesos

Telephone
services

164

229

Colbún Transmisión S.A.

76.218.856-2

Common Stockholder

Chile

Chilean
pesos

Electrical
Power

274

399

Woodtech S.A.

76.724.000-7

Indirect associate of
controlling parent

Chile

Chilean
pesos

Wood
volumen
measurement
services

698

1,362

Inversiones Siemel S.A.

94.082.000-6

Common Stockholder

Chile

Chilean
pesos

Rentals

279

Elemental S.A.

76.659.730-0

Associate of controlling
parent

Chile

Chilean
pesos

Services and
other
purchases

364

Servicios Corporativos Sercor S.A.

96.925.430-1

Associate

Chile

Chilean
pesos

Other
purchases

107

242

Sales and other transactions

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Transaction
Descriptions

06-30-2021
ThU.S.$

12-31-2020
ThU.S.$

EKA Chile S.A.

99.500.140-3

Joint venture

Chile

Chilean
pesos

Electrical
Power

9,988

16,559

Forestal del Sur S.A.

79.825.060-4

Associate of a subsidiary’s
minority shareholder

Chile

Chilean
pesos

Harvesting
services,
wood and
chips

7,329

21,146

CMPC Pulp S.A.

96.532.330-9

Common Stockholder

Chile

Chilean
pesos

Wood and
chips

4,474

7,849

CMPC Tissue S.A.

96.529.310-8

Common Stockholder

Chile

Chilean
pesos

Pulp

—

3,681

Unilin Arauco Pisos Ltda.

—

Joint venture

Brazil

Brazilian
Real

Wood

—

4,623

E2E S.A.

76.879.577-0

Joint venture

Chile

Chilean
pesos

Wood,
plywood
and boards

211

471

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 14. INVESTMENTS IN SUBSIDIARIES

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

On March 10, 2021, Arauco through the subsidiary Forestal Arauco S.A. sold its total stake in the company Forestal Los Lagos SpA (ex S.A.) for ThU.S.$ 48,000. This operation generated a profit of ThU.S.$ 20,381 that is presented in Other income.

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

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

NOTE 15. INVESTMENTS IN ASSOCIATES

As of June 30, 2021 and as of December 31, 2020, there were no new investments in associates to report.

The following tables set forth information about Investments in associates.


Name	Inversiones Puerto Coronel S.A.
Country	Chile
Functional Currency	U.S. Dollar
Corporate purpose	Investments in movables and real estate, acquisition of companies, securities and investment instruments, investment management and development and/or participation in all kind of businesses and companies related to industrial, shipping, forestry and commercial activities.
Ownership interest (%)	50.0000%
	06-30-2021	12-31-2020
Carrying amount accounted for using equity method	ThU.S.$ 55,562	ThU.S.$ 56,314

Name	Servicios Corporativos Sercor S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Consulting services related to business management to Boards of Directors and Senior Management of all Arauco’s entities.
Ownership interest (%)	20.0000%
	06-30-2021	12-31-2020
Carrying amount accounted for using equity method	ThU.S.$ 235	ThU.S.$ 187

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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%
	06-30-2021	12-31-2020
Carrying amount accounted for using equity method	ThU.S.$ 6	ThU.S.$ 7

Name	Consorcio Tecnológico Bioenercel S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Developing of technologies which will promote the development of a biofuels industry in Chile, obtained from lingo-cellulosic materials. The future execution of this sustainable project is financed by the Innova Chile Committee.
Ownership interest (%)	20.0000%
	06-30-2021	12-31-2020
Carrying amount accounted for using equity method	ThU.S.$ 1	ThU.S.$ 1

Name	Vale do Corisco S.A.
Country	Brazil
Functional Currency	Brazilian Real
Corporate purpose	Management of forestry activities.
Ownership interest (%)	49.0000%
	06-30-2021	12-31-2020
Carrying amount accounted for using equity method	ThU.S.$ 30,587	ThU.S.$ 29,205

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Summarized Financial Information of Associates


	Assets
06-30-2021	Inversiones Puerto Coronel S.A. ThU.S.$			Serv.Corporativos Sercor S.A. ThU.S.$			Vale do Corisco S.A. ThU.S.$			Consorcio Tecnológico Bioenercel S.A. ThU.S.$		Genómica Forestal S.A. ThU.S.$			Total ThU.S.$
Current		1			3,351			4,830			1		15			8,198
Non-current		112,944			3,145			78,502			7		56			194,654
Total		112,945			6,496			83,332			8		71			202,852


	Liabilities and Equity
	Inversiones Puerto Coronel S.A. ThU.S.$			Serv.Corporativos Sercor S.A. ThU.S.$			Vale do Corisco S.A. ThU.S.$			Consorcio Tecnológico Bioenercel S.A. ThU.S.$		Genómica Forestal S.A. ThU.S.$			Total ThU.S.$
Current		54			2,691			596			—		7			3,348
Non-current		—			2,628			20,314			5		38			22,985
Equity		112,890			1,176			62,422			3		25			176,516
Total		112,944			6,495			83,332			8		70			202,849


06-30-2021
Income		—			2,607			3,532			—		—			6,139
Other income / expenses		(1,520	)		(2,345	)		(4,503	)		—		(2	)		(8,370	)
Profit or loss (continuing operations)		(1,520	)		262			(971	)		—		(2	)		(2,231	)

Other comprehensive income		—			—			—			—		—			—
Comprehensive income		(1,520	)		262			(971	)		—		(2	)		(2,231	)
Dividends received		—			—			573			—		—			573


	Assets
12-31-2020	Inversiones Puerto Coronel S.A. ThU.S.$			Serv.Corporativos Sercor S.A. ThU.S.$			Vale do Corisco S.A. ThU.S.$			Consorcio Tecnológico Bioenercel S.A. ThU.S.$		Genómica Forestal S.A. ThU.S.$			Total ThU.S.$
Current		114,463			4,155			3,725			1		18			122,362
Non-current		1			3,444			76,129			11		57			79,642
Total		114,464			7,599			79,854			12		75			202,004


	Liabilities and Equity
	Inversiones Puerto Coronel S.A. ThU.S.$			Serv.Corporativos Sercor S.A. ThU.S.$			Vale do Corisco S.A. ThU.S.$			Consorcio Tecnológico Bioenercel S.A. ThU.S.$		Genómica Forestal S.A. ThU.S.$			Total ThU.S.$
Current		54			4,029			699			—		8			4,790
Non-current		—			2,634			19,554			5		39			22,232
Equity		114,410			936			59,601			7		28			174,982
Total		114,464			7,599			79,854			12		75			202,004


06-30-2020
Income		—			2,194			2,843			—		—			5,037
Other income / expenses		6,019			(1,978	)		(1,625	)		—		(2	)		2,414

Profit or loss (continuing operations)		6,019			216			1,218			—		(2	)		7,451

Other comprehensive income		—			—			—			—		—			—
Comprehensive income		6,019			216			1,218			—		(2	)		7,451
Dividends received		—			—			783			—		—			783

Reconciliation of Investment in Associates and Joint Ventures


	06-30-2021			12-31-2020
	ThU.S.$			ThU.S.$
Opening balance as of January 1 Changes		316,939			293,118
Investment in joint ventures, additions (*)		4,800			20,129
Disposals, investment in associates and joint ventures (**)		(3,197	)		(943	)
Share of profit (loss) in investment in associates		139			4,821
Share of profit (loss) in investment in joint ventures		11,077			(2,504	)
Dividends Received, Investments in Associates		(1,166	)		(4,357	)
Increase (Decrease) in foreign exchange currency on translation of Associates and Joint Ventures		(5,546	)		8,351
Other increase (decrease) in investment and associates and joint ventures		1,345			(1,676	)
Total changes		7,452			23,821
Closing balance		324,391			316,939

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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


	06-30-2021		12-31-2020
	ThU.S.$		ThU.S.$
Carrying amount of associates accounted for using equity method		86,391		85,714
Carrying amount of joint ventures accounted for using equity method		238,000		231,225
Total investment accounted for using equity method		324,391		316,939

NOTE 16. INTERESTS IN JOINT ARRANGEMENTS

Investments and contributions made

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

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

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

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

As of June 30, 2021 and as of December 31, 2020, Arauco has not made contributions to Uruguayan companies Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A.

The investments in Uruguay qualify as a joint operation. In relation to “other rights and contractual conditions”, the joint operation has the primary objective of providing the parties an output. As established in the “Pulp Supply Agreement”, both Arauco and its partner have the obligation to acquire 100% of the yearly pulp produced by the joint operation. Arauco has recognized the assets, liabilities, income and expenses associated with its interest ownership, as of January 1, 2013, pursuant to IFRS 11.

Arauco holds a 50% interest in Sonae Arauco, which subsidiary produces and commercializes wood panels, of the type of MDF, PB and OSB, and sawn timber, through the operation of 2 panel plants and one sawmill in Spain; 2 panel plants and one resin plant in Portugal; 4 panel plants in Germany and 2 panel plants in South Africa.

Furthermore, Arauco holds a 50% ownership in Eka Chile S.A. (“Eka”), a company that sells sodium chlorate to pulp plants in Chile. There is a contractual agreement with this company whereby Arauco has engaged in an economic activity subject to common control, which is classified as a joint venture.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

The following tables set forth summarized financial information of the more significant interests in joint arrangements, which qualify as joint operations:


	06-30-2021				12-31-2020
Celulosa y Energía Punta Pereira S.A. (Uruguay)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		368,755		172,712		262,446		163,887
Non-current		2,069,384		270,245		2,103,903		325,894
Equity		—		1,995,182		—		1,876,568
Total Joint Arrangement		2,438,139		2,438,139		2,366,349		2,366,349

Investment		997,591				938,284


	06-30-2021 ThU.S.$		06-30-2020 ThU.S.$
Income		401,669		311,311
Expenses		(288,512)		(296,789)
Joint Arrangement Net Income (Loss)		113,157		14,522


	06-30-2021				12-31-2020
Forestal Cono Sur S.A. (consolidated)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		63,833		2,515		44,684		2,121
Non-current		151,658		9,416		170,028		10,637
Equity		—		203,560		—		201,954
Total Joint Arrangement		215,491		215,491		214,712		214,712

Investment		101,780				100,977


	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Income		10,112			16,658
Expenses		(8,505	)		(17,953	)
Joint Arrangement Net Income (Loss)		1,607			(1,295	)


	06-30-2021				12-31-2020
Eufores S.A. (consolidated)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		133,150		206,707		115,971		192,443
Non-current		891,545		143,388		870,093		131,893
Equity		—		674,600		—		661,728
Total Joint Arrangement		1,024,695		1,024,695		986,064		986,064

Investment		337,300				330,864


	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Income		114,241			123,568
Expenses		(101,145	)		(118,958	)
Joint Arrangement Net Income (Loss)		13,096			4,610


	06-30-2021				12-31-2020
Zona Franca Punta Pereira S.A. (Uruguay)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		6,250		103,961		6,233		107,131
Non-current		448,095		16,378		453,572		19,179
Equity		—		334,006		—		333,495
Total Joint Arrangement		454,345		454,345		459,805		459,805

Investment		167,003				166,748


	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Income		9,093			9,117
Expenses		(8,582	)		(15,298	)
Joint Arrangement Net Income (Loss)		511			(6,181	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

The following tables set forth summarized financial information of the more significant interests in joint ventures accounted in for equity method:


	06-30-2021				12-31-2020
Unilin Arauco Pisos Ltda.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		—		—		8,050		4,995
Non-current		—		—		3,747		408
Equity		—		—		—		6,394
Total Joint Arrangement		—		—		11,797		11,797

Investment		—				3,197


	06-30-2021 ThU.S.$		06-30-2020 ThU.S.$
Income		—		5,844
Expenses		—		(5,631	)
Joint Arrangement Net Income (Loss)		—		213

Other comprehensive income		—		—
Comprehensive income		—		213
Dividends		—		—


	06-30-2021				12-31-2020
Eka Chile S.A.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		15,338		2,798		16,551		4,154
Non-current		35,588		4,472		35,599		4,782
Equity		—		43,656		—		43,214
Total Joint Arrangement		50,926		50,926		52,150		52,150

Investment		21,828				21,607


	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Income		20,376			20,035
Expenses		(18,747	)		(18,221	)
Joint Arrangement Net Income (Loss)		1,629			1,814

Other comprehensive income		—			—
Comprehensive income		1,629			1,814
Dividends		594			2,894

06-30-2021

12-31-2020

Sonae Arauco S.A.

Assets
ThU.S.$

Liabilities
ThU.S.$

Assets
ThU.S.$

Liabilities
ThU.S.$

Current

264,103

286,404

258,058

276,127

Non-current

726,448

320,614

765,712

379,260

Equity

—

383,533

—

368,383

Total Joint Arrangement

990,551

1,023,770

Net assets

166,229

157,552

Net asset adjustment (Goodwill)

25,538

26,640

Investment

191,767

184,192


	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Income		538,966			363,122
Expenses		(513,749	)		(371,177	)
Joint Arrangement Net Income (Loss)		25,217			(8,055	)

Other comprehensive income		—			—
Comprehensive income		25,217			(8,055	)
Dividends		—			—


	06-30-2021				12-31-2020
Agrícola El Paque SpA.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		1,590		10		4,562		69
Non-current		10,945		2,355		5,782		—
Equity		—		10,170		—		10,275
Total Joint Arrangement		12,535		12,535		10,344		10,344

Investment		5,085				5,138


	06-30-2021 ThU.S.$		06-30-2020 ThU.S.$
Income		—		—
Expenses		120		—
Joint Arrangement Net Income (Loss)		120		—

Other comprehensive income		—		—
Comprehensive income		120		—
Dividends		—		—

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


	06-30-2021				12-31-2020
Parque Eólico Ovejera del Sur SpA.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		206		105		367		27
Non-current		2,155		—		2,057		—
Equity		—		2,256		—		2,398
Total Joint Arrangement		2,361		2,361		2,424		2,425

Investment		1,128				1,199


	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Income		64			—
Expenses		(152	)		(69	)
Joint Arrangement Net Income (Loss)		(88	)		(60	)

Other comprehensive income		—			—
Comprehensive income		(88	)		(69	)
Dividends		—			—


	06-30-2021				12-31-2020
E2E S.A.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		6,677		1,994		9,196		4,233
Non-current		32,742		2,199		27,045		1,407
Equity		—		35,226		—		30,601
Total Joint Arrangement		39,419		39,419		36,241		36,241

Investment		17,613				15,301


	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Income		386			800
Expenses		(4,774	)		(1,556	)
Joint Arrangement Net Income (Loss)		(4,388	)		(756	)

Other comprehensive income		—			—
Comprehensive income		(4,388)			(756)
Dividends		—			—


	06-30-2021				12-31-2020
Agrícola San Gerardo SpA.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		230		373		603		387
Non-current		5,302		1,108		3,859		—
Equity		—		4,051		—		4,075
Total Joint Arrangement		5,532		5,532		4,462		4,462

Investment		2,026				2,038


	06-30-2021			06-30-2020
	ThU.S.$			ThU.S.$
Income		—			—
Expenses		(79	)		(56	)
Joint Arrangement Net Income (Loss)		(79	)		(56	)

Other comprehensive income		—			—
Comprehensive income		(79)			(56)
Dividends		—			—

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 17. IMPAIRMENT OF ASSETS

As a result of current market conditions in the United States generated by the decrease in prices, the impairment tests carried out at the CGU yielded an impairment provision of ThU.S.$ 14,918 relating to Property, Plant and Equipment and spare parts from Inventories corresponding to facilities of wood products in United States. For these calculations we used a discount rate of 8.7%. In the 2021 period, provisions associated with assets sold and recovered were reversed for a total of ThU.S.$ 10,716.

In addition, due to the modernization and expansion project of the Arauco Mill (Proyecto de Modernización y Ampliación de la Planta Arauco, or MAPA Project), as of June 30, 2021, we recorded an impairment provision due to a reduction in the useful lives for the CGU Line 1 of Arauco Mill (Pulp business) in an amount of ThU.S.$ 4,914 (ThU.S.$ 46,577 as of December 31, 2020). For this calculation, we used a discount rate of 6.1%. The Line 1 of the Arauco mill will be permanently shut down upon completion of the MAPA project.

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


Changes in CGU impairment provision	06-30-2021			12-31-2020
Changes in CGU impairment provision	ThU.S.$			ThU.S.$
Opening balance		218,764			180,209
Impairment loss recognized in profit or loss		5,328			62,701
Reversal of impairment loss in profit or loss		(13,348	)		(6,171	)
Increase (Decrease) in foreign exchange currency on translation		2,045			(17,975	)

Closing balance		212,789			218,764

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


Changes in impairment provision from impaired assets	06-30-2021			12-31-2020
Changes in impairment provision from impaired assets	ThU.S.$			ThU.S.$
Opening balance		8,088			8,135
Impairment loss recognized in profit or loss		2,077			1,262
Reverse of ompairment loss in profit or loss		(63	)		(1,204	)
Increase (Decrease) in foreign exchange currency on translation		260			(105	)

Closing balance		10,362			8,088

Goodwill

Goodwill is allocated to the groups of cash-generating units that are expected to benefit from the synergies of the combination.

At the date of these interim consolidated financial statements, the balance of goodwill is ThU.S.$ 59,617 (ThU.S.$ 59,567 at December 31, 2020), as shown below:


Goodwill	06-30-2021		12-31-2020
Goodwill	ThU.S.$		ThU.S.$
Arauco Canada Ltd. (Flakeboard Company Ltd)		40,853		40,793
Arauco do Brasil S.A. (Pien mill)		18,032		17,357
Arauco North America, Inc. (Prime-Line, Inc.)		732		732
Forestal Arauco S.A. (Forestal Los Lagos S.A.)		—		685

Closing balance		59,617		59,567

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


	06-30-2021			12-31-2020
Goodwill	ThU.S.$			ThU.S.$
Opening balance at January 1		59,567			65,751
Increase (decrease) due to business combination		(685	)		—
Increase (decrease) in foreign currency exchange		735			(6,184	)

Closing balance		59,617			59,567

Of the total of goodwill, ThU.S.$ 40,853 (ThU.S.$ 40,793 as of December 31, 2020) were generated by the acquisition of “Flakeboard” (currently Arauco Canada Ltd.), a company that, directly and/or through its subsidiaries, possesses and operates 7 panel plants, for which Arauco acquired and paid, on September 24, 2012, the price of ThU.S.$ 242,502 for the 100% interest ownership. The remaining balance of ThU.S.$ 732 corresponds to the acquisition of Prime-Line Inc, on September 1, 2019, for which Arauco North America Inc, a subsidiary of Arauco Canada Ltd. paid ThU.S.$ 18,880 for all the shares of said company.

The recoverable amount for Flakeboard’s cash generating unit was determined based on the calculations of its value in use, and this calculation was made using cash flow projections covering a 7-year term, a period time, which is considered to represent the cyclicality of the business performance, applying a nominal discount rate of 7% which reflects current market assessments for the wood products segment in North America.

The investment in the panel plant in Pien, Brazil generated a goodwill of ThU.S.$ 18,032 (ThU.S.$ 17,357 as of December 31, 2020).

The recoverable amount for the Pien plant’s cash generating unit was determined based on the calculations of its value in use, and this calculation was made using cash flow projections covering a 5-year term based on the operational plan approved by the Administration, applying a 7.4% nominal discount rate that reflects current evaluations for the panel segment in Brazil.

As of June 30, 2021 and as of December 31, 2020, the carrying value of the goodwill of the plants did not exceed their recoverable value, and therefore there was no need to recognize impairment losses.

Sensitivity analysis on discount rate was made and no impairment provision was determined.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 18. PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES

The contingent liabilities for outstanding litigations are as follows:

Celulosa Arauco y Constitución S.A.

1. On August 25, 2005, the Chilean Servicio de Impuestos Internos (the “Chilean IRS”) issued tax resolutions No. 184 and No. 185 of 2005, and objected certain income tax returns made by Arauco on April 16, 2001 and October 31, 2001, and furthermore, requested the reimbursement of the amounts returned in connection with tax losses, along with the amendment of the FUT (Tax Profits Fund) Registry balance. In consideration to the foregoing, the above mentioned tax resolutions ordered the restitution of the historical amount as of October 31, 2002 of $4,571,664,617 Chilean Pesos (equal to ThU.S.$ 6,282 as of June 30, 2021). On November 7, 2005, the Company requested a Review of the Supervision Action (Revisión de la Actuación Fiscalizadora, or “RAF”), which is an administrative review of the tax action brought by the Chilean IRS, and filed a claim disputing the above mentioned tax resolutions No. 184 and 185 of 2005. The RAF was resolved on January 9, 2009 by the Chilean IRS, partially sustaining the Company’s request, granting a discount to the total amount of $1,209,399,164 Chilean Pesos (equal to ThU.S.$ 1,662 as of June 30, 2021), resulting in a total disputed amount as of October of 2002 of $3,362,265,453 Chilean Pesos (equal to ThU.S.$ 4,620 as of as of June 30, 2021) plus fines and interests. On February 19, 2010, the Court acknowledged receipt of the Company’s request.

On September 26, 2014, Arauco requested the submission of this claim to the competent jurisdiction of the new Tax and Customs Courts. On October 10, 2014, Arauco’s request was granted. Currently the action is being considered by these new Courts under the Docket No. RUC 14-9-0002087-3. On September 20, 2017, the Court issued its first instance decision confirming the liquidations.

On October 12, 2017, Arauco challenged the decision through an appeal, requesting the Court of Appeals of Santiago to revoke the first instance decision and uphold Arauco’s claim instead. On June 29, 2018, the Court of Appeals of Santiago issued a ruling on appeal, confirming the first instance decision. On July 19, 2018, Arauco lodged a cassation appeal based on formal and substantial flaws before the Supreme Court. (case file 24,758-2018).

On June 21, 2019, Celulosa Arauco y Constitución S.A. filed a claim before the Constitutional Court to declare the legal provision contemplated under section 53, paragraph 3 of the Tax Code unconstitutional and, as a consequence, inapplicable.

On October 29, 2019 the Constitutional Court accepted the claim filed by Celulosa Arauco y Constitución S.A., finding unconstitutional and declaring the inapplicability of section 53, paragraph 3 of the Tax Code in the context of the proceeding “Celulosa Arauco y Constitución S.A. with SII Large taxpayers”, which is in the Supreme Court docket as a result of a cassation appeal (based on form and content) under case file 24,758-2018.

Currently, the case is related in the Supreme Court.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore as of as of June 30, 2021, Arauco has not made any provision whatsoever in connection with this contingency.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

2. Through Res. Ex. N° 1 issued by the Superintendence of the Environment (“SMA”) on January 8, 2016, notified on January 14, 2016, the SMA formulated 11 charges against the Company, due to alleged breaches of certain Environmental Qualification Resolutions for the Valdivia Plant and of DS No. 90/2000. The 11 charges were classified as follows by the SMA: 1 critical, 5 severe, 5 minor.

On February 12, 2016, the Company submitted its defenses.

On December 15, 2017, the Superintendence of the Environment issued Exempted Resolution No. 1,487, closing the punitive administrative proceeding, absolving the company with regards to one of the charges and convicting for other 10 charges, applying a fine of 7,777 UTA (equal to ThU.S.$ 6,669 as of June 30, 2021). On December 22, 2017, the Company submitted a motion for reconsideration regarding Exempted Resolution No. 1,487, before the SMA, requesting that we be absolved of all infringements, with the exception of the charge specified under number 7 (late submission of the water quality report regarding the Cruces river). On March 23, 2018, the reconsideration appeal lodged by the company was rejected. On April 5, 2018, a judicial claim was submitted before the Third Environmental Court. On November 12, 2018, the case was in agreement, and the Minister Ms. Sibel Villalobos Volpi was appointed to draft the ruling.

On February 11, 2020 the judgment of the Third Environmental Court was notified, which partially accepted the legal claim of the Company, only as to the inadequate severity qualification of one of the charges. On February 28, 2020, both the Company and the SMA submitted cassation appeals based on form and content, to be heard and resolved by the Supreme Court.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company, and therefore as of June 30, 2021, Arauco has not made any provision whatsoever in connection with this contingency.

Celulosa Arauco y Constitución S.A., Forestal Arauco S.A., Maderas Arauco S.A. and Servicios Logísticos Arauco S.A.

1. On August 13, 2018, Asociación Gremial de Dueños de Camiones de Constitución (ASODUCAM) filed a complaint seeking the performance of a contract and claiming compensation for damages against Celulosa Arauco y Constitución S.A., Forestal Arauco S.A., Maderas Arauco S.A. and Servicios Logísticos Arauco S.A., The complaint is based on alleged breaches of some agreements for the allocation, distribution and supply of cargo volumes for the years 2001 and 2005, initially executed by associates of ASODUCAM with Forestal Arauco S.A., and then, allegedly, with Servicios Logísticos Arauco S.A., in favor of the other two defendants, Celulosa Arauco and Constitución S.A. and Maderas Arauco S.A. The complaint seeks to enforce the contract, plus $575,000,000 Chilean Pesos (equal to ThU.S.$ 790 as of June 30, 2021) in compensation for damages. In the alternative, it claims (a) $11,189,270,050 Chilean Pesos (equivalent to ThU.S.$ 15,375 as of June 30, 2021), for actual damages; (b) $ 11,189,270,050 monthly during the entire course of the trial, until the termination of the contract is declared in the final ruling, for loss of profits, and (c) $5,000,000,000 Chilean Pesos (equivalent to ThU.S.$ 6,870 as of June 30, 2021) for moral damages.

On August 28, 2018 the claim was served upon Celulosa Arauco y Constitución S.A., Forestal Arauco S.A. and Maderas Arauco S.A., but notification for Servicios Logísticos Arauco S.A. is pending.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and, therefore, as of June 30, 2021, Arauco has not made any provision whatsoever in connection with this contingency.

Forestal Arauco S.A.

1. On July 7, 2015 Inversiones Forestales Los Alpes Limitada and Forestal Neltume-Carrasco S.A. filed a claim against Forestal Arauco S.A. before the Civil Court of Angol (C-502-2015), in which they request that Forestal Arauco S.A. restitute the material possession of 1,855.9 hectares, which would be part of their property “Resto del Fundo Los Alpes”, which would have an area of approximately 2,700 hectares. Likewise, they requested that it be declared that the property is the exclusive domain of the actors, the restitution of the civil and natural fruits, in addition to the deteriorations that the property would have experienced, with litigation costs.

On May 29, 2019, the lawsuit was answered, and the counterclaim of the acquisitive prescription was filed.

On September 1, 2020, the court received the trial case, and its notification remains pending.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of June 30, 2021, Arauco has not made any provision whatsoever in connection with this contingency.

2. On August 2, 2019, the company was notified of a lawsuit for termination of contract and compensation for damages filed by “Sociedad Recuperadora de Fibra S.A.” before the First Court of Valdivia (Case C-2215-2019). In the lawsuit, the plaintiff questions the anticipated termination of a contract by Forestal Arauco. It also claims that the company would have breached various contractual obligations regarding to 2 groups of contracts:

A. (i) Aggregates Transport Contract and (ii) Production, Cargo, Storage and Construction Management Contract for Platforms and flooring.

B. (i) Contract for the Production of Aggregates, (ii) Contract for Long Freight Services for Aggregates and (iii) Contract for Construction Services for Granular floor and Short Freight for Aggregates.

Based on the foregoing, it requests payment of compensation for an amount of $3,486,187,431 Chilean Pesos (equivalent to ThU.S.$ 4,790 as of June 30, 2021).

On September 17, 2019, Forestal Arauco S.A. answered the claim and filed a counterclaim for compensation of damages which is in the process of a conciliation hearing, requesting that the main claimant be ordered to pay $421,723,281 Chilean Pesos (equivalent to ThU.S$ 579 as of June 30, 2021).

Through the resolution dated as of January 9, 2020, the court received the case to commence the production of evidence and the notification of such resolution was delivered to both parties.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Currently, the discovery period is suspended due to the health contingency.

3. On April 15, 2020, Forestal Arauco S.A. was notified of a civil claim for recovery (demanda reivindicatoria de cuota) filed by the company “Agrícola, Forestal, Transportes e Inversiones El Quillay SpA” before the Court of Constitución (Case C-298-2020). The plaintiff sues Forestal Arauco S.A. for the restitution of 3,424.59 hectares that it would be occupying, with respect to the following properties: (i) “Predio que formaba parte de la Hijuela Sur Poniente, de la Hijuela Sur del Fundo Quivolgo”, (ii) “Lomas de Quivolgo” and, (iii) “Hijuela Astillero”. It is the opinion of the plaintiff that the aforementioned piece of land would be part of the property called “Bodega de subdelegation de Quivolgo”, in respect of which the plaintiff would have rights and shares corresponding to 4.17% of said property. Likewise, the plaintiff requests to cancel the registration of the above-mentioned properties of Forestal Arauco S.A., deeming it as a bad-faith holder.

Currently, the discussion period is suspended due to the health contingency.

4. Forestal Arauco S.A. filed before the Court of Constitución (Case C-353-2019) a claim seeking compensation on the basis of non-contractual civil liability against Ricardo Guzmán Reyes, for damages caused as a result of illegal logging inside the land of Forestal Arauco called “Parte Sur-Poniente de la Hijuela Sur de la Hacienda Quivolgo” and “Lomas de Quivolgo”. Said damages are valued in $ 100,000,000 Chilean Pesos (equivalent to ThU.S$ 137 as of June 30, 2021).

On May 2, 2020, Mr. Ricardo Guzmán answered the lawsuit and filed a counterclaim for recovery in which he requests to Forestal Arauco S.A. the restitution of 3,424.59 hectares that it would be occupying, corresponding to the following properties owned by the latter: (i) “Predio que formaba parte de la Hijuela Sur Poniente, de la Hijuela Sur del Fundo Quivolgo”, (ii) “Lomas de Quivolgo” and, (iii) “Hijuela Astillero”. It is the opinion of the plaintiff that the aforementioned piece of land would be part of the property called “Bodega de subdelegation de Quivolgo”, from which would have rights and shares corresponding to 2.38% of said property. Likelywise, the plaintiff requests to cancel the registration of the properties before mentioned of Forestal Arauco S.A., deeming it as a bad-faith holder.

Through a resolution dated November 11, 2020, the court received the trial case, and both parties were notified.

Currently, the discovery period is suspended due to the health contingency.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

5. On May 11, 2020, Forestal Arauco S.A. was notified of a lawsuit of declaration of mere certainty filed against it by the company “Agrícola, Forestal, Transportes y Inversiones El Quillay SpA”, before the Court of Constitución (Case C-323-2020), in which the plaintiff claims that the property called “Predio que formaba parte de la Hijuela Sur Poniente, de la Hijuela Sur del Fundo Quivolgo” owned by Forestal Arauco S.A. would actually have an area of 498 hectares, and, consequently, that the defendant lacks the right of ownership over a portion of land corresponding to 1,768.20 hectares of said property. Based on the foregoing, the plaintiff requests the court to declare mere legal certainty regarding the foregoing and also to declare that said area is part of the property called “La Bodega de la Subdelegación de Quivolgo”, owned by the succession of Mr. José Arcos González in which it would have rights.

On July 29, 2021, the conciliation hearing, was held and an agreement was not reached by the parties. Currently, a decision on the case remains pending.

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 2019 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, and through the resolution No. 2019-228-APN-SECAGYP#MPYT approved the annual forestry plan for 2008 on November 29, 2019. For this reason, Arauco Argentina S.A. may compute the exemption in the income tax related to the forest appraisal on the plantations to be harvested from the lands included in those plans as from the 2019 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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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 (caution) policies for each shipment permits exempted from payment of export duty. The company maintains an assignment of funds equivalent to $ 2,160,896,000 Argentine Pesos (ThU.S.$ 22,575 as of June 30, 2021) for guaranteed export duties between 2007-2015, which appears under not current provisions. Additionally, the Company filed a restitution claim for a total amount of ThU.S.$ 6,555, 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. The Company’s claim is being heard under case file No. 21830/2006 before the Federal Contentious Administrative Court No. 4. On October 28, 2019, a judgment of first instance was issued in said case, rejecting the claim and imposing the litigation costs on Arauco. Against that judgment, the Company filed an appeal and expressed the corresponding arguments in December 2019. On November 5, 2020, the Chamber of Appeals considered the arguments made by Arauco and determined that a final ruling will be issued in the case.

On the other hand, Arauco Argentina S.A. currently has a guarantee at an amount of $435,952,315 Argentine Pesos (ThU.S.$ 4,554 as of June 30, 2021) in favor of the Secretary of Agriculture, Livestock and Fishing.

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.

The Federal Reserve of Brazil contested the amortization of goodwill resulting from acquisitions of Placas do Paraná, Tafibrás, Tafisa (now, Arauco do Brasil S.A.) y Dynea.

On July 20, 2015, Arauco do Brasil was notified of the first-level administrative ruling which partially upheld the infringement. 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, for which 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 (“Special Remedy”). 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.

On August 28, 2020, the Company was served with an intermediate decision in Grievance of Instrument, issued by CARF that divided the claim into two parts:

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

(i)

One part that remains awaiting the administrative decision in Special Remedy to the CSRF (the issue of the isolated fine of 50% and interests) with the estimated amount of R$ 29,250,417 (equivalent to ThU.S.$ 5,862 as of June 30, 2021) and that amount will be added interests and readjustments as of January 31, 2019 until the administrative discussion is finished.

(ii)

Second part that closes the administrative discussion (Comment of the contractual expenses deducted in the purchase of Tafisa; Comment of interests and legal expenses on debts paid in the amnesty program; payment of IRPJ and lower CSLL in the second part of 2010). Regarding this second part, the amount of R$ 31,774,176 (equivalent to ThU.S.$ 6,368 as of June 30, 2021) and to this amount interests and readjustments will be added as of August 28, 2020 until the final decision of the discussion court initiated on September 23, 2019, to continue answering that part of the claim. Thus, we enter with a Tax Debt Cancellation Action and we are introducing a guarantee for the suspension of any collection an to obtain the Certificates of Tax Compliance until the final decision of the trial. Currently we are starting to produce expert evidence in the case.

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.

Provisions recorded as of June 30, 2021 as of December 31, 2020 are as follows:


	06-30-2021		12-31-2020
Classes of Provisions	ThU.S.$		ThU.S.$
Provisions, Current		385		386
Provisions for litigations		385		386
Provisions, non-Current		29,277		30,450
Provisions for litigations		5,795		6,968
Other provisions		23,482		23,482

Total Provisions		29,662		30,836

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


	06-30-2021
	*Litigations ()**			Other Provisions		Total
Movements in Provisions	ThU.S.$			ThU.S.$		ThU.S.$
Opening balance		7,354			23,482		30,836
Changes in provisions
Increase in existing provisions		1,253			—		1,253
Used provisions		(2,324	)		—		(2,324	)
Increase (decrease) in foreign currency exchange		(183	)		—		(183	)
Other Increases (Decreases)		80			—		80
Total Changes		(1,174	)		—		(1,174	)
Closing balance		6,180			23,482		29,662

(*)	The increase in legal claims is comprised mainly by ThU.S.$ 1,239 (Brazilian subsidiaries) and THU.S.$ 14 (Argentina) in connection with civil and labor lawsuits


	12-31-2020
	*Litigations ()**			Other Provisions			Total
Movements in Provisions	ThU.S.$			ThU.S.$			ThU.S.$
Opening balance		9,524			23,500			33,024
Changes in provisions
Increase in existing provisions		3,257			—			3,257
Used provisions		(2,832	)		—			(2,832	)
Increase (decrease) in foreign currency exchange		(2,240	)		—			(2,240	)
Other Increases (Decreases)		(355	)		(18	)		(373	)
Total Changes		(2,170	)		(18	)		(2,188	)
Closing balance		7,354			23,482			30,836

(*)	The increase in legal claims is comprised mainly by ThU.S.$ 3,045 and ThU.S.$ 212 (Brazilian and Argentine subsidiaries respectively) in connection with civil and labor lawsuits.

Provisions for litigations are related to labor and tax claims whose payment period is uncertain. Other provisions mainly include 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

June 30, 2021

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

NOTE 19. INTANGIBLE ASSETS


	06-30-2021			12-31-2020
Classes of Intangible Assets, Net	ThU.S.$			ThU.S.$
Intangible assets, net		97,140			102,090
Computer software		31,751			31,877
Water rights		5,684			5,684
Customer		32,683			35,092
Other identifiable intangible assets		27,022			29,437

Classes of intangible Assets, Gross		236,318			232,391
Computer software		121,907			116,315
Water rights		5,684			5,684
Customer		76,201			75,626
Other identifiable intangible assets		32,526			34,766

Classes of accumulated amortization and impairment
Total accumulated amortization and impairment		(139,178	)		(130,301	)
Accumulated amortization and impairment, intangible assets		(139,178	)		(130,301	)
Computer software		(90,156	)		(84,438	)
Customer		(43,518	)		(40,534	)
Other identifiable intangible assets		(5,504	)		(5,329	)

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


	06-30-2021
	Computer Software			Water Rights		Customer			Others			TOTAL
Reconciliation of intangible assets	ThU.S.$			ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance		31,877			5,684		35,092			29,437			102,090
Changes
Additions		1,461			—		—			1,390			2,581
Disposals		—			—		—			(479	)		(479	)
Amortization		(6,058	)		—		(2,663	)		(111	)		(8,832	)
Increase (Decrease) related to foreign currency translation		288			—		254			5			547
Other Increases (Decreases)		4,183			—		—			(3,220	)		963
Changes Total		(126	)		—		(2,409	)		(2,415	)		(4,950	)
Closing Balance		31,751			5,684		32,683			27,022			97,140


	12-31-2020
	Computer Software			Water Rights			Customer			Others			TOTAL
Reconciliation of intangible assets	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance		39,065			5,966			39,981			21,240			106,252
Changes
Additions		6,084			—			—			4,461			10,545
Additions through business combination		—			—			—			5,162			5,162
Disposals		(10	)		—			—			—			(10	)
Amortization		(10,112	)		—			(5,120	)		(329	)		(15,561	)
Increase (Decrease) related to foreign currency translation		(277	)		—			231			(116	)		(162	)
Other Increases (Decreases)		(2,873	)		(282	)		—			(981	)		(4,136	)
Changes Total		(7,188	)		(282	)		(4,889	)		8,197			(4,162	)
Closing Balance		31,877			5,684			35,092			29,437			102,090


	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

June 30, 2021

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.

As of June 30, 2021 Arauco has a total surface of 1.7 million hectares of which 998 thousand hectares are used for forestry planting, 493 thousand hectares are native forest, 111 thousand hectares are used for other purposes and 88 thousand hectares not yet planted.

For the period ended June 30, 2021, the production volume of logs totaled 9.9 million m3 (9.1 million m3 as of June 30, 2020).

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 June 30, 2021 amounted to ThU.S.$ 83,080 (ThU.S.$ 88,143 as of June 30, 2020). 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 June 30, 2021 amounted to ThU.S.$ 96,584 (ThU.S.$ 85,298 as of June 30, 2020).

•

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

June 30, 2021

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

•

The discount rates used are 5.5% in Chile, 6.7% Brazil, 16.2% in Argentina and 6.5% 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		(149,083	)
	-0.5		159,429
Margins (%)	10		442,060
	-10		(442,060	)

The significant unobservable input data used in the measurement of the fair value of biological assets are discount rates and sales margins of the different products that are harvested from the forest. Increases (decreases) in any of these input data considered in isolation would result in a smaller or greater fair value measurement.

The adjustment to fair value of biological assets minus sale costs 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.

As of the date of these Interim Consolidated Financial Statements, there are no committed disbursements for the acquisition of biological assets.

Detail of Biological Assets Pledged as Security

As of June 30, 2021, there are no forestry plantations pledged as security.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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.

Current and Non-Current Biological Assets

As of the date of these Interim Consolidated Financial Statements, the Current and Non-current biological assets are as follows:


	06-30-2021		12-31-2020
	ThU.S.$		ThU.S.$
Current		297,890		302,710
Non-current		3,189,681		3,296,117
Total		3,487,571		3,598,827

Reconciliation of carrying amount of biological assets


	06-30-2021
	Current			Non-current			Total
Movement	ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance		302,710			3,296,117			3,598,827
Changes in real incurred cost		26,816			(74,049	)		(47,233	)
Additions through acquisition and costs of new plantations		78			104,816			104,894
Sales		—			(1,065	)		(1,065	)
Harvest		(53,065	)		—			(53,065	)
Increases (decreases) in Foreign Currency Translation		1,760			9,091			10,851
Loss of forest due to fires		—			(6,155	)		(6,155	)
Transfers to non-current assets held for sale		—			(76,286	)		(76,286	)
Transfers from non-current to current		81,140			(81,140	)		—
Decrease due to loss of control in subsidiary		(3,097	)		(19,977	)		(23,074	)
Other increases (decreases)		—			(3,333	)		(3,333	)
Changes in fair value		(31,636	)		(32,387	)		(64,023	)
Gain (losses) arising from changes in fair value minus sale costs		—			83,080			83,080
Sales		—			(1,937	)		(1,937	)
Harvest		(103,231	)		—			(103,231	)
Loss of forest due to fires		—			(11,398	)		(11,398	)
Transfers to non-current assets held for sale		—			(22,168	)		(22,168	)
Transfers from non-current to current		73,359			(73,359	)		—
Decrease due to loss of control in subsidiary		(1,764	)		(6,605	)		(8,369	)
Total Changes		(4,820	)		(106,436	)		(111,256	)
Closing balance		297,890			3,189,681			3,487,571


	12-31-2020
	Current			Non-current			Total
Movement	ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance		275,792			3,393,634			3,669,426
Changes in real incurred cost		(1,140	)		(68,081	)		(69,221	)
Additions through acquisition and costs of new plantations		2,590			182,746			185,336
Sales		—			(47,110	)		(47,110	)
Harvest		(99,300	)		—			(99,300	)
Increases (decreases) in Foreign Currency Translation		(12,889	)		(85,393	)		(98,282	)
Loss of forest due to fires		(326	)		(9,535	)		(9,861	)
Transfers from non-current to current		108,786			(108,786	)		—
Other increases (decreases)		(1	)		(3	)		(4	)
Changes in fair value		28,058			(29,436	)		(1,378	)
Gain (losses) arising from changes in fair value minus sale costs		—			182,950			182,950
Sales		—			15,184			15,184
Harvest		(182,753	)		—			(182,753	)
Loss of forest due to fires		—			(16,759	)		(16,759	)
Transfers from non-current to current		210,811			(210,811	)		—
Total Changes		26,918			(97,517	)		(70,599	)
Closing balance		302,710			3,296,117			3,598,827

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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 into practice in everyday company operations.

All 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 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.

Detail information of disbursements related to the environment

As of June 30, 2021 and as of December 31, 2020 Arauco has made and / or has committed the following disbursements in major environmental projects:

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

06-30-2021

Disbursements undertaken 2021

Committed
Disbursements

State

Amount

Asset

Asset/expense

Amount

Estimated

Company

Name of project

of project

ThU.S.$

Expense

destination item

ThU.S.$

date

Celulosa Arauco y Constitucion S.A.

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

In process

128

Assets

Properties, plants
and equipments

931

2021

Celulosa Arauco y Constitucion S.A.

Environmental improvement studies

In process

9,428

Assets

Properties, plants
and equipments

17,913

2021

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

537

Assets

Properties, plants
and equipments

9,647

2021

Celulosa Arauco y Constitucion S.A.

Environmental improvement studies

In process

4,843

Expenses

Operating costs

7,844

2021

Celulosa Arauco y Constitucion S.A.

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

Finished

—

Expenses

Operating costs

597

—

Celulosa Arauco y Constitucion S.A.

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

In process

4,665

Expenses

Operating costs

6,118

2021

Celulosa Arauco y Constitucion S.A.

Environmental improvement studies

Finished

—

Expenses

Operating costs

1,200

—

Arauco Argentina S.A.

Construction emissary

In process

—

Assets

Properties, plants
and equipments

697

2021

Arauco Argentina S.A.

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

In process

727

Assets

Properties, plants
and equipments

9,466

2021

Arauco Argentina S.A.

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

In process

409

Assets

Properties, plants
and equipments

994

2021

Arauco Argentina S.A.

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

In process

Assets

Properties, plants
and equipments

2,112

2021

Maderas Arauco S.A.

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

In process

301

Expenses

Operating costs

301

2021

Maderas Arauco S.A.

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

In process

753

Assets

Properties, plants
and equipments

363

2021

Forestal Arauco S.A.

Environmental improvement studies

In process

616

Expenses

Administration
expenses

878

2021

Celulosa y Energía Punta Pereira S.A.

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

Finished

221

Assets

Properties, plants
and equipments

—

Celulosa y Energía Punta Pereira S.A.

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

Finished

547

Assets

Properties, plants
and equipments

—

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

1,865

Assets

Properties, plants
and equipments

—

Arauco North America, Inc

Environmental improvement studies

In process

292

Assets

Properties, plants
and equipments

—

Arauco North America, Inc

Environmental improvement studies

Finished

1,412

Assets

Properties, plants
and equipments

—

TOTAL

26,779

59,061

12-31-2020

Disbursements undertaken 2020

Committed
Disbursements

State

Amount

Asset

Asset/expense

Amount

Estimated

Company

Name of project

of project

ThU.S.$

Expense

destination item

ThU.S.$

date

Celulosa Arauco y Constitucion S.A.

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

In process

633

Assets

Properties, plants
and equipments

979

2021

Celulosa Arauco y Constitucion S.A.

Environmental improvement studies

In process

25,947

Assets

Properties, plants
and equipments

27,215

2021

Celulosa Arauco y Constitucion S.A.

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

Finished

1,750

Expenses

Operating costs

—

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

2,443

Assets

Properties, plants
and equipments

9,660

2021

Celulosa Arauco y Constitucion S.A.

Environmental improvement studies

Finished

10,693

Expenses

Operating costs

—

Celulosa Arauco y Constitucion S.A.

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

Finished

11,786

Expenses

Operating costs

—

Arauco Argentina S.A.

Construction emissary

In process

—

Assets

Properties, plants
and equipments

697

2021

Arauco Argentina S.A.

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

In process

702

Assets

Properties, plants
and equipments

10,368

2021

Arauco Argentina S.A.

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

In process

125

Assets

Properties, plants
and equipments

560

2021

Arauco Argentina S.A.

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

In process

1,453

Assets

Properties, plants
and equipments

2,147

2021

Maderas Arauco S.A.

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

In process

178

Expenses

Operating costs

—

Maderas Arauco S.A.

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

In process

464

Expenses

Operating costs

—

Maderas Arauco S.A.

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

In process

230

Assets

Properties, plants
and equipments

435

2021

Forestal Arauco S.A.

Environmental improvement studies

In process

324

Expenses

Administration
expenses

105

2021

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

1,983

Assets

Properties, plants
and equipments

836

2021

Celulosa y Energía Punta Pereira S.A.

Environmental improvement studies

Finished

221

Assets

Properties, plants
and equipments

—

Celulosa y Energía Punta Pereira S.A.

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

Finished

547

Assets

Properties, plants
and equipments

—

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

667

Assets

Properties, plants
and equipments

—

Forestal Los Lagos S.A.

Environmental improvement studies

In process

179

Expenses

Operating costs

2021

Arauco North America, Inc

Environmental improvement studies

In process

784

Assets

Properties, plants
and equipments

—

Arauco North America, Inc

Environmental improvement studies

Finished

628

Assets

Properties, plants
and equipments

—

Arauco Industria de México, S.A.de C.V.

Investment projects for the control and management solid industrial waste dumpsite for management of these in the future

Finished

223

Expenses

Operating costs

—

TOTAL

61,960

53,071

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 22. NON-CURRENT ASSETS HELD FOR SALE

Arauco carried out a bidding process for the sale of forestry land (80,489 hectares), in which various domestic and foreign companies participated. In December 2020, bids were received from interested parties, and Arauco selected the proposal submitted by BTG Pactual Timberland Investment Group LLC, and also comprising British Columbia Investment Management Corporation and APG Asset Management N.V. (the “Consorcio”), as this offer contained the highest price and also proposed a working procedure to reach a final agreement within a reasonable period of time. This ongoing process involved the reclassification to assets held for the sale of land, biological assets and farm roads.

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


	06-30-2021		12-31-2020
	ThU.S.$		ThU.S.$
Land		28,954		2,415
Buildings		1,639		1,256
Property, plant and equipment		206		206
Forest		98,454		—
Farm roads		2,707		—
Total		131,960		3,877

As of June 30, 2021 and as of December 31, 2020, 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

June 30, 2021

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

NOTE 23. FINANCIAL INSTRUMENTS

23.1 Classification

Arauco’s financial instruments as of June 30, 2021 and as of December 31, 2020, are displayed in the table below. Regarding those instruments valued at an amortized cost, an estimation of their fair value is displayed for informational purposes.


	June 2021				December 2020
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)		66,001		66,001		199,771		199,771
Derivatives (1)		—		—		29		29
Mutual funds (2)		66,001		66,001		199,742		199,742
Financial assets at amortized cost		1,967,841		1,967,841		1,625,235		1,625,235
Cash and cash equivalents (amortized cost)		1,067,728		1,067,728		864,972		864,972
Cash		453,371		453,371		357,453		357,453
Time deposits		614,357		614,357		507,519		507,519
Accounts Receivable (net)		894,301		894,301		753,987		753,987
Trade and other receivables		788,793		788,793		647,924		647,924
Lease receivable		82		82		135		135
Other receivables		105,426		105,426		105,928		105,928
Accounts receivable due from related parties		5,812		5,812		6,274		6,274
Other financial assets (3)		—		—		2		2
Hedging assets		19,979		19,979		30,714		30,714

Financial liabilities at amortized cost (4)		6,598,132		7,073,968		6,824,202		7,641,425
Bonds issued denominated in U.S. Dollars		3,521,638		3,884,419		3,519,027		3,970,081
Bonds issued denominated in U.F. (5)		1,164,769		1,244,935		1,188,917		1,458,106
Bank Loans in U.S. Dollars		498,281		509,719		741,669		770,551
Bank borrowing denominated in U.S. Dollars		514,094		535,545		532,591		600,689
Lease liabilities		195,262		195,262		211,755		211,755
Trade and other payables		700,226		700,226		626,504		626,504
Accounts payable to related parties		3,862		3,862		3,739		3,739
Financial liabilities at fair value through profit or loss		—		—		74		74
Hedging Liabilities		111,138		111,138		39,586		39,586

(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)	Corresponds to the balance of assets from margin call for current derivatives (collateral).

(4)

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 and non-current based on their maturity.

(5)	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

June 30, 2021

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 June 30, 2021, 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	June 2021 ThU.S.$		Level 1 ThU.S.$		Level 2 ThU.S.$		Level 3 ThU.S.$
Financial assets at fair value
Mutual Funds		66,001		66,001		—		—

Hedging assets		19,979		—		19,979		—

Hedging liabilities		111,138		—		111,138		—

At the closing date of these interim consolidated financial statements, there have been no transfers between the different hierarchy levels.

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

Arauco’s current derivatives are valued under the cash flow discount method. These flows are discounted at the rate applicable according to the transaction’s and counterparties’ risk, using an internal methodology based on the information obtained from Bloomberg.

Given thath our cross-currency swaps correspond to future flows in UF, U.S. dollars and Euros, Arauco calculates the current value of such flows by using 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

June 30, 2021

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

The fair value of zero cost collar contracts is calculated by reference to the price differential between the agreed price range and the market price of the hedge’s object.

The counterparty risk uses the Z-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 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):


	June 2021		December 2020
	ThU.S.$		ThU.S.$
Interest bearing loans, current (a)		487,651		369,998
Other financial liabilities, current		429,426		307,136
Current Lease liabilities		58,225		63,640
Hedging liabilities current + Financial liabilities at fair value through profit or loss current		—		778
Interest bearing loans, non-current (b)		5,406,393		5,823,961
Other financial liabilities, non-current		5,380,494		5,714,728
Non-current lease liabilities		137,037		148,115
Hedging liabilities non-current + Financial liabilities at fair value through profit or loss non-current		111,138		38,882
Financial debt total (c)		5,894,044		6,193,959
Cash and cash equivalents		1,133,729		1,064,714
Other financial assets current		3,309		1,763
Total Cash (d)		1,137,038		1,066,477
Net Financial Debt (e)		4,757,006		5,127,482
Non-controlling interests		7,876,916		7,384,722
Equity attributable to owners of parent		26,926		30,913
Total Equity (f)		7,903,842		7,415,635
Debt to equity ratio (g)		0.60		0.69

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

(b)	Other Non-Current Financial Liabilities + Non-current Lease liabilities – (Non-current Hedge Liabilities + Financial Liabilities with changes in non-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

June 30, 2021

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):


	June 2021		December 2020
	ThU.S.$		ThU.S.$
Other financial liabilities (a)		5,809,920		6,021,864
Other financial liabilities, current		429,426		307,136
Other financial liabilities, non-current		5,380,494		5,714,728
Lease liabilities (b)		195,262		211,755
Current lease liabilities		58,225		63,640
Non-current lease liabilities		137,037		148,115
Financial liabilities at fair value through profit or loss		—		74
Hedging liabilities (c)		111,138		39,586
Swaps		110,580		38,251
Forward		558		1,335
Financial debt total (d)		5,894,044		6,193,959
Cash and cash equivalents		1,133,729		1,064,714
Total Cash (e)		1,133,729		1,064,714
Net Financial Debt (f)		4,760,315		5,129,245
Non-controlling interests		7,876,916		7,384,722
Equity attributable to owners of parent		26,926		30,913
Total Equity (g)		7,903,842		7,415,635
Debt to equity ratio (h)		0.60		0.69

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

(b)	Current lease liabilities + Non-current lease liabilities

(c)	Swaps + Forwards + Options

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

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

(f)	Total Financial Debt – Total Cash

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

(h)	Net Financial Debt / Total Equity

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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



	June 2021
Thousands of dollars	Up to 90 days		From 91 days to 1 year		Other current financial liabilities, Total		From 1 year to 3 years		From 3 years to 5 years		More than 5 years		Other non-current financial liabilities, Total		Total
Bonds obligations		32,052		183,737		215,789		584,359		88,539		3,797,720		4,470,618		4,686,407
Bank borrowing		30,356		183,281		213,637		241,981		315,635		241,122		798,738		1,012,375
Swap and Forward		—		—		—		111,138		—		—		111,138		111,138

Other Financial Liabilities, Total (a)		62,408		367,018		429,426		937,478		404,174		4,038,842		5,380,494		5,809,920


	June 2021

Thousands of dollars	Up to 90 days		From 91 days to 1 year		Total Current		From 1 year to 3 years		From 3 years to 5 years		More than 5 years		Total non-current		Total
Lease liabilities		15,774		42,451		58,225		67,997		26,798		42,242		137,037		195,262

Lease liabilities, Total (b)		15,774		42,451		58,225		67,997		26,798		42,242		137,03		195,262


	June 2021
Thousands of dollars	Up to 90 days		From 91 days to 1 year		Total Current		From 1 year to 3 years		From 3 years to 5 years		More than 5 years		Total non-current		Total
Trades and other payables		681,418		18,808		700,226		—		—		—		—		700,226
Accounts payable to related companies		3,862		—		3,862		—		—		—		—		3,862

Accounts Payable, Total (c)		685,280		18,808		704,088		—		—		—		—		704,088

Financial Liabilities, Total (a) + (b) + (c)		763,462		428,277		1,191,739		1,005,475		430,972		4,081,084		5,517,531		6,709,270


	December 2020
Thousands of dollars	Up to 90 days		From 91 days to 1 year		Other current financial liabilities, Total		From 1 year to 3 years		From 3 years to 5 years		More than 5 years		Other non-current financial liabilities, Total		Total
Bonds obligations		32,053		58,871		90,924		214,092		584,344		3,818,584		4,617,020		4,707,944
Bank borrowing		30,774		184,660		215,434		473,233		335,247		250,346		1,058,826		1,274,260
Swap and Forward		778		—		778		38,882		—		—		38,882		39,660

Other Financial Liabilities, Total (a)		63,605		243,531		307,136		726,207		919,591		4,068,930		5,714,728		6,021,864


	December 2020
Thousands of dollars	Up to 90 days		From 91 days to 1 year		Total Current		From 1 year to 3 years		From 3 years to 5 years		More than 5 years		Total non-current		Total
Lease liabilities		18,631		45,009		63,640		85,964		21,906		40,245		148,115		211,755

Lease liabilities, Total (b)		18,631		45,009		63,640		85,964		21,906		40,245		148,115		211,755


	December 2020
Thousands of dollars	Up to 90 days		From 91 days to 1 year		Total Current		From 1 year to 3 years		From 3 years to 5 years		More than 5 years		Total non-current		Total
Trades and other payables		585,428		41,076		626,504		—		—		—		—		626,504
Accounts payable to related companies		3,739		—		3,739		—		—		—		—		3,739

Accounts Payable, Total (c)		589,167		41,076		630,243		—		—		—		—		630,243

Financial Liabilities, Total (a) + (b) + (c)		671,403		329,616		1,001,019		812,171		941,497		4,109,175		5,862,843		6,863,862

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

23.4 Derivative Instruments

Hedging instruments recorded as of June 30, 2021 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 Interim Consolidated Statements of Financial Position under Other Non-Current Financial Assets or Other Non-Current Financial Liabilities, respectively. The effects for the period are presented in Interim Consolidated statement of changes in equity as Other Interim 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 consolidated statements of financial position as of June 30, 2021, is presented below:


Financial Instruments	June 2021 Fair Value ThU.S.$			December 2020 Fair Value ThU.S.$
Assets at fair value through profit or loss (held for trading)		—			29
Derivatives (1)		—			29

Hedging Assets		19,979			30,714
Derivatives (1)		11,201			4,343
Cross Currency Swaps		8,778			26,371

Financial liabilities at fair value through profit or loss		—			(74	)
Derivatives (1)		—			(74	)

Hedging Liabilities		(111,138	)		(39,586	)
Derivatives (1)		(739	)		(4,245	)
Cross Currency Swaps		(110,399	)		(35,341	)

(1)	Includes Swap, Zero Cost Collar, Forward and IRS from Chile, USA and Uruguay tables.

(2)	Includes Forwards from Colombia and Chile.

23.4.1. Chile

In order to cover the exposure to variation in cash flows associated with fluctuations in exchange rates, interest rates or commodity prices, Arauco Chile has the following derivatives as of June 30, 2021 and as of December 31, 2020:

Cross Currency Swaps

Cross currency swaps to cover the exposure to the exchange rate risk generated from bonds denominated in U.F.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


Bond	Institution	Amount U.S.$		Amount U.F.		Starting date		Ending date		June 2021 Fair Value ThU.S.$			December 2020 Fair Value ThU.S.$
F	Deutsche Bank – U.E.		33,705,054		772,727		10-30-2011		10-30-2021		(2,427	)		(1,775	)
F	JP Morgan - N.A.		33,705,054		772,727		10-30-2011		10-30-2021		(2,404	)		(1,755	)
F	Scotiabank – Chile		29,693,153		772,727		10-30-2014		04-30-2023		1,639			2,825
F	Scotiabank – Chile		29,656,067		772,727		10-30-2014		04-30-2023		1,755			2,965
F	Santander – Chile		29,345,913		772,727		10-30-2014		04-30-2023		2,168			3,341
F	BCI – Chile		29,071,206		772,727		10-30-2014		04-30-2023		2,422			3,697
F	Banco de Chile - Chile		29,345,914		772,727		04-30-2019		10-30-2029		794			2,493
P	Itau – Chile		46,474,122		1,000,000		05-15-2012		11-15-2021		(5,819	)		(4,727	)
P	JP Morgan - N.A.		47,163,640		1,000,000		11-15-2012		11-15-2021		(6,416	)		(5,241	)
P	Scotiabank – Chile		42,412,852		1,000,000		11-15-2013		11-15-2023		(1,792	)		(94	)
P	Santander – Chile		41,752,718		1,000,000		11-15-2013		11-15-2023		(907	)		718
P	Deutsche - U.K.		41,752,718		1,000,000		11-15-2013		11-15-2023		(989	)		720
Q	BCI – Chile		—		—		—		—					(267	)
Q	BCI – Chile		—		—		—		—					(266	)
R	Santander - Chile		128,611,183		3,000,000		10-01-2014		04-01-2024		(8,896	)		(3,812	)
R	JP Morgan - U.K.		43,185,224		1,000,000		10-01-2014		04-01-2024		(2,995	)		(1,154	)
R	Itau - Chile		43,277,070		1,000,000		10-01-2014		04-01-2024		(3,052	)		(1,208	)
S	Santander - Chile		201,340,031		5,000,000		11-15-2016		11-15-2026		(1,712	)		9,612
W	Goldman Sachs - N.A.		40,521,750		1,000,000		10-10-2018		10-10-2028		(4,476	)		(2,029	)
W	Scotiabank - Chile		40,537,926		1,000,000		10-10-2018		10-10-2028		(4,359	)		(1,939	)
W	Goldman Sachs - N.A.		40,066,555		1,000,000		10-10-2018		10-10-2028		(3,829	)		(1,390	)
X	Santander - Chile		118,400,504		3,000,000		10-10-2018		10-10-2038		(19,693	)		(2,675	)
X	Santander - Chile		97,971,786		2,500,000		10-10-2018		10-10-2038		(16,138	)		(1,955	)

											(77,126	)		(3,916	)

Series Q of bonds matured and had their final amortization on April 1,2021, resulting in the termination of the associated cross currency swaps which had the same expiration date.

Cross currency swaps contracts to cover the exposure to the risk of the exchange rate for bank contracts in Euro.


Institution	Amount U.S.$		Amount EUR		Starting date		Ending date		June 2021 Fair Value ThU.S.$			December 2020 Fair Value ThU.S.$
Santander - Chile		118,670,000		100,000,000		06-15-2021		12-15-2029		(4,788	)		(1,027	)
Banco de Chile - Chile		59,335,000		50,000,000		06-15-2021		12-15-2029		(2,457	)		(488	)
MUFG - N.A.		118,670,000		100,000,000		06-15-2021		12-15-2029		(4,898	)		(896	)
JP Morgan - N.A.		237,340,000		200,000,000		06-15-2021		12-15-2029		(9,898	)		(2,048	)
HSBC - N.A.		59,335,000		50,000,000		06-15-2021		12-15-2029		(2,454	)		(595	)

										(24,495	)		(5,054	)

Zero Cost Collars

Zero cost collar to cover the exposure to the Fuel Oil No. 6 and Brent, instruments for oil used by our plants.


Commodity	Institution	Volume		Unit		Starting date		Ending date		June 2021 Fair Value ThU.S.$		December 2020 Fair Value ThU.S.$
Fuel Oil N°6	JP Morgan - N.A.		—		bbl		01-11-2020		04-30-2021		—		1,029
Fuel Oil N°6	Goldman Sachs - N.A.		—		bbl		01-22-2020		04-30-2021		—		516
Brent	BNP Paribas – E.U.		220,000		bbl		08-01-2021		07-31-2021		3,546		280
Brent	Goldman Sachs - N.A.		220,000		bbl		08-01-2021		07-31-2021		3,579		404

											7,125		2,229

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Interest Rate Swap

Interest rate swap to fix the rate associated to loans with a variable rate.


Institution	Amount US$		Starting date		Ending date		June 2021 Fair Value ThU.S.$		December 2020 Fair Value ThU.S.$
Goldman Sachs - N.A.		100,000,000		03-27-2020		03-29-2021		—		(750	)
MUFG - N.A.		100,000,000		03-27-2020		03-29-2021		—		(737	)

								—		(1,487	)

Both Interest Rate Swaps covered portions of a credit for ThU.S.$ 200,000 that we prepay in March 2021. These derivatives were finished in that time.

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. Uruguay

Forward

As of June 30, 2021 and as of December 31, 2020, 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 June 2021 ThU.S.$		June 2021 Fair Value ThU.S.$		Notional December 2020 ThU.S.$		December 2020 Fair Value ThU.S.$
UYUUSD		Santander-Uruguay		7,685		354		12,160		947
UYUUSD		Santander-Uruguay		—		—		4,395		(179	)
UYUUSD		HSBC-Uruguay		10,340		296		8,055		366
UYUUSD		Itaú-Uruguay		6,420		240		—		—
EURUSD		HSBC-Uruguay		—		—		595		41

						890				1,175

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 pulp manufacturing process. In order to minimize this risk, the volatility of future flows associated to the purchase of Fuel Oil No. 6 through forwards of this commodity. The agreements that are in force and effect as of June 30, 2021 and as of December 31, 2020, are detailed below:


Commodity	Institution		Notional June 2021 ThU.S.$		June 2021 Fair Value ThU.S.$			Notional December 2020 ThU.S.$		December 2020 Fair Value ThU.S.$
Fuel Oil N°6		JP Morgan -N.A.		5,737		1,961			3,274		541
Fuel Oil N°6		DNB Bank ASA		3,844		1,226			2,281		248
Fuel Oil N°6		JP Morgan -N.A.		1,215		(166	)		3,786		(351	)
Fuel Oil N°6		DNB Bank ASA		208		(21	)		2,642		(320	)

						3,000					118

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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 June 30, 2021 and as of December 31, 2020 is shown below:


Exchange rate	Institution		Notional ThU.S.$		June 2021 Fair Value ThU.S.$			December 2020 Fair Value ThU.S.$
USD		DNB Bank ASA		21,099		(372	)		(559	)

						(372	)		(559	)

23.4.3. United States

Interest Rate Swap

Arauco through its subsidiary in United States maintains an Interest Rate Swap with the purpose of setting the interest rate of a variable rate debt in the same currency (USD). The instrument was settled on September 2020 and the valuation off this instrument as of June 30, 2021 and as of December 31, 2020 is shown below:


Institution	Amount ThU.S.$		Starting date		Ending date		June 2021 Fair Value			December 2020 Fair Value
Institution	Amount ThU.S.$		Starting date		Ending date		ThU.S.$			ThU.S.$
JP Morgan - N.A.		100,000,000		04-28-2020		10-28-2023		(87	)		(474	)
Goldman Sachs N.A.		100,000,000		04-28-2020		10-28-2023		(17	)		(486	)
JP Morgan - N.A.		100,000,000		04-28-2020		10-28-2023		(78	)		(463	)

								(182	)		(1,423	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

23.5 Cash equivalent, Loans and Receivables

The financial assets measured at amortized cost using the effective interest method and tested for impairment are: cash and cash equivalent, time deposits, repurchase agreements, trade and other current/non-current receivables (with third parties and from related parties)

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

As of June 30, 2021 and as of December 31, 2020, there are provisions for impairment for ThU.S.$ 8,251 and ThU.S.$ 8,000, respectively.


	June 2021 ThU.S.$		December 2020 ThU.S.$
Financial assets at amortized cost		1,967,841		1,625,235
Cash and cash equivalents (Mutual Funds not included)		1,067,728		864,972
Cash		453,371		357,453
Time Deposits		614,357		507,519
Trade and other receivables (net)		900,113		760,261
Trade and other receivables		788,793		647,924
Lease receivable		82		135
Other receivables		105,426		105,928
Accounts receivable from related parties		5,812		6,274
Other financial assets		—		2

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 June 30, 2021 and as of December 31, 2020, classified by currency is as follows:


	06-30-2021 ThU.S.$		12-31-2020 ThU.S.$
Cash and Cash Equivalents		1,133,729		1,064,714
U.S. Dollars		733,103		773,822
Euro		2,635		3,891
Mexican pesos		47,680		43,049
Other currencies		218,361		194,942
Chilean pesos		131,950		49,010

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: These represent enforceable rights for Arauco resulting from the normal course of the business.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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 is written-off when Arauco has exhausted all levels of recovery of the receivable in a reasonable time.

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 a non-controlling ownership of the counterparty.

The following table sets forth trade and other current/non-current receivables classified by currencies as of June 30, 2021 and as of December 31, 2020:


	06-30-2021 ThU.S.$		12-31-2020 ThU.S.$
Trades and other current receivables		878,628		737,381

U.S. Dollars		653,449		542,296
Euros		15,648		10,448
Mexican pesos		38,116		30,856
Other currencies		65,444		54,118
Chilean pesos		103,149		96,847
U.F.		2,822		2,816

Accounts receivable from related parties, current		5,812		6,274
U.S. Dollars		—		369
Other currencies		—		829
Chilean pesos		5,812		5,076

Trade and other non-current receivables		15,673		16,606
U.S. Dollars		12,926		13,637
Other currencies		4		40
Chilean pesos		2,743		2,859
U.F.		—		70

23.6 Financial Liabilities

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


Financial Liabilities	June 2021 ThU.S.$		December 2020 ThU.S.$
Total Financial Liabilities		6,709,270		6,863,862
Financial liabilities at fair value through profit or loss (held for trading)		—		74
Hedging Liabilities		111,138		39,586
Financial Liabilities Measured at Amortized Cost		6,598,132		6,824,202

The following table sets forth the current portion of the non-current bank borrowings and debt issued as of June 30, 2021 and as of December 31, 2020.


	June 2021 ThU.S.$		December 2020 ThU.S.$
Bank borrowings - current portion		121,307		123,087
Bonds issued - current portion		86,985		80,074
Total		208,292		203,161

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

23.7 Financial Liabilities Measured at Amortized Cost

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

Also, this category includes those non-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 these financial statements, 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.


		06-30-2021		12-31-2020		06-30-2021		12-31-2020
	Currency	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
	Currency	Amortized Cost				Fair Value
Total Financial Liabilities			6,598,132		6,824,202		7,073,967		7,641,425
Bonds Issued	U.S. Dollar		3,521,638		3,519,027		3,884,418		3,970,081
Bonds Issued	U.F.		1,164,769		1,188,917		1,244,935		1,458,106
Bank borrowings	U.S. Dollar		498,281		741,669		509,719		770,551
Bank borrowings	Euro		512,760		531,181		535,545		600,689
Bank borrowings	Other currencies		1,334		1,410		—		—
Lease liabilities	U.F.		20,253		27,373		20,253		27,373
Lease liabilities	Chilean pesos		59,861		77,158		59,861		77,158
Lease liabilities	Mexican pesos		4,904		644		4,904		644
Lease liabilities	U.S. Dollar		82,556		87,822		82,556		87,822
Lease liabilities	Euro		309		314		309		314
Lease liabilities	Other currencies		27,379		18,444		27,379		18,444
Trades and Other Payables	U.S. Dollar		210,161		153,860		210,161		153,860
Trades and Other Payables	Euro		9,811		11,924		9,811		11,924
Trades and Other Payables	Mexican pesos		35,196		26,400		35,196		26,400
Trades and Other Payables	Other currencies		113,032		99,428		113,032		99,428
Trades and Other Payables	Chilean pesos		294,143		298,908		294,143		298,908
Trades and Other Payables	U.F.		37,883		35,984		37,883		35,984
Accounts payable to related parties	U.S. Dollar		193		236		193		236
Accounts payable to related parties	Chilean pesos		3,669		3,503		3,669		3,503

The financial liabilities at amortized cost presented in the interim consolidated statements of financial positions as of June 30, 2021 and as of December 31, 2020 are as follows:

June 2021
ThU.S.$

Current

Non-Current

Total

Other financial liabilities

429,426

5,269,356

5,698,782

Lease liabilities

58,225

137,037

195,262

Trade and other payables

700,226

—

700,226

Accounts payable to related parties

3,862

—

3,862

Total Financial Liabilities Measured at Amortized Cost

1,191,739

5,406,393

6,598,132

December 2020
ThU.S.$

Current

Non-Current

Total

Other financial liabilities

306,358

5,675,846

5,982,204

Lease liabilities

63,640

148,115

211,755

Trade and other payables

626,504

—

626,504

Accounts payable to related parties

3,739

—

3,739

Total Financial Liabilities Measured at Amortized Cost

1,000,241

5,823,961

6,824,202

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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:


	January – June						April - June
	2021			2020			2021			2020
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening balance		(37,007	)		9,010			(11,416	)		(69,467	)
Gains (losses) on cash flow hedges, before tax		(49,740	)		(66,873	)		(82,658	)		36,593
Reclassification adjustments on cash flow hedges, before tax		(10,137	)		(20,854	)		(9,862	)		(18,057	)
Income tax relating to cash flow hedges of other comprehensive income		17,132			21,427			24,184			(6,359	)
Closing balance		(79,752	)		(57,290	)		(79,752	)		(57,290	)

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

June 2021
ThU.S.$

December 2020
ThU.S.$

Interest
coverage
>= 2,0x

Debt level
(1)
<= 1,2x

Domestic bonds (Chile)

1,164,769

1,188,917

N/R

✓

Syndicate Loan

—

200,022

✓

Syndicate Loan - Grayling

285,199

300,121

✓

Syndicate ECA - MAPA

512,760

531,181

✓

N/R: Not required for the financial obligation

(1) Debt to equity ratio (financial debt divided by equity plus non-controlling interests)

As of June 30, 2021 and as of December 31, 2020, Arauco has complied with all of its financial covenants.

The following table sets forth the credit ratings of our debt instruments as of June 30, 2021, are as follows:

Instrument

Standard &
Poor’s

Fitch
Ratings

Moody’s

Feller
Rate

Local bonds

—

AA-

(*)

—

Foreign bonds

BBB-

BBB

Baa3

—

(*)	As of July 28, 202,1 Fitch Ratings upgraded the risk rating of local instrument to AA.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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 June 30, 2021 and as of December 31, 2020 is as follows:


	June 2021		December 2020
	ThU.S.$		ThU.S.$
Equity		7,903,842		7,415,635
Bank borrowings		1,012,375		1,274,260
Lease liabilities		195,262		211,755
Bonds issued		4,686,407		4,707,944

Capitalization		13,797,886		13,609,594

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. The company is not actively involved in trading its financial assets for speculative purposes.

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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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 receivables, financial lease debtors and other debtors.

Arauco does not have a securitized portfolio.


	June 2021			December 2020
	ThU.S.$			ThU.S.$
Current Receivables
Trade receivables		787,483			646,607
Financial lease receivables		82			109
Other debtors		91,063			90,665
Net subtotal		878,628			737,381

Trade receivables		790,813			649,680
Financial lease receivables		82			109
Other debtors		93,566			93,168
Gross subtotal		884,461			742,957

Provision for doubtful trade receivables		3,330			3,073
Provision for doubtful lease receivables		—	��		—
Provision for doubtful other debtors		2,503			2,503
Subtotal Bad Debt		5,833			5,576

Non-Current Receivables

Trade receivables		1,310			1,317
Financial lease receivables		—			26
Other debtors		14,363			15,263
Net Subtotal		15,673			16,606

Trade receivables		3,728			3,741
Financial lease receivables		—			26
Other debtors		14,363			15,263
Gross subtotal		18,091			19,030

Provision for doubtful trade receivables		2,418			2,424
Provision for doubtful lease receivables		—			—
Provision for doubtful other debtors		—			—
Subtotal Bad Debt		2,418			2,424

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

The Credit and Collections Sub-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 June 30, 2021, Arauco’s balance for commercial debtors was ThU.S.$ 794,541 of which, according to the agreed sales conditions, 54.57% corresponded to sales on credit (open account), 43.88% to sales with letters of credit and 1.55% to other types of sales. The client with the largest Open Account debt represented 1.972% of the total accounts receivable as of that date.

100

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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


June 30, 2021

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
N° Debtor		1,813			694			74			59			56			83			4			3			3			100			2,889
ThU.S.$		742,750			39,980			5,533			409			257			4			3			8			3			5,594			794,541
%		93.48	%		5.03	%		0.70	%		0.05	%		0.03	%		0.00	%		0.00	%		0.00	%		0.00	%		0.71	%		100	%

December 31, 2020

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
N° Debtor		1,597			547			51			52			12			7			2			3			7			81			2,359
ThU.S.$		625,225			21,502			474			96			636			11			70			72			299			5,036			653,421
%		95.68	%		3.29	%		0.07	%		0.01	%		0.10	%		0.00	%		0.01	%		0.01	%		0.05	%		0.78	%		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 are up-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		341,402			7,200			28			—			—			—			38			—			—			38			348,668
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		396,681			27,996			2,954			112			256			3			3			8			3			5,556			433,572
Loss allowance provision		—			—			88			11			26			—			—			8			3			5,556			5,692
Expected loss rate		0.00	%		0.00	%		2.98	%		9.82	%		10,16	%		0.00	%		0.00	%		100.00	%		100.00	%		100.00	%

Others		4,667			4,784			2,551			297			1			1			—			—			—			—			12,301
Loss allowance provision		—			—			24			30			1			1			—			—			—			—			56
Expected loss rate		0.00	%		0.00	%		0.94	%		10.10	%		100.00	%		100.00	%		0.00	%		0.00	%		0.00	%		0.00	%

Trade receivables, total (ThU.S.$)		742,750			39,980			5,533			409			257			4			3			8			3			5,594			794,541
Allowance for doubtful accounts, total (ThU.S.$)		—			—			112			41			27			1			—			8			3			5,556			5,748

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 a case-by-case basis and subjected to the approval of the Corporate Finance Division.

Regarding the loss allowance for trade receivables and others, below we provide detail for the movements as of June 30, 2021 and as of December 31, 2020:


	June 2021			December 2020
	ThU.S.$			ThU.S.$
Opening loss allowance as at January 1		8,000			16,368
Increase in loan loss allowance recognised in profit or loss during the year		463			1,369
Receivables written off during the year as uncollectible		—			(6,970	)
Unused amount reversed		(212	)		(2,767	)
Closing balance		8,251			8,000

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

101

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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 Credit Sub-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., Arauco Argentina S.A., and Arauco do Brasil S.A., as well as the domestic sales of Arauco Europe Coöperatief U.A., Arauco Argentina S.A., Araucomex S.A. de C.V., Arauco Industria de México, S.A. de C.V., Arauco Colombia S.A., Arauco Perú S.A., Arauco North America, Inc., Arauco Canada Ltd., Celulosa Arauco y Constitución S.A., Maderas Arauco S.A., Arauco Florestal Arapoti, Arauco Forest Brasil S.A., Arauco do Brasil S.A. and Arauco Industria de Paineis Ltda. 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% for non-registered clients (*).

(*) Non-registered clients are those whose lines are under ThU.S.$ 100 (equivalent currency of their invoicing) of the credit sales for all companies in the Arauco group that have a valid insurance policy. The top lines are from nominated 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.$ 98,269, effective as of June 30, 2021, 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.

102

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


Guarantees Arauco Group (ThU.S.$)
Guarantees Debtors (received from clients)
Certificate of deposits	6,665	6.78	%
Standby	6,692	6.81	%
Promissory notes	78,812	80.20	%
Finance	2,228	2.27	%
Mortgage	2,277	2.32	%
Pledge	195	0.20	%
Promissory notes	1,400	1.42	%

Total Guarantees	98,269	100	%

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 96.4% and, therefore, Arauco’s portfolio exposure amounts to 3.6%.


Secured Open Accounts Receivable	ThU.S.$		%
Total open accounts receivable		451,963		100.0	%
Secured receivables (*)		435,692		96.4	%
Unsecured receivables		16,271		3.6	%

(*) 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).

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

103

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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 Corporate Financial Management Division 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.

The following tables detail Arauco’s liquidity analysis for its financial liabilities as of June 30, 2021 and as of December 31, 2020. The tables have been drawn up based on the contractual undiscounted cash outflows and their remaining contractual maturities.

104

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


June 30, 2021					Maturity														Total
Tax ID	Name	Currency		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.		Euros	BNP Paribas / ECA		—		68,266		67,688		67,049		66,334		65,664		224,567		68,266		491,301		1.10%	1.06%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo A		1,102		1,090		2,145		1,055		—		—		—		2,192		3,200		2.24%	Libor 6M +2.05%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Banco BBVA		—		18,340		—		—		—		—		—		18,340		—		1.00%	Fixed 1.00%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo A		4,456		4,410		8,677		4,267		—		—		—		8,867		12,944		2.24%	Libor 6M +2.05%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Finnish Export Credit		25,200		24,827		48,507		—		—		—		—		50,027		48,507		3.20%	0.00%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	DnB Nor		165		132		165		33		—		—		—		297		197		1.47%	0.00%
—	Eufores S.A.		U.S. Dollars	Banco República Oriental del Uruguay		—		26,546		—		—		—		—		—		26,546		—		1.49%	Libor 6M +1.3%
—	Eufores S.A.		U.S. Dollars	Citibank		—		2,513		—		—		—		—		—		2,513		—		1.05%	Libor 6M +0.9%
—	Eufores S.A.		U.S. Dollars	ITAU		—		12,564		—		—		—		—		—		12,564		—		1.05%	Fixed 1.05%
—	Eufores S.A.		U.S. Dollars	Scotiabank		—		5,024		—		—		—		—		—		5,024		—		1.00%	Fixed 1.00%
—	Eufores S.A.		U.S. Dollars	Santander		—		27,134		—		—		—		—		—		27,134		—		1.00%	Fixed 1.00%
—	Stora Enso Uruguay S.A.		U.S. Dollars	Banco República Oriental del Uruguay		—		554		—		—		—		—		—		554		—		1.49%	Libor 6M +1.3%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Votorantim		264		—		252		—		—		—		—		264		252		5.00%	5.00%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Votorantim		234		—		224		—		—		—		—		234		224		5.00%	5.00%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bndes Subcrédito A		37		106		34		—		—		—		—		143		34		7.52%	TJLP +2.91%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bndes Subcrédito B		22		64		21		—		—		—		—		86		21		8.52%	TJLP +3.91%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Bndes Subcrédito C		39		113		49		—		—		—		—		152		49		5.65%	Cesta +2.91%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bndes Subcrédito D		25		72		23		—		—		—		—		97		23		9.72%	TJLP +5.11%
	Arauco North America, Inc.		U.S. Dollars	Banco Itau Corpbanca		—		35,091		34,541		229,001		—		—		—		35,091		263,542		1.81%	Libor 6M +1.65%

				Total		31,544		226,846		162,326		301,405		66,334		65,664		224,567		258,391		820,294


June 30, 2021				Maturity														Total
Tax ID	Name	Currency	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		—		24,995		24,214		23,434		22,654		21,873		70,410		24,995		162,585		4.25%	4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-F		—		9,998		9,686		9,374		9,061		8,749		28,164		9,998		65,034		4.25%	4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-P		—		17,363		26,090		25,355		24,620		23,885		137,336		17,363		237,286		4.00%	4.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-R		—		7,283		7,283		7,283		7,283		7,283		269,668		7,283		298,800		3.60%	3.60%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-S		—		4,870		4,870		4,870		4,870		4,870		206,553		4,870		226,033		2.40%	2.40%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-W		—		2,558		2,558		2,558		2,558		2,558		128,867		2,558		139,099		2.10%	2.10%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-X		—		6,022		6,022		6,022		6,022		6,022		329,913		6,022		354,001		2.70%	2.70%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2022		2,996		129,164		—		—		—		—		—		132,160		—		4.75%	4.75%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2024		11,250		11,250		22,500		22,500		511,250		—		—		22,500		556,250		4.50%	4.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2027		—		19,375		19,375		19,375		19,375		19,375		529,063		19,375		606,563		3.88%	3.88%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2047		—		22,000		22,000		22,000		22,000		22,000		873,000		22,000		961,000		5.50%	5.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2029		—		21,250		21,250		21,250		21,250		21,250		563,750		21,250		648,750		4.25%	4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2049		—		27,500		27,500		27,500		27,500		27,500		1,132,500		27,500		1,242,500		5.50%	5.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2030		10,500		10,500		21,000		21,000		21,000		21,000		584,000		21,000		668,000		4.20%	4.20%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2050		12,875		12,875		25,750		25,750		25,750		25,750		1,118,000		25,750		1,221,000		5.15%	5.15%
—	Prime-Line, Inc.	U.S. Dollars	Bond ADFA 2014		128		384		512		512		512		512		1,237		512		3,285		4.84%	4.84%
—	Prime-Line, Inc.	U.S. Dollars	Bond ADFA 2013		38		111		149		37		—		—		—		149		186		4.00%	4.00%

			Total		37,787		327,498		240,759		238,820		725,705		212,627		5,972,461		365,285		7,390,372

105

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


June 30, 2021				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.	Motor vehicles		518		1,331		1,445		701		455		395		90			1,849		3,086
85.805.200-9	Forestal Arauco S.A.	U.S. Dollars	Lands		60		180		240		240		240		240		600			240		1,560
85.805.200-9	Forestal Arauco S.A.	U.F.	Plants and equipments		950		1,346		590		—		—		—		—			2,296		590
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Plants and equipments		37		112		149		—		—		—		—			149		149
85.805.200-9	Forestal Arauco S.A.	U.F.	Other properties, plant and equipment		1,135		3,258		1,684		355		208		740		—			4,393		2,987
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Other properties, plant and equipment		106		294		141		141		141		487		—			400		910
—	Arauco Argentina S.A.	U.S. Dollars	Buildings and constructions		124		177		24		—		—		—		—			301		24
—	Arauco Argentina S.A.	U.S. Dollars	IT equipment		13		39		9		—		—		—		—			52		9
—	Arauco Argentina S.A.	U.S. Dollars	Plants and equipments		347		1,040		1,194		1,002		167		—		—			1,387		2,363
—	Arauco Argentina S.A.	U.S. Dollars	Motor vehicles		806		1,646		1,696		1,500		—		—		—			2,452		3,196
—	Arauco Industria de Paineis S.A.	Brazilian Real	Other properties, plant and equipment		3		10		1		—		—		—		—			13		1
—	Arauco Industria de Paineis S.A.	Brazilian Real	Fixed facilities and accessories		10		30		40		7									40		47
—	Arauco Industria de Paineis S.A.	Brazilian Real	IT equipment		14		43		12		—		—		—		—			57		12
—	Arauco Industria de Paineis S.A.	Brazilian Real	Motor vehicles		123		306		—		—		—		—		—			429		—
—	Arauco Forest Brasil S.A.	Brazilian Real	IT equipment		6		17		7		—		—		—		—			23		7
—	Arauco Forest Brasil S.A.	Brazilian Real	Lands		1,468		3,640		4,629		4,629		4,629		4,629		5,401			5,108		23,917
—	Arauco Florestal Arapoti S.A.	Brazilian Real	IT equipment		2		5		2		—		—		—		—			7		2
—	Arauco do Brasil S.A.	Brazilian Real	Buildings and constructions		46		139		186		139		—		—		—			185		325
—	Arauco do Brasil S.A.	Brazilian Real	IT equipment		15		45		23		—		—		—		—			60		23
—	Arauco do Brasil S.A.	Brazilian Real	Motor vehicles		106		317		141		—		—		—		—			423		141
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.F.	Buildings and constructions		427		1,230		1,584		377		—		—		—			1,657		1,961
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.F.	Motor vehicles		162		486		499		177		110		61		5			648		852
93.458.000-1	Celulosa Arauco y Constitucion S.A.	Chilean pesos	Buildings and constructions		18		54		54		—		—		—		—			72		54
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.S. Dollars	Plants and equipments		484		484		—		—		—		—		—			968		—
93.458.000-1	Celulosa Arauco y Constitucion S.A.	Chilean pesos	Motor vehicles		4,938		14,815		15,452		1,267		—		—		—			19,753		16,719
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.S. Dollars	Motor vehicles		45		75		—		—		—		—		—			120		—
—	Arauco North America, Inc.	U.S. Dollars	Buildings and constructions		275		838		1,165		1,294		1,435		1,589		2,339			1,113		7,822
—	Arauco North America, Inc.	U.S. Dollars	Motor vehicles		39		190		158		136		48		—		—			229		342
—	Arauco Canada Limited	Canadian dollars	Buildings and constructions		26		36		—		—		—		—		—			62		—
—	Arauco Canada Limited	Canadian dollars	Motor vehicles		13		42		75		60		13		—		—			55		148
—	Celulosa y Energía Punta Pereira S.A.	U.S. Dollars	Plants and equipments		192		488		592		592		592		592		7,424			680		9,792
—	Eufores S.A.	U.S. Dollars	Lands		806		3,878		6,065		5,853		5,547		5,126		36,030			4,684		58,621
—	Eufores S.A.	U.S. Dollars	Plants and equipments		306		917		1,222		1,222		1,222		1,222		1,834			1,223		6,722
—	Eufores S.A.	U.S. Dollars	Buildings and constructions		111		251		239		107		—		—		—			362		346
96.510.970-6	Maderas Arauco S.A.	Chilean pesos	Motor vehicles		2,981		9,154		8,943		2,380		—		—		—			12,135		11,323
96.510.970-6	Maderas Arauco S.A.	U.F.	Motor vehicles		92		265		238		36		12		5		—			357		291
	Arauco Colombia S.A.	U.S. Dollars	Buildings and constructions		6		18		42		—		—		—		—			24		42
—	Arauco Colombia S.A.	U.S. Dollars	Fixed facilities and accessories		99		99		—		—		—		—		—	��		198		—
—	Arauco Europe Cooperatief U.A.	Euros	Motor vehicles		6		17		23		14		9		—		—			23		46
—	Arauco Europe Cooperatief U.A.	Euros	Buildings and constructions		19		59		80		82		28		—		—			78		190
—	Araucomex S.A. de C.V.	Mexican pesos	Buildings and constructions		344		224		1,763		1,482		985		—		—			568		4,230
—	Araucomex S.A. de C.V.	U.S. Dollars	Buildings and constructions		27		82		115		40		—		—		—			109		155
—	Arauco Industria de México, S.A. de C.V.	U.S. Dollars	Plants and equipments		—		193		131		—		—		—		—			193		131
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Lands		—		4		9		9		9		—		—			4		27
—	Araucomex Servicios S.A. de C.V.	Mexican pesos	Motor vehicles		—		50		64		59		60		5		—			50		188
96.637.330-K	Servicios Logisticos Arauco S.A.	U.F.	Motor vehicles		19		56		49		—		—		—		—			75		49
79.990.550-7	Investigaciones Forestales Bioforest S.A.	U.F.	Motor vehicles		21		28		40		18		5		—		—			49		63

			Total		17,345		48,008		50,815		23,919		15,915		15,091		53,723			65,353		159,463

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.

106

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


December 31, 2020					Maturity														Total
Tax ID	Name	Currency		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		1,379		1,378		2,733		202,733		—		—		—		2,757		205,466		1.35%	Libor 6M+1.1%
93.458.000-1	Celulosa Arauco y Constitución S.A.		Euros	BNP Paribas / ECA		—		31,224		57,365		56,798		56,251		55,658		216,997		31,224		443,069		1.06%	1.06%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo A		1,117		1,104		2,172		2,123		—		—		—		2,221		4,295		2.33%	Libor 6M +2.05%
—	Zona Franca Punta Pereira S.A.		U.S. Dollars	Banco BBVA		—		18,341		—		—		—		—		—		18,341		—		1.00%	1.00%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo A		4,517		4,466		8,785		8,588		—		—		—		8,983		17,373		2.33%	Libor 6M +2.05%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	Finn Vera/ Finnish Export Credit		25,589		25,200		49,269		24,065		—		—		—		50,789		73,334		3.20%	3.20%
—	Celulosa y Energia Punta Pereira S.A.		U.S. Dollars	DnB Nor		187		155		218		93		—		—		—		342		311		—	—
—	Eufores S.A.		U.S. Dollars	Banco República Oriental del Uruguay		—		26,551		—		—		—		—		—		26,551		—		1.54%	Libor 6M +1.3%
—	Eufores S.A.		U.S. Dollars	Citibank		—		2,514		—		—		—		—		—		2,514		—		1.16%	Libor 6M +0.9%
—	Eufores S.A.		U.S. Dollars	ITAU		—		12,564		—		—		—		—		—		12,564		—		1.05%	1.05%
—	Eufores S.A.		U.S. Dollars	Scotiabank		—		5,025		—		—		—		—		—		5,025		—		1.00%	1.00%
—	Eufores S.A.		U.S. Dollars	Santander		—		27,133		—		—		—		—		—		27,133		—		1.00%	1.00%
—	Stora Enso Uruguay S.A.		U.S. Dollars	Banco República Oriental del Uruguay		—		554		—		—		—		—		—		554		—		1.54%	Libor 6M +1.3%
—	Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Votorantim		—		255		243		—		—		—		—		255		243		5.00%	5.00%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Votorantim		—		226		215		—		—		—		—		226		215		5.00%	5.00%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bndes Subcrédito A		36		106		100		—		—		—		—		142		100		7.46%	TJLP +2.91%
—	Arauco Forest Brasil S.A.		Brazilian Real	Banco Bndes Subcrédito B		22		64		60		—		—		—		—		86		60		8.46%	TJLP +3.91%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Bndes Subcrédito C		40		116		124		—		—		—		—		156		124		5.80%	Cesta +2.91%
—	Arauco Forest Brasil S.A.		U.S. Dollars	Banco Bndes Subcrédito D		25		72		67		—		—		—		—		97		67		9.66%	TJLP +5.11%
—	Arauco North America, Inc.		U.S. Dollars	Banco del Estado de Chile - NY Branch		—		35,657		35,077		34,496		212,036		—		—		35,657		281,609		1.91%	Libor 6M +1.65%

				Total		32,912		192,705		156,428		328,896		268,287		55,658		216,997		225,617		1,026,266

December 31, 2020					Maturity														Total
Tax ID	Name	Currency		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		—		25,426		24,644		23,863		23,081		22,299		81,380		25,426		175,267		4.25%	4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-F		—		10,170		9,858		9,545		9,232		8,920		32,552		10,170		70,107		4.25%	4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-P		—		8,098		26,500		25,764		25,027		24,291		149,427		8,098		251,009		4.00%	4.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-Q		—		10,375		—		—		—		—		—		10,375		—		3.00%	3.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-R		—		7,295		7,295		7,295		7,295		7,295		273,750		7,295		302,930		3.60%	3.60%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-S		—		4,878		4,878		4,878		4,878		4,878		209,325		4,878		228,837		2.40%	2.40%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-W		—		2,563		2,563		2,563		2,563		2,563		130,356		2,563		140,608		2.10%	2.10%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.F.	Barau-X		—		6,032		6,032		6,032		6,032		6,032		333,461		6,032		357,589		2.70%	2.70%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2022		2,996		2,996		129,164		—		—		—		—		5,992		129,164		4.75%	4.75%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2024		11,250		11,250		22,500		22,500		522,500		—		—		22,500		567,500		4.50%	4.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2027		—		19,375		19,375		19,375		19,375		19,375		538,750		19,375		616,250		3.88%	3.88%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2047		—		22,000		22,000		22,000		22,000		22,000		884,000		22,000		972,000		5.50%	5.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2029		—		21,250		21,250		21,250		21,250		21,250		574,375		21,250		659,375		4.25%	4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2049		—		27,500		27,500		27,500		27,500		27,500		1,146,250		27,500		1,256,250		5.50%	5.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2030		10,500		10,500		21,000		21,000		21,000		21,000		594,500		21,000		678,500		4.20%	4.20%
93.458.000-1	Celulosa Arauco y Constitución S.A.		U.S. Dollars	Yankee 2050		12,875		12,875		25,750		25,750		25,750		25,750		1,130,875		25,750		1,233,875		5.15%	5.15%
—	Prime-Line, Inc.		U.S. Dollars	Bond ADFA 2014		128		384		512		512		512		512		1,493		512		3,541		4.84%	4.84%
—	Prime-Line, Inc.		U.S. Dollars	Bond ADFA 2013		38		113		149		112		—		—		—		151		261		4.00%	4.00%

				Total		37,787		203,080		370,970		239,939		737,995		213,665		6,080,494		240,867		7,643,063

107

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


December 31, 2020				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.	Motor vehicles		527		1,563		1,578		1,057		569		431		271		2,090		3,906
85.805.200-9	Forestal Arauco S.A.	U.F.	Plants and equipments		1,511		2,005		1,410		41		—		—		—		3,516		1,451
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Plants and equipments		384		259		153		76		—		—		—		643		229
85.805.200-9	Forestal Arauco S.A.	U.F.	Other properties, plant and equipment		1,518		3,812		4,459		46		—		—		—		5,330		4,505
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Other properties, plant and equipment		72		217		120		—		—		—		—		289		120
—	Arauco Argentina S.A.	U.S. Dollars	Buildings and constructions		116		334		34		—		—		—		—		450		34
—	Arauco Argentina S.A.	U.S. Dollars	IT equipment		13		39		35		—		—		—		—		52		35
—	Arauco Argentina S.A.	U.S. Dollars	Other properties, plant and equipment		—		—		—		—		—		—		—		—		—
—	Arauco Argentina S.A.	U.S. Dollars	Plants and equipments		347		1,040		1,386		1,002		668		—		—		1,387		3,056
—	Arauco Argentina S.A.	U.S. Dollars	Motor vehicles		744		2,316		1,804		1,589		750		—		—		3,060		4,143
—	Novo Oeste Gestao de Ativos Florestais S.A.	Brazilian Real	Lands		—		—		—		—		—		—		—		—		—
—	Arauco Industria de Paineis S.A.	Brazilian Real	Other properties, plant and equipment		3		10		8		—		—		—		—		13		8
—	Arauco Industria de Paineis S.A.	Brazilian Real	IT equipment		14		42		38		1		—		—		—		56		39
—	Arauco Industria de Paineis S.A.	Brazilian Real	Motor vehicles		118		355		177		—		—		—		—		473		177
—	Arauco Forest Brasil S.A.	Brazilian Real	IT equipment		7		17		16		2		—		—		—		24		18
—	Arauco Forest Brasil S.A.	Brazilian Real	Lands		676		2,027		2,476		2,702		2,702		2,702		4,728		2,703		15,310
—	Arauco Florestal Arapoti S.A.	Brazilian Real	IT equipment		5		8		5		—		—		—		—		13		5
—	Arauco do Brasil S.A.	Brazilian Real	Buildings and constructions		75		226		301		301		75		—		—		301		677
—	Arauco do Brasil S.A.	U.S. Dollars	IT equipment		—		—		—		—		—		—		—		—		—
—	Arauco do Brasil S.A.	Brazilian Real	IT equipment		34		64		49		3		—		—		—		98		52
—	Arauco do Brasil S.A.	Brazilian Real	Motor vehicles		84		252		408		—		—		—		—		336		408
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.F.	Buildings and constructions		428		1,283		1,597		1,170		—		—		—		1,711		2,767
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.F.	Motor vehicles		197		527		603		312		141		88		27		724		1,171
93.458.000-1	Celulosa Arauco y Constitucion S.A.	Chilean pesos	Buildings and constructions		18		55		74		18		—		—		—		73		92
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.S. Dollars	Plants and equipments		1,612		—		—		—		—		—		—		1,612		—
93.458.000-1	Celulosa Arauco y Constitucion S.A.	Chilean pesos	Motor vehicles		5,055		15,165		20,220		7,005		—		—		—		20,220		27,225
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.S. Dollars	Motor vehicles		45		136		30		—		—		—		—		181		30
—	Arauco North America, Inc.	U.S. Dollars	Lands		—		—		—		—		—		—		—		—		—
—	Arauco North America, Inc.	U.S. Dollars	Buildings and constructions		267		822		1,156		1,285		1,426		1,581		3,275		1,089		8,723
—	Arauco North America, Inc.	U.S. Dollars	Motor vehicles		38		118		247		138		123		—		—		156		508
—	Arauco North America, Inc.	U.S. Dollars	Other properties, plant and equipment		—		—		—		—		—		—		—		—		—
—	Arauco Canada Limited	Canadian dollars	Other properties, plant and equipment		—		—		—		—		—		—		—		—		—
—	Arauco Canada Limited	Canadian dollars	Buildings and constructions		25		78		9		—		—		—		—		103		9
—	Arauco Canada Limited	Canadian dollars	Motor vehicles		13		41		57		91		34		—		—		54		182
—	Celulosa y Energía Punta Pereira S.A.	U.S. Dollars	Plants and equipments		139		418		383		384		384		384		7,094		557		8,629
—	Celulosa y Energía Punta Pereira S.A.	U.S. Dollars	Buildings and constructions		—		—		—		—		—		—		—		—		—
—	Eufores S.A.	U.S. Dollars	Lands		975		2,980		5,744		5,549		5,245		4,819		32,721		3,955		54,078
—	Eufores S.A.	U.S. Dollars	Other properties, plant and equipment		—		—		—		—		—		—		—		—		—
—	Eufores S.A.	U.S. Dollars	Plants and equipments		306		917		1,222		1,222		1,222		1,222		2,445		1,223		7,333
—	Eufores S.A.	U.S. Dollars	Buildings and constructions		70		210		117		117		49		—		—		280		283
96.510.970-6	Maderas Arauco S.A.	Chilean pesos	Motor vehicles		3,906		10,298		12,736		5,840		—		—		—		14,204		18,576
96.510.970-6	Maderas Arauco S.A.	U.F.	Motor vehicles		125		322		345		105		28		6		2		447		486
96.510.970-6	Maderas Arauco S.A.	U.F.	Lands		—		—		—		—		—		—		—		—		—
—	Arauco Colombia S.A.	U.S. Dollars	Buildings and constructions		10		—		—		—		—		—		—		10		—
—	Arauco Colombia S.A.	U.S. Dollars	Fixed facilities and accesories		137		411		—		—		—		—		—		548		—
—	Arauco Europe Cooperatief U.A.	Euros	Motor vehicles		8		12		11		10		—		—		—		20		21
—	Arauco Europe Cooperatief U.A.	Euros	Buildings and constructions		17		52		77		79		81		7		—		69		244
—	Araucomex S.A. de C.V.	Mexican pesos	Buildings and constructions		26		80		112		98		—		—		—		106		210
—	Araucomex S.A. de C.V.	U.S. Dollars	Buildings and constructions		358		970		2,251		1,859		1,815		—		—		1,328		5,925
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Plants and equipments		261		—		—		—		—		—		—		261		—
—	Arauco Industria de México, S.A. de C.V.	U.S. Dollars	Plants and equipments		94		288		131		—		—		—		—		382		131
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Buildings and constructions		—		—		—		—		—		—		—		—		—
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Lands		—		—		—		—		—		—		—		—		—
—	Arauco Industria de México, S.A. de C.V.	U.S. Dollars	Lands		—		—		—		—		—		—		—		—		—
—	Araucomex Servicios S.A. de C.V.	Mexican pesos	Motor vehicles		20		59		17		—		—		—		—		79		17
96.637.330-K	Servicios Logisticos Arauco S.A.	U.F.	Motor vehicles		24		62		70		16		—		—		—		86		86
79.990.550-7	Investigaciones Forestales Bioforest S.A.	U.F.	Motor vehicles		21		40		38		21		5		—		—		61		64

			Total		20,443		49,930		61,704		32,139		15,317		11,240		50,563		70,373		170,963

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.

108

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Regarding the Libor rate and its discontinuity, at the end of June 2021 Arauco maintains 5.87% of its total debt at said rate and it is not estimated that the effect of its elimination will be material. Additionally, Arauco maintains interest rate derivatives for 89.8% of its Libor rate based debt.

Guarantees

As of the date of these interim consolidated financial statements, Arauco has financial assets of approximately MU.S.$ 61 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 June 30, 2021, the total assets pledged as an indirect guarantee were MU.S.$ 421. 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 a non-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

209

Directorate General of Maritime Territory

and Merchant Marine

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean
Pesos

384

Railways

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean
Pesos

2,574

Regional Road Administration (Bío - Bío region)

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean
Pesos

4,729

Ministry of Public Works (MOP)

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Chilean
Pesos

15,683

Sociedad Concesionaria Autopista Costa Arauco S.A.

Forestal Arauco S.A.

Guarantee
letter

—

Chilean
Pesos

5,378

Transelec S.A.

Arauco Forest Brasil S.A.

Mortgage
Industrial
Plant of

Jaguariaíva
of Arauco do
Brasil

Property
plant and
equipment

Brazilian
Real

30,649

BNDES

Arauco Forest Brasil S.A.

Endorsement
of Arauco do
Brasil

—

Brazilian
Real

426

Bank Votorantim S.A.

Arauco Florestal Arapoti S.A.

Endorsement
of Arauco do
Brasil

—

Brazilian
Real

481

Bank Votorantim S.A.

Total

61,001

INDIRECT

Subsidiary

Guarantee

Assets
Pledged

Currency

ThU.S.$

Guarantor

Celulosa Arauco y Constitución S.A.

Suretyship
not
supportive
and
cumulative

—

U.S. Dollar

121,053

Joint Ventures (Uruguay)

Celulosa Arauco y Constitución S.A.

Full
Guarantee

—

U.S. Dollar

300,000

Arauco North America, Inc.

Celulosa Arauco y Constitución S.A.

Guarantee
letter

—

Brazilian
Real

384

Arauco Forest Brasil

Total

421,437

109

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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.

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 +/- 2.88% (equivalent to ThU.S.$ -/+ 8,742), and +/- 0.20% of equity (equivalent to ThU.S.$ -/+ 8,742).

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 +/- 1.01% (equivalent to ThU.S.$-/+$ 3,064) and a change on the equity of +/- 1.21% (equivalent to ThU.S. -/+$ 95,661).

110

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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 June 30, 2021, 6% 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 +/- 0.01% (equivalent to ThU.S.$-/+ 40) and +/- 0.001% (equivalent to ThU.S.$-/+ 40) on equity.


	June 2021 ThU.S.$		Total
Fixed rate		5,552,363		94.2	%
Bonds issued		4,686,407
Bank borrowings and others (*)		670,694
Lease liabilities		195,262
Variable rate		341,681		5.8	%
Bonds issued		—
Bank borrowings		341,681
Total		5,894,044		100.0	%


	December 2020 ThU.S.$		Total
Fixed rate		5,631,837		90.9	%
Bonds issued		4,707,944
Bank borrowings and others (*)		712,138
Lease liabilities		211,755
Variable rate		562,122		9.1	%
Bonds issued		—
Bank borrowings		562,122
Total		6,193,959		100.0	%

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

111

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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 June 30, 2021, revenue due to pulp sales accounted for 44.3% 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 +/- 28.5% (equivalent to ThU.S.$-/+ 86,636) on the income for the year after tax and +/- 1.10% (equivalent to ThU.S.$ -/+ 86,636) on equity.

112

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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 segment

The main products sold by this reportable segment are long fiber bleached pulp (BSKP), short fiber bleached pulp (BHKP), long fiber raw pulp (UKP), pulp fluff and dissolving pulp (DP). Additionally, it manages a forest plantations in order to supply its production plants and, at the same time, to sell to the wood products segment or to third parties what it does not use (pruning, sawing, poles and chips). Finally, depending on the needs, it buys logs and chips from third parties which are consumed or sold to the wood products segment.

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. Fluff pulp is mainly used in the production of diapers and female hygiene products. On the other hand, dissolving pulp is used as raw material for the manufacture of different fabrics.

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 41 countries, mainly in Asia and Europe.

113

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

Wood products segment

The main products sold by this segment correspond to plywood, MDF (Medium Density Fiberboard), PB (chipboard), sawn wood of different dimensions and remanufactured products such as moldings, pre-cut pieces, finger joints, among others.

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 20 industrial plants: 4 in Chile, 2 in Argentina, 4 in Brazil, 2 in Mexico, and 8 plants around USA and Canada. The Company has a total annual production capacity of 7.6 million cubic meters of PBO, MDF, 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, 2.4 million m3 of PB, 460,000 m3 of OSB and 70,000 m3 of sawn timber.

Including Sonae Arauco at 50%, Arauco totalize a capacity of 4.3 million m3 of MDF, 4.5 million m3 of PB and 230,000 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 sawmills in operation (7 in Chile and 1 in Argentina), the Company has a production capacity of 3.0 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.

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

According to Note 2 Accounting Policies, changes in Accounting Estimates, since January 1, 2021, the pulp and forestry segments were merged. Given this merger and complying with the requirements of IFRS 8, the information for the period to December 31, 2020 and the 6 months period to June 30, 2021 has been restated.

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

114

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


Period ended June 30, 2021	Pulp ThU.S.$		Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from sales of goods		1,240,933		1,614,953		—			—			2,855,886						2,855,886
Revenues from rendering of services		46,195		26		174			—			46,395						46,395

Revenues from external customers		1,287,128		1,614,979		174			—			2,902,281						2,902,281
Revenues from transactions with other operating segments		239,934		14,429		17,314			—			271,677			(271,677	)		—

Finance income		—		—		—			14,434			14,434						14,434
Finance costs		—		—		—			(118,180	)		(118,180	)					(118,180	)
Net finance costs		—		—		—			(103,746	)		(103,746	)					(103,746	)

Depreciation and amortizations		151,306		91,449		802			5,545			249,102						249,102
Other income		91,476		8,176		—			20,724			120,376						120,376
Other expenses		48,760		12,535		133			9,028			70,456						70,456

Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		848		—		—			(709	)		139						139
Joint ventures		—		12,565		—			(1,488	)		11,077						11,077

Income tax expense		—		—		—			(166,006	)		(166,006	)					(166,006	)


Profit (loss) of each reportable segment		298,219		347,418		(4,567	)		(337,283	)		303,787						303,787

Geographical information on revenues
Revenue – Chilean entities		887,247		423,157		174			—			1,310,578						1,310,578
Revenue – Foreign entities		399,881		1,191,822		—			—			1,591,703						1,591,703
Total Ordinary Income		1,287,128		1,614,979		174			—			2,902,281						2,902,281


Period ended June 30, 2021	Pulp ThU.S.$		Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Amounts of additions to non-current assets

Acquisition of property, plant and equipment and biological assets		699,497		34,983		52			2,401			736,933			—			736,933
Acquisition and contribution of investments in associates and joint venture		—		—		—			4,805			4,805			—			4,805


Period ended June 30, 2021	Pulp ThU.S.$		Wood products ThU.S.$		Others ThU.S.$		Corporate ThU.S.$		Subtotal ThU.S.$		Elimination ThU.S.$			Total ThU.S.$
Segment assets		12,043,096		2,935,109		25,668		1,491,455		16,495,328		(70,972	)		16,424,356
Segment assets (excluding deferred tax assets)		12,043,096		2,935,109		25,668		1,485,740		16,489,613		(70,972	)		16,418,641
Deferred tax assets								5,715		5,715					5,715
Investments accounted through equity method
Associates		30,587		—		—		55,804		86,391					86,391
Joint Ventures		—		191,766		—		46,234		238,000					238,000
Segment liabilities		528,532		507,832		9,328		7,474,822		8,520,514					8,520,514
Segment liabilities (excluding deferred tax liabilities)		528,532		507,832		9,328		5,965,507		7,011,199					7,011,199
Deferred tax liabilities								1,509,315		1,509,315					1,509,315

Geographical information on non-current assets
Chile		7,687,699		556,850		24,785		311,534		8,580,868		(6,397	)		8,574,471
Foreign countries		2,729,758		1,267,766		—		61,454		4,058,978					4,058,978
Non-current assets, Total		10,417,457		1,824,616		24,785		372,988		12,639,846		(6,397	)		12,633,449

115

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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


Period ended June 30, 2020	Pulp ThU.S.$		Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from goods sale		971,829		1,166,722			—			—			2,138,551						2,138,551
Revenues from rendering of services		38,406		1			82			—			38,489						38,489

Revenues from external customers		1,010,235		1,166,723			82			—			2,177,040						2,177,040
Revenues from transactions with other operating segments		542,091		11,643			15,401			—			569,135			(569,135	)		—

Finance income		—		—			—			19,519			19,519						19,519
Finance costs		—		—			—			(137,704	)		(137,704	)					(137,704	)
Net finance costs		—		—			—			(118,185	)		(118,185	)					(118,185	)

Depreciation and amortizations		151,119		95,843			774			4,338			252,074						252,074
Other income		96,216		26,273			—			355			122,844						122,844
Other expenses		58,792		42,128			2			7,372			108,294						108,294

Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		597		—			—			3,033			3,630						3,630
Joint ventures		—		(4,575	)		—			457			(4,118	)					(4,118	)

Income tax expense		—		—			—			29,111			29,111						29,111


Profit (loss) of each reportable segment		74,006		16,480			(464	)		(175,665	)		(85,643	)					(85,643	)

Geographical information on revenues
Revenue – Chilean entities		701,272		478,640			82			—			1,179,994						1,179,994
Revenue – Foreign entities		308,963		688,083			—			—			997,046						997,046
Total Ordinary Income		1,010,235		1,166,723			82			—			2,177,040						2,177,040


Period ended June 30, 2020	Pulp ThU.S.$		Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Amounts of additions to non-current assets

Acquisition of property, plant and equipment and biological assets		748,668		61,984			325			3,489			814,466			—			814,466
Acquisition and contribution of investments in associates and joint venture		—		—			—			15,212			15,212			—			15,212


Period ended December 31, 2020	Pulp ThU.S.$		Wood products ThU.S.$		Others ThU.S.$		Corporate ThU.S.$		Subtotal ThU.S.$		Elimination ThU.S.$			Total ThU.S.$
Segment assets		11,543,571		2,886,177		24,941		1,623,700		16,078,389		(50,070	)		16,028,319
Segment assets (excluding deferred tax assets)		11,543,571		2,886,177		24,941		1,617,659		16,072,348		(50,070	)		16,022,278
Deferred tax assets		—		—		—		6,041		6,041					6,041
Investments accounted through equity method
Associates		29,205		—		—		56,509		85,714					85,714
Joint Ventures		—		187,388		—		43,837		231,225					231,225
Segment liabilities		494,065		471,024		8,574		7,639,021		8,612,684					8,612,684
Segment liabilities (excluding deferred tax liabilities)		494,065		471,024		8,574		6,175,135		7,148,798					7,148,798
Deferred tax liabilities		—		—		—		1,463,886		1,463,886					1,463,886

Geographical information on non-current assets
Chile		7,487,475		588,973		24,305		314,330		8,415,083		(6,380	)		8,408,703
Foreign countries		2,731,405		1,277,666		—		66,220		4,075,291		—			4,075,291
Non-current assets, Total		10,218,880		1,866,639		24,305		380,550		12,490,374		(6,380	)		12,483,994

116

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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 June 30, 2021	Pulp ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		467,894			382,363			(419	)		5,072			854,838			—		854,838
Cash flows (used in) investing activities		(635,195	)		(44,141	)		(271	)		(1,983	)		(681,590	)		—		(681,590	)
Cash flows from (used in) Financing Activities		(76,493	)		(24,716	)		(885	)		(1,497	)		(103,591	)		—		(103,591	)
Net increase (decrease) in Cash and Cash Equivalents		(243,794	)		313,506			(1,647	)		1,592			69,657			—		69,657


Period ended June 30, 2020	Pulp ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		258,772			96,832			(17	)		(106,349	)		249,238			—		249,238
Cash flows (used in) investing activities		(742,243	)		(71,291	)		(325	)		(2,876	)		(816,735	)		—		(816,735	)
Cash flows from (used in) Financing Activities		260,391			(1,790	)		(37	)		8,144			266,708			—		266,708
Net increase (decrease) in Cash and Cash Equivalents		(223,080	)		23,751			(379	)		(101,081	)		(300,789	)		—		(300,789	)

Information required by geographic area:


	Geographical area
2021	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 goods sale		1,282,065		226,713		285,220		749,323		223,478		89,087		2,855,886
Revenues from rendering of services		28,513		—		—		—		17,857		25		46,395

Revenues as of June 30, 2021		1,310,578		226,713		285,220		749,323		241,335		89,112		2,902,281

Revenues from goods sale		701,091		115,440		153,752		387,741		128,973		44,923		1,531,920
Revenues from rendering of services		14,759		—		—		—		8,886		13		23,658

Revenues between April – June of 2021		715,850		115,440		153,752		387,741		137,859		44,936		1,555,578

Non-current Assets at 06-30-2021 other than deferred tax		8,569,880		717,261		737,861		754,626		1,714,878		133,228		12,627,734

Geographical area

2020

Local country

Foreign country

Chile

Argentina

Brazil

USA/
Canada

Uruguay

Mexico

Total

Disclosure of geographical areas

ThU.S.$

Revenues from goods sale

1,158,146

176,172

176,011

419,400

151,723

57,099

2,138,551

Revenues from rendering of services

21,848

—

16,640

38,489

Revenues as of June 30, 2020

1,179,994

176,172

176,011

419,400

168,363

57,100

2,177,040

Revenues from goods sale

592,522

90,076

72,254

179,231

76,934

20,499

1,031,516

Revenues from rendering of services

9,644

—

8,713

18,358

Revenues between April – June of 2020

602,166

90,076

72,254

179,231

85,647

20,500

1,049,874

Non-current Assets at 12-31-2020 other than deferred tax

8,404,695

741,337

694,079

774,969

1,725,736

137,137

12,477,953

117

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 25. OTHER NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES


	06-30-2021		12-31-2020
Current non-financial assets	ThU.S.$		ThU.S.$
Roads to amortize current		55,805		55,000
Prepayment to amortize (insurance and others)		52,505		16,671
Recoverable taxes (GST and others)		91,705		91,337
Other current non-financial assets		8,029		5,589
Total		208,044		168,597


	06-30-2021		12-31-2020
Non-current non-financial assets	ThU.S.$		ThU.S.$
Roads to amortize, non-current		91,027		91,441
Guarantee values		2,917		3,605
Recoverable taxes		20,085		14,437
Other non-current non-financial assets		3,882		3,731
Total		117,911		113,214


	06-30-2021		12-31-2020
Current non-financial liabilities	ThU.S.$		ThU.S.$
Provision of minimum dividend (1)		594		698
ICMS, PIS-COFINS and other tax payables - Brazil		26,302		24,997
Other tax payable		18,912		17,851
Other Current non-financial liabilities		4,150		1,184
Total		49,958		44,730

(1)	In late 2019, the Parent’s dividend policy was modified as disclosed in notes 1 and 26. Provision includes a minimum dividend of subsidiary minority.



	06-30-2021		12-31-2020
Non-current non-financial liabilities	ThU.S.$		ThU.S.$
ICMS tax payable—Brazil		84,118		82,033
Other non-current non-financial liabilities		1,890		1,270
Total		86,008		83,303

118

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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.

Considering the current dividend policy described in Note 1, it is not appropriate to record a minimum dividend provision.

The following table details the adjustments made for the determination of distributable net profit as of June 30, 2021 and 2020:


	Distributable Net Profit
	06-30-2021 ThU.S.$			06-30-2020 ThU.S.$
Net profit attributable to parent company		302,912			(85,477	)
Adjustments:
Biological assets
Unrealized gains/losses		(81,810	)		(88,638	)
Realized gains/losses		109,077			88,700
Deferred income taxes		(5,615	)		1,636

Total adjustments		21,652			1,698

Distributable Net Profit		324,564			(83,779	)

119

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

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 - June					April - June
	2021 ThU.S.$		2020 ThU.S.$			2021 ThU.S.$		2020 ThU.S.$
Profit or loss attributable to ordinary equity holder of parent		302,912		(85,477	)		201,004		(56,017	)
Weighted average of number of shares		118,336,956		113,159,655			120,188,355		113,159,655
Basic and diluted earnings per share (in U.S.$ per share)		2.5597414		(0.7553664	)		1.6724083		(0.4950263	)

120

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 27. COVID-19

In late December 2019 a notice of pneumonia originating from Wuhan, Hubei province (COVID-19, caused by a novel coronavirus) was reported to the World Health Organization, with cases soon confirmed in multiple provinces in China, as well as in other countries. As of the date of this report, the virus has affected most nations, including Chile, Argentina, Brazil, Uruguay, Mexico, and the United States.

Several measures have been undertaken by governments around the globe, including the use of quarantine, screening at airports and other transport hubs, travel restrictions, suspension of visas, nation-wide lockdowns, closing of public and private institutions, suspension of sport events, restrictions to museums and tourist attractions and extension of holidays, among many others.

In this complex scenario, it is important to highlight that, in March 2020, our industrial activities were declared as essential business by the authorities in most of the countries where we have operations. This has allowed us, as of the date of this report, to maintain the operational continuity in most of our industrial operations, helping to mitigate negative effects on the demand of some of our clients and products. We have implemented health and safety protocols for our workers both in industrial operations and in commercial offices. The measures adopted -such as social distancing, sanitation of the facilities, preventive testing, personnel transportation, home office, among others- are being continuously monitored so that workers have all the necessary protection for the performance of their functions.

Arauco’s commitment is not only with its workers, but also with the communities where we operate. In this regard, we have developed programs aimed at strengthening the capacities of the health system, through massive sanitation and fumigation programs of common spaces in the suburbs where we are present in Chile and delivery of sanitary supplies and essential reagents for 8 thousand diagnostic tests in the Ñuble region. In addition, support has been provided in temperature taking points and sanitary barriers in coordination with authorities; contributuion of hospital equipment and mechanical fans in Curanilahue, Biobío region; support in the implementation of rest areas for hospital personnel and improvements in spaces within hospitals in Chile; and collaborated in research for the development of mechanical fans.

On the other hand, our employees have participated as volunteers to deliver food boxes, as part of the campaign promoted by the CPC to reach the most vulnerable families in the country. This initiative entailed deliverying 5,226 food boxes in 28 communes of Chile, and putting together a network of Arauco Chile seamstresses for the development of reusable masks. Support was also provided, through the Fundación AcercaRedes, to the economy of small producers in Chile and for thereopening of agricultura fairs, applying various sanitation actions and delivering health kits. A network of volunteers was also assembled to support families living in rural areas.

No significant economic impacts have been generated in the operations reflected in Arauco’s financial statements.

121

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

June 30, 2021

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

NOTE 28. SUBSEQUENT EVENTS

1) As informed to the Commission for the Financial Market through a material fact (hecho esencial) dated May 13, 2021, Forestal Arauco S.A., a subsidiary of the Company, executed, on May 12, 2021, a master agreement (the “Master Agreement”), by means of which it agreed to sell to Vista Hermosa Inversiones Forestales SpA, a company controlled by BTG Inversiones Forestales Fondo de Inversión, 461 forest properties for a total price of US$ 385,500,000 (three hundred and eighty-five million five hundred thousand United States dollars), plus the corresponding Value Added Tax (the “VAT”). As reported at that time, it is estimated that the transaction would generate a gain of approximately US$ 192,500,000 (one hundred ninety-two million five hundred thousand United States dollars) after taxes, as a result of the sale of all the forest properties.

The closing of the transaction was subject to the fulfillment of customary conditions precedent for this type of transactions, including the authorization by the antitrust authorities. We hereby inform the Commission for the Financial Market that the conditions precedent for the closing of the aforementioned transaction have been fulfilled and, as a result, on August 17, 2021, the parties therein have proceeded to execute the purchase and sale agreements of 430 properties as committed in the Master Agreement for a total price of US$ 343,668,296 (three hundred forty-three million six hundred sixty-eight thousand two hundred ninety-six United States dollars), plus the corresponding VAT.

Additionally, on August 17, 2021, the parties executed a timber supply and preferential right purchase agreement (contrato de suministro y opción preferente de compra de volumen pulpable de pino radiata), a firefighting services agreement (contrato de servicios de combate de incendios) and an agreement for transitional services for the management of operational tasks (contrato de servicios transitorios de administración de predios forestales y gestión de faenas operativas), among other documents. Finally, it shall be noted that the parties expect to execute the purchase and sale agreements of the remaining 31 properties provided that, for each of them, certain specific conditions precedent are met within the following months, in accordance with the Master Agreement.

2) The authorization for the issuance and publication of these consolidated financial statements for the period between January 01, 2021 and June 30, 2021 was approved by the Board of Directors of Arauco at the Extraordinary Meeting No. 654 held on August 16, 2021.

Subsequent to June 30, 2021 and as of 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.

122

LOGO

Press Release 2Q 2021

LOGO

2Q 2021 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$1,555.6 million ARAUCO’s revenues reached US$1,555.6 million during the second quarter of 2021, a 15.5% increase compared to the US$1,346.7 million obtained during the first quarter of 2021 and a 48.2% increase compared to the second quarter of 2020. NET INCOME US$201.4 million ARAUCO’s net income was US$201.4 million, equivalent to a US$99.1 million increase when compared to the US$102.4 million obtained during the first quarter of 2021, and a US$257.4 million increase compared to the second quarter of 2020. ADJUSTED EBITDA US$545.4 million Adjusted EBITDA reached US$545.4 million, a 41.7% or US$160.6 million increase compared to the US$384.7 million obtained during the first quarter of 2021, and a 165.0% or US$339.6 million increase compared to the second quarter of 2020. NET DEBT TO EBITDA 2.97x Net Financial Debt decreased by US$265.1 million or 5.3% compared to the last quarter. Net Financial Debt / LTM Adjusted EBITDA ratio reached 2.97x in this quarter, a decrease compared to 3.98x in the first quarter of 2021 and the 5.94x reached during the second quarter of 2021. CAPEX US$401.8 million CAPEX reached US$401.8 million during this quarter, a US$109.9 increase when compared to the US$291.9 million from the first quarter of 2021.

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2Q 2021 RESULTS ARAUCO´s net income for the second quarter of 2021 was US$201.4 million, an increase of US$99.1 million compared to the first quarter of 2021. This is mainly explained by a higher operational result due to higher average prices, as well as a slight decrease in cost of sales. This was partially offset by a decrease in Other Income, and increases in both Distribution Costs and Administrative Expenses. Our Adjusted EBITDA was 41.7% higher than that of the first quarter, reaching US$545.4 million. The Adjusted EBITDA margin increased Overview from 28.6% to 35.1% on a quarterly basis. Net Financial Debt decreased by US$265.1 million or 5.3% compared to the last quarter. Our Net Debt/LTM EBITDA ended up in 2.97x, a decrease when compared to the 3.98x reached during the first quarter of 2021. In US$ Million Q2 2021 Q1 2021 Q2 2020 QoQ YoY YTD 2021 YTD 2020 YoY Acum Revenue 1,555.6 1,346.7 1,049.9 15.5% 48.2% 2,902.3 2,177.0 33.3% Net income 201.4 102.4 -55.9 96.8% 460.1% 303.8 -85.6 454.7% Adjusted EBITDA 545.4 384.7 205.8 41.7% 165.0% 930.1 400.4 132.3% Adjusted EBITDA 35.1% 28.6% 19.6% 22.7% 78.9% 28.6% 18.4% 55.3% Margin LTM Adj. EBITDA 1,601.6 1,262.0 849.6 26.9% 88.5% 1,601.6 849.6 88.5% CAPEX 401.8 291.9 384.2 37.6% 4.6% 693.8 829.7 -16.4% Net Financial Debt 4,760.3 5,025.5 5,050.0 -5.3% -5.7% 4,760.3 5,050.0 -5.7% Net Financial Debt / 2.97x 3.98x 5.94x -25.4% -50.0% 2.97x 5.94x -50.0% LTM Adj. EBITDA Adjusted EBITDA and EBITDA Margin (in US$ Million) FY 2019 FY 2020 YTD 2021 1,147.4 1,071.8 930.1

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2Q 2021 RESULTS Income Statement In US$ Million Q2 2021 Q1 2021 QoQ Revenues 1,555.6 1,346.7 15.5% Cost of sales (887.2) (897.8) -1.2% Distribution costs (159.3) (144.8) 10.0% Administrative expenses (150.7) (136.5) 10.4% Other income 45.4 75.0 -39.5% Other expenses (33.0) (37.5) -12.0% Financial income 7.6 6.8 11.2% Financial costs (57.2) (61.0) -6.2% Share of profit (loss) of associates and joint 8.7 2.5 249.0% ventures accounted for using equity method Exchange rate differences (5.2) (8.5) -38.5% Income before income tax 324.8 145.0 124.0% Income tax (123.4) (42.6) 189.3% Net income 201.4 102.4 96.8%

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2Q 2021 RESULTS Revenues ARAUCO’s revenues reached US$1,555.6 million in the second quarter of 2021, an increase of 15.5% when compared to the previous quarter. This variation is mostly explained by higher revenues in our pulp division, due to an increase of 39.9% of average prices, while sales volumes decreased by 4.2%. Additionally, revenues for our wood products division increased by 9.4% or US$72.2 million. The following table shows a breakdown of our revenues by business segment: In US$ Million Q2 2021 Q1 2021 QoQ Pulp 711.9 575.3 23.7% Wood Products 843.6 771.4 9.4% Total 1,555.6 1,346.7 15.5% 2Q 2021 Revenue’s breakdown

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2Q 2021 RESULTS Cost of sales Decreased by 1.2% or US$10.6 million compared to the first quarter of 2021. This is mostly explained by lower costs associated to timber, partially compensated by an increase in forestry labor costs and chemical costs. In US$ Million Q2 2021 Q1 2020 QoQ Timber 181.0 229.0 -21.0% Forestry labor costs 136.5 119.6 14.1% Depreciation and amortization 100.3 104.0 -3.5% Depreciation for right of use 10.2 11.7 -12.5% Maintenance costs 63.2 64.5 -2.0% Chemical costs 130.5 115.0 13.5% Sawmill services 28.1 25.5 10.1% Other raw materials and indirect costs 86.6 81.5 6.3% Energy and fuel 42.8 42.9 -0.1% Cost of electricity 12.5 9.6 29.5% Wage, salaries and severance indemnities 95.3 94.5 0.8% Cost of Sales 887.2 897.8 -1.2% Administrative expenses Increased by 10.4% or US$14.2 million, when compared to the previous quarter, mainly due to an increase in (i) other administrative expenses (mostly due to higher expenses related to sanitization services and COVID-19 testing, and also due to the maintenance stoppage in our pulp mill in Argentina), (ii) property taxes, patents and municipality rights and (iii) wages, salaries and severance indemnities. In US$ Million Q2 2021 Q1 2021 QoQ Wages, salaries and severance indemnities 62.7 60.2 4.2% Marketing, advertising, promotion and publications 3.3 2.6 26.8% expenses Insurance 6.0 5.8 3.0% Depreciation and amortization 9.4 8.6 9.5% Depreciation for the right of use 1.7 1.8 -8.5% Computer services 9.6 8.7 11.5% Lease rentals (offices, warehouses and machinery) 1.6 1.6 -2.7% Donations, contributions, scholarships 1.2 1.9 -37.9% Fees (legal and technical advisories) 9.3 8.9 4.9% Property taxes, patents and municipality rights 8.2 4.5 84.0% Other administration expenses 37.6 31.9 17.7% Administrative Expenses 150.7 136.5 10.4%

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2Q 2021 RESULTS Distribution costs Distribution costs increased by 10.0%, or US$14.5 million due to an increase in freight costs caused by pandemic-related logistic issues. In US$ Million Q2 2021 Q1 2021 QoQ Commissions 3.6 3.6 0.3% Insurance 0.9 1.1 -24.4% Other selling costs 4.5 4.0 11.7% Port services 11.8 11.7 1.1% Freight 128.2 113.1 13.4% Depreciation for the 0.6 0.6 11.7% right of use Other shipping and freight costs 9.6 10.7 -9.9% Distribution Costs 159.3 144.8 10.0% Other income Decreased by 39.5% or US$29.6 million, mainly as a result of profit on sales of permanent investments due to the sale of our shares in Forestal Los Lagos SpA. in the previous quarter. In US$ Million Q2 2021 Q1 2021 QoQ Gain from changes in fair 41.8 41.3 1% value of biological assets Net income from insurance 0.6 0.01 7375% compensation Leases received 0.2 0.53 -64% Gains on sales of assets 1.7 1.97 -15% Tax recovery — 0% Severance, payments—7.0 -100% Profit on sales of—20.4 -100% permanent investments Other operating results 1.1 10.79 -89% Government Subsidies — 0% Other Income 45.4 75.0 -39.5%

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2Q 2021 RESULTS Other expenses Decreased by 12.0% or US$4.5 million when compared to the first quarter of 2021. This is mostly explained by a decrease in loss of forests due to last quarter’s adjustments related to the forest fire in Matto Grosso, Brazil in 2020. This was partially offset by an increase in impairment provision property, plant and equipment and others. In US$ Million Q2 2021 Q1 2021 QoQ Legal payments 4.7 1.5 221.6% Impairment provision 7.9 4.0 99.1% property, plant and equipment and others Operating expenses related 2.1 1.5 37.4% to plant stoppages Project expenses 6.1 5.3 16.8% Loss (gain) from asset sales 1.2 2.0 -43.7% Loss and repair of assets 0.2 0.3 -47.1% Loss of forests 0.6 16.9 -96.4% Other taxes 6.8 3.3 107.7% Research and development 1.7 0.3 419.1% expenses Other expenses (donations, 1.8 2.4 -27.0% repayments insurance) Other expenses 33.0 37.5 -12.0% Foreign exchange differences Showed a net loss of US$5.2 million, a US$3.3 million decrease when compared to the first quarter that ended with a US$8.5 million loss. The main significant effects are given by the variation of local currencies in the countries where we have industrial operations. Income tax For the second quarter, income tax expenses reached US$123.4 million, US$80.7 million higher than the US$42.6 million of the previous quarter. This is mainly as a result of a better pre-tax result owing to the increase in revenues.

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2Q 2021 RESULTS Adjusted Adjusted EBITDA for the second quarter of 2021 was US$545.4 million, a 41.7% or US$160.6 million increase when compared to the previous quarter. This is mainly explained by increases in the pulp business EBITDA segment of US$131.9 million and the wood products business segment of US$67.0 million, mostly due to higher operational income. In US$ Million Q2 2021 Q1 2021 Q2 2020 QoQ YoY Net Income 201.4 102.4 (55.9) 96.8% 460.1% Financial costs 57.2 61.0 65.9 -6.2% -13.3% Financial income (7.6) (6.8) (12.3) 11.2% -38.3% Income tax 123.4 42.6 (19.4) 189.3% 737.5% EBIT 374.4 199.2 (21.7) 88.0% 1827.0% Depreciation & amortization 122.4 126.7 125.4 -3.4% -2.4% EBITDA 496.7 325.9 103.8 52.4% 378.8% Fair value cost of timber harvested 77.2 70.8 75.3 9.0% 2.6% Gain from changes in fair value of (41.8) (41.3) (36.1) 1.1% 15.6% biological assets Exchange rate differences 5.2 8.5 26.7 -38.5% -80.4% Others (*) 8.0 20.9 36.2 -61.8% -78.0% Adjusted EBITDA 545.4 384.7 205.8 41.7% 165.0% (*) ((*)Includes provision from forestry fires and provisions from property, plants and equipment, and others. Adjusted EBITDA variation by business segment (in US$ million)

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2Q 2021 RESULTS Pulp Business During the second quarter, pulp demand remained stable, with some markets more solid and requesting additional volumes. Prices increased in some markets and were stable in others. On the other hand, sales started to be affected by the logistic issues that are affecting all industries worldwide. World inventories for both fibers increased between March and May, long fiber increased by 1 day and short fiber by 2 days. Global BCP Shipments Change China -1.4% Europe -0.8% Other Asia -8.2% USA -12.5% Rest of the World -9.6% Total -4.3% Last 5 months, Jan-May 2020 and 2021. BCP stands for Bleached Chemical. Pulp Source: Hawkins Wright. In China, pulp demand remained relatively stable, even though during the second quarter the low demand season begins in the northern hemisphere. The tissue industry has lowered its operating rate due to high prices of raw materials and the difficulties to pass such high prices onto their final products. The P&W industry remained more stable, with some producers decreasing supply and inventories, and trying to maintain prices of final products. During the second quarter, the Chinese government implemented measures to try to stop the rise in commodity prices, these measures impacted negatively upon the pulp futures market. Short fiber price reached its highest level at the beginning of the quarter and then remained stable, however, long fiber prices after increasing and reaching its highest level slightly decreased towards the end of the quarter. The spread between the long and short fiber decreased reaching US$130 at the end of the quarter, a decrease of US$40 compared to end of the first quarter. In Europe there was good pulp demand during the quarter. The P&W and specialty industries experienced good demand for their final products, and they have been able to confirm price increases transferring the higher costs of raw material to their final products. The tissue industry came under increased pressure because of (i) pulp prices, (ii) prices for final products did not increase, and (iii) demand for their products remained stable. Pulp prices, as in the first quarter, continued to rise throughout the second quarter. The dissolving pulp market remained stable and prices kept at high levels. The viscose market started to decline so some local dissolving pulp producers in China switched to producing paper grade pulp, anticipating the pressure in the dissolving pulp market. Production during the second quarter was lower by 3.5% compared to the same period of 2020. During the second quarter of this year we had the programmed maintenance stoppage of the Esperanza mill, in Argentina, and the Line 2 of the Arauco mill. Production and Sales Volume (In thousand tonnes)

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2Q 2021 RESULTS u The Adjusted EBITDA for our pulp business segment reached US$342.2 million during this quarter, which translates to a 62.7% or US$131.9 million increase compared to the first quarter of 2021. Pulp EBITDA Mg reached 48.1%, 11.5% higher than the previous quarter. Days of Stoppages Mill 2021 1Q 2Q 3Q 4Q Arauco—Line 1 11 Arauco—Line 2 22 Constitución Licancel 11 Nueva Aldea 19 11 Valdivia Esperanza 27 Montes del Plata

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2Q 2021 RESULTS Wood Products Business Includes PB, MDF, OSB, HB, Composite Panels and Retail Panels. Includes sawn timber, kilned sawn timber, remanufactured wood products, pallets. Note: Sales include trading Panels Revenues increased when compared to the first quarter, mainly as a result of a 9.7% increase in average prices. Sales volumes increased 1.6%. During the second quarter, the market demand continued to rise. The foregoing is explained by an increase in demand for products of home improvement and remodeling, the reactivation of construction projects and by government measures that have favored consumption. Production and Sales Volume: Panels (1) (In thousand m3) Sawn timber During the second quarter sales volume decreased by 2.0% while average prices increased by 7.2%. During the second quarter prices for sawn timber and remanufactured wood products continued to rise compared to the first quarter mainly due to an increase in demand. Logistics problems have also continued throughout the quarter leading to low availability and rising costs. Production and Sales Volume: Sawn Timber (2) (In thousand m3) Plywood Sales volume decreased by 21.2% during the second quarter, partially offset by an increase in average prices of 14.7%. There has been an increase in demand in markets such as Chile, Europe, Oceania and the US, despite some effects arising from logistical issues leading to some invoice delays. Production and Sales Volume: Plywood (In thousand m3)

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2Q 2021 RESULTS Adjusted EBITDA for our wood products business was US$254.5 million during the second quarter of 2021, which translates to a 35.8% or US$67.0 million increase, compared to the previous quarter. Wood products EBITDA Mg was 30.2%, higher than the 24.3% reached during the first quarter.

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2Q 2021 RESULTS During this quarter, capital expenditures(*) reached US$401.8 million, Capital US$109.9 million higher than the previous quarter. This is mainly due to an increase in purchase and sale of property, plant and equipment due to MAPA project. Expenditures The biggest single item in CAPEX-related expenditures during the quarter were those related to the MAPA project. These expenditures reached approximately US$228.3 million. US$ Million Q2 2021 Q1 2021 Q2 2020 YTD 2021 YTD 2020 Cash flow used to obtain control of—(48.0)—(48.0)—subsidiaries or other businesses Cash flow used to purchase in 2.5 2.3 0.1 4.8 15.2 associates Purchase and sale of property, plant 346.2 256.9 326.1 603.1 682.8 and equipment Purchase and sale of intangible (0.4) 2.8 5.5 2.5 11.6 assets Purchase of other long-term assets 53.4 78.0 52.5 131.3 120.1 Total CAPEX (*) 401.8 291.9 384.2 693.8 829.7 (*) On a cash basis.

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2Q 2021 RESULTS During the second quarter, free cash flow increased by US$169.6 million compared Free to the previous quarter, ending with inflows of US$253.1 million. Cash provided by operating activities increased by US$45.4 million mainly due an increase in Adjusted EBITDA due to a higher operational income. Cash used in investment activities Cash Flow increased by US$116.8 million mostly due to higher capital expenditures. Cash from financing activities increased by US$200.6 million due to the US$200.0 million portion of the capital increase received during May. US$ Million Q2 2021 Q1 2021 Q2 2020 Adjusted EBITDA 545.4 384.7 205.8 Working Capital Variation (164.4) 16.0 5.8 Interest paid and received (73.4) (38.7) (87.0) Income tax received (paid/refunded) 81.0 49.0 83.0 Other cash inflows (outflows) 61.5 (6.4) 57.4 Cash from Operations 450.1 404.7 265.0 Capex (*) (401.8) (291.9) (384.2) Proceeds from investment activities 2.5 8.7 2.6 Other inflows of cash, net 0.2 0.9 1.8 Cash from (used in) Investment Activities (399.2) (282.4) (379.9) Dividends paid (0.2)—(0.1) Other inflows of cash, net (17.5) (18.3) (25.0) Proceeds from issue of shares 200.0 — Cash from (used in) Financing Activities—Net of Proceeds and Repayments 182.3 (18.3) (25.1) Effect of exchange rate changes on cash and cash equivalents 19.9 (20.5) (3.4) Free Cash Flow 253.1 83.5 (143.4) (*) On a cash basis. Net Debt Variation Q2 2021 – Q1 2021 (in US$ million)

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2Q 2021 RESULTS Cash Our cash position was US$1,133.7 million at the end of the second quarter, which translates to a 22.7% increase equivalent to US$209.6 million when compared to the end of the first quarter of 2021. Cash provided by operational activities increased by US$45.4 million mainly due to an increase in receipts of sales of goods, partially offset by an increase in payments of suppliers and personnel. Cash provided in investment activities decreased US$116.8 million mainly due to an increase in capital expenditures. Cash provided by financing activities increased by US$200.6 mainly due to an increase of capital of US$200.0 million paid during May 2021. In terms of liquidity, and additionally to our cash position, the Company has a committed revolving credit facility for a total amount of US$375 million, which as of the date of this report hasn’t been withdrawn. This facility is due in February 2025. Cash by Currency Cash by Instrument

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ARAUCO’s total financial debt as of June 30, 2021 reached US$5,894.0 2Q 2021 RESULTS million, a decrease of 0.9% or US$55.5 million when compared to March 31, 2021. Our consolidated net financial debt decreased 5.3% or US$265.1 million when compared with March 2021. Our leverage, measured as Net Financial Debt/LTM Adjusted EBITDA was 2.97x, which compares to the 3.98x in the last quarter. In US$ Million Jun 2021 Mar 2021 Jun 2020 Short term financial 487.7 510.9 659.7 debt Long term financial 5,406.4 5,438.7 5,620.3 Financial debt TOTAL FINANCIAL 5,894.0 5,949.5 6,280.0 DEBT Debt Cash and cash equivalents 1,133.7 924.1 1,230.0 NET FINANCIAL DEBT 4,760.3 5,025.5 5,050.0 LTM Adjusted EBITDA 1,601.6 1,262.0 849.6 Net Financial Debt and Leverage (In US$ Million)

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2Q 2021 RESULTS Financial Debt Profile For 2021 short term bank and bond obligations (which includes accrued interest) sum up US$272.3 million. Bank obligations include the following maturities: US$170.2 million in bank loans and US$34.6 million in leasing. Bond obligations for the remainder of the year sum up US$67.5 million. These obligations include amortizations of local bonds, and interest payments of our USD-denominated bonds. Debt Amortization Profile as of June 30, 2021 (In US$ Million) Debt Profile and Structure Debt by Currency Debt by Instrument (*) UF is a Chilean monetary unit indexed to inflation.

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2Q 2021 RESULTS Second Quarter Subsequent Events and News Agreement for Selling Forestry Assets update On May 12, 2021, Forestal Arauco S.A., a subsidiary of the Company, executed a master agreement (the “Master Agreement”), by means of which it agreed to sell to a third party, 461 forest properties that include a total of 80,489 hectares, of which 61,742 are productive hectares, for a total price of US$385,500,000, plus the corresponding Value Added Tax. Pursuant to the Master Agreement, at the closing of the transaction, the price corresponding to 430 properties was to be paid, while the price of the remaining 31 properties will be paid subject to satisfaction, for each such property, of certain specific conditions within the months following closing; all of the above according to the procedure established in the Master Agreement. As informed on such occasion, it has been preliminarily estimated that this transaction will generate a gain for 2021 or 2022, depending on the closing date, of approximately US$192,500,000 after taxes, as a result of the sale of all the properties. We hereby inform that the conditions precedent for the closing of the operation described above have been met and, consequently, on August 17, 2021, the parties proceeded to execute the sale of 430 properties committed in the master agreement for a price of US $ 343,668,296, plus the corresponding Value Added Tax. Additionally, on the same date, the parties entered into a supply contract and a preferential call option to purchase pulp volume of radiata pine, a fire fighting service contract and a temporary forest property management and operational task management service contract, among others. Finally, it is noted that the parties expect to carry out the sale of the 31 remaining properties to the extent that, for each of them, certain particular conditions are met within the following months, as established in the Master Agreement.

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2Q 2021 RESULTS Second Quarter Subsequent Events and News MAPA Project update MAPA Project overall progress as of the end of July 2021 was 85.6%. Construction work continues, as well as the commissioning and startup of some facilities and equipment. During the quarter there have been some advancements and highlights such as (i) the bridge cranes of the Washing and Machine buildings were put into service, (ii) the hydraulic test of the digester was started and, (iii) the production of demineralized water began. Progress was made in the activities necessary to carry out the first ignition of the Power Boiler as well as, the hydraulic test of the Recovery Boiler. To date, more than 389 thousand PCR tests have been applied to workers of the project, with a positivity rate lower than the national average informed by the Health Ministry in the daily COVID-19 report. We estimate that the startup will take place during the fourth quarter of 2021. At that point the existing eucalyptus line (Line 1) will be permanently shut down in accordance with the environmental permit.

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2Q 2021 RESULTS UPCOMING EVENTS 2Q 2021 RESULTS CONFERENCE CALL Thursday, August 26, 2021 11:00 Santiago Time 11:00 Eastern Time (New York) Dial in: +1 (844) 450 3845 from the US +56 (44) 208 1274 from Chile +55 (11) 3181 8565 from Brazil +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 Marcelo Reyes Intveen Investor Relations marcelo.reyes@arauco.com Phone: +56 2 2461 7434 investor_relations@arauco.cl

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2Q 2021 RESULTS Financial Statements Income Statement In US$ Million Q2 2021 Q1 2021 Q2 2020 YTD 2021 YTD 2020 Revenues 1,555.6 1,346.7 1,049.9 2,902.3 2,177.0 Cost of sales (887.2) (897.8) (800.1) (1,785.0) (1,643.6) Gross profit 668.4 448.9 249.8 1,117.3 533.4 Other income 45.4 75.0 67.6 120.4 122.8 Distribution costs (159.3) (144.8) (122.8) (304.1) (260.2) Administrative expenses (150.7) (136.5) (130.2) (287.2) (253.7) Other expenses (33.0) (37.5) (57.4) (70.5) (108.3) Financial income 7.6 6.8 12.3 14.4 19.5 Financial costs (57.2) (61.0) (65.9) (118.2) (137.7) Share of profit (loss) of associates and joint 8.7 2.5 (2.0) 11.2 (0.5) ventures accounted for using equity method Other income (loss) — ——Exchange rate differences (5.2) (8.5) (26.7) (13.7) (30.1) Income before income tax 324.8 145.0 (75.3) 469.8 (114.8) Income tax (123.4) (42.6) 19.4 (166.0) 29.1 Net income 201.4 102.4 (55.9) 303.8 (85.6) Profit attributable to parent company 201.0 101.9 (56.0) 302.9 (85.5) Profit attributable to non-parent company 0.4 0.5 0.1 0.9 (0.2)

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2Q 2021 RESULTS Balance Sheet In US$ Million 30-06-2021 31-03-2020 30-06-2020 Cash and cash equivalents 1,133.7 924.1 1,230.0 Other financial current assets 3.3 1.9 37.0 Other current non-financial assets 208.0 197.1 194.9 Trade and other receivables-net 878.6 755.1 654.5 Related party receivables 5.8 5.6 6.8 Inventories 1,019.8 904.1 1,028.0 Biological assets, current 297.9 296.1 276.6 Tax assets 111.8 249.3 175.1 Non-Current Assets classified as held for sale 132.0 125.6 4.3 Total Current Assets 3,790.9 3,458.7 3,607.2 Other non-current financial assets 16.7 36.4 1.3 Other non-current and non-financial assets 117.9 124.2 133.5 Non-current receivables 15.7 16.2 7.1 Investments accounted through equity method 324.4 307.9 288.1 Intangible assets 97.1 100.3 102.5 Goodwill 59.6 57.4 58.5 Property, plant and equipment 8,806.7 8,574.1 8,078.8 Biological assets, non-current 3,189.7 3,166.5 3,323.7 Deferred tax assets 5.7 5.3 7.1 Total Non-Current Assets 12,633.4 12,388.3 12,000.9 TOTAL ASSETS 16,424.4 15,847.1 15,608.1 Other financial liabilities, current 487.7 510.4 663.7 Trade and other payables 700.2 624.4 569.9 Related party payables 3.9 4.6 5.7 Other provisions, current 0.4 0.4 0.4 Tax liabilities 56.0 60.8 14.0 Current provision for employee benefits 6.4 6.2 5.7 Other non-financial liabilities, current 50.0 48.7 34.6 Total Current Liabilities 1,304.5 1,255.5 1,294.1 Other non-current financial liabilities 5,517.5 5,486.6 5,921.3 Trade and Other payables non-current ——Other provisions, non-current 29.3 30.3 30.8 Deferred tax liabilities 1,509.3 1,461.9 1,285.0 Non-current provision for employee benefits 73.9 72.3 66.6 Other non-financial liabilities, non-current 86.0 75.8 79.3 Total Non-Current Liabilities 7,216.1 7,126.9 7,383.0 Non-parent participation 26.9 24.3 29.4 Net equity attributable to parent company 7,876.9 7,440.3 6,901.6 TOTAL LIABILITIES AND EQUITY 16,424.4 15,847.1 15,608.1

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2Q 2021 RESULTS Cash Flow Statement US$ Million Q2 2021 Q1 2021 Q2 2020 YTD 2021 YTD 2020 Receipts from sales of goods and rendering of 1,473.4 1,359.0 1,175.4 2,832.4 2,298.3 services Other cash receipts (payments) 95.5 104.0 108.5 199.5 183.6 Payments of suppliers and personnel (less) (1,125.2) (1,067.6) (1,013.9) (2,192.7) (2,135.7) Interest paid and received (73.4) (38.7) (87.0) (112.1) (122.4) Income tax paid 81.0 49.0 83.0 130.0 27.5 Other (outflows) inflows of cash, net (1.3) (1.1) (1.0) (2.3) (2.1) Net Cash Provided by (Used in) Operating 450.1 404.7 265.0 854.8 249.2 Activities Capital Expenditures (401.8) (291.9) (384.2) (693.8) (829.7) Other investment cash flows 2.6 9.5 4.3 (12.2) 12.9 Net Cash Provided by (Used in) Investing (399.2) (282.4) (379.9) (681.6) (816.7) Activities Proceeds from borrowings—5.0 238.8 5.0 378.8 Repayments of borrowings (43.5) (229.2) (20.9) (272.6) (65.8) Dividends paid (0.2) 0.0 (0.1) (0.2) (0.1) Other inflows of cash, net (17.5) (18.3) (25.0) (35.8) (46.2) Proceeds from Issue of Shares 200.0 — — Net Cash Provided by (Used in) Financing 138.9 (242.5) 192.8 (103.6) 266.7 Activities Total Cash Inflow (Outflow) of the Period 189.8 (120.1) 77.9 69.7 (300.8) Effect of exchange rate changes on cash and cash 19.9 (20.5) (3.4) (0.6) (29.2) equivalents Cash and Cash equivalents at beginning of the 924.1 1,064.7 1,155.5 1,064.7 1,560.0 period Cash and Cash Equivalents at end of the Period 1,133.7 924.1 1,230.0 1,133.7 1,230.0

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: August 27, 2021	By:	/s/ Matías Domeyko Cassel
	Name:	Matías Domeyko Cassel
	Title:	Chief Executive Officer

Arauco & Constitution Pulp 6-KCurrent report (foreign)