Form 6-K

6-K 1 d79543d6k.htm FORM 6-K Form 6-K

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 September, 2020

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2020

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

1. ANALYSIS OF FINANCIAL POSITION

Statement of Financial Position

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


Assets	09-30-2020 ThU.S.$		12-31-2019 ThU.S.$
Current assets		3,388,604		3,931,381
Non-current assets		12,206,202		11,928,649

Total assets		15,594,806		15,860,030


Liabilities	09-30-2020 ThU.S.$		12-31-2019 ThU.S.$
Current liabilities		1,006,571		1,261,522
Non-current liabilities		7,359,883		7,229,093
Non–parent participation		29,622		35,011
Net equity attributable to parent company		7,198,730		7,334,404

Total net equity and liabilities		15,594,806		15,860,030

As of September 30, 2020, total assets decreased MU.S.$265 compared to December 31, 2019, equivalent to a 1.67% variation. This variation was driven mainly by decreases in cash equivalents (mutual funds) and biological assets, which was partially offset by an increase in property, plant and equipment.

In turn, total liabilities decreased by MU.S.$124 principally due to a decrease in deferred tax liabilities and trade and other current payables partially offset by an increase in bank financial liabilities.

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


Liquidity ratios	09-30-2020		12-31-2019
Current Liquidity (current assets / current liabilities)		3.37		3.12
Acid ratio ((current assets-inventories, biological assets) / current liabilities)		2.11		2.06


Debt indicators	09-30-2020		12-31-2019
Debt to equity ratio (total liabilities / equity)		1.16		1.15
Short-term debt to total debt (current liabilities / total liabilities)		0.12		0.15
Long-term debt to total debt (non-current liabilities / total liabilities)		0.88		0.85

	09-30-2020		09-30-2019
Financial expenses coverage ratio (earnings before taxes + interest expense / interest expense)		0.72		1.99


Activity ratio	09-30-2020		12-31-2019
Inventory turnover-time (cost of sales / inventories + current biological assets)		2.58		2.92
Inventory turnover-time (excluding biological assets) (Cost of sales /inventory)		3.26		3.75
Inventory permanence-days ((inventories + biological assets) /cost of sales)		139.69		123.17
Inventory permanence-days (excluding biological assets) (inventory / cost of sales)		110.33		95.93

As of September 30, 2020, the short-term debt to total debt ratio represented 12% of total liabilities (15% too as of December 31, 2019).

Our financial expenses coverage ratio decreased from 1.99 to 0.72, mainly due to loss before taxes for period ended September 30, 2020, compared to profit before taxes in the same period of 2019.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2020

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

Statement of profit or loss

Profit before income tax

Profit before income tax registered a loss of approximately MU.S.$57 compared to a profit of approximately MU.S.$191 in the same period of 2019. The negative variation of MU.S.$248 is explained by the factors described in the following table:


Item	MU.S.$
Gross profit		(298	)
Distribution and Administrative Expenses		110
Other income and expenses		(52	)
Other financial income and expenses		(8	)

Net change in profit before income tax		(248	)

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


Revenues	09-30-2020 ThU.S.$		09-30-2019 ThU.S.$
Pulp		1,416,146		1,877,391
Timber		1,865,991		2,146,040
Forestry		97,734		103,182
Other		82		298

Total revenues		3,379,953		4,126,911


Sales costs	09-30-2020 ThU.S.$		09-30-2019 ThU.S.$
Wood		607,070		642,415
Forestry work and other services		338,471		429,276
Depreciation and amortization		344,371		355,693
Other costs		1,221,552		1,532,783

Total sales costs		2,511,464		2,960,167


Profitability index	09-30-2020			12-31-2019
Profitability on equity		(0.91	)		0.84
Profitability on assets		(0.42	)		0.41
Return on operating assets		1.01			1.90


Profitability ratios	09-30-2020			09-30-2019
Income per share (U.S.$) (1)		(0.44	)		1.32
Profit after tax (ThU.S.$) (2)		(49,594	)		153,932
Gross margin (ThU.S.$)		868,489			1,166,744
Finance costs (ThU.S.$)		(202,099	)		(192,718	)

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

(2)	Includes non-controlling interest.


EBITDA	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Profit (loss)		(49,594	)		153,932
Finance costs		202,099			192,718
Finance income		(23,683	)		(22,328	)
Income tax expense		(7,726	)		36,636
EBIT		121,096			360,958
Depreciation and amortization		378,637			386,921
EBITDA		499,733			747,879
Cost at fair value of the harvest		228,072			244,567
Gain from changes in fair value of biological assets		(130,004	)		(110,500	)
Exchange difference		16,186			19,509
Others*		77,063			34,879
Adjusted EBITDA		691,049			936,335

*	Considers impairment provision for industrial property, plant and equipment and forest incidents.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2020

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

2. MAIN SOURCES OF FINANCING

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

3. MARKET SITUATION

Pulp Division

The third quarter of 2020 began with a lower demand due to the seasonality effects of summer in the northern hemisphere. However, as time passed the situation improved. During the third quarter there was a decrease in supply of market pulp, in comparison to the second quarter, due to integrated paper and/or dissolving pulp producers that decided to switch back from producing paper-grade pulp as they did during the past quarter. Nevertheless, supply continues to surpass demand thereby keeping prices stable.

Tissue demand declined after the increase seen during the second quarter, but this decrease was partially offset by higher activity in the P&W paper segment. Pulp inventories in days of supply increased by 4 and 2 days respectively for long and short fiber, between June and August.

In China, despite increasing demand the third quarter also had a complex start due to seasonality and high levels of supply and pulp inventories. This affected primarily the tissue segment, since it experienced a decrease in prices paired with an increase in inventories of final products. This situation normalized towards the end of the quarter. P&W markets improved slightly due to schools resuming classes. The packaging segment also began to improve due to an increase in both export and e-commerce sales. Average prices remained stable.

In Europe, as lockdown-related measures decreased the local economies began to recover. This led to an improvement of the P&W and specialties segments, allowing some clients´ mills that were previously shut down to start production again. Additionally, the tissue segment (particularly with products used by hotels and restaurants) started to improve, yet in a moderate fashion. Other “Away from Home” products remained with low activity throughout the quarter.

Our production during the quarter remained stable when compared to the same quarter of 2019, due to no maintenance stoppages. On a quarterly basis, our production increased by 8.0%.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2020

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

Composite Panel

Revenues increased significantly compared to the second quarter, with sales volume increasing by 40.2%. Average prices remained stable.

During the third quarter we saw a recovery coming from the reactivation of markets, and because of consumption-encouraging measures taken by different governments. In Latam, this quarter marked a return to the trends seen during the beginning of the year with improvements in terms of sales volumes.

Sawn timber

During the third quarter sales volume increased by 20.2%. Average prices also increased by 2.1%.

Results for remanufactured wood products in the US market remained positive, mainly due to strong retail channels and the recovery of the economic activity. On the supply side, some of our competitors in the US were suffering from tariff issues. In terms of demand, even with the effects of the global pandemic, a supply deficit allowed us to continue observing market improvements.

Plywood

Sales volume increased by 2.4% during the third quarter. We saw a return to what we had seen during Q1 2020, with sales volume increases when compared to 2019. This is explained by a higher demand in some markets such as the US, Europe and Oceania, and logistic complications of our competitors due to the pandemic. Average prices increased by 14.5% on a quarterly basis.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2020

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

4. ANALYSIS OF CASH FLOW

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


	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Positive (negative) Cash flow
Net cash flows from operating activities		801,820			505,880
Cash flows from (used in) financing activities:
Innuance of shares		250,000			—
Loan and bond obtention and payments		(90,122	)		715,036
Payment of lease liabilities		(55,731	)		(59,868	)
Dividends paid		(394	)		(182,109	)
Others		(8,938	)		(7,853	)
Cash flows from (used in) investment activities:
Purchase and sale of property, plant and equipment		(1,097,176	)		(645,007	)
Purchase and sale of biological assets		(145,832	)		(174,064	)
Purchase and sale of intangible assets		(14,631	)		(15,266	)
Additions (disposals), investments in joint ventures and associates		(15,252	)		(70,211	)
Dividends received		4,042			13,007
Others		5,100			346

Positive (negative) net cash flow		(367,114	)		79,891

Cash flow from operating activities shows a higher positive balance of MU.S.$802 for the current period (compared to the positive balance of MU.S.$506 for the same period in 2019), resulting mainly from lower payments to suppliers and lower taxes payments, which was partially offset by lower revenues from customer collections in the current period.

The financing cash flow shows a lower positive balance of MU.S.$97 for the current period (compared to the positive balance of MU.S.$465 for the same period in 2019), resulting mainly from less cash received from bank loans.

Regarding the investment cash flow, the current period shows a higher negative balance of MU.S.$1,267 (compared to the negative balance of MU.S.$891 for the same period of 2019), mainly due to higher disbursements for the purchase of property, plant and equipment in the current period and the sale of the company Puertos y Logística S.A. in 2019, partially offset by the purchase of plants to Masisa in Mexico in said year.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2020

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

5. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of September 30, 2020, a ratio of fixed rate debt to total consolidated debt of approximately 89.8%, which we believe is consistent with industry standards.

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

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

In the Interim Consolidated Financial Statements as of September 30, 2020, a detailed analysis of the risks associated with the business of Arauco is available (See Note 23).

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Ratio Analysis of the Interim Consolidated Financial Statements

September 30, 2020

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

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


			09-30-2020		12-31-2019
	Note		ThU.S.$		ThU.S.$
Assets
Current Assets
Cash and cash equivalents		5-23		1,162,658		1,560,012
Other current financial assets		23		12,717		3,370
Other current non-financial assets		25		153,214		174,110
Trade and other current receivables		23		629,824		642,315
Accounts receivable from related companies		13		8,067		17,526
Current inventories		4		998,668		1,053,867
Current biological assets		20		270,343		275,792
Current tax assets		6		149,242		199,953
Total Current Assets other than assets or disposal groups classified as held for sale				3,384,733		3,926,945
Non-Current Assets or disposal groups classified as held for sale		22		3,871		4,436
Non-Current Assets or disposal groups classified as held for sale or as held for distribution to owners				3,871		4,436
Total Current Assets				3,388,604		3,931,381
Non-Current Assets
Other non-current financial assets		23		953		9,395
Other non-current non-financial assets		25		122,306		112,414
Trade and other non-current receivables		23		6,665		9,456
Investments accounted for using equity method		15-16		298,367		293,118
Intangible assets other than goodwill		19		97,889		106,252
Goodwill		17		58,101		65,751
Property, plant and equipment		7		8,080,654		7,648,183
Right of use assets		8		234,058		284,379
Non-current biological assets		20		3,300,249		3,393,634
Deferred tax assets		6		6,960		6,067
Total Non-Current Assets				12,206,202		11,928,649
Total Assets				15,594,806		15,860,030

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)


			09-30-2020			12-31-2019
	Note		ThU.S.$			ThU.S.$
Equity and Liabilities
Liabilities
Current Liabilities
Other current financial liabilities		23		274,268			460,846
Current lease liabilities		8-23		63,684			69,208
Trade and other current payables		23		596,396			673,057
Accounts payable to related companies		13		3,189			8,880
Other current provisions		18		338			1,259
Current tax liabilities		6		23,481			2,242
Current provisions for employee benefits		10		5,869			5,965
Other current non-financial liabilities		25		39,346			40,065

Total Current Liabilities other than assets included in disposal groups classified as held for sale				1,006,571			1,261,522
Total Current Liabilities				1,006,571			1,261,522
Non-Current Liabilities
Other non-current financial liabilities		23		5,763,774			5,452,194
Non-current lease liabilities		8-23		150,381			201,817
Non-current payables		23		—			2,230
Other non-current provisions		18		30,058			31,765
Deferred tax liabilities		6		1,270,949			1,360,187
Non-current provisions for employee benefits		10		68,466			69,464
Other non-current non-financial liabilities		25		76,255			111,436
Total Non-Current Liabilities				7,359,883			7,229,093
Total Liabilities				8,366,454			8,490,615
Equity
Issued capital		3		603,618			353,618
Retained earnings				7,819,362			7,873,650
Other reserves				(1,224,250	)		(892,864	)
Equity attributable to parent company				7,198,730			7,334,404
Non-controlling interests				29,622			35,011
Total Equity				7,228,352			7,369,415
Total Equity and Liabilities				15,594,806			15,860,030

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS


			January-September						July-September
			2020			2019			2020			2019
	Note		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Statements of profit or loss

Revenue		9		3,379,953			4,126,911			1,202,913			1,387,155
Cost of sales		3		(2,511,464	)		(2,960,167	)		(867,850	)		(1,054,296	)
Gross profit				868,489			1,166,744			335,063			332,859
Other income		3		175,623			173,552			52,779			41,600
Distribution costs		3		(389,826	)		(448,587	)		(129,581	)		(160,409	)
Administrative expenses		3		(376,396	)		(427,939	)		(122,668	)		(140,435	)
Other expense		3		(141,426	)		(87,184	)		(33,132	)		(37,178	)
Profit from operating activities				136,464			376,586			102,461			36,437
Finance income		3		23,683			22,328			4,164			7,483
Finance costs		3		(202,099	)		(192,718	)		(64,395	)		(65,778	)
Share of profit of associates and joint ventures accounted for using equity method		3-15		818			3,881			1,306			(5,776	)
Gains (losses) on exchange differences on translation				(16,186	)		(19,509	)		13,898			(12,290	)
Profit before income tax				(57,320	)		190,568			57,434			(39,924	)
Income Tax		6		7,726			(36,636	)		(21,385	)		10,329
Net Profit				(49,594	)		153,932			36,049			(29,595	)

Net profit attributable to
Net profit attributable to parent company				(49,320	)		153,682			36,157			(29,477	)
Net profit attributable to non-controlling interests				(274	)		250			(108	)		(118	)
Net Profit				(49,594	)		153,932			36,049			(29,595	)


Basic and diluted earnings per share (in U.S.$ per share)
Basic and diluted earnings per share from continuing operations				(0.4354	)		1.3581			0.3185			(0.2605	)


Basic and diluted earnings per share				(0.4354	)		1.3581			0.3185			(0.2605	)

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


			January-September						July-September
			2020			2019			2020			2019
	Note		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Net profit				(49,594	)		153,932			36,049			(29,595	)
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		(465	)		1,174			(11	)		675
Other Comprehensive Income that will not be reclassified to profit or loss before tax				(465	)		1,174			(11	)		675
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		(285,017	)		(76,473	)		(3,625	)		(89,952	)
Other Comprehensive Income before tax exchange differences on translation				(285,017	)		(76,473	)		(3,625	)		(89,952	)
Cash flow hedges
Gains (losses) on cash flow hedges, before tax		23		(16,556	)		35,516			50,064			3,118
Recycle of cash flow hedges to profit or loss before tax		23		(53,065	)		(15,465	)		(32,211	)		(2,558	)
Other Comprehensive Income before tax Cash flow hedges				(69,621	)		20,051			17,853			560
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				(6,512	)		25,938			(590	)		17,776
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				(6,512	)		25,938			(590	)		17,776
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				(361,150	)		(30,484	)		13,638			(71,616	)
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				125			(317	)		6			(182	)
Income tax relating to components of other comprehensive income that will not be reclassified to profit or loss before tax				125			(317	)		6			(182	)
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		17,589			(4,458	)		(3,585	)		701
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				1,356			(6,467	)		119			(4,296	)
Income tax relating to components of other comprehensive income that will be reclassified to profit or loss				18,945			(10,925	)		(3,466	)		(3,595	)
Other comprehensive income (loss)				(342,545	)		(40,552	)		10,167			(74,718	)
Comprehensive income (loss)				(392,139	)		113,380			46,216			(104,313	)

Comprehensive Income (loss) attributable to
Comprehensive income (loss), attributable to Owners of parent company				(385,674	)		114,728			47,123			(102,415	)
Comprehensive income (loss), attributable to Non-controlling interests				(6,465	)		(1,348	)		(907	)		(1,898	)
Total comprehensive income (loss)				(392,139	)		113,380			46,216			(104,313	)

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


09-30-2020	Issued Capital ThU.S.$		Reserve of exchange differences on translation ThU.S.$			Reserve of cash flow hedges ThU.S.$			Reserve of actuarial losses on defined benefit plans ThU.S.$			Other Reserves ThU.S.$			Total other Reserves ThU.S.$			Retained Earnings ThU.S.$			Equity attributable to owners of parent ThU.S.$			Non - controlling interests ThU.S.$			Total Equity ThU.S.$
Opening balance at 01-01-2020		353,618		(902,387	)		9,010			(19,511	)		20,024			(892,864	)		7,873,650			7,334,404			35,011			7,369,415
Changes in Equity:
Comprehensive income
Net profit		—		—			—			—			—			—			(49,320	)		(49,320	)		(274	)		(49.594	)
Other comprehensive income, net of tax		—		(278,822	)		(52,032	)		(344	)		(5,156	)		(336,354	)					(336,354	)		(6.191	)		(342.545	)
Comprehensive income		—		(278,822	)		(52,032	)		(344	)		(5,156	)		(336,354	)		(49,320	)		(385,674	)		(6.465	)		(392.139	)
Issue of equity		250,000		—			—			—			—			—			—			250,000						250.000
Dividends		—		—			—			—			—			—			—			—			1,076			1.076
Increase(decrease) from transfers and other changes		—		—			—			—			4,968			4,968			(4,968	)		—			—			—
Changes in equity		250,000		(278,822	)		(52,032	)		(344	)		(188	)		(331,386	)		(54,288	)		(135,674	)		(5,389	)		(141.063	)
Closing balance at 09-30-2020		603,618		(1,181,209	)		(43,022	)		(19,855	)		19,836			(1,224,250	)		7,819,362			7,198,730			29,622			7,228,352

09-30-2019	Issued Capital ThU.S.$		Reserve of exchange differences on translation ThU.S.$			Reserve of cash flow hedges ThU.S.$			Reserve of actuarial losses on defined benefit plans ThU.S.$			Other Reserves ThU.S.$			Total other Reserves ThU.S.$			Retained Earnings ThU.S.$			Equity attributable to owners of parent ThU.S.$			Non - controlling interests ThU.S.$			Total Equity ThU.S.$
Opening balance at 01-01-2019		353,618		(872,395	)		13,395			(17,571	)		687			(875,884	)		7,824,045			7,301,779			37,192			7,338,971
Increase (decrease) for changes in accounting policies		—		—			—			—			—			—			(107	)		(107	)		—			(107	)
Re-expressed opening balance		353,618		(872,395	)		13,395			(17,571	)		687			(875,884	)		7,823,938			7,301,672			37,192			7,338,864
Changes in Equity:
Comprehensive income
Net profit																			153,682			153,682			250			153,932
Other comprehensive income, net of tax		—		(74,871	)		15,593			853			19,471			(38,954	)		—			(38,954	)		(1,598	)		(40,552	)
Comprehensive income		—		(74,871	)		15,593			853			19,471			(38,954	)		153,682			114,728			(1,348	)		113,380
Dividends																			(74,200	)		(74,200	)		(128	)		(74,328	)
Increase (decrease) from transfers and other changes																			(11,430	)		(11,430	)		(57	)		(11,487	)
Changes in equity		—		(74,871	)		15,593			853			19,471			(38,954	)		68,052			29,098			(1,533	)		27,565
Closing balance at 09-30-2019		353,618		(947,266	)		28,988			(16,718	)		20,158			(914,838	)		7,891,990			7,330,770			35,659			7,366,429

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the years ended September 30,
	2020 ThU.S.$			2019 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		3,528,079			4,093,475
Other cash receipts from operating activities		600,258			315,769
Classes of cash payments
Payments to suppliers for goods and services		(2,508,590	)		(3,311,656	)
Payments to and on behalf of employees		(426,345	)		(469,077	)
Other cash payments from operating activities		(258,875	)		(105,394	)
Interest paid		(180,193	)		(159,961	)
Interest received		12,954			21,025
Income taxes paid		36,263			(273,509	)
Other inflows (outflows) of cash, net		(1,731	)		(4,792	)
Net Cash flow from Operating Activities		801,820			505,880


Cash flows from (used in) Investing Activities
Cash flow used in obtaining control of subsidiaries and other businesses		—			(171,821	)
Cash flows from obtaining non-controlling interest		(3	)		—
Other cash receipts from sales of equity or debt instruments of other entities		—			102,080
Other cash payments to acquire interests in joint ventures		(15,249	)		(470	)
Proceeds from sale of property, plant and equipment		3,269			7,516
Purchase of property, plant and equipment		(1,100,445	)		(652,523	)
Purchase of intangible assets		(14,631	)		(15,266	)
Proceeds from sales of other long-term assets		7,411			3,639
Purchase of other non-current assets		(153,243	)		(177,703	)
Dividends received		4,042			13,007
Other inflows (outflows) of cash, net		2,236			346
Cash flows from (used in) Investing Activities		(1,266,613	)		(891,195	)


Cash flows from (used in) Financing Activities
Proceeds from the issue of shares		250,000			—
Total borrowings obtained		389,827			1,146,234
Debt obtained in long-term		239,827			1,129,127
Debt obtained in short-term		150,000			17,107
Repayments of borrowings		(479,949	)		(431,198	)
Payments of lease liabilities		(55,731	)		(59,868	)
		2,864			—
Dividends paid		(394	)		(182,109	)
Other outflows of cash, net		(8,938	)		(7,853	)
Cash flows from (used in) Financing Activities		97,679			465,206

Net increase (decrease) in Cash and Cash Equivalents before effect of exchange rate changes		(367,114	)		79,891
Effect of exchange rate changes on cash and cash equivalents		(30,240	)		(13,603	)

Net increase (decrease) of Cash and Cash Equivalents		(397,354	)		66,288
Cash and cash equivalents, at the beginning of the period		1,560,012			1,075,942
Cash and cash equivalents, at the end of the period		1,162,658			1,142,230

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND 2019 AND DECEMBER 31, 2019

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, wood products and forestry.

As of September 30, 2020, Arauco is controlled by Empresas Copec S.A., tax identification number 90,690,000-9, which owns 99.9780% of Arauco, and is registered in the Securities Registry as No. 0028. Each of the above mentioned companies is subject to the oversight of the CMF.

Moreover, Empresas Copec S.A. is controlled by the public corporation AntarChile S.A., tax identification 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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Presentation of Interim Consolidated Financial Statements

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

•

Interim Consolidated Statements of Financial Position as of September 30, 2020 and December 31, 2019.

•

Interim Consolidated Statements of Profit or Loss for the periods ended September 30, 2020 and 2019.

•

Interim Consolidated Statements of Comprehensive Income for the periods ended September 30, 2020 and 2019.

•

Interim Consolidated Statements of Changes in Equity for the periods ended September 30, 2020 and 2019.

•

Interim Consolidated Statements of Cash Flows for the periods ended September 30, 2020 and 2019.

•

Explanatory disclosures (notes)

Period Covered by the Interim Consolidated Financial Statements

Periods ended September 30, 2020 and 2019.

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. 640 on November 11, 2020.

Abbreviations used in this report:

IFRS - International Financial Reporting Standards

IASB - International Accounting Standards Board

IAS - International Accounting Standards

IFRIC - International Financial Reporting Standards Interpretations Committee

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

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

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

UTA - Annual Tax Unit

ICMS - Tax movement of inventories and services (Brazil)

Functional and Presentation Currency

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

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

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

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

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

Summary of significant accounting policies

a) Basis for preparation of the interim consolidated financial statements

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.

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

- Goodwill

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

- Litigation and Contingencies

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

c) Consolidation

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

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

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

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

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

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

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

c) rights arising from other contractual arrangements; and

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

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

The profit or loss of each component of other comprehensive income is attributed to owners of the parent company and 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, separately from the equity of the owners of the parent company.

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

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

A parent company will 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 Corporate Managing Directors of each segment.

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

•

Pulp

•

Wood products

•

Forestry

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

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

September 30, 2020

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 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

September 30, 2020

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

September 30, 2020

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

h)	Derivative financial instruments

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

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

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

(iii) Hedge accounting—The Company designates certain hedging instruments as either fair value hedges or cash flow hedges.

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

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

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

Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income and accumulated in equity at that time remains in equity and is recognized when the forecasted transaction is ultimately recognized in profit or loss. When a forecasted

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

September 30, 2020

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

September 30, 2020

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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

o)	Property, Plant and Equipment

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

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

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

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

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

p)	Leases

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

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

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

The cost of the asset for right of use comprises:

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

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

The initial direct costs incurred by the lessee; and

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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 (January 1, 2019), 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

September 30, 2020

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 forestry plantations is based on discounted cash flow models whereby the fair value of the biological assets is determined using estimated future cash flows from continuing operations calculated using our sustainable forest management plans and including the estimated growth of the forests. This valuation is performed on the basis of each identifiable farm block and for each type of tree.

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

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

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

the personal responsibility of the directors participating in the respective agreement, distribute interim 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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

any goodwill allocated to the unit and then to other assets pro rata based on the carrying amount of each asset in the unit. Any impairment loss of goodwill is recognized directly in the interim consolidated statement of profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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.

z)	Recent accounting pronouncements

a) Standards, interpretations and amendments that are mandatory for the first time for annual periods beginning on January 1, 2020:


Amendments and improvements	Content	Mandatory application for annual periods beginning on or after
IAS 1 y IAS 8	Presentation of Financial Statements and Accounting Policies, Changes in Accounting Estimates and Errors. Clarifies the definition of material and align the definition used in the Conceptual Framework and the standards themselves.	January 1, 2020
IFRS 3	Definition of a Business Narrows the definitions of a business	January 1, 2020
IFRS 9, IAS 39 and IFRS 7	Interest rate benchmark reform Provides certain reliefs in connection with interest rate benchmark reform.	January 1, 2020
IFRS 16	Lease incentives Provides an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification. 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.	January 1, 2020

The adoption of the standards, amendments and interpretations described above do not have a significant impact on Arauco 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:

Standards and
interpretations

Content

Mandatory application
for annual periods
beginning on or after

IFRS 17

Insurance Contracts

Supersedes IFRS 4. It changes mainly the accounting for insurance contracts and investments contracts.

January 1, 2021

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September 30, 2020

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	Sale or Contribution of assets among an Investor and its Associates or Joint Ventures.	Indeterminate

IAS 1	Presentation of Financial Statements Provides more general approach to the classification of liabilities as Current or Non-current based on the contractual arrangements in place at the reporting date. Also, it clarifies what is meant by ‘settlement’ of liabilities.	January 1, 2022
Reference to the Conceptual Framework- Amendments to IFRS 3	IFRS 3, ‘Business combinations’ has been updated to refer to the Conceptual Framework for Financial Reporting and added a new exception for liabilities and contingent liabilities within the scope pf IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, or IFRIC 21, ‘Levies’. Also, it clarifies that the acquirer should not recognize contingent assets at the acquisition date.	January 1, 2022
IAS 16	Properties, plant and equipments Prohibits an entity from deducting from the cost of an item of PP&E any proceeds received from selling items produced while the entity is preparing the asset for its intended use. The proceeds from selling such samples, together with the costs of producing them, are now recognized in profit or loss.	January 1, 2022
IAS 37	Provisions, contingent assets and contingent liabilities Clarifies what unavoidable costs an entity considers in assessing whether a contract is onerous. The amendment clarifies the meaning of ‘costs to fulfil a contract’.	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 Modifies the Illustrative Example 13 that accompanies IFRS 16 to remove the illustration of payments from the lessor relating to leasehold improvements. The reason for the amendment is to remove any potential confusion about the treatment of lease incentives.
	IAS 41 Agriculture Removes the requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41, ‘Agriculture’. This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis.

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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 2. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES

Changes to accounting policies

As of September 30, 2020, there have been no changes regarding the accounting policies with respect to the 2019 financial year.

Changes to accounting estimates

As of September 30, 2020, there have been no changes regarding the accounting estimates with respect to the 2019 financial year.

NOTE 3. DISCLOSURE OF OTHER INFORMATION

a)	Disclosure of information on Issued Capital

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

As of September 30, 2020, the shareholders composition is as follows:


Shareholders	%
Empresas Copec S.A.		99.97805	%
Chilur S.A.		0.01281	%
Administradora Sintra Ltda.		0.00906	%
Antarchile S.A.		0.00008	%
		100.00000	%

At the date of these interim consolidated financial statements the share capital of Arauco is ThU.S.$603,618.

100% of Capital corresponds to ordinary shares.


	09-30-2020	12-31-2019
Description of Ordinary Capital Share Types	100% of Capital corresponds to ordinary shares
Number of Authorized Shares by Type of Capital in Ordinary Shares	117,223,375	113,159,655
Nominal Value of Shares by Type of Capital in Ordinary Shares	ThU.S.$0.0051493 per share	ThU.S.$0.0031249 per share
Amount of Capital in Shares by Type of Ordinary Shares that Constitute Capital	ThU.S.$603,618	ThU.S.$353,618

	09-30-2020	12-31-2019
Number of Shares Issued and Fully Paid by Type of Capital in Ordinary Shares	117,223,375	113,159,655

b)	Dividends paid

As of September 30, 2020, no dividends were paid.

As of September 30, 2020, and December 31, 2019 according to the current dividends policy, it is not required to recognize a minimum dividend provision.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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


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

c)	Disclosure of Information on Reserves

Other reserves comprise reserves of exchange differences on translation, reserves of cash flow hedges and other reserves. Arauco does not have any restrictions associated with these reserves.

Reserves of exchange differences on translation

Reserves of exchange differences on translation correspond to exchange differences relating to the translation of the results and net assets of Arauco’s subsidiaries whose functional currency is other than Arauco’s presentation currency.

Reserves of cash flow hedges

The hedging reserve includes the cash flow hedge reserve and the costs of hedging reserve. The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives that are designated and qualify as cash flow hedges.

Reserve of Actuarial Losses in Defined Benefit Plans

This corresponds to changes in the present value of the obligation for defined benefits resulting from experience adjustments (the effect of the differences between the previous actuarial assumptions and the events that occurred within the context of the plan) and the effects of the changes in the actuarial assumptions.

Other reserves

This mainly corresponds to the share of other comprehensive income of investments in associates and joint ventures.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

The table below sets forth other income, other expenses, finance income, finance costs and share of profit (loss) of associates and joint ventures for the periods ended September 30, 2020 and 2019 are as follows:


	January - September						July - September
	2020 ThU.S.$			2019 ThU.S.$			2020 ThU.S.$			2019 ThU.S.$
Classes of Other Income
Other Income, Total		175,623			173,552			52,779			41,600
Gain from changes in fair value of biological assets (See note 20)		130,004			110,500			41,861			36,090
Net income from insurance compensation		2,378			1,319			272			165
Revenue from export promotion		718			931			210			251
Lease income		1,396			1,650			612			336
Gain on sales of assets		3,015			11,576			799			2,221
Access easement		411			—			376			—
Recovery of tax credits		21,133			—			—			—
Compensations received		964			782			14			722
Gain on sales of associates		—			40,842			—			—
Other operating results		15,604			5,952			8,635			1,815

Classes of Other Expenses by activity
Total of Other Expenses by activity		(141,426	)		(87,184	)		(33,132	)		(37,178	)
Legal expenses		(3,770	)		(3,148	)		(951	)		76
Impairment provision for property, plant and equipment and others		(53,364	)		(28,670	)		(841	)		(19,869	)
Operating expenses related to staff restructuring or from plants stoppage or closed		(23,749	)		(8,869	)		(2,679	)		(4,544	)
Expenses related to projects		(10,755	)		(9,527	)		(3,980	)		(449	)
Loss of asset sales		(7,257	)		(8,939	)		(4,047	)		(4,547	)
Loss and repair of assets		(5,213	)		(674	)		(1,058	)		(163	)
Loss of forest due to fires or decrease		(19,183	)		(6,209	)		(13,986	)		0
Other Taxes		(12,128	)		(10,995	)		(3,608	)		(3,206	)
Research and development expenses		(2,093	)		(2,942	)		(815	)		(1,283	)
Fines, readjustments and interests		(441	)		(1,545	)		236			(900	)
Other expenses		(3,473	)		(5,666	)		(1,403	)		(2,293	)

Classes of financing income
Financing income, total		23,683			22,328			4,164			7,483
Financial income from mutual funds—term deposits		11,246			14,936			3,179			4,744
Financial income resulting from swap—forward instruments		835			503			168			335
Other financial income		11,602			6,889			817			2,404

Classes of financing costs
Financing costs, Total		(202,099	)		(192,718	)		(64,395	)		(65,778	)
Interest expense, Banks loans		(22,549	)		(26,296	)		(6,774	)		(9,947	)
Interest expense, Bonds		(129,119	)		(121,757	)		(41,427	)		(41,624	)
Interest expense, other financial instruments		(24,830	)		(20,329	)		(7,459	)		(7,753	)
Interest expense for right-of-use		(7,129	)		(8,519	)		(2,299	)		(2,151	)
Other financial costs		(18,472	)		(15,817	)		(6,436	)		(4,303	)

Share of profit (loss) of associates and joint ventures accounted for using equity method
Total		818			3,881			1,306			(5,776	)
Investments in associates		4,532			2,500			902			954
Joint ventures		(3,714	)		1,381			404			(6,730	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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


	January - September				July - September
*Cost of sales ()**	2020 ThU.S.$		2019 ThU.S.$		2020 ThU.S.$		2019 ThU.S.$
Timber		607,070		642,415		216,161		246,930
Forestry labor costs and other services		338,471		429,276		122,540		148,795
Depreciation and amortization		300,352		307,685		101,188		109,547
Depreciation for right of use		44,019		48,008		13,933		11,538
Maintenance costs		167,747		217,204		55,246		77,787
Chemical costs		338,864		429,842		115,277		151,067
Sawmill Services		72,307		109,533		22,859		33,265
Other Raw Materials		144,891		182,549		53,272		77,298
Other Indirect costs		95,884		109,996		34,259		28,731
Energy and fuel		120,617		166,007		41,532		60,264
Cost of electricity		24,477		26,748		7,336		8,490
Wages and salaries		256,765		290,904		84,247		100,584
Total		2,511,464		2,960,167		867,850		1,054,296

(*)	Total amount is composed by the cost of inventory sales for ThU.S.$ 2,461,531 (ThU.S.$ $ 2,901,881 as of September 30, 2019) and by cost of rendering services for ThU.S.$ 43,933 (ThU.S.$ 58,286 as of September 30, 2019)


	January - September				July - September
Distribution cost	2020 ThU.S.$		2019 ThU.S.$		2020 ThU.S.$		2019 ThU.S.$
Selling costs		27,644		31,150		9,205		11,076
Commissions		10,003		11,093		3,607		4,500
Insurance		2,846		3,706		646		1,464
Provision for doubtful accounts		1,063		1,093		426		441
Other selling costs		13,732		15,258		4,526		4,671
Shipping and freight costs		362,182		417,437		120,376		149,333
Port services		29,673		26,852		11,141		10,531
Freights		298,588		362,112		97,099		128,239
Depreciation for right of use		1,238		1,354		413		434
Other shipping and freight costs (internation, warehousing, stowage, customs and other costs)		32,683		27,119		11,723		10,129
Total		389,826		448,587		129,581		160,409


	January - September				July - September
Administrative expenses	2020 ThU.S.$		2019 ThU.S.$		2020 ThU.S.$		2019 ThU.S.$
Wages and salaries		157,236		182,476		103,775		123,127
Marketing, advertising, promotion and publications expenses		6,745		15,183		3,360		8,556
Insurances		17,885		15,269		12,166		10,333
Depreciation and amortization		24,984		21,148		17,369		14,119
Depreciation for right of use		6,160		7,442		3,385		5,311
Computer services		24,167		26,074		18,866		18,048
Lease rentals (offices, other property and vehicles)		3,904		5,842		2,396		2,060
Donations, contributions, scholarships		9,647		7,483		7,048		4,057
Fees (legal and technical advisors)		27,293		36,479		17,968		25,641
Property taxes, city permits and rights		14,455		13,469		10,584		9,483
Cleaning services, security services and transportation		19,745		16,932		14,552		11,030
Third-party variable services (maneuvers, logistics)		27,425		30,557		19,229		20,083
Basic services (electricity, telephone)		5,743		6,986		3,986		4,727
Maintenance and repair		4,228		5,105		2,873		3,743
Seminars, courses, training materials		1,232		1,935		704		1,348
Other administration expenses (travels, clothing and safety equipment, environmental expenses, audits and others)		25,547		35,559		14,632		24,993
Total		376,396		427,939		252,893		286,659

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

e)	Auditor Fees and Number of Employees


Auditors fees	09-30-2020 ThU.S.$		09-30-2019 ThU.S.$
Audit services		1,815		2,023
Other services
Tax services		865		995
Others		183		169
TOTAL		2,863		3,187


Number of employees	N°
		18,119		17,252

NOTE 4. INVENTORIES


Components of Inventory	09-30-2020 ThU.S.$		12-31-2019 ThU.S.$
Raw materials		87,446		129,004
Production supplies		131,892		128,229
Work in progress		55,976		69,760
Finished goods		525,899		532,200
Spare Parts		197,456		194,674
Total Inventories		998,669		1,053,867

Inventories recognized as cost of sales as of September 30, 2020 were ThU.S.$ 2,461,531 (ThU.S.$ 2,901,881 as of September 30, 2019).

In order to have the inventories recorded at net realizable value as of September 30, 2020, a net increase of inventories was recognized associated with a lower provision of obsolescence of ThU.S.$ 18,834 (increase of ThU.S.$ 5,622 as of September 30, 2019). As of September 30, 2020, the amount of obsolescence provision is ThU.S.$34,346 (ThU.S.$ 53,180 as of December 31, 2019).

As of September 30, 2020, there were inventory write-offs of ThU.S.$1,416 (ThU.S.$ 1,133 as of September 30, 2019).

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

As of the date of these interim consolidated financial statements, there are no inventories pledged as security to report.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 5. CASH AND CASH EQUIVALENTS

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

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

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

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


Components of Cash and Cash Equivalents	09-30-2020 ThU.S.$		12-31-2019 ThU.S.$
Cash on hand		133		177
Bank checking account balances		354,319		314,804
Time deposits		663,404		611,073
Mutual funds		144,802		633,958
Total		1,162,658		1,560,012

The risk classification of the Company’s mutual funds as of September 30, 2020 and December 31, 2019 is shown below.


	09-30-2020 ThU.S.$		12-31-2019 ThU.S.$
AAAfm		91,583		624,534
No classification		53,219		9,424
Total Mutual Funds		144,802		633,958

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Changes in Financial Liabilities


		09-30-2020												12-31-2019
		Borrowings from banks			Hedging liabilities			Bonds and promissory notes			Other financial liabilities, Total			Borrowings from banks			Hedging liabilities			Bonds and promissory notes			Other financial liabilities, Total
		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening balance January 1			947,022			134,275			4,831,743			5,913,040			940,435			71,599			3,501,654			4,513,688
Cash flows	(+) Borrowings obtained		389,827			—			—			389,827			156,350			—			1,986,089			2.142.439
	(-) Borrowings paid		(240,943	)		(34,679	)		(204,327	)		(479,949	)		(143,998	)		(1,708	)		(577,954	)		(723.660	)
	(-) Commissions paid		(9,113	)		—			—			(9,113	)		(4,797	)		—			(5,900	)		(10.697	)
	(-) Interest paid		(22,090	)		(19,799	)		(131,398	)		(173,287	)		(36,902	)		(27,756	)		(188,748	)		(253.406	)
(+) Accrued interest			20,229			19,800			153,313			193,342			31,480			29,464			190,765			251,709
(+/-) Inflation adjustment			25,820			—			(48,202	)		(22,382	)		(125	)		—			(66,385	)		(66,510	)
(+) Increase due to business combination			—			—			—			—			6,738			—			4,324			11,062
(+/-) Changes in fair value			—			88,140			—			88,140			—			62,676			—			62,676
(+/-) Other non-cash movements			132,405			—			6,019			138,424			(2,159	)		—			(12,102	)		(14,261	)
Closing balance			1,243,157			187,737			4,607,148			6,038,042			947,022			134,275			4,831,743			5,913,040


		09-30-2020						12-31-2019
		Lease liabilities (IFRS 16)			Lease liabilities, Total			Lease liabilities (IFRS 16)			Lease liabilities, Total
		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening balance January 1			271,025			271,025			68,187			68,187
Increase (decrease) for changes in accounting policies			—			—			249,317			249,317
Re-expressed opening balance			271,025			271,025			317,504			317,504
Cash flows	(+) Borrowings obtained		—			—			—			—
	(-) Borrowings paid		(55,731	)		(55,731	)		(80,323	)		(80.323	)
	(-) Commissions paid		—			—			—			—
	(-) Interest paid		(6,906	)		(6,906	)		(10,905	)		(10.905	)
(+) Accrued interest			6,793			6,793			10,601			10,601
(+/-) Inflation adjustment			(5,656	)		(5,656	)		(9,339	)		(9,339	)
(+) Increase due to business combination			—			—			4,133			4,133
(+) Increase due to new leases liabilities			14,109			14,109			52,385			52,385
(+/-) Other non-cash movements			(9,569	)		(9,569	)		(13,031	)		(13,031	)
Closing balance			214,065			214,065			271,025			271,025

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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, 30% in Argentina and Mexico, 34% in Brazil, 25% in Uruguay and 21% in the United States (federal tax).

On December 29, 2017, Law No. 27,430 was published in the Official Gazette of Argentina, which amended several articles of the Income Tax Act. The most relevant amendments include the reduction of the federal income tax rate from 35% to 30% by 2018 and 2019 fiscal years, and 25% by 2020. Law 27,541 suspended the withdrawal for the year 2020, so the tax rate for this fiscal year is 30%.

On March 25, 2019, the subsidiary Arauco Argentina S.A. chose to conduct the Tax Reappraisal set forth in Title X – Chapter 1 of Law No. 27,430. The option was exercised for all Properties, Plants and Equipments included in the category of amortizable movable assets, pursuant to the income tax law, which were adjusted to inflation using the coefficients published in such law for the purposes of calculating the aforementioned tax. The effect of the special tax in the presentation US$ 3 millions, which was paid in six instalments during year 2019. Additionally, the increase of the value of these tax assets, arising from this adjustment, generated a decrease of the liabilities for deferred taxes as of December 31, 2019 of approximately ThU.S.$12,629. Both the loss for the special tax as well as the profits for the decrease of the deferred tax, are shown in the Income tax line in period 2019.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Deferred Tax Assets

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


	09-30-2020			12-31-2019
Deferred Tax Assets	ThU.S.$			ThU.S.$
Deferred tax Assets relating to Provisions		4,931			5,749
Deferred tax Assets relating to Accrued Liabilities		7,117			7,182
Deferred tax Assets relating to Post-Employment benefits		20,067			20,378
Deferred tax Assets relating to Property, Plant and equipment		20,667			16,609
Deferred tax Assets relating to Impairment provision		23,420			20,169
Deferred tax Assets relating to Financial Instruments		57,626			68,390
Deferred tax Assets relating to Tax Loss Carryforward		196,463			133,221
Deferred tax Assets relating to Inventories		9,586			12,460
Deferred tax Assets relating to Provisions for Income		12,441			6,631
Deferred tax Assets relating to Allowance for Doubtful Accounts		3,897			4,349
Deferred tax Assets relating to Intangible revaluation		3,676			6,044
Deferred tax Assets relating to tax credits		23,529			19,460
Deferred tax Assets relating to Other Deductible Temporary Differences		20,780			16,161
Total Deferred Tax Assets		404,200			336,803

Offsetting presentation		(397,240	)		(330,736	)

Net Effect		6,960			6,067

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 estimate that, given the projection of future profits, will allow the recovery of these assets. The total amount of these tax losses is ThU.S.$771,066 (ThU.S.$ 512,449 at December 31, 2019), which are mainly originated by operational and financial losses.

In addition, as of the closing date of these interim consolidated financial statements there are ThU.S.$157,739 (ThU.S.$ 188,474 at December 31, 2019) of non-recoverable tax losses from companies in Uruguay as joint operations based on the participation of Arauco and subsidiaries in USA, for which deferred tax assets have not been recognized. The estimated recovery period exceeds the expiry date of such tax losses.

Deferred Tax Liabilities

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


	09-30-2020			12-31-2019
Deferred Tax Liabilities	ThU.S.$			ThU.S.$
Deferred tax Liabilities relating to Property, Plant and Equipment		898,615			900,415
Deferred tax Liabilities relating to Financial Instruments		27,319			25,630
Deferred tax Liabilities relating to Biological Assets		627,596			642,221
Deferred tax Liabilities relating to Inventory		38,333			38,251
Deferred tax Liabilities relating to Prepaid Expenses		42,338			41,338
Deferred tax Liabilities relating to Intangible		14,391			17,942
Deferred tax Liabilities relating to Other Taxable Temporary Differences		19,597			25,126
Total Deferred Tax Liabilities		1,668,189			1,690,923

Offsetting presentation		(397,240	)		(330,736	)

Net Effect		1,270,949			1,360,187

The effect of changes in current and deferred tax liabilities related to financial hedging instruments corresponds to a credit of ThU.S.$17,589 as of September 30, 2020 (ThU.S.$4,458 as of September 30, 2019), which is presented net in Reserves for Cash Flow Hedges in the Interim Consolidated Statement of Changes in Equity.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Reconciliation of deferred tax assets and liabilities


	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 09-30-2020
Deferred Tax Assets	ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S$
Deferred tax Assets relating to Provisions		5,749		(282	)		—			(536	)		4,931
Deferred tax Assets relating to Accrued Liabilities		7,182		(23	)		—			(42	)		7,117
Deferred tax Assets relating to Post-Employment benefits		20,378		(366	)		125			(70	)		20,067
Deferred tax Assets relating to Property, Plant and equipment		16,609		4,057			—			1			20,667
Deferred tax Assets relating to Impairment provision		20,169		6,097			—			(2,846	)		23,420
Deferred tax Assets relating to Financial Instruments		68,390		(3,671	)		(6,172	)		(921	)		57,626
Deferred tax Assets relating to Tax Loss Carryforward		133,221		51,081			23,761			(11,600	)		196,463
Deferred tax Assets relating to Inventories		12,460		(2,730	)		—			(144	)		9,586
Deferred tax Assets relating to Provisions for Income		6,631		5,840			—			(30	)		12,441
Deferred tax Assets relating to Allowance for Doubtful Accounts		4,349		(6	)		—			(446	)		3,897
Deferred tax Assets relating to Intangible revaluation		6,044		(793	)		—			(1,575	)		3,676
Deferred tax Assets relating to tax credits		19,460		4,069			—			—			23,529
Deferred tax Assets relating to Other Deductible Temporary Differences		16,161		5,663			—			(1,044	)		20,780
Total Deferred Tax Assets		336,803		68,936			17,714			(19,253	)		404,200


	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 09-30-2020
Deferred Tax Liabilities	ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$			ThU.S$
Deferred tax Liabilities relating to Property, Plant and Equipment		900,415		13,163			—			(14,963	)		898,615
Deferred tax Liabilities relating to Financial Instruments		25,630		1,689			—			—			27,319
Deferred tax Liabilities relating to Biological Assets		642,221		7,655			—			(22,280	)		627,596
Deferred tax Liabilities relating to Inventory		38,251		111			—			(29	)		38,333
Deferred tax Liabilities relating to Prepaid Expenses		41,338		1,042			—			(42	)		42,338
Deferred tax Liabilities relating to Intangible		17,942		(939	)		—			(2,612	)		14,391
Deferred tax Liabilities relating to Other Taxable Temporary Differences		25,126		(2,180	)		—			(3,349	)		19,597
Total Deferred Tax Liabilities		1,690,923		20,541			—			(43,275	)		1,668,189


	Opening Balance 01-01-2019		Deferred tax Income (Expenses)			Deferred tax of items charged to other comprehensive Income		Increase (decrease) through business combinations		Increase (decrease) Net exchange differences			Closing balance 12-31-2019
Deferred Tax Assets	ThU.S.$		ThU.S.$			ThU.S.$		ThU.S.$		ThU.S.$			ThU.S$
Deferred tax Assets relating to Provisions		6,105		(517	)		—		244		(83	)		5,749
Deferred tax Assets relating to Accrued Liabilities		10,906		(3,921	)		—		197		—			7,182
Deferred tax Assets relating to Post-Employment benefits		19,072		423			717		150		16			20,378
Deferred tax Assets relating to Property, Plant and equipment		10,125		6,484			—		—		—			16,609
Deferred tax Assets relating to Impairment provision		11,963		8,385			—		—		(179	)		20,169
Deferred tax Assets relating to Financial Instruments		9,761		55,087			3,609		—		(67	)		68,390
Deferred tax Assets relating to Tax Loss Carryforward		88,945		44,521			—		1,505		(1,750	)		133,221
Deferred tax Assets relating to Inventories		5,532		6,288			—		279		361			12,460
Deferred tax Assets relating to Provisions for Income		7,443		(657	)		—		112		(267	)		6,631
Deferred tax Assets relating to Allowance for Doubtful Accounts		5,001		(645	)		—		68		(75	)		4,349
Deferred tax Assets relating to Intangible revaluation		7,651		(1,345	)		—		—		(262	)		6,044
Deferred tax Assets relating to tax credits		20,375		(915	)		—		—		—			19,460
Deferred tax Assets relating to Other Deductible Temporary Differences		11,328		4,470			—		731		(368	)		16,161
Total Deferred Tax Assets		214,207		117,658			4,326		3,286		(2,674	)		336,803


	Opening Balance 01-01-2019		Deferred tax (Income) Expenses			Deferred tax of items charged to other comprehensive Income		Increase (decrease) through business combinations		Increase (decrease) Net exchange differences			Closing balance 12-31-2019
Deferred Tax Liabilities	ThU.S.$		ThU.S.$			ThU.S.$		ThU.S.$		ThU.S.$			ThU.S$
Deferred tax Liabilities relating to Property, Plant and Equipment		831,471		66,656			—		4,234		(1,946	)		900,415
Deferred tax Liabilities relating to Financial Instruments		14,225		11,405			—		—		—			25,630
Deferred tax Liabilities relating to Biological Assets		661,582		(15,770	)		—		—		(3,591	)		642,221
Deferred tax Liabilities relating to Inventory		39,025		(774	)		—		—		—			38,251
Deferred tax Liabilities relating to Prepaid Expenses		37,897		3,487			—		69		(115	)		41,338
Deferred tax Liabilities relating to Intangible		20,240		(1,914	)		—		—		(384	)		17,942
Deferred tax Liabilities relating to Other Taxable Temporary Differences		22,790		2,905			—		182		(751	)		25,126
Total Deferred Tax Liabilities		1,627,230		65,995			—		4,485		(6,787	)		1,690,923

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:


	09-30-2020						12-31-2019
	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		207,737			—			203,582			—
Deferred Tax Assets—Tax loss carryforward		196,463			—			133,221			—
Deferred Tax Liabilities		—			1,668,189			—			1,690,923
Total		404,200			1,668,189			336,803			1,690,923


	January - September						July - September
	2020			2019			2020			2019
Detail of Temporary Difference Income and Loss Amounts	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Deferred Tax Assets		17,855			43,164			3,108			14,474
Deferred Tax Assets—Tax loss carryforward		51,081			30,511			19,973			2,870
Deferred Tax Liabilities		(20,541	)		(32,401	)		(6,844	)		(10,611	)
Total		48,395			41,274			16,237			6,733

Income Tax Expense

Income tax expense consists of the following:


	January - September						July - September
Income Tax composition	2020			2019			2020			2019
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Current income tax expense		(41,271	)		(79,617	)		(36,534	)		2,082
Tax benefit arising from unrecognized tax assets previously used to reduce current tax expense		3,552			3,771			—			—
Prior period current income tax adjustments		1,226			(2,923	)		(76	)		(52	)
Other current benefit tax (expenses)		(4,176	)		859			(1,012	)		1,566
Current Tax Expense, Net		(40,669	)		(77,910	)		(37,622	)		3,596
Deferred tax expense relating to origination and reversal of temporary differences		(2,686	)		10,763			(3,736	)		3,863
Tax benefit arising from unrecognized tax assets previously used to reduce deferred tax expense		51,081			30,511			19,973			2,870
Total deferred Tax benefit (expense), Net		48,395			41,274			16,237			6,733
Income Tax benefit (expense), Total		7,726			(36,636	)		(21,385	)		10,329

The following table presents the current income tax expense detailed by foreign and domestic (Chile) companies at September 30, 2020 and 2019:


	January - September						July - September
	2020			2019			2020			2019
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Foreign current income tax expense		2,132			(9,662	)		(11,197	)		7,674
Domestic current income tax expense		(42,801	)		(68,248	)		(26,425	)		(4,078	)
Total current income tax expense		(40,669	)		(77,910	)		(37,622	)		3,596
Foreign deferred tax benefit (expense)		(14,907	)		19,949			(325	)		(12,149	)
Domestic deferred tax benefit (expense)		63,302			21,325			16,562			18,882
Total deferred tax benefit (expense)		48,395			41,274			16,237			6,733
Total income tax benefit (expense)		7,726			(36,636	)		(21,385	)		10,329

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

The reconciliation of income tax expense is as follows:


	January - September						July - September
Reconciliation of Income tax from Statutory Rate to Effective Tax Rate	2020 ThU.S.$			2019 ThU.S.$			2020 ThU.S.$			2019 ThU.S.$
Statutory domestic (Chile) income tax rate		27.0	%		27.0	%		27.0	%		27.0	%
Tax Expense at statutory tax rate		15,476			(51,453	)		(15,508	)		10,780
Tax effect of foreign tax rates		(2,061	)		1,596			(420	)		738
Tax effect of revenues exempt from taxation		810			35,737			621			(8,714	)
Tax effect of not deductible expenses		(17,975	)		(32,509	)		(9,665	)		11,726
Tax rate effect of previously unrecognized tax loss		—			43			—			43
Tax effect of unrecognized tax benefit in the Income Statement previously		14,301			—			3,235			—
Tax effect of a new evaluation of deferred tax assets		(1,787	)		17,021			(1,009	)		980
Tax Effect of tax provided in excess in prior periods		1,226			(2,923	)		(76	)		(52	)
Other tax rate effects		(2,264	)		(4,148	)		1,437			(5,172	)
Total adjustments to tax expense at applicable tax rate		(7,750	)		14,817			(5,877	)		(451	)
Tax benefit (expense) at effective tax rate		7,726			(36,636	)		(21,385	)		10,329

Current tax assets and liabilities

The current tax assets and liabilities balances are as follow:


Current tax Assets	09-30-2020 ThU.S.$			12-31-2019 ThU.S.$
Monthly Provisional Payments (MPP)		26,949			190,169
Income tax receivable		115,376			27,628
Provision tax income		(819	)		(39,490	)
Other tax receivables		7,736			21,646
Total		149,242			199,953


Current tax Liabilities	09-30-2020 ThU.S.$			12-31-2019 ThU.S.$
Provision tax income (First category)		47,187			10,626
Monthly Provisional Payments (MPP)		(30,474	)		(9,309	)
Other tax payables		6,768			925
Total		23,481			2,242

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 7. PROPERTY, PLANT AND EQUIPMENT


Property, Plant and Equipment, Net	09-30-2020 ThU.S.$			12-31-2019 ThU.S.$
Construction work in progress		1,725,030			1,128,431
Land		927,851			971,061
Buildings		2,248,194			2,247,996
Plant and equipment		3,008,386			3,139,761
Information technology equipment		26,096			20,906
Fixtures and fittings		14,501			13,421
Motor vehicles		15,245			14,922
Other property, plant and equipment		115,351			111,685
Total Net		8,080,654			7,648,183

Property, Plant and Equipment, Gross
Construction work in progress		1,725,030			1,128,431
Land		927,851			971,061
Buildings		4,371,529			4,268,590
Plant and equipment		6,912,395			7,004,549
Information technology equipment		100,421			91,585
Fixtures and fittings		47,224			45,703
Motor vehicles		58,403			56,771
Other property, plant and equipment		132,692			131,030
Total Gross		14,275,545			13,697,720

Accumulated depreciation and impairment
Buildings		(2,123,335	)		(2,020,594	)
Plant and equipment		(3,904,009	)		(3,864,788	)
Information technology equipment		(74,325	)		(70,679	)
Fixtures and fittings		(32,723	)		(32,282	)
Motor vehicles		(43,158	)		(41,849	)
Other property, plant and equipment		(17,341	)		(19,345	)
Total		(6,194,891	)		(6,049,537	)

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

As of September 30, 2020, there are no significant assets pledged as collateral to be disclosed in these interim consolidated financial statements.

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


	09-30-2020 ThU.S.$		12-31-2019 ThU.S.$
Amount committed for the acquisition of property, plant and equipment		647,771		1,200,111

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Reconciliation of Property, Plant and Equipment

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment as of September 30, 2020 and December 31, 2019:


	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 01-01-2020		1,128,431			971,061			2,247,996			3,139,761			20,906			13,421			14,922			111,685			7,648,183
Changes
Additions		942,121			1,475			1,812			22,410			430			866			1,079			11,444			981,637
Disposals		—			(173	)		(78	)		(7,572	)		—			—			(110	)		(1,392	)		(9,325	)
Withdrawals		(224	)		(692	)		(1,406	)		(2,421	)		(96	)		(1	)		(8	)		—			(4,848	)
Depreciation		—			—			(103,962	)		(213,777	)		(4,892	)		(2,228	)		(3,295	)		(866	)		(329,020	)
Impairment loss recognized in profit or loss		—			—			(16,790	)		(31,059	)		(330	)		—			(80	)		—			(48,259	)
Increase (decrease) through net exchange differences		(6,186	)		(43,825	)		(30,798	)		(70,631	)		(440	)		(227	)		(457	)		(5,883	)		(158,447	)
Increase (decrease) through transfers from construction in progress		(339,112	)		5			151,420			171,044			10,518			2,670			3,092			363			—
Reclassification from lease to Property, plant and equipment		—			—			—			631			—			—			102			—			733
Total changes		596,599			(43,210	)		198			(131,375	)		5,190			1,080			323			3,666			432,471
Closing balance 09-30-2020		1,725,030			927,851			2,248,194			3,008,386			26,096			14,501			15,245			115,351			8,080,654


	Construction work in progress			Land			Buildings			Plant and equipment			IT Equipment			Fixtures and fittings			Motor vehicles			Other Property, Plant and Equipment			TOTAL
Reconciliation of Property, Plant and Equipment	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance 01-01-2019		1,030,730			972,143			2,062,887			2,921,462			23,292			15,906			14,916			133,357			7,174,693
Increase (decrease) for changes in accounting policies		—			—			—			(55,015	)		—			—			—			(17,237	)		(72,252	)
Restated opening balance		1,030,730			972,143			2,062,887			2,866,447			23,292			15,906			14,916			116,120			7,102,441
Changes
Additions		889,882			6,722			13,561			44,800			1,637			960			3,808			10,779			972,149
Acquisitions through business combinations		12,839			3,915			24,118			110,701			238			156			313			6,272			158,552
Disposals		—			(2,241	)		(2,167	)		(2,821	)		(94	)		(1	)		(213	)		(29	)		(7,566	)
Withdrawals		(6,992	)		(3,442	)		(3,435	)		(23,231	)		(2	)		(1	)		(36	)		(13,202	)		(50,341	)
Depreciation		—			—			(130,454	)		(297,332	)		(6,426	)		(2,722	)		(4,111	)		(1,180	)		(442,225	)
Impairment loss recognized in profit or loss		—			—			(15,398	)		(60,219	)		(337	)		(14	)		(74	)		—			(76,042	)
Increase (decrease) through net exchange differences		(1,066	)		(7,530	)		(479	)		(1,347	)		(74	)		27			(31	)		(918	)		(11,418	)
Reclassification to assets held for sale		—			—			—			990			—			—			—			—			990
Increase (decrease) through transfers from construction in progress		(796,962	)		1,494			299,363			500,140			2,672			(890	)		340			(6,157	)		—
Reclassification from lease to Property, plant and equipment		—			—			—			1,633			—			—			10			—			1,643
Total changes		97,701			(1,082	)		185,109			273,314			(2,386	)		(2,485	)		6			(4,435	)		545,742
Closing balance 12-31-2019		1,128,431			971,061			2,247,996			3,139,761			20,906			13,421			14,922			111,685			7,648,183

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

The depreciation expense for the period ending September 30, 2020 and 2019 is as follows:


	January - September				July - September
Depreciation for the year	2020 ThU.S.$		2019 ThU.S.$		2020 ThU.S.$		2019 ThU.S.$
Cost of sales		300,352		307,685		102,420		109,547
Administrative expenses		13,556		11,431		4,667		3,911
Other expenses		1,885		1,284		284		518
Total		315,793		320,400		107,371		113,976

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 the Inventories. Furthermore, this deviation is also affected by the conversion differences of the companies with a functional currency other than U.S. dollars.

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


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

See Note 12 for details of capitalized borrowing costs.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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.

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

Right of use assets


	09-30-2020			12-31-2019
	ThU.S.$			ThU.S.$

Property, Plant and Equipment by right of use, Net
Land		60,831			67,804
Buildings		21,328			25,940
Plant and equipment		27,100			44,753
Information technology equipment		423			574
Fixtures and fittings		819			1,138
Motor vehicles		101,371			126,587
Other property, plant and equipment		22,186			17,583
Total Net		234,058			284,379

Property, Plant and Equipment by right of use, Gross
Land		72,698			75,403
Buildings		30,312			32,266
Plant and equipment		67,643			71,394
Information technology equipment		750			757
Fixtures and fittings		1,636			1,595
Motor vehicles		168,030			164,683
Other property, plant and equipment		22,976			19,580
Total Gross		364,045			365,678

Accumulated depreciation and impairment by right of use
Land		(11,867	)		(7,599	)
Buildings		(8,984	)		(6,326	)
Plant and equipment		(40,543	)		(26,641	)
Information technology equipment		(327	)		(183	)
Fixtures and fittings		(817	)		(457	)
Motor vehicles		(66,659	)		(38,096	)
Other property, plant and equipment		(790	)		(1,997	)
Total		(129,987	)		(81,299	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Reconciliation of Property, Plant and Equipment by Right of Use

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment by right of use as of September 30, 2020 and December 31, 2019:


Reconciliation of Property, Plant and Equipment by right of use	Land ThU.S.$			Buildings ThU.S.$			Plant and equipment ThU.S.$			IT Equipment ThU.S.$			Fixtures and fittings ThU.S.$			Motor vehicles ThU.S.$			Other Property, Plant and Equipment ThU.S.$			TOTAL ThU.S.$
Opening Balance 01-01-2020		67,804			25,940			44,753			574			1,138			126,587			17,583			284,379
Changes
Additions		4,153			1,609			—			203			—			4,396			3,750			14,111
Withdrawals		—			(33	)		(3,801	)		—			—			(783	)		(329	)		(4,946	)
Depreciation		(5,284	)		(4,773	)		(13,949	)		(203	)		(360	)		(29,119	)		(1,939	)		(55,627	)
Increase (decrease) through net exchange differences		(5,680	)		(208	)		206			(151	)		41			(468	)		—			(6,260	)
Increase (decrease) through others		(162	)		(1,207	)		(109	)		—			—			758			3,854			3,134
Reclassification from lease to Property, plant and equipment		—			—			—			—			—			—			(733	)		(733	)
Total changes		(6,973	)		(4,612	)		(17,653	)		(151	)		(319	)		(25,216	)		4,603			(50,321	)
Closing balance 09-30-2020		60,831			21,328			27,100			423			819			101,371			22,186			234,058


Reconciliation of Property, Plant and Equipment by right of use	Land ThU.S.$			Buildings ThU.S.$			Plant and equipment ThU.S.$			IT Equipment ThU.S.$			Fixtures and fittings ThU.S.$			Motor vehicles ThU.S.$			Other Property, Plant and Equipment ThU.S.$			TOTAL ThU.S.$
Opening Balance 01-01-2019		—			—			—			—			—			—			—			—
Increase (decrease) for changes in accounting policies		65,363			20,865			76,258			310			—			144,304			17,237			324,337
Restated opening balance		65,363			20,865			76,258			310			—			144,304			17,237			324,337
Changes
Additions		8,668			10,580			5,817			449			1,595			20,531			4,745			52,385
Business combination		906			1,129			3,257			—			—			290			—			5,582
Withdrawals		—			—			(13,750	)		—			—			—			—			(13,750	)
Depreciation		(7,599	)		(6,326	)		(26,641	)		(183	)		(457	)		(38,096	)		(2,756	)		(82,058	)
Increase (decrease) through net exchange differences		466			(216	)		137			(2	)		—			(131	)		—			254
Increase (decrease) through others		—			(92	)		(325	)		—			—			(311	)		—			(728	)
Reclassification from lease to Property, plant and equipment		—			—			—			—			—			—			(1,643	)		(1,643	)
Total changes		2,441			5,075			(31,505	)		264			1,138			(17,717	)		346			(39,958	)
Closing balance 12-31-2019		67,804			25,940			44,753			574			1,138			126,587			17,583			284,379

The depreciation expense for the period ending September 30, 2020 and 2019 Property, Plant and Equipment by right of use is as follows:


	January - September				July - September
Depreciation for the period	2020 ThU.S.$		2019 ThU.S.$		2020 ThU.S.$		2019 ThU.S.$
Cost of sales		44,018		48,008		13,932		11,538
Distribution costs		1,238		1,354		413		434
Administrative expenses		6,160		7,442		1,993		4,155
Total		51,416		56,804		16,338		16,127

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 concepts excluded from the application of IFRS 16:


	January - September
	2020 ThU.S.$		2019 ThU.S.$
Expenses from payments of variable leases		100,902		121,626
Expenses from low value leases		3,000		4,360
Expenses from short-term leases		24,079		23,273
Total		127,982		149,259

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Arauco acting as lessor

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

Reconciliation of Financial Lease Minimum Payments:


	09-30-2020
Periods	Gross ThU.S.$		Interest ThU.S.$		Present Value ThU.S.$
Less than one year		206		18		188
Between one and five years		53		—		53
More than five years		—		—		—
Total		259		18		241


	12-31-2019
Periods	Gross ThU.S.$		Interest ThU.S.$		Present Value ThU.S.$
Less than one year		960		48		912
Between one and five years		200		—		200
More than five years		—		—		—
Total		1,160		48		1,112

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.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 9. REVENUE

January - September

July - September

Classes of revenue

2020
ThU.S.$

2019
ThU.S.$

2020
ThU.S.$

2019
ThU.S.$

Revenue from sales of goods

3,324,674

4,057,979

1,186,123

1,368,205

Revenue from rendering of services

55,279

68,932

16,790

18,950

Total

3,379,953

4,126,911

1,202,913

1,387,155

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

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

January - September

July - September

2020
ThU.S.$

2019
ThU.S.$

2020
ThU.S.$

2019
ThU.S.$

Employee expenses

437,995

499,843

147,436

166,910

Wages and salaries

425,889

485,144

142,090

161,577

Severance indemnities

12,106

14,699

5,346

5,333


	09-30-2020			12-31-2019
Discount rate		1.81	%		1.81	%
Inflation		3.00	%		3.00	%
Annual rate of wage growth		5.22	%		5.22	%
Mortality rate (1)		RV-2014			RV-2014

(1)

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


Sensitivities to assumptions	ThU.S.$
Discount rate
Increase in 100 bps		(5,821	)
Decrease in 100 bps		6,682
Wage growth rates
Increase in 100 bps		5,999
Decrease in 100 bps		(5,242	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

The following tables set forth the balances and the reconciliation of the present value of severance indemnities obligations as of September 30, 2020 and December 31, 2019:


	09-30-2020 ThU.S.$			12-31-2019 ThU.S.$
Current		5,869			5,965
Non-current		68,466			69,464
Total		74,335			75,429


Reconciliation of the present value of severance indemnities obligations	09-30-2020 ThU.S.$			12-31-2019 ThU.S.$
Opening balance		75,429			70,551
Business combinations		—			462
Current service cost		4,316			5,884
Interest cost		2,572			3,855
(Gains) losses from changes in actuarial assumptions		—			6,095
Actuarial gains and losses arising from experience		464			(3,440	)
Benefits paid		(4,642	)		(3,028	)
Increase (decrease) for foreign currency exchange rates changes		(3,804	)		(4,950	)
Closing balance		74,335			75,429

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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


September 30, 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		904,397		5,174		80,091		53,193		31,333		7,575		80,895		—		1,162,658
Other current financial assets		12,642		—		—		—		—		75		—		—		12,717
Other current non-financial assets		31,736		86		21,263		4,490		972		4,356		90,311		—		153,214
Trade and other current receivables		464,323		6,558		38,595		16,787		32,062		7,414		60,335		3,750		629,824
Accounts receivable due from related companies		371		—		561		—		—		—		7,135		—		8,067
Current Inventories		918,733		—		55,051		—		24,884		—		—		—		998,668
Current biological assets		228,270		—		42,073		—		—		—		—		—		270,343
Current tax assets		32,641		567		980		2,532		2,851		739		108,932		—		149,242
Non-current assets or disposal groups classified as held for sale		2,593,113		12,385		238,614		77,002		92,102		20,159		347,608		3,750		3,384,733
Non-current assets or disposal groups classified as held for sale		3,815		—		14		—		42		—		—		—		3,871

Total Current Assets		2,596,928		12,385		238,628		77,002		92,144		20,159		347,608		3,750		3,388,604

Non-Current Assets
Other non-current financial assets		181		—		—		—		—		—		772		—		953
Other non-current non-financial assets		1,722		—		15,719		521		728		90		103,526		—		122,306
Trade and other non-current receivables		3,160		—		64		—		—		—		3,325		116		6,665
Investments accounted for using equity method		79,866		165,890		30,455		—		—		—		22,156		—		298,367
Intangible assets other than goodwill		96,595		—		1,259		—		35		—		—		—		97,889
Goodwill		42,111		—		15,990		—		—		—		—		—		58,101
Property, plant and equipment		7,622,346		—		335,524		—		122,468		—		316		—		8,080,654
Right of use assets		215,121		—		18,937		—		—		—		—		—		234,058
Non-current biological assets		3,039,171		—		261,078		—		—		—		—		—		3,300,249
Deferred tax assets		5,469		—		1,089		—		402		—		—		—		6,960

Total Non-Current Assets		11,105,742		165,890		680,115		521		123,633		90		130,095		116		12,206,202

Total Assets		13,702,670		178,275		918,743		77,523		215,777		20,249		477,703		3,866		15,594,806


September 30, 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		215,271		1,427		685		—		—		—		—		56,885		274,268
Current lease liabilities		14,553		85		2,738		—		1,807		112		30,231		14,158		63,684
Trade and other current payables		174,367		7,791		61,377		14,560		23,256		8,122		277,252		29,671		596,396
Accounts payable to related companies		229		—		—		—		—		—		2,960		—		3,189
Other current provisions		338		—		—		—		—		—		—		—		338
Current tax liabilities		1,097		—		4,309		—		6		26		18,043		—		23,481
Current provisions for employee benefits		—		—		—		—		—		—		5,869		—		5,869
Other current non-financial liabilities		6,545		51		21,463		2,821		3,157		36		5,273		—		39,346

Total Liabilities, current		412,400		9,354		90,572		17,381		28,226		8,296		339,628		100,714		1,006,571

Non-Current Liabilities
Other non-current financial liabilities		4,229,620		504,700		674		—		—		—		—		1,028,780		5,763,774
Non-current lease liabilities		68,984		240		13,976		—		5,404		91		47,381		14,305		150,381
Other non-current provisions		—		—		3,700		26,358		—		—		—		—		30,058
Deferred tax liabilities		1,208,594		—		58,296		—		4,059		—		—		—		1,270,949
Non-current provisions for employee benefits		—		—		—		—		1,047		—		67,419		—		68,466
Other non-current non-financial liabilities		20		—		76,197		16		—		—		22		—		76,255

Total non-current liabilities		5,507,218		504,940		152,843		26,374		10,510		91		114,822		1,043,085		7,359,883

																	—

Total Liabilities		5,919,618		514,294		243,415		43,755		38,736		8,387		454,450		1,143,799		8,366,454

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


December 31, 2019	U.S Dollar ThU.S.$		Euros ThU.S.$		Brazilian Real ThU.S.$		Argentine Pesos ThU.S.$		Mexican Pesos ThU.S.$		Other currencies ThU.S.$		Chilean Pesos ThU.S.$		U.F. ThU.S.$		Total ThU.S.$
Assets
Current Assets
Cash and Cash Equivalents		1,412,688		2,264		50,868		11,292		13,684		6,756		62,460		—		1,560,012
Other current financial assets		3,370		—		—		—		—		—		—		—		3,370
Other current non-financial assets		24,554		95		15,134		8,014		1,244		6,742		118,327		—		174,110
Trade and other current receivables		435,663		8,483		56,039		11,218		33,981		7,287		86,954		2,690		642,315
Accounts receivable due from related companies		1,319		—		197		—		—		—		15,512		498		17,526
Current Inventories		931,619		—		90,362		—		31,886		—		—		—		1,053,867
Current biological assets		209,844		—		65,948		—		—		—		—		—		275,792
Current tax assets		7,955		234		9,246		2,908		2,936		2,658		174,016		—		199,953
Non-current assets or disposal groups classified as held for sale		3,027,012		11,076		287,794		33,432		83,731		23,443		457,269		3,188		3,926,945
Non-current assets or disposal groups classified as held for sale		3,814		—		572		—		50		—		—		—		4,436

Total Current Assets		3,030,826		11,076		288,366		33,432		83,781		23,443		457,269		3,188		3,931,381

Non-Current Assets
Other non-current financial assets		9,395		—		—		—		—		—		—		—		9,395
Other non-current non-financial assets		1,889		—		10,962		1,054		884		90		97,535		—		112,414
Trade and other non-current receivables		3,691		—		351		—		—		—		2,983		2,431		9,456
Investments accounted for using equity method		77,725		168,880		41,811		—		—		—		4,702		—		293,118
Intangible assets other than goodwill		104,165		—		1,992		—		95		—		—		—		106,252
Goodwill		43,373		—		22,378		—		—		—		—		—		65,751
Property, plant and equipment		7,024,518		—		471,620		—		151,692		—		353		—		7,648,183
Right of use assets		256,524		—		27,855		—		—		—		—		—		284,379
Non-current biological assets		3,021,411		—		372,223		—		—		—		—		—		3,393,634
Deferred tax assets		5,897		—		—		—		170		—		—		—		6,067

Total Non-Current Assets		10,548,589		168,880		949,191		1,054		152,841		90		105,573		2,431		11,928,649

Total Assets		13,579,415		179,956		1,237,557		34,486		236,622		23,533		562,842		5,619		15,860,030


December 31, 2019	U.S Dollar ThU.S.$		Euros ThU.S.$		Brazilian Real ThU.S.$		Argentine Pesos ThU.S.$		Mexican Pesos ThU.S.$		Other currencies ThU.S.$		Chilean Pesos ThU.S.$		U.F. ThU.S.$		Total ThU.S.$
Liabilities
Current Liabilities
Other current financial liabilities		215,453		41		4,391		—		—		—		—		240,961		460,846
Current lease liabilities		7,357		52		6,108		—		2,361		117		33,575		19,638		69,208
Trade and other current payables		155,524		20,414		70,259		14,365		22,272		10,322		348,155		31,746		673,057
Accounts payable to related companies		454		—		—		—		—		—		8,426		—		8,880
Other current provisions		444		—		—		—		815		—		—		—		1,259
Current tax liabilities		1,784		—		—		—		246		—		212		—		2,242
Current provisions for employee benefits		—		—		—		—		—		—		5,965		—		5,965
Other current non-financial liabilities		7,353		59		20,022		3,128		2,711		2,335		4,457		—		40,065

Total Liabilities, current		388,369		20,566		100,780		17,493		28,405		12,774		400,790		292,345		1,261,522

Non-Current Liabilities
Other non-current financial liabilities		4,245,493		116,218		1,791		—		—		—		—		1,088,692		5,452,194
Non-current lease liabilities		76,228		—		22,299		—		7,664		160		73,471		21,995		201,817
Other non-current payables		2,230		—		—		—		—		—		—		—		2,230
Other non-current provisions		12		—		5,226		26,527		—		—		—		—		31,765
Deferred tax liabilities		1,271,282		—		84,420		—		4,485		—		—		—		1,360,187
Non-current provisions for employee benefits		836		—		—		—		285		—		68,343		—		69,464
Other non-current non-financial liabilities		24		—		111,380		19		—		—		13		—		111,436

Total non-current liabilities		5,596,105		116,218		225,116		26,546		12,434		160		141,827		1,110,687		7,229,093

																	—

Total Liabilities		5,984,474		136,784		325,896		44,039		40,839		12,934		542,617		1,403,032		8,490,615

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


	09-30-2020						12-31-2019
	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		783,916		222,655		1,006,571		844,866		416,657		1,261,523

Other current financial liabilities		130,515		143,753		274,268		93,182		367,664		460,846
U.S Dollar		92,896		122,375		215,271		89,688		125,765		215,453
Euros		1,427		—		1,427		—		41		41
Brazilian Real		78		607		685		1,462		2,929		4,391
U.F.		36,114		20,771		56,885		2,032		238,929		240,961

Bank Loans		54,285		109,498		163,783		69,971		113,334		183,305
U.S Dollar		52,780		108,891		161,671		68,509		110,364		178,873
Euros		1,427		—		1,427		—		41		41
Brazilian Real		78		607		685		1,462		2,929		4,391

Other Loans		76,230		34,255		110,485		23,211		254,330		277,541
U.S Dollar		40,116		13,484		53,600		21,179		15,401		36,580
U.F.		36,114		20,771		56,885		2,032		238,929		240,961

Current lease liabilities		16,042		47,642		63,684		21,518		47,690		69,208
U.S Dollar		2,627		11,926		14,553		4,570		2,787		7,357
Euros		24		61		85		24		28		52
Brazilian Real		684		2,054		2,738		1,644		4,464		6,108
Mexican Pesos		370		1,437		1,807		1,235		1,126		2,361
Other currencies		38		74		112		26		91		117
Chilean Pesos		8,013		22,218		30,231		8,313		25,262		33,575
U.F.		4,286		9,872		14,158		5,706		13,932		19,638

Trade and other current payables		568,271		28,125		596,396		672,809		248		673,057
U.S Dollar		174,154		213		174,367		155,501		23		155,524
Euros		7,791		—		7,791		20,414		—		20,414
Brazilian Real		35,411		25,966		61,377		70,140		119		70,259
Argentine Pesos		14,560		—		14,560		14,365		—		14,365
Mexican Pesos		21,310		1,946		23,256		22,166		106		22,272
Other currencies		8,122		—		8,122		10,322		—		10,322
Chilean Pesos		277,252		—		277,252		348,155		—		348,155
U.F.		29,671		—		29,671		31,746		—		31,746

Accounts payable to related companies		3,189		—		3,189		8,880		—		8,880
U.S Dollar		229		—		229		454		—		454
Chilean Pesos		2,960		—		2,960		8,426		—		8,426

Other current provisions		338		—		338		444		815		1,259
U.S Dollar		338		—		338		444		—		444
Mexican Pesos		—		—		—		—		815		815

Current tax liabilities		21,013		2,468		23,481		2,031		211		2,242
U.S Dollar		1,097		—		1,097		1,784		—		1,784
Brazilian Real		4,309		—		4,309		—		—		—
Mexican Pesos		6		—		6		246		—		246
Other currencies		26		—		26		—		—		—
Chilean Pesos		15,575		2,468		18,043		1		211		212

Current provisions for employee benefits		5,202		667		5,869		5,938		27		5,965
Chilean Pesos		5,202		667		5,869		5,938		27		5,965

Other current non-financial liabilities		39,346		—		39,346		40,063		2		40,065
U.S Dollar		6,545		—		6,545		7,353		—		7,353
Euros		51		—		51		59		—		59
Brazilian Real		21,463		—		21,463		20,022		—		20,022
Argentine Pesos		2,821		—		2,821		3,128		—		3,128
Mexican Pesos		3,157		—		3,157		2,711		—		2,711
Other currencies		36		—		36		2,335		—		2,335
Chilean Pesos		5,273		—		5,273		4,455		2		4,457

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


	09-30-2020								12-31-2019
	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		1,514,803		1,168,270		4,676,810		7,359,883		1,534,114		1,169,993		4,524,986		7,229,093

Other non-current financial liabilities		649,390		1,117,736		3,996,648		5,763,774		531,475		1,080,656		3,840,063		5,452,194
U.S Dollar		461,846		920,449		2,847,325		4,229,620		432,496		968,514		2,844,483		4,245,493
Euros		117,456		119,208		268,036		504,700		22,236		29,648		64,334		116,218
Brazilian Real		674		—		—		674		1,791		—		—		1,791
U.F.		69,414		78,079		881,287		1,028,780		74,952		82,494		931,246		1,088,692

Bank Loans		267,896		543,442		268,036		1,079,374		196,611		502,772		64,334		763,717
U.S Dollar		149,766		424,234		—		574,000		172,584		473,124		—		645,708
Euros		117,456		119,208		268,036		504,700		22,236		29,648		64,334		116,218
Brazilian Real		674		—		—		674		1,791		—		—		1,791

Other Loans		381,494		574,294		3,728,612		4,684,400		334,865		577,884		3,775,728		4,688,477
U.S Dollar		312,080		496,215		2,847,325		3,655,620		259,913		495,390		2,844,482		3,599,785
U.F.		69,414		78,079		881,287		1,028,780		74,952		82,494		931,246		1,088,692
Non-current lease liabilities		86,520		22,498		41,363		150,381		117,608		46,408		37,801		201,817
U.S Dollar		19,093		13,647		36,244		68,984		27,570		21,621		27,037		76,228
Euros		162		78		—		240
Brazilian Real		4,745		4,479		4,752		13,976		6,970		6,336		8,993		22,299
Mexican Pesos		3,581		1,823		—		5,404		3,546		3,296		822		7,664
Other currencies		91		—		—		91		160		—		—		160
Chilean Pesos		46,059		1,322		—		47,381		61,283		12,072		116		73,471
U.F.		12,789		1,149		367		14,305		18,079		3,083		833		21,995

Other non-current payables		—		—		—		—		2,230		—		—		2,230
U.S Dollar		—		—		—		—		2,230		—		—		2,230

Other non-current provisions		30,058		—		—		30,058		31,765		—		—		31,765
U.S Dollar		—		—		—		—		12		—		—		12
Brazilian Real		3,700		—		—		3,700		5,226		—		—		5,226
Argentine Pesos		26,358		—		—		26,358		26,527		—		—		26,527

Deferred tax liabilities		649,851		—		621,098		1,270,949		741,164		7,254		611,769		1,360,187
U.S Dollar		587,496		—		621,098		1,208,594		659,513		—		611,769		1,271,282
Brazilian Real		58,296		—		—		58,296		77,166		7,254		—		84,420
Mexican Pesos		4,059		—		—		4,059		4,485		—		—		4,485

Non-current provisions for employee benefits		68,466		—		—		68,466		69,464		—		—		69,464
U.S Dollar		—		—		—		—		836		—		—		836
Mexican Pesos		1,047		—		—		1,047		285		—		—		285
Chilean Pesos		67,419		—		—		67,419		68,343		—		—		68,343

Other non-current non-financial liabilities		30,518		28,036		17,701		76,255		40,407		35,675		35,354		111,436
U.S Dollar		20		—		—		20		24		—		—		24
Brazilian Real		30,460		28,036		17,701		76,197		40,351		35,675		35,354		111,380
Argentine Pesos		16		—		—		16		19		—		—		19
Chilean Pesos		22		—		—		22		13		—		—		13

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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 Ltda.	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
Tablered Araucomex, S.A. de C.V.	Mexico	Mexican pesos

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


	January - September						July - September
	2020			2019			2020			2019
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Arauco do Brasil S.A.		(117,130	)		(28,739	)		(9,405	)		6,850
Arauco Forest Brasil S.A.		(107,600	)		(26,850	)		(8,246	)		6,427
Arauco Florestal Arapoti S.A.		(26,992	)		(6,339	)		(1,935	)		1,537
Sonae Arauco S.A.		7,224			(8,426	)		6,999			2,382
Arauco Argentina S.A.		(9	)		(1,054	)		(2	)		1,013
Arauco Canada Ltd.		(2,774	)		2,687			4,228			3,228
Arauco Industria México S.A. de C.V.		(30,678	)		(4,759	)		5,498			(4,695	)
Others		(863	)		(1,391	)		49			4,929
Total reserve of exchange differences on translation		(278,822	)		(74,871	)		(2,814	)		21,671

Effect of foreign exchange rates changes


	January - September						July - September
	2020			2019			2020			2019
	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		(16,186	)		(19,509	)		13,898			(12,290	)

Reserve of exchange differences on translation (with Non-controlling interests)		(285,017	)		(76,473	)		(3,625	)		(89,952	)

NOTE 12. BORROWING COSTS

Arauco capitalizes interest at effective rate on current investment projects.

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


	January - September						July - September
	2020			2019			2020			2019
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Property, plant and equipment capitalized cost
Property, plant and equipment capitalized interest cost rate		4.63	%		4.43	%		4.64	%		4.35	%
Amount of the capitalized interest cost, property, plant and equipment		30,173			17,547			12,191			5,012

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

September 30, 2020

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

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


			Functional	% Ownership interest 09-30-2020						% Ownership interest 12-31-2019
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		9.9753		90.0048		99.9801
-	Arauco Australia Pty Ltd.	Australia	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
96547510-9	Arauco Bioenergía S.A.	Chile	U.S. Dollar		98.0000		1.9999		99.9999		98.0000		1.9999		99.9999
-	Arauco Canada Ltd.	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		0.5230		99.4760		99.9990		0.5493		99.4497		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		—		99.9484		99.9484
-	Arauco Perú S.A.	Peru	U.S. Dollar		0.0013		99.9977		99.9990		0.0013		99.9977		99.9990
-	Arauco 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		—		57.0831		57.0831		—		57.0831		57.0831
-	Empreendimentos Florestais Santa Cruz Ltda.	Brazil	Brazilian Real		—		99.9985		99.9985		—		99.9985		99.9985
85805200-9	Forestal Arauco S.A.	Chile	U.S. Dollar		99.9484		—		99.9484		99.9484		—		99.9484
93838000-7	Forestal Cholguán S.A.	Chile	U.S. Dollar		—		98.5683		98.5683		—		98.5676		98.5676
78049140- K	Forestal Los Lagos S.A.	Chile	U.S. Dollar		—		79.9587		79.9587		—		79.9587		79.9587
-	Forestal Nuestra Señora del Carmen S.A.	Argentina	Argentine pesos		—		—		—		—		99.9805		99.9805
-	Forestal Talavera S.A.	Argentina	Argentine pesos		—		—		—		—		99.9942		99.9942
-	Greenagro S.A.	Argentina	Argentine pesos		—		—		—		—		97.9805		97.9805
96563550-5	Inversiones Arauco Internacional Ltda.	Chile	U.S. Dollar		98.0186		1.9804		99.9990		98.0186		1.9804		99.9990
79990550-7	Investigaciones Forestales Bioforest S.A.	Chile	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		—		99.9801		99.9801
-	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
-	Prime-Line,Inc.	United States	U.S. Dollar		—		99.9990		99.9990		—		99.9990		99.9990
-	Savitar S.A.	Argentina	Argentine pesos		—		—		—		—		99.9841		99.9841
76375371-9	Servicios Aéreos Forestales Ltda.	Chile	U.S. Dollar		0.0100		99.9890		99.9990		0.0100		99.9890		99.9990
96637330- K	Servicios Logísticos Arauco S.A.	Chile	U.S. Dollar		45.0000		54.9997		99.9997		45.0000		54.9997		99.9997
-	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

There are no significant restrictions on the ability of subsidiaries to transfer funds to Arauco, in the form of cash dividends or repayment of loans and/or advances.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Employee Benefits for Key Management Personnel


	January - September				July - September
	2020		2019		2020		2019
	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
Salaries and bonuses		47,380		59,371		15,598		16,402
Per diem compensation to members of the Board of Directors		1,648		1,825		561		600
Termination benefits		3,042		6,050		824		4,608
Total		52,070		67,246		16,983		21,610

Related Party Receivables, Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

09-30-2020
ThU.S.$

12-31-2019
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

1,761

1,834

Forestal del Sur S.A.

79.825.060-4

Associate of a subsidiary’s

minority shareholder

Chile

Chilean pesos

30 days

670

10,519

Unilin Arauco Pisos Ltda.

—

Joint Venture

Brazil

Brazilian Real

30 days

561

197

Colbún S.A.

96.505.760-9

Common Stockholder

Chile

Chilean pesos

—

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

911

834

Fundación Educacional Arauco

71.625.000-8

Parent company is
founder and contributor

Chile

Chilean pesos

30 days

992

931

Fundación Acerca Redes

65.097.218-K

Parent company is founder
and contributor

Chile

Chilean pesos

30 days

1,046

1,319

Sonae Arauco Portugal S.A.

—

Subsidiary of a Joint
Venture

Portugal

U.S. Dollar

30 days

371

—

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of an Associate

Chile

—

498

E2E S.A.

76.879.577-0

Joint Venture

Chile

Chilean pesos

10-
may-21

436

—

E2E S.A.

76.879.577-0

Joint Venture

Chile

Chilean pesos

28-
Oct-20

285

278

E2E S.A.

76.879.577-0

Joint Venture

Chile

Chilean pesos

30 days

1,006

1,058

Colbún Transmisión S.A.

76.218.856-2

Common Stockholder

Chile

Chilean pesos

—

TOTAL

8,067

17,526

Related Party Payables, Current

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Maturity

09-30-2020
ThU.S.$

12-31-2019
ThU.S.$

Compañía de Petróleos de Chile S.A.

99.520.000-7

Common controlling
parent

Chile

Chilean pesos

30 days

2,779

8,075

Abastible S.A.

91.806.000-6

Common controlling
parent

Chile

Chilean pesos

30 days

142

156

Red to Green S.A.

86.370.800-1

Common
Stockholder

Chile

Chilean pesos

—

Portaluppi, Guzman y Bezanilla Asesorías Ltda.

78.096.080-9

Common director

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

—

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of an
associate

Chile

U.S. Dollar

30 days

227

447

Elemental S.A.

76.659.730-0

Associate of
controlling parent

Chile

Chilean pesos

—

Woodtech S.A.

76.724.000-7

Indirect associate of
controlling parent

Chile

Chilean pesos

30 days

—

Orizon S.A.

96.929.960-7

Common controlling
parent

Chile

Chilean pesos

—

Vía Limpia SPA

79.874.200-0

Common controlling
parent

Chile

Chilean pesos

—

Air BP Copec

96.942.120-8

Joint venture of
controlling parent

Chile

Chilean pesos

30 days

Sonae Arauco Portugal S.A.

—

Subsidiary of a Joint
Venture

Portugal

U.S. Dollar

30 days

TOTAL

3,189

8,880

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Related Party Transactions

Purchases

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Transaction
Descriptions

09-30-2020
ThU.S.$

12-31-2019
ThU.S.$

Abastible S.A.

91.806.000-6

Common controlling parent

Chile

Chilean pesos

Fuel

1,636

2,864

Compañía de Petróleos de Chile S.A.

99.520.000-7

Common controlling parent

Chile

Chilean pesos

Fuel and other

38,676

64,271

Compañía Puerto de Coronel S.A.

79.895.330-3

Subsidiary of the Associate

Chile

U.S. Dollar

Transport and
stowage

10,524

10,662

Puerto Lirquén S.A.

96.959.030-1

Subsidiary of the Associate

Chile

U.S. Dollar

Port services

—

2,206

EKA Chile S.A.

99.500.140-3

Joint Venture

Chile

Chilean pesos

Sodium
chlorate

29,751

41,349

Forestal del Sur S.A.

79.825.060-4

Associate of a subsidiary’s
minority shareholder

Chile

Chilean pesos

Wood and
chips

3,712

4,547

Portaluppi, Guzman y Bezanilla Asesorías Ltda.

78.096.080-9

Common director

Chile

Chilean pesos

Legal services

545

828

Empresa Nacional de Telecomunicaciones S.A.

92.580.000-7

Common Stockholder

Chile

Chilean pesos

Telephone
services

193

524

Colbún Transmisión S.A.

76.218.856-2

Common Stockholder

Chile

Chilean pesos

Electrical
Power

292

240

Woodtech S.A.

76.724.000-7

Indirect associate of
controlling parent

Chile

Chilean pesos

Wood
volumen
measurement
services

1,183

1,988

Inversiones Siemel S.A.

94.082.000-6

Common Stockholder

Chile

Chilean pesos

Rentals

206

256

Elemental S.A.

76.659.730-0

Associate of controlling
parent

Chile

Chilean pesos

Other
purchases

333

193

Vía Limpia SPA

79.874.200-0

Common controlling parent

Chile

Chilean pesos

Residual
handling
services and
other
purchases

141

215

Sales and other transactions

Name of Related Party

Tax ID No.

Nature of Relationship

Country

Currency

Transaction
Descriptions

09-30-2020
ThU.S.$

12-31-2019
ThU.S.$

Colbún S.A.

96.505.760-9

Common Stockholder

Chile

Chilean
pesos

Electrical
Power

543

EKA Chile S.A.

99.500.140-3

Joint venture

Chile

Chilean
pesos

Electrical
Power

13,052

18,764

Forestal del Sur S.A.

79.825.060-4

Associate of a subsidiary’s
minority shareholder

Chile

Chilean
pesos

Harvesting
services,
wood and
chips

21,100

29,543

CMPC Pulp S.A.

96.532.330-9

Common Stockholder

Chile

Chilean
pesos

Wood and
chips

5,702

1,467

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

2,638

3,350

E2E S.A.

76.879.577-0

Joint venture

Chile

Chilean
pesos

Loan (capital
+ interests)

718

E2E S.A.

76.879.577-0

Joint venture

Chile

Chilean
pesos

Wood,
plywood
and boards

421

787

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 14. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

On September 1, 2019, the corporation Prime-Line, Inc. was acquired through the subsidiary Arauco North America, Inc. The price paid was ThU.S.$12,626. This transaction generated a goodwill for ThU.S.$ 732.

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

The final price of the transaction was ThU.S.$168,680 and was paid in 2019.

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

Arauco carried out the initial recognition of the acquisition of these companies based on the information available as of that date, performing a preliminary determination about the allocation of the fair values during the acquisition of the same. The amounts of acquired assets and liabilities are deemed to be provisional amounts and could be adjusted during the measurement period of this acquisition, in order to reflect new information obtained based on facts and circumstances that existed as of the acquisition date and which, if known, would have affected the measurement of the amounts recognized as of that date. The measurement period will not exceed the term of one year as from the acquisition date. During the year 2019, after finalizing the determination of fair values for the acquisition of these companies in Mexico, Arauco recognized a profit of ThU.S.$ 21,674 in Other Gains (Losses) in the Consolidated Statements of Profit or Loss.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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


Masisa Mexico Group	01-31-2019 ThU.S.$
Masisa Mexico Group	01-31-2019 ThU.S.$
Cash and cash equivalent		9,164
Other current non-financial		321
Trade and other current receivables (*)		23,163
Accounts receivable from related companies		27,702
Inventories		30,477
Current tax assets		8,769
Investments accounted for using equity method		278
Property, plant and equipment		155,722
Deferred tax assets		3,701
Non-Current Assets or disposal groups classified as held for sale		49

Total assets		259,346

Trade and other current payables		2,024
Accounts payable to related companies		27,100
Other current provisions		17,832
Current tax liabilities		3,243
Deferred tax liabilities		14,368
Non-current provisions for employee benefits		4,426

Total liabilities		68,993

Total equity		190,353

(*)	Trade receivables and other current receivables have an insignificant risk of bad debt. At the acquisition date, the bad debt provision was near to 1%, which is in accordance with the Arauco policy.

The following table shows revenue and net profit recognized from the acquisition date through December 31, 2019:


Masisa Mexico Group	02-01-2019 to 12-31-2019 ThU.S.$
Revenue		138,803
Net loss		995

If the acquisition had occurred on January 1, 2019, consolidated pro-forma revenue and profit for the year ended December 31, 2019 would have been:


CELULOSA ARAUCO Y CONSTITUCIÓN S.A. AND SUBSIDIARIES	January-December 2019 (Pro-forma) ThU.S.$
Revenue		5,353,354
Net profit		58,472

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 15. INVESTMENTS IN ASSOCIATES

As of September 30, 2020, there were no new investments in associates to report.

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

The following tables set forth information about Investments in associates.


Name	Inversiones Puerto Coronel S.A.
Country	Chile
Functional Currency	U.S. Dollar
Corporate purpose	Investments in movables and real estate, acquisition of companies, securities and investment instruments, investment management and development and/or participation in all kind of businesses and companies related to industrial, shipping, forestry and commercial activities.
Ownership interest (%)	50.0000%
	09-30-2020	12-31-2019
Carrying amount accounted for using equity method	ThU.S.$58,559	ThU.S.$55,032

Name	Servicios Corporativos Sercor S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Consulting services related to business management to Boards of Directors and Senior Management of all Arauco’s entities.
Ownership interest (%)	20.0000%
	09-30-2020	12-31-2019
Carrying amount accounted for using equity method	ThU.S.$ 205	ThU.S.$ 172

Name	Genómica Forestal S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Developing forestry genomics, through the use of biotechnological, molecular and bioinformatics tools with the purpose of strengthening genetic programs so as to improve the competitive position of the Chilean forestry industry for priority tree species.
Ownership interest (%)	25.0000%
	09-30-2020	12-31-2019
Carrying amount accounted for using equity method	ThU.S.$6	ThU.S.$(2)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


Name	Consorcio Tecnológico Bioenercel S.A.
Country	Chile
Functional Currency	Chilean Pesos
Corporate purpose	Developing of technologies which will promote the development of a biofuels industry in Chile, obtained from lingo-cellulosic materials. The future execution of this sustainable project is financed by the Innova Chile Committee.
Ownership interest (%)	20.0000%
	09-30-2020	12-31-2019
Carrying amount accounted for using equity method	ThU.S.$7	ThU.S.$7

Name	Vale do Corisco S.A.
Country	Brazil
Functional Currency	Brazilian Real
Corporate purpose	Management of forestry activities.
Ownership interest (%)	49.0000%
	09-30-2020	12-31-2019
Carrying amount accounted for using equity method	ThU.S.$27,701	ThU.S.$38,370

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Summarized Financial Information of Associates


	Assets
09-30-2020	Puertos y Logística S.A. ThU.S.$			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		—			29		3,295			4,209			2		15			7,550
Non-current		—			118,937		3,123			70,455			36		46			192,597
Total		—			118,966		6,418			74,664			38		61			200,147


	Liabilities
		Puertos y Logística S.A. ThU.S.$			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		—			83		3,138			117			—		5			3,343
Non-current		—			—		2,255			18,015			5		32			20,307
Equity		—			118,883		1,026			56,532			33		24			176,498
Total		—			118,966		6,419			74,664			38		61			200,148

09-30-2020
Revenues		—			—		3,408			4,782			—		—			8,190
Expenses		—			7,041		(3,073	)		(2,816	)		—		(2	)		1,150
Profit or loss (continuing operations)		—			7,041		335			1,966			—		(2	)		9,340
Other comprehensive income		—			—		—			—			—		—			—
Comprehensive income		—			7,041		335			1,966			—		(2	)		9,340
Dividends		—			—		—			1,148			—		—			1,148


	Assets
12-31-2019	Puertos y Logística S.A. ThU.S.$			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		—			29		9,974			4,992			2		25			15,022
Non-current		—			111,896		3,436			99,943			36		19			215,330
Total		—			111,925		13,410			104,935			38		44			230,352


	Liabilities
		Puertos y Logística S.A. ThU.S.$			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		—			98		10,222			965			—		9			11,294
Non-current		—			—		2,325			25,664			5		42			28,036
Equity		—			111,827		863			78,306			33		(7	)		191,022
Total		—			111,925		13,410			104,935			38		44			230,352

09-30-2019
Revenues		42,362			—		3,631			5,297			—		—			51,290
Expenses		(42,350	)		4,878		(3,521	)		(2,356	)		—		(2	)		(43,351	)
Profit or loss (continuing operations)		12			4,878		110			2,941			—		(2	)		7,939
Other comprehensive income		7,540					—			—			—		—			7,540
Comprehensive income		7,552			4,878		110			2,941			—		(2	)		15,479
Dividends		6,060			—		—			—			—		—			6,060

Reconciliation of Investment in Associates and Joint Ventures


	09-30-2020			12-31-2019
	ThU.S.$			ThU.S.$
Opening balance as of January 1 Changes		293,118			358,053
Investment in joint ventures, additions (*)		20,002			2,741
Disposals, investment in associates and joint ventures (**)		—			(58,850	)
Share of profit (loss) in investment in associates		4,532			7,416
Share of profit (loss) in investment in joint ventures		(3,714	)		359
Dividends Received, Investments in Associates		(4,042	)		(13,601	)
Increase (Decrease) in foreign exchange currency on translation of Associates and Joint Ventures		(4,891	)		(5,440	)
Other increase (decrease) in investment and associates and joint ventures		(6,638	)		2,440
Total changes		5,249			(64,935	)
Closing balance		298,367			293,118

(*)

During the period ended September 2020, Arauco Bioenegía S.A. has made three contributions to Parque Eólico Ovejera del Sur SpA, one for M$ 53,000 on February 01, the second for M$ 100,000 on May 15, and the third for M$30,000. These amounts are equivalent to ThU.S.$ 227 corresponding to 183 shares.

During the first quarter of 2020, Maderas Arauco S.A. has made two contributions to E2E S.A, one for M$300,000 on January 29 and the second for M$11,700,000 on February 03. Both are equivalent to ThU.S.$ 15,022.

On July 29, 2020 Agrícola El Paque SpA was constituted. Forestal Arauco S.A. contributed with non-monetary assets for M$ 3,651,895 equivalent to ThU.S.$4,753.

(**)	ThU.S.$ 56,492 account for the carrying amount of investment in Puertos y Logística S.A., which was sold on April 5, 2019.


	09-30-2020		12-31-2019
	ThU.S.$		ThU.S.$
Carrying amount of associates accounted for using equity method		86,477		93,579
Carrying amount of joint ventures accounted for using equity method		211,890		199,539
Total investment accounted for using equity method		298,367		293,118

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 16. INTERESTS IN JOINT ARRANGEMENTS

Investments and contributions made

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 M$3,651,895 equivalent to ThU.S.$ 4,753.

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

Between February and September 2020, Arauco through its subsidiary Arauco Bioenergía S.A. has contributed ThU.S.$ 227 to Parque Eólico Ovejera Sur SpA., representing 50% of the interest in this company.

On April 1, 2019 Arauco through its subsidiary Forestal Arauco S.A. entered into a shareholders agreement with respect to Agrícola San Gerado SpA, which was established with the special purpose of developing an agricultural project in Molina. The capital contributed by Forestal Arauco S.A. was M$1,570,000 (equivalent to ThU.S.$ 2,162 as of December 31, 2019).

As of September 30, 2020 and December 31, 2019, 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 interest in Unilin Arauco Pisos Laminados Ltda., a Brazilian company, and in Eka Chile S.A. (“Eka”), a company that sells sodium chlorate to cellulose plants in Chile. There is a contractual agreement with these companies whereby Arauco has engaged in an economic activity subject to common control, which is classified as a joint venture.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

09-30-2020

12-31-2019

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

Assets
ThU.S.$

Liabilities
ThU.S.$

Assets
ThU.S.$

Liabilities
ThU.S.$

Current

315,617

224,882

346,498

206,683

Non-current

2,109,908

327,660

2,158,586

444,181

Equity

—

1,872,983

—

1,854,220

Total Joint Arrangement

2,425,525

2,505,084

Investment

936,492

927,110


	09-30-2020 ThU.S.$		09-30-2019 ThU.S.$
Income		472,897		666,862
Expenses		(448,056)		(446,350)
Joint Arrangement Net Income (Loss)		24,841		220,512


	09-30-2020				12-31-2019
Forestal Cono Sur S.A. (consolidated)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		51,307		3,879		37,625		2,180
Non-current		162,347		10,395		172,913		9,046
Equity		—		199,380		—		199,312
Total Joint Arrangement		213,654		213,654		210,538		210,538

Investment		99,690				99,656


	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Income		16,839			12,703
Expenses		(16,771	)		(10,123	)
Joint Arrangement Net Income (Loss)		68			2,580


	09-30-2020				12-31-2019
Eufores S.A. (consolidated)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		170,580		248,780		148,550		209,665
Non-current		847,631		134,044		808,647		117,443
Equity		—		635,387		—		630,089
Total Joint Arrangement		1,018,211		1,018,211		957,197		957,197

Investment		317,694				315,045


	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Income		180,760			189,188
Expenses		(176,279	)		(189,574	)
Joint Arrangement Net Income (Loss)		4,481			(386	)


	09-30-2020				12-31-2019
Zona Franca Punta Pereira S.A (Uruguay)	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		6,789		113,184		5,823		115,627
Non-current		455,934		21,309		464,151		19,740
Equity		—		328,230		—		334,607
Total Joint Arrangement		462,723		462,723		469,974		469,974

Investment		164,115				167,304


	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Income		13,706			13,620
Expenses		(20,083	)		(14,562	)
Joint Arrangement Net Income (Loss)		(6,377	)		(942	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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


	09-30-2020				12-31-2019
Unilin Arauco Pisos Ltda.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		7,040		4,603		6,674		3,761
Non-current		3,108		36		4,024		55
Equity		—		5,509		—		6,882
Total Joint Arrangement		10,148		10,148		10,698		10,698

Investment		2,755				3,441


	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Income		11,568			12,095
Expenses		(10,917	)		(11,931	)
Joint Arrangement Net Income (Loss)		651			164
Other comprehensive income		—			—
Comprehensive income		651			164
Dividends		—			—


	09-30-2020				12-31-2019
Eka Chile S.A.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		15,890		3,666		21,449		4,930
Non-current		34,348		4,369		33,442		4,917
Equity		—		42,203		—		45,044
Total Joint Arrangement		50,238		50,238		54,891		54,891

Investment		21,102				22,522


	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Income		30,040			34,668
Expenses		(27,092	)		(31,014	)
Joint Arrangement Net Income (Loss)		2,948			3,654
Other comprehensive income		—			—
Comprehensive income		2,948			3,654
Dividends		2,895			496


.	09-30-2020				12-31-2019
Sonae Arauco S.A	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		672,281		274,143		216,342		215,632
Non-current		314,765		381,121		695,902		358,851
Equity		—		331,781		—		337,761
Total Joint Arrangement		987,046		987,045		912,244		912,244

Net assets		138,717				140,146
Net asset adjustment (Goodwill)		27,174				28,735
Investment		165,891				168,881


	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Income		569,207			677,741
Expenses		(577,901	)		(677,534	)
Joint Arrangement Net Income (Loss)		(8,694	)		207
Other comprehensive income		—			—
Comprehensive income		(8,694	)		207
Dividends		—			6,634


	09-30-2020				12-31-2019
Agrícola El Paque SpA.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		4,542		35		—		—
Non-current		4,760		—		—		—
Equity		—		9,267		—		—
Total Joint Arrangement		9,302		9,302		—		—

Investment		4,634				—


	09-30-2020 ThU.S.$		09-30-2019 ThU.S.$
Income		—		—
Expenses		—		—
Joint Arrangement Net Income (Loss)		—		—

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

09-30-2020

12-31-2019

Parque Eólico Ovejera del Sur SpA.

Assets

ThU.S.$

Liabilities

ThU.S.$

Assets

ThU.S.$

Liabilities

ThU.S.$

Current

132

Non-current

1,737

—

1,505

Equity

—

1,864

—

1,593

Total Joint Arrangement

1,869

1,600

Investment

932

797


	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Income		—			—
Expenses		(78	)		(84	)
Joint Arrangement Net Income (Loss)		(78	)		(84	)
Other comprehensive income		—			—
Comprehensive income		(78	)		(84	)
Dividends		—			—


	09-30-2020				12-31-2019
E2E S.A.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		8,428		2,312		3,045		1,331
Non-current		27,362		1,240		3,099		1,336
Equity		—		32,238		—		3,477
Total Joint Arrangement		35,790		35,790		6,144		6,144

Investment		16,119				1,739


	09-30-2020 ThU.S.$			09-30-2019 ThU.S.$
Income		800			170
Expenses		(1,556	)		(1,143	)
Joint Arrangement Net Income (Loss)		(756	)		(973	)
Other comprehensive income		—			—
Comprehensive income		(756)			(973)
Dividends		—			—


	09-30-2020				12-31-2019
Agrícola San Gerardo SpA.	Assets ThU.S.$		Liabilities ThU.S.$		Assets ThU.S.$		Liabilities ThU.S.$
Current		596		87		—		—
Non-current		3,299		—		2,162		—
Equity		—		3,808		—		2,162
Total Joint Arrangement		3,895		3,895		2,162		2,162

Investment		1,904				1,081


	09-30-2020			09-30-2019
	ThU.S.$			ThU.S.$

Income		—			—
Expenses		(156	)		—
Joint Arrangement Net Income (Loss)		(156	)		—
Other comprehensive income		—			—
Comprehensive income		(156)			—
Dividends		—			—

NOTE 17. IMPAIRMENT OF ASSETS

As a result of current market conditions generated by the fall in prices, the impairment tests carried out at the CGU yielded a impairment provision of ThU.S.$12,515 of Property, plant and equipment and spare parts from Inventories (ThU.S.$43,181 as of December 31, 2019) in connection with two plants of Wood products business area in USA. For these calculations a discount rate of 8% was used.

In addition, due to the modernization and expansion project of the Arauco Mill (Proyecto de Modernización y Ampliación de la Planta Arauco, or MAPA Project), as of September 30, 2020, an impairment provision due to a reduction in the useful lives for the CGU Line 1 of Arauco Mill (Pulp business) was recorded in an amount of ThU.S.$68,873 (ThU.S.$33,570 as of December 31, 2019). For this calculation a discount rate of 6.1% was used. The Line 1 of the Arauco mill will be permanently shut down when the MAPA project is completed.

Both impairment provision charges are presented in the consolidated statement of Profit or Loss in Other expenses line.

Provisions for impairment of property, plant and equipment due to technical obsolescence (does not include the CGU impairments discussed above) have been recorded as of September 30, 2020 and December 31, 2019, respectively, as shown below:


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

	09-30-2020	12-31-2019
Provisions for impairment of property, plant and equipment	ThU.S.$13,513	ThU.S.$13,774

Goodwill

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

At the date of these interim consolidated financial statements, the balance of goodwill is ThU.S.$58,101 (ThU.S.$ 65,751 at December 31, 2019), as shown below:


	09-30-2020		12-31-2019
Goodwill	ThU.S.$		ThU.S.$
Arauco Canada Ltd. (Flakeboard Company Ltd)		40,694		40,765
Arauco do Brasil S.A. (Pien mill)		15,990		22,378
Arauco North America, Inc. (Prime-Line, Inc.)		732		732
Arauco Argentina S.A. (Forestal Nuestra Señora del Carmen S.A.)		—		1,191
Forestal Arauco S.A. (Forestal Los Lagos S.A.)		685		685

Closing balance		58,101		65,751


	09-30-2020			12-31-2019
Goodwill	ThU.S.$			ThU.S.$
Opening balance at January 1		65,751			65,851
Increase (decrease) due to business combination		—			732
Increase (decrease) in foreign currency exchange		(7,650	)		(832	)
Closing balance		58,101			65,751

Of the total of goodwill, ThU.S.$ 40,694 (ThU.S.$ 40,765 as of December 31, 2019) are 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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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, applying a real discount rate of 8% 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.$15,990 (ThU.S.$ 22,378 as of December 31, 2019).

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

As of September 30, 2020 and December 31, 2019, the carrying value of the goodwill of the plants did not exceed their recoverable value, and therefore there was no need to recognize impairment losses.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 18. PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES

The contingent liabilities for outstanding litigations are as follows:

Celulosa Arauco y Constitución S.A.

1. On August 25, 2005, the Chilean Servicio de Impuestos Internos (the “Chilean IRS”) issued tax resolutions No. 184 and No. 185 of 2005, and objected certain income tax returns made by Arauco on April 16, 2001 and October 31, 2001, and furthermore, requested the reimbursement of the amounts returned in connection with tax losses, along with the amendment of the FUT (Tax Profits Fund) Registry balance. In consideration to the foregoing, the above mentioned tax resolutions ordered the restitution of the historical amount as of October 31, 2002 of $4,571,664,617 (equal to ThU.S.$5,800 as of September 30, 2020). On November 7, 2005, the Company requested a Review of the Supervision Action (Revisión de la Actuación Fiscalizadora, or “RAF”), which is an administrative review of the tax action brought by the Chilean IRS, and filed a claim disputing the above mentioned tax resolutions No. 184 and 185 of 2005. The RAF was resolved on January 9, 2009 by the Chilean IRS, partially sustaining the Company’s request, granting a discount to the total amount of $1,209,399,164 (equal to ThU.S.$1,534 as of September 30, 2020), resulting in a total disputed amount of $3,362,265,453 (equal to ThU.S.$4,266 as of as of September 30, 2020) 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 to the Supreme Court.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore as of as of September 30, 2020, 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

September 30, 2020

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.$ 5,959 as of September 30, 2020). On December 22, 2017, the Company submitted a motion for reconsideration regarding Exempted Resolution No. 1,487, before the SMA, requesting that we be absolved of all infringements, with the exception of the charge specified under number 7 (late submission of the water quality report regarding the Cruces river). On March 23, 2018, the reconsideration appeal lodged by the company was rejected. On April 5, 2018, a judicial claim was submitted before the Third Environmental Court. On November 12, 2018, the case was in agreement, and the Minister Ms. Sibel Villalobos Volpi was appointed to draft the ruling.

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

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company, and therefore as of September 30, 2020, 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 $575,000,000 (equal to ThU.S.$ 730 as of September 30, 2020) in compensation for damages. In the alternative, it claims (a) $11,189,270,050 (equivalent to ThU.S.$ 14,197 as of September 30, 2020), for actual damages; (b) $ 11,189,270,050 monthly during the entire course of the trial, until the termination of the contract is declared in the final ruling, for loss of profits, and (c) $5,000,000,000 (equivalent to ThU.S.$ 6,344 as of September 30, 2020) 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. Currently, the case is filed, but notification for Servicios Logísticos Arauco S.A. is pending.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and, therefore, as of September 30, 2020, Arauco has not made any provision whatsoever in connection with this contingency.

Forestal Arauco S.A.

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

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

On August 12, 2019, the plaintiff filed an appeal against the final ruling. On September 2, 2019, Forestal Arauco S.A. adhered to the appeal. On July 2, 2020, the Court of Appeals confirmed the decision of the lower court.

On July 19, 2020, the plaintiff filed an appeal based on form and content. Currently, a ruling on the admissibility of the appeal by the Supreme Court is pending.

Considering that the Company’s position is based on solid legal grounds, there is a reasonable margin for obtaining a favorable result for the Company and therefore, as of September 30, 2020, Arauco has not made any provision whatsoever in connection with this contingency.

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

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

On March 18, 2019, the answer and settlement hearing took place, and, during such hearing, the court decided to proceed to the production of evidence stage.

On May 11, 2020, the ruling was issued rejecting the claim on the whole. Subsequently, on June 9, 2020, it was certified that the court ruling is final and enforceable. Case ended.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

3. 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.

Through a resolution dated September 1, 2020, the court received the trial case, and its notification is pending.

4. 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 $3,486,187,431 (equivalent to ThU.S.$ 4,423 as of September 30, 2020).

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 $421,723,281 (equivalent to ThU.S$ 535 as of September 30, 2020).

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.

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

5. 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 y 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.

On November 6, 2020, the conciliation hearing was held. The issuance of a resolution is still pending.

6. 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 (equivalent to ThU.S$ 127 as of September 30, 2020).

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.

Currently, the discussion period is over, pending that the parties be summoned to a conciliation hearing.

7. 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-393-2020), 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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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.

Currently, the discussion period is over, pending the parties be summoned to a conciliation hearing.

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 2018 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 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 $1,789,377,455

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Argentine Pesos (ThU.S.$ 23,455 as of September 30, 2020) 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 US$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 the other hand, in April 2016, the Secretary of Agriculture, Livestock and Fishing issued Resolution No.154 – E/2016, that requires that the holders of enterprises that have received the fiscal benefits envisaged by Law No. 25,080, establish collateral to cover a third of the duration of the project, with a minimum term of five years. During May of 2019, the Company modified the duly established collateral in accordance to the terms of said Resolution, for which reason the security was ultimately established at an amount of $435,952,315 Argentine Pesos (ThU.S.$5,722 as of September 30, 2020).

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 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 learned of an intermediate decision in Grievance of Instrument, issued by CARF that divided the claim into two parts:

(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.$ 5,197 as of September 30, 2020) and that amount will be added interests and readjustments as of January 31, 2019 until the administrative discussion is finished.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

(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.$ 5,646 as of September 30, 2020) 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 a guarantee will be presented to suspend any collection until the final decision of the trial.

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 September 30, 2020 and December 31, 2019 are as follows:


	09-30-2020		12-31-2019
Classes of Provisions	ThU.S.$		ThU.S.$
Provisions, Current		338		1,259
Provisions for litigations		338		1,259
Provisions, non-Current		30,058		31,765
Provisions for litigations		6,576		8,265
Other provisions		23,482		23,500

Total Provisions		30,396		33,024


	09-30-2020
	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		2,147			—			2,147
Used provisions		(1,944	)		—			(1,944	)
Increase (decrease) in foreign currency exchange		(3,100	)		—			(3,100	)
Other Increases (Decreases)		287			(18	)		269
Total Changes		(2,610	)		(18	)		(2,628	)
Closing balance		6,914			23,482			30,396

(*)	The increase in legal claims is comprised mainly by ThU.S.$1,942 and ThU.S.$205 (Brazilian and Argentine subsidiaries respectively) in connection with civil and labor lawsuits


	12-31-2019
	Litigations			Other Provisions		Total
Movements in Provisions	ThU.S.$			ThU.S.$		ThU.S.$
Opening balance		10,797			23,500		34,297
Changes in provisions
Increase in existing provisions		1,196			—		1,196
Increase through business combinations		815			—		815
Used provisions		(1,988	)		—		(1,988	)
Increase (decrease) in foreign currency exchange		(1,942	)		—		(1,942	)
Other Increases (Decreases)		646			—		646
Total Changes		(1,273	)		—		(1,273	)
Closing balance		9,524			23,500		33,024

(*)	The increase in legal claims is comprised mainly by ThU.S.$886 and ThU.S.$766 (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

September 30, 2020

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

NOTE 19. INTANGIBLE ASSETS


	09-30-2020			12-31-2019
Classes of Intangible Assets, Net	ThU.S.$			ThU.S.$
Intangible assets, net		97,889			106,252
Computer software		45,695			39,065
Water rights		5,684			5,966
Customer		35,941			39,981
Other identifiable intangible assets		10,569			21,240

Classes of intangible Assets, Gross		223,311			220,222
Computer software		127,253			113,487
Water rights		5,684			5,966
Customer		74,665			74,723
Other identifiable intangible assets		15,709			26,046

Classes of accumulated amortization and impairment
Total accumulated amortization and impairment		(125,422	)		(113,970	)
Accumulated amortization and impairment, intangible assets		(125,422	)		(113,970	)
Computer software		(81,558	)		(74,422	)
Customer		(38,724	)		(34,742	)
Other identifiable intangible assets		(5,140	)		(4,806	)

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


	09-30-2020
	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		1,302			—			—			4,777			6,079
Additions
Disposals		(10	)		—			—			—			(10	)
Amortization		(7,351	)		—			(3,831	)		(246	)		(11,428	)
Increase (Decrease) related to foreign currency translation		(476	)		—			(209	)		(122	)		(807	)
Other Increases (Decreases)		13,165			(282	)		—			(15,080	)		(2,197	)
Changes Total		6,630			(282	)		(4,040	)		(10,671	)		(8,363	)
Closing Balance		45,695			5,684			35,941			10,569			97,889


	12-31-2019
	Computer Software			Water Rights		Customer			Others			TOTAL
Reconciliation of intangible assets	ThU.S.$			ThU.S.$		ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance		26,545			5,966		41,634			15,948			90,093
Changes
Additions		17,908			—		—			4,472			22,380
Additions through business combination		223			—		2,800			1,300			4,323
Disposals		(67	)		—		—			—			(67	)
Amortization		(8,008	)		—		(4,769	)		(360	)		(13,137	)
Increase (Decrease) related to foreign currency translation		177			—		316			(120	)		373
Other Increases (Decreases)		2,287			—		—			—			2,287
Changes Total		12,520			—		(1,653	)		5,292			16,159
Closing Balance		39,065			5,966		39,981			21,240			106,252


	Years of Useful life (Average)
Computer Software		5

Customer		15
Brands		7

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 20. BIOLOGICAL ASSETS

Biological assets comprise forestry plantations, mainly radiata and taeda pine, and to a lesser extent eucalyptus. The plantations are located in Chile, Argentina, Brazil and Uruguay, with a total surface of 1.7 million hectares as of September 30, 2020 out of which 1 million hectares are used for forestry planting, 511 thousand hectares are native forest, 107 thousand hectares are used for other purposes and 118 thousand hectares not yet planted.

For the period ended September 30, 2020, the production volume of logs totaled 13.7 million m3 (15.6 million m3 as of September 30, 2019).

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

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

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

•

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

•

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

•

Future plantations are not considered.

•

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

•

Expected cash flows are determined in terms of harvest and expected sale of forestry products, associated with the demand from the Company’s own industrial centers and sales to third parties at market prices. Sales margin of the different products that are harvested in the forest is also considered in the valuation. The changes in the value of the plantations pursuant to the criteria defined above are accounted for in the results for the fiscal year, as established in IAS 41. These changes are presented in the interim Consolidated Statements of Profit or Loss under the line item Other income per function, which as of September 30, 2020 amounted to ThU.S.$130,004 (ThU.S.$ 110,500 as of September 30, 2019). The appraisal of biological assets resulted in a greater cost of the lumber sold in comparison to the real incurred cost, which is presented included in the cost of sales which as of September 30, 2020 amounted to ThU.S.$146,128 (ThU.S.$ 147,888 as of September 30, 2019).

•

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

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

•

The discount rates used are 6.4% in Chile, 7.4% Brazil, 11.1% in Argentina and 8.0% 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		(138,914	)
	-0,5		148,369
Margins (%)	10		436,893
	-10		(436,893	)

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. A change in the assumption used for the probability of a change in the discount rate is accompanied by a change in the opposite direction in the assumption used before a change in the sales margins.

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

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

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

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 September 30, 2020, there are no forestry plantations pledged as security.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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:


	09-30-2020		12-31-2019
	ThU.S.$		ThU.S.$
Current		270,343		275,792
Non-current		3,300,249		3,393,634
Total		3,570,592		3,669,426

Reconciliation of carrying amount of biological assets


	09-30-2020
	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		(8,278	)		(63,775	)		(72,053	)
Additions through acquisition and costs of new plantations		2,535			131,902			134,437
Sales		—			(3,209	)		(3,209	)
Harvest		(70,893	)		—			(70,893	)
Increases (decreases) in Foreign Currency Translation		(18,041	)		(106,601	)		(124,642	)
Loss of forest due to fires		(374	)		(7,369	)		(7,743	)
Transfers from non-current to current		78,495			(78,495	)		—
Changes in fair value		2,829			(29,610	)		(26,781	)
Gain (losses) arising from changes in fair value minus sale costs		—			130,004			130,004
Sales		—			(3,519	)		(3,519	)
Harvest		(141,966	)		—			(141,966	)
Loss of forest due to fires		—			(11,300	)		(11,300	)
Transfers from non-current to current		144,795			(144,795	)		—
Total Changes		(5,449	)		(93,385	)		(98,834	)
Closing balance		270,343			3,300,249			3,570,592


	12-31-2019
	Current			Non-current			Total
Movement	ThU.S.$			ThU.S.$			ThU.S.$
Opening Balance		315,924			3,336,339			3,652,263
Changes in real incurred cost		(22,719	)		90,999			68,280
Additions through acquisition and costs of new plantations		9,195			217,562			226,757
Sales		—			(2,722	)		(2,722	)
Harvest		(133,335	)		—			(133,335	)
Increases (decreases) in Foreign Currency Translation		4,699			(23,091	)		(18,392	)
Loss of forest due to fires		—			(3,823	)		(3,823	)
Transfers from non-current to current		96,875			(96,875	)		—
Other Increases (decreases)		(153	)		(52	)		(205	)
Changes in fair value		(17,413	)		(33,704	)		(51,117	)
Gain (losses) arising from changes in fair value minus sale costs		(6,588	)		161,294			154,706
Sales		—			(4,015	)		(4,015	)
Harvest		(198,089	)		—			(198,089	)
Loss of forest due to fires		—			(3,718	)		(3,718	)
Transfers from non-current to current		187,264			(187,264	)		—
Total Changes		(40,132	)		57,295			17,163
Closing balance		275,792			3,393,634			3,669,426

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 21. ENVIRONMENTAL MATTERS

Environment Management

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

All 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 September 30, 2020, and December 31, 2019 Arauco has made and / or has committed the following disbursements in major environmental projects:

09-30-2020

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

Arauco Florestal Arapoti S.A.

Environmental improvement studies

In process

—

Assets

Properties, plants
and equipments

241

2020

Celulosa Arauco y Constitucion S.A.

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

In process

332

Assets

Properties, plants
and equipments

1,201

2020

Celulosa Arauco y Constitucion S.A.

Environmental improvement studies

In process

15,520

Assets

Properties, plants
and equipments

38,030

2020

Celulosa Arauco y Constitucion S.A.

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

Finished

977

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

1,779

Assets

Properties, plants
and equipments

10,329

2020

Celulosa Arauco y Constitucion S.A.

Environmental improvement studies

In process

8,846

Expenses

Operating costs

5,050

2020

Celulosa Arauco y Constitucion S.A.

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

In process

7,318

Expenses

Operating costs

2,057

2020

Arauco Argentina S.A.

Construction emissary

In process

—

Assets

Properties, plants
and equipments

697

2020

Arauco Argentina S.A.

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

In process

528

Assets

Properties, plants
and equipments

10,541

2020

Arauco Argentina S.A.

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

In process

120

Assets

Properties, plants
and equipments

587

2020

Arauco Argentina S.A.

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

In process

1,285

Assets

Properties, plants
and equipments

2,315

2020

Maderas Arauco S.A.

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

In process

119

Expenses

Operating costs

2020

Maderas Arauco S.A.

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

In process

351

Expenses

Operating costs

117

2020

Maderas Arauco S.A.

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

In process

118

Assets

Properties, plants
and equipments

—

Forestal Arauco S.A.

Environmental improvement studies

In process

226

Expenses

Costs de
Administración

386

2020

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

906

Assets

Properties, plants
and equipments

1,361

2020

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

545

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

631

Assets

Properties, plants
and equipments

—

Forestal Los Lagos S.A.

Environmental improvement studies

In process

129

Expenses

Operating costs

118

2020

Arauco North America, Inc

Environmental improvement studies

In process

666

Assets

Properties, plants
and equipments

—

Arauco North America, Inc

Environmental improvement studies

Finished

607

Assets

Properties, plants
and equipments

—

TOTAL

41,224

73,070

12-31-2019

Disbursements undertaken 2019

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 Constitución S.A.

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

In process

267

Assets

Properties, plants
and equipments

792

2020

Celulosa Arauco y Constitución S.A.

Environmental improvement studies

In process

21,927

Assets

Properties, plants
and equipments

53,111

2020

Celulosa Arauco y Constitución S.A.

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

Finished

375

Expense

Operating cost

—

Celulosa Arauco y Constitución S.A.

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

In process

3,535

Assets

Properties, plants
and equipments

6,595

2020

Celulosa Arauco y Constitución S.A.

Environmental improvement studies

Finished

15,570

Expense

Operating cost

—

Celulosa Arauco y Constitución S.A.

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

Finished

348

Assets

Properties, plants
and equipments

—

Celulosa Arauco y Constitución S.A.

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

Finished

7,745

Expense

Operating cost

—

Arauco Argentina S.A.

Construction emissary

In process

Assets

Properties, plants
and equipments

697

2020

Arauco Argentina S.A.

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

In process

1,174

Assets

Properties, plants
and equipments

1,816

2020

Arauco Argentina S.A.

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

In process

987

Assets

Properties, plants
and equipments

343

2020

Maderas Arauco S.A.

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

In process

208

Expense

Operating cost

—

Maderas Arauco S.A.

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

In process

647

Expense

Operating cost

—

Maderas Arauco S.A.

Environmental improvement studies

Finished

305

Assets

Properties, plants
and equipments

—

Forestal Arauco S.A.

Environmental improvement studies

In process

626

Expense

Administration
expenses

401

2020

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

684

Assets

Properties, plants
and equipments

2,567

2020

Celulosa y Energía Punta Pereira S.A.

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

In process

400

Assets

Properties, plants
and equipments

100

2020

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

448

Assets

Properties, plants
and equipments

—

Forestal Los Lagos S.A.

Environmental improvement studies

In process

210

Expense

Operating cost

2020

Arauco North America, Inc

Environmental improvement studies

In process

945

Assets

Properties, plants
and equipments

530

2020

TOTAL

56,441

67,015

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 22. NON-CURRENT ASSETS HELD FOR SALE

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

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


	09-30-2020		12-31-2019
	ThU.S.$		ThU.S.$
Land		2,409		2,422
Buildings		1,256		1,256
Property, plant and equipment		206		758
Total		3,871		4,436

As of September 30, 2020 and 2019, there were no significant effects on results related to the sale of assets held for sale.

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 23. FINANCIAL INSTRUMENTS

23.1 Classification

Arauco’s financial instruments as of September 30, 2020 and December 31, 2019, 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.


	September 2020				December 2019
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)		144,877		144,877		634,079		634,079
Derivatives (1)		75		75		121		121
Mutual funds (2)		144,802		144,802		633,958		633,958
Financial assets at amortized cost		1,674,167		1,674,167		1,597,356		1,597,356
Cash and cash equivalents (amortized cost)		1,017,856		1,017,856		926,054		926,054
Cash		354,452		354,452		314,981		314,981
Time deposits		663,404		663,404		611,073		611,073
Accounts Receivable (net)		636,489		636,489		651,771		651,771
Trade and other receivables		568,822		568,822		562,419		562,419
Lease receivable		241		241		1,112		1,112
Other receivables		67,426		67,426		88,240		88,240
Accounts receivable due from related parties		8,067		8,067		17,526		17,526
Other financial assets (3)		11,755		11,755		2,005		2,005
Hedging assets		1,840		1,840		10,639		10,639

Financial liabilities at amortized cost (4)		6,663,955		7,170,305		6,733,957		7,001,457
Bonds issued denominated in U.S. Dollars		3,521,483		3,747,394		3,502,090		3,554,538
Bonds issued denominated in U.F. (5)		1,085,665		1,271,083		1,329,653		1,475,667
Bank Loans in U.S. Dollars		735,671		761,498		824,581		874,584
Bank borrowing denominated in U.S. Dollars		507,486		576,680		122,441		141,476
Lease liabilities		214,065		214,065		271,025		271,025
Trade and other payables		596,396		596,396		675,287		675,287
Accounts payable to related parties		3,189		3,189		8,880		8,880
Financial liabilities at fair value through profit or loss		259		259		33		33
Hedging Liabilities		187,478		187,478		134,242		134,242

(1)	The derivatives are presented in the line item “other financial assets” in the interim 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 interim 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

September 30, 2020

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

23.2 Fair Value Hierarchy of Financial Assets and Liabilities

The assets and liabilities measured at fair value in the interim consolidated statements of financial position as of September 30, 2020, have been measured based on the valuation methodologies provided in IFRS 13. The methodologies applied for each financial instrument are classified according to their hierarchy as follows:

•

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

•

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

•

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


Fair Value	September 2020 ThU.S.$		Level 1 ThU.S.$		Level 2 ThU.S.$		Level 3 ThU.S.$
Financial assets at fair value
Derivatives		75				75
Mutual Funds		144,802		144,802

Hedging assets		1,840				1,840

Financial liabilities at fair value through profit or loss		259				259
Hedging liabilities		187,478				187,478

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

September 30, 2020

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 consolidated financial statements, and correspond to Level 2 of the fair value hierarchy.

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


	September 2020		December 2019
	ThU.S.$		ThU.S.$
Interest bearing loans, current (a)		335,533		529,217
Other financial liabilities, current		274,268		460,846
Current Lease liabilities		63,684		69,208
Hedging liabilities current + Financial liabilities at fair value through profit or loss current		2,419		837
Interest bearing loans, non-current (b)		5,728,837		5,520,573
Other financial liabilities, non-current		5,763,774		5,452,194
Non-current lease liabilities		150,381		201,817
Hedging liabilities non-current + Financial liabilities at fair value through profit or loss non-current		185,318		133,438
Financial debt total (c)		6,064,370		6,049,790
Cash and cash equivalents		1,162,658		1,560,012
Other financial assets current		12,717		3,370
Total Cash (d)		1,175,375		1,563,382
Net Financial Debt (e)		4,888,995		4,486,408
Non-controlling interests		7,198,730		7,334,404
Equity attributable to owners of parent		29,622		35,011
Total Equity (f)		7,228,352		7,369,415
Debt to equity ratio (g)		0,68		0.61

(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

September 30, 2020

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

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


	September 2020 ThU.S.$		December 2019 ThU.S.$
Other financial liabilities (a)		6,038,042		5,913,040
Other financial liabilities, current		274,268		460,846
Other financial liabilities, non-current		5,763,774		5,452,194
Lease liabilities (b)		214,065		271,025
Current lease liabilities		63,684		69,208
Non-current lease liabilities		150,381		201,817
Financial liabilities at fair value through profit or loss		259		33
Hedging liabilities (c)		187,478		134,242
Swaps		184,381		133,390
Forward		3,097		852
Financial debt total (d)		6,064,370		6,049,790
Cash and cash equivalents		1,162,658		1,560,012
Total Cash (e)		1,162,658		1,560,012
Net Financial Debt (f)		4,901,712		4,489,778
Non-controlling interests		7,198,730		7,334,404
Equity attributable to owners of parent		29,622		35,011
Total Equity (g)		7,228,352		7,369,415
Debt to equity ratio (h)		0,68		0.61

(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 +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

September 30, 2020

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

The following table sets forth a reconciliation between the financial liabilities and the consolidated statements of financial position as of September 30, 2020 and December 31, 2019:


Thousands of dollars	September 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		73,811		34,255		108,066		196,176		574,294		3,728,612		4,499,082		4,607,148
Bank borrowing		54,285		109,498		163,783		267,896		543,442		268,036		1,079,374		1,243,157
Swap and Forward		2,419		—		2,419		185,318		—		—		185,318		187,737

Other Financial Liabilities, Total (a)		130,515		143,753		274,268		649,390		1,117,736		3,996,648		5,763,774		6,038,042


Thousands of dollars	September 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		16,042		47,642		63,684		86,520		22,498		41,363		150,381		214,065

Lease liabilities, Total (b)		16,042		47,642		63,684		86,520		22,498		41,363		150,381		214,065


Thousands of dollars	September 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		568,271		28,125		596,396		—		—		—		—		596,396
Accounts payable to related companies		3,189		—		3,189		—		—		—		—		3,189

Accounts Payable, Total (c)		571,460		28,125		599,585		—		—		—		—		599,585

Financial Liabilities, Total (a) + (b) + (c)		718,017		219,520		937,537		735,910		1,140,234		4,038,011		5,914,155		6,851,692


Thousands of dollars	December 2019
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		22,374		254,330		276,704		201,427		577,884		3,775,728		4,555,039		4,831,743
Bank borrowing		69,971		113,334		183,305		196,611		502,772		64,334		763,717		947,022
Swap and Forward		837		—		837		133,438		—		—		133,438		134,275

Other Financial Liabilities, Total (a)		93,182		367,664		460,846		531,476		1,080,656		3,840,062		5,452,194		5,913,040


Thousands of dollars	December 2019
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		21,518		47,690		69,208		117,608		46,408		37,801		201,817		271,025

Lease liabilities, Total (b)		21,518		47,690		69,208		117,608		46,408		37,801		201,817		271,025

Thousands of dollars	December 2019
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		672,809		248		673,057		2,230		—		—		2,230		675,287
Accounts payable to related companies		8,880		—		8,880		—		—		—		—		8,880

Accounts Payable, Total (c)		681,689		248		681,937		2,230		—		—		2,230		684,167

Financial Liabilities, Total (a) + (b) + (c)		796,389		415,602		1,211,991		651,314		1,127,064		3,877,863		5,656,241		6,868,232

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

23.4 Derivative Instruments

Hedging instruments recorded as of September 30, 2020 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 Contolidated 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 Consolidated statement of changes in equity as Other Comprehensive Income or the Statements of Comprehensive Income as Finance Income or Finance Costs, net of differences in exchange rate of the hedged items and the deferred tax.

A summary of the derivative financial instruments included in the interim consolidated statements of financial position as of September 30, 2020 and December 31, 2019, is presented below:


Financial Instruments	September 2020 Fair Value ThU.S.$			December 2019 Fair Value ThU.S.$
Assets at fair value through profit or loss (held for trading)		75			121
Derivatives (1)		—			121
Forward (2)		75

Hedging Assets		1,840			10,639
Derivatives (1)		1,840			5,827
Cross Currency Swaps		—			4,812

Financial liabilities at fair value through profit or loss		(259	)		(33	)
Derivatives (1)		(236	)		(19	)
Forward (2)		(23	)		(14	)

Hedging Liabilities		(187,478	)		(134,242	)
Cross Currency Swaps		(10,647	)		(22,842	)
Derivatives (1)		(176,831	)		(111,400	)

(1)	Includes Swap, Zero Cost Collar, and 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 September 30, 2020 and December 31, 2019:

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

September 30, 2020

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


Bond	Institution	Amount U.S.$		Amount U.F.		Starting date		Ending date		September 2020 Fair Value ThU.S.$			December 2019 Fair Value ThU.S.$
F	Deutsche - Bank - EU		37,670,356		863,636		10-30-2011		10-30-2021		(6,251	)		(4,435	)
F	JP Morgan - N.A.		37,670,356		863,636		10-30-2011		10-30-2021		(6,219	)		(4,392	)
F	Scotiabank - Chile		33,186,466		863,636		10-30-2014		04-30-2023		(1,578	)		615
F	Scotiabank - Chile		33,145,016		863,636		10-30-2014		04-30-2023		(1,413	)		801
F	Santander - Chile		32,798,374		863,636		10-30-2014		04-30-2023		(1,012	)		1,214
F	BCI - Chile		32,491,348		863,636		10-30-2014		04-30-2023		(629	)		1,611
F	Banco de Chile - Chile		32,798,375		863,636		04-30-2019		10-30-2029		(2,082	)		418
P	Itau - Chile		46,474,122		1,000,000		05-15-2012		11-15-2021		(9,712	)		(7,100	)
P	JP Morgan - N.A.		47,163,640		1,000,000		11-15-2012		11-15-2021		(10,133	)		(7,420	)
P	Scotiabank - Chile		42,412,852		1,000,000		11-15-2013		11-15-2023		(5,309	)		(2,416	)
P	Santander - Chile		41,752,718		1,000,000		11-15-2013		11-15-2023		(4,485	)		(1,609	)
P	Deutsche - U.K.		41,752,718		1,000,000		11-15-2013		11-15-2023		(4,471	)		(1,594	)
Q	BCI - Chile		10,796,306		250,000		10-01-2014		04-01-2021		(1,710	)		(1,755	)
Q	BCI - Chile		10,799,174		250,000		10-01-2014		04-01-2021		(1,706	)		(1,747	)
R	Santander - Chile		128,611,183		3,000,000		10-01-2014		04-01-2024		(19,627	)		(11,059	)
R	JP Morgan - U.K.		43,185,224		1,000,000		10-01-2014		04-01-2024		(6,373	)		(3,461	)
R	Itau - Chile		43,277,070		1,000,000		10-01-2014		04-01-2024		(6,408	)		(3,486	)
S	Santander - Chile		201,340,031		5,000,000		11-15-2016		11-15-2026		(15,485	)		153
W	Goldman Sachs - N.A.		40,521,750		1,000,000		10-10-2018		10-10-2028		(6,647	)		(3,360	)
W	Scotiabank - Chile		40,537,926		1,000,000		10-10-2018		10-10-2028		(6,582	)		(3,169	)
W	Goldman Sachs - N.A.		40,066,555		1,000,000		10-10-2018		10-10-2028		(6,025	)		(2,766	)
X	Santander - Chile		118,400,504		3,000,000		10-10-2018		10-10-2038		(9,599	)		(1,036	)
X	Santander - Chile		97,971,786		2,500,000		10-10-2018		10-10-2038		(7,738	)		(614	)

											(141,194	)		(82,178	)

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		September 2020 Fair Value ThU.S.$			December 2019 Fair Value ThU.S.$
Santander - Chile		118,670,000		100,000,000		06-15-2021		12-15-2029		(7,141	)		(4,903	)
Banco de Chile - Chile		59,335,000		50,000,000		06-15-2021		12-15-2029		(3,546	)		(2,428	)
MUFG - N.A.		118,670,000		100,000,000		06-15-2021		12-15-2029		(7,084	)		(4,846	)
JP Morgan - N.A.		237,340,000		200,000,000		06-15-2021		12-15-2029		(14,253	)		(9,740	)
HSBC - N.A.		59,335,000		50,000,000		06-15-2021		12-15-2029		(3,613	)		(2,493	)

										(35,637	)		(24,410	)

Forward

Forward contracts to hedge the exchange rate risk exposure in connection with construction company contracts in local currency.


Institution	Amount U.S.$		Amount CLP		Starting date		Ending date		September 2020 Fair Value ThU.S.$			December 2019 Fair Value ThU.S.$
Banco de Chile - Chile		7,896,461		5,446,189,313		10-11-2019		12-11-2020		(969	)		(3,543	)
Banco de Chile - Chile		7,886,170		5,446,189,313		10-11-2019		12-11-2020		(959	)		(3,482	)
BCI - Chile		7,873,629		5,446,189,313		10-11-2019		12-11-2020		(947	)		(3,408	)
Itau - Chile		7,880,465		5,446,189,313		10-11-2019		12-11-2020		(954	)		(3,449	)
Itau - Chile		7,836,244		5,446,189,313		10-11-2019		12-11-2020		(909	)		(3,188	)
Itau - Chile		7,783,384		5,446,189,314		10-11-2019		12-11-2020		(857	)		(3,065	)
BCI - Chile		7,590,508		5,446,189,314		10-11-2019		12-11-2020		(664	)		(1,855	)
Itau - Chile		9,800,539		7,625,015,061		01-10-2020		12-11-2020		(101	)		2,131
Scotiabank - Chile		9,791,980		7,625,015,061		01-10-2020		12-11-2020		(92	)		2,175

										(6,452	)		(17,684	)

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

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		September 2020 Fair Value ThU.S.$			December 2019 Fair Value ThU.S.$
Fuel Oil N°6		JP Morgan—N.A.		22,412		bbl		05-01-2020		10-01-2020		82			—
Fuel Oil N°6		JP Morgan—N.A.		11,206		bbl		05-01-2020		10-01-2020		42			—
Fuel Oil N°6		JP Morgan—N.A.		123,906		bbl		11-01-2020		04-01-2021		419			—
Fuel Oil N°6		Goldman Sachs—N.A.		61,953		bbl		11-01-2020		04-01-2021		229			—
Brent		BNP Paribas – E.U.		220,000		bbl		08-01-2021		07-01-2022		(280	)		—
Brent		Goldman Sachs—N.A.		220,000		bbl		08-01-2021		07-01-2022		(34	)		—

												458			—

Interest Rate Swap

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


Institution	Amount US$		Starting date	Ending date	September 2020 Fair Value ThU.S.$			December 2019 Fair Value ThU.S.$
Goldman Sachs—N.A.		100,000,000	03-27-2020	09-27-2023		(439	)		—
MUFG—N.A.		100,000,000	03-27-2020	09-27-2023		(345	)		—

						(784	)		—

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

23.4.2. Colombia

Forward contracts that are in force and effect, executed by Arauco Colombia as of September 30, 2020 and December 31, 2019, are detailed in the following tables:


Exchange rate	Institution		Amount ThU.S.$		Starting date	Ending date	September 2020 Fair Value ThU.S.$
USDCOP		Itaú Corpbanca Colombia		1,400	07-15-2020	10-19-2020		75
USDCOP		Itaú Corpbanca Colombia		1,200	08-25-2020	11-23-2020		(15	)
USDCOP		Itaú Corpbanca Colombia		1,300	09-25-2020	12-22-2020		(8	)

								52


Exchange rate	Institution		Amount ThU.S.$		Starting date	Ending date	December 2019 Fair Value ThU.S.$
USDCOP		Corpbanca Colombia		2,100	11-07-2019	01-14-2020		(8	)
USDCOP		Corpbanca Colombia		1,700	11-25-2019	02-11-2020		(6	)

								(14	)

23.4.3. Uruguay

Forward

As of September 30, 2020 and December 31, 2019, Arauco through its subsidiaries as a joint operation (50%) in Uruguay maintains the following forward contracts in force and effect for the purposes of ensuring an exchange rate for sale of dollars:


Exchange rate	Institution		Notional ThU.S.$		September 2020 Fair Value ThU.S.$
UYUUSD		Santander-Uruguay		16,205		292
UYUUSD		HSBC-Uruguay		5,855		75
UYUUSD		Itaú-Uruguay		2,310		(83	)
EURUSD		Citibank-U.K.		210		—
EURUSD		HSBC-Uruguay		1,062		22

						306


Exchange rate	Institution		Notional ThU.S.$		December 2019 Fair Value ThU.S.$
UYUUSD		Santander-Uruguay		8,070		(182	)
UYUUSD		HSBC-Uruguay		12,915		(264	)
UYUUSD		Citibank U.K.		1,500		(101	)
UYUUSD		Itaú-Uruguay		3,710		(4	)
EURUSD		Citibank U.K.		833		(20	)

						(571	)

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 September 30, 2020 and December 31, 2019, are detailed below:


Commodity	Institution	Notional ThU.S.$		September 2020 Fair Value ThU.S.$
Fuel Oil N°6	JP Morgan - N.A		7,399		(1,026	)
Fuel Oil N°6	DNB Bank ASA		4,849		(849	)

					(1,875	)


Commodity	Institution	Notional ThU.S.$		December 2019 Fair Value ThU.S.$
Fuel Oil N°6	JP Morgan - N.A		6,925		878
Fuel Oil N°6	DNB Bank ASA		5,241		472

					1,350

Interest Rate Swap

In addition, Arauco through its subsidiaries as a joint operation (50%) in Uruguay maintains an Interest Rate Swap in force and effect, a derivative instrument which purpose is to set the interest rate of a variable rate debt in the same currency (USD). The valuation off this instrument as of September 30, 2020 and December 31, 2019 is shown below:


Exchange rate	Institution	Notional ThU.S.$		September 2020 Fair Value ThU.S.$
USD	DNB Bank ASA		25,319		(633	)

Exchange rate	Institution	Notional ThU.S.$		December 2019 Fair Value ThU.S.$
USD	DNB Bank ASA		33,758		(8	)

23.4.4. Estados Unidos

Interest Rate Swap

As of September 30, 2020, 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 September 30, 2020 is shown below:


Institution	Amount ThU.S.$	Starting date		Ending date		September 2020 Fair Value ThU.S.$
JP Morgan—N.A.	100,000,000		04-28-2020		10-28-2023		(23	)
Goldman Sachs N.A.	100,000,000		04-28-2020		10-28-2023		(34	)
JP Morgan—N.A.	100,000,000		04-28-2020		10-28-2023		(6	)

							(63	)

23.5 Loans and Receivables

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

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

As of September 30, 2020 and December 31, 2019, there are provisions for impairment for ThU.S.$ 15,550 and ThU.S.$ 16,368, respectively.


	September 2020 ThU.S.$		December 2019 ThU.S.$
Financial assets at amortized cost		1,674,167		1,597,356
Cash and cash equivalents (Mutual Funds not included)		1,017,856		926,054
Cash		354,452		314,981
Time Deposits		663,404		611,073
Trade and other receivables (net)		644,556		669,297
Trade and other receivables		568,822		562,419
Lease receivable		241		1,112
Other receivables		67,426		88,240
Accounts receivable from related parties		8,067		17,526
Other financial assets		11,755		2,005

100

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

23.5.1. Cash and Cash Equivalents

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

The composition of cash and cash equivalents (including the balance of mutual funds displayed in this note as valuation, instruments at fair value with profit or loss) at September 30, 2020 and December 31, 2019, classified by currency is as follows:


	09-30-2020 ThU.S.$		12-31-2019 ThU.S.$
Cash and Cash Equivalents		1,162,658		1,560,012
U.S. Dollars		904,397		1,412,688
Euro		5,174		2,264
Mexican pesos		31,333		13,684
Other currencies		140,859		68,916
Chilean pesos		80,895		62,460

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.

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.

101

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

The following table sets forth trade and other current/non-current receivables classified by currencies as of September 30, 2020 and December 31, 2019:


	09-30-2020 ThU.S.$		12-31-2019 ThU.S.$
Trades and other current receivables		629,824		642,315

U.S. Dollars		464,323		435,663
Euros		6,558		8,483
Mexican pesos		32,062		33,981
Other currencies		62,796		74,544
Chilean pesos		60,335		86,954
U.F.		3,750		2,690

Accounts receivable from related parties, current		8,067		17,526
U.S. Dollars		371		1,319
Other currencies		561		197
Chilean pesos		7,135		15,512
U.F.		—		498

Trade and other non-current receivables		6,665		9,456
U.S. Dollars		3,160		3,691
Other currencies		64		351
Chilean pesos		3,325		2,983
U.F.		116		2,431

23.6 Financial Liabilities

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


Financial Liabilities	September 2020 ThU.S.$		December 2019 ThU.S.$
Total Financial Liabilities		6,851,692		6,868,232
Financial liabilities at fair value through profit or loss (held for trading)		259		33
Hedging Liabilities		187,478		134,242
Financial Liabilities Measured at Amortized Cost		6,663,955		6,733,957

The following table sets forth the current portion of the non-current bank borrowings and debt issued as of September 30, 2020 and December 31, 2019.


	September 2020 ThU.S.$		December 2019 ThU.S.$
Bank borrowings - current portion		76,947		62,220
Bonds issued - current portion		89,495		85,641
Total		166,442		147,861

102

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


		*09-30-2020*		*12-31-2019*		*09-30-2020*		*12-31-2019*
	*Currency*	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$
	*Currency*	*Amortized Cost*				*Fair Value*
Total Financial Liabilities			6,663,955		6,733,957		7,170,305		7,001,457
Bonds Issued	U.S. Dollar		3,521,483		3,502,090		3,747,394		3,554,538
Bonds Issued	U.F.		1,085,665		1,329,653		1,271,083		1,475,667
Bank borrowings	U.S. Dollar		735,671		824,581		761,498		874,584
Bank borrowings	Euro		506,127		116,259		576,680		141,476
Bank borrowings	Other currencies		1,359		6,182		—		—
Lease liabilities	U.F.		28,463		41,633		28,463		41,633
Lease liabilities	Chilean pesos		77,612		107,046		77,612		107,046
Lease liabilities	Mexican pesos		7,211		10,025		7,211		10,025
Lease liabilities	U.S. Dollar		83,537		83,585		83,537		83,585
Lease liabilities	Euro		325		52		325		52
Lease liabilities	Other currencies		16,917		28,684		16,917		28,684
Trades and Other Payables	U.S. Dollar		174,367		157,754		174,367		157,754
Trades and Other Payables	Euro		7,791		20,414		7,791		20,414
Trades and Other Payables	Mexican pesos		23,256		22,272		23,256		22,272
Trades and Other Payables	Other currencies		84,059		94,946		84,059		94,946
Trades and Other Payables	Chilean pesos		277,252		348,155		277,252		348,155
Trades and Other Payables	U.F.		29,671		31,746		29,671		31,746
Accounts payable to related parties	U.S. Dollar		229		454		229		454
Accounts payable to related parties	Chilean pesos		2,960		8,426		2,960		8,426

The financial liabilities at amortized cost presented in the consolidated statements of financial positions as of September 30, 2020 and December 31, 2019 are as follows:


	September 2020 ThU.S.$
	Current		Non-Current		Total
Other financial liabilities		271,849		5,578,456		5,850,305
Lease liabilities		63,684		150,381		214,065
Trade and other payables		596,396		—		596,396
Accounts payable to related parties		3,189		—		3,189

Total Financial Liabilities Measured at Amortized Cost		935,118		5,728,837		6,663,955


	December 2019 ThU.S.$
	Current		Non-Current		Total
Other financial liabilities		460,009		5,318,756		5,778,765
Lease liabilities		69,208		201,817		271,025
Trade and other payables		673,057		2,230		675,287
Accounts payable to related parties		8,880		—		8,880

Total Financial Liabilities Measured at Amortized Cost		1,211,154		5,522,803		6,733,957

103

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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 - September						July - September
	2020			2019			2020			2019
	ThU.S.$			ThU.S.$			ThU.S.$			ThU.S.$
Opening balance		9,010			13,395			(57,290	)		27,727
Gains (losses) on cash flow hedges		(16,556	)		35,516			50,317			3,118
Recycle of cash flow hedges to profit or loss		(53,065	)		(15,465	)		(32,211	)		(2,558	)
Income tax		17,589			(4,458	)		(3,838	)		701
Closing balance		(43,022	)		28,988			(43,022	)		28,988

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

September 2020
ThU.S.$

December 2019
ThU.S.$

Interest
coverage
>= 2,0x

Debt level
(1)
<= 1,2x

Domestic bonds (Chile)

1,085,665

1,329,653

N/R

✓

Syndicate Loan Scotiabank

199,249

200,703

✓

Syndicate Loan Banco Estado - Grayling

301,989

301,452

✓

Syndicate ECA Banco BNP Paribas

506,127

116,259

✓

N/R: Not required for the financial obligation

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

As of September 30, 2020 and December 31, 2019, Arauco has complied with all of its financial covenants.

The following table sets forth the credit ratings of our debt instruments as of September 30, 2020 and December 31, 2019, are as follows:

Instrument

Standard &
Poor’s

Fitch Ratings

Moody’s

Feller Rate

Local bonds

—

AA-

—

Foreign bonds

BBB-

BBB

Baa3

—

104

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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 September 30, 2020 and December 31, 2019 is as follows:


	September 2020		December 2019
	ThU.S.$		ThU.S.$
Equity		7,228,352		7,369,415
Bank borrowings		1,243,157		947,022
Lease liabilities		214,065		271,025
Bonds issued		4,607,148		4,831,743

Capitalization		13,292,722		13,419,205

23.10 Risk Management

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

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

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

23.10.1 Type of Risk: Credit Risk

Description

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

105

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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.


	September 2020		December 2019
	ThU.S.$		ThU.S.$
Current Receivables
Trade receivables		567,275		559,164
Financial lease receivables		188		912
Other debtors		62,361		82,239
Net subtotal		629,824		642,315

Trade receivables		575,230		568,123
Financial lease receivables		188		912
Other debtors		66,936		85,848
Gross subtotal		642,354		654,883

Provision for doubtful trade receivables		7,955		8,959
Provision for doubtful lease receivables		—		—
Provision for doubtful other debtors		4,575		3,609
Subtotal Bad Debt		12,530		12,568

Non-Current Receivables

Trade receivables		1,547		3,255
Financial lease receivables		53		200
Other debtors		5,065		6,001
Net Subtotal		6,665		9,456

Trade receivables		4,567		7,055
Financial lease receivables		53		200
Other debtors		5,065		6,001
Gross subtotal		9,685		13,256

Provision for doubtful trade receivables		3,020		3,800
Provision for doubtful lease receivables		—		—
Provision for doubtful other debtors		—		—
Subtotal Bad Debt		3,020		3,800

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 September 30, 2020, Arauco’s balance for commercial Debtors was ThU.S.$ 579,797 of which, according to the agreed sales conditions, 58.33% corresponded to sales on credit (open account), 41.06% to sales with letters of credit and 0.61% to other types of sales, distributed in 2,469 debtors. The client with the largest Open Account debt represented 1.86% of the total accounts receivable as of that date.

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

106

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


September 30, 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
ThU.S.$		547,611			20,243			182			30			133			439			277			1,366			7			9,509			579,797
%		94.45	%		3.49	%		0.03	%		0.01	%		0.02	%		0.08	%		0.05	%		0.24	%		0.00	%		1.63	%		100	%

December 31, 2019

Age of trade receivables
Days	Non-past due			1 to 30			31 to 60			61 to 90			91 to 120			121 to 150			151 to 180			181 to 210			211 to 250			More than 250			Total
ThU.S.$		531,881			28,469			899			309			18			846			22			34			389			12,311			575,178
%		92.47	%		4.95	%		0.16	%		0.05	%		0.00	%		0.15	%		0.00	%		0.01	%		0.07	%		2.14	%		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		233,558			4,487			12			—			—			—			—			—			—			—			238,057
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		311,274			15,099			141			30			133			439			277			1,292			7			9,494			338,186
Loss allowance provision		—			—			5			3			13			44			28			1,292			7			9,494			10,886
Expected loss rate		0.00	%		0.00	%		3.55	%		10.00	%		9.77	%		10.02	%		10.11	%		100.00	%		100.00	%		100.00	%

Others		2,779			657			29			—			—			—			—			74			—			15			3,554
Loss allowance provision		—			—			—			—			—			—			—			74			—			15			89
Expected loss rate		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		100.00	%		—			100.00	%

Trade receivables, total (ThU.S.$)		547,611			20,243			182			30			133			439			277			1,366			7			9,509			579,797
Allowance for doubtful accounts, total (ThU.S.$)		—			—			5			3			13			44			28			1,366			7			9,509			10,975

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 provision for trade receivables and others, below we provide detail for the movements as of September 30, 2020 and December 31, 2019:


	September 2020			December 2019
	ThU.S.$			ThU.S.$
Opening loss allowance as at January 1		(16,368	)		(15,147	)
Increase in loan loss allowance recognised in profit or loss during the year		(969	)		(2,506	)
Receivables written off during the year as uncollectible		1,137			163
Unused amount reversed		650			1,122
Closing balance		(15,550	)		(16,368	)

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

107

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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., Arauco Industria de Paineis Ltda. and Arauco Nutrientes SPA. 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.$89,295, effective as of September 2020, 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.

108

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


Guarantees Arauco Group (ThU.S.$)
Guarantees Debtors (received from clients)
Certificate of deposits	7,108	8.0	%
Standby	7,814	8.8	%
Promissory notes	67,705	75.8	%
Finance	2,624	2.9	%
Mortgage	2,459	2.8	%
Pledge	185	0.2	%
Promissory notes	1,400	1.5	%

Total Guarantees	89,295	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 90.2% and, therefore, Arauco’s portfolio exposure amounts to 9.8%.


Secured Open Accounts Receivable	ThU.S.$		%
Total open accounts receivable		341,038		100.0	%
Secured receivables (*)		307,616		90.2	%
Unsecured receivables		33,422		9.8	%

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

Investment Policy:

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

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

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

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

109

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

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

23.10.2 Type of Risk: Liquidity Risk

Description

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

Explanation of Liquidity Risk Exposure and How This Risk Arises

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

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

The 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 September 30, 2020 and December 31, 2019. The tables have been drawn up based on the contractual undiscounted cash outflows and their remaining contractual maturities:

110

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


September 30, 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		—		2,769		2,757		202,757		—		—		—		2,769		205,514		1.36%	Libor6M+1.1%
93.458.000-1		Celulosa Arauco y Constitución S.A.		Euros	BNP Paribas / ECA		2,300		2,402		57,569		57,082		56,543		55,940		244,755		4,702		471,889		1.06%	1.06%
—		Zona Franca Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo A		—		2,221		2,172		2,123		—		—		—		2,221		4,295		2.33%	Libor6M+2.05%
—		Celulosa y Energía Punta Pereira S.A.		U.S. Dollars	Banco Interamericano de Desarrollo A		—		8,982		8,785		8,588		—		—		—		8,982		17,373		2.33%	Libor6M+2.05%
—		Celulosa y Energía Punta Pereira S.A.		U.S. Dollars	Finn Vera/ Finnish Export Credit		—		50,789		49,269		24,065		—		—		—		50,789		73,334		3.20%	3.20%
—		Celulosa y Energía Punta Pereira S.A.		U.S. Dollars	DNB Nor ASA		—		342		218		93		—		—		—		342		311		0.00%	0.00%
—		Eufores S.A.		U.S. Dollars	BBVA		—		14,114		—		—		—		—		—		14,114		—		1.65%	Libor6M+1.3%
—		Eufores S.A.		U.S. Dollars	Banco República Oriental del Uruguay		26,609		—		—		—		—		—		—		26,609		—		1.96%	Libor6M+1.3%
—		Eufores S.A.		U.S. Dollars	Banco República Oriental del Uruguay		555		—		—		—		—		—		—		555		—		1.96%	Libor6M+1.3%
—		Eufores S.A.		U.S. Dollars	Citibank		3,529		—		—		—		—		—		—		3,529		—		1.67%	Libor6M+1.25%
—		Eufores S.A.		U.S. Dollars	ITAU		12,603		—		—		—		—		—		—		12,603		—		1.71%	Libor6M+1.3%
—		Eufores S.A.		U.S. Dollars	Heritage		1,355		—		—		—		—		—		—		1,355		—		1.52%	Libor3M+1.3%
—		Eufores S.A.		U.S. Dollars	Santander		—		20,158		—		—		—		—		—		20,158		—		1.59%	Libor6M+1.3%
—		Eufores S.A.		U.S. Dollars	Santander		5,049		—		—		—		—		—		—		5,049		—		1.96%	Libor6M+1.3%
—		Eufores S.A.		U.S. Dollars	Scotiabank		3,020		—		—		—		—		—		—		3,020		—		1.69%	Libor6M+1.3%
—		Arauco Forest Brasil S.A.		Brazilian Real	Banco Votorantim		—		208		198		—		—		—		—		208		198		5.00%	5.00%
—		Arauco Forest Brasil S.A.		Brazilian Real	BNDES Subcrédito A		34		99		125		—		—		—		—		133		125		7.82%	TJLP+2.91%
—		Arauco Forest Brasil S.A.		Brazilian Real	BNDES Subcrédito B		21		60		75		—		—		—		—		81		75		8.82%	TJLP+3.91%
—		Arauco Forest Brasil S.A.		U.S. Dollars	BNDES Subcrédito C		32		119		150		12		—		—		—		151		162		6.49%	Cesta+2.91%
—		Arauco Forest Brasil S.A.		Brazilian Real	BNDES Subcrédito D		24		68		84		—		—		—		—		92		84		10.02%	TJLP+5.11%
—		Arauco Florestal Arapoti S.A.		Brazilian Real	Banco Votorantim		—		234		224		—		—		—		—		234		224		5.00%	5.00%
—		Mahal Empreendimentos e Participações S.A.		U.S. Dollars	BNDES Subcrédito G		154		—		—		—		—		—		—		154		—		6.49%	Cesta+2.91%
—		Mahal Empreendimentos e Participações S.A.		U.S. Dollars	BNDES Subcrédito K		17		—		—		—		—		—		—		17		—		6.49%	Cesta+2.91%
—		Arauco North America, Inc.		U.S. Dollars	Banco del Estado de Chile— NY Branch		3,923		17,896		35,374		34,793		229,223		—		—		21,819		299,390		2.83%	Libor6M+1.65%

					Total		59,225		120,461		157,000		329,513		285,766		55,940		244,755		179,686		1,072,974


September 30, 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		11,586		11,412		22,301		21,605		20,909		20,212		82,338		22,998		167,365		4.25%	4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-F		4,634		4,565		8,921		8,642		8,363		8,085		32,935		9,199		66,946		4.25%	4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-P		3,607		3,607		15,492		23,278		22,622		21,967		143,847		7,214		227,206		4.00%	4.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-Q		9,377		9,242		—		—		—		—		—		18,619		—		3.00%	3.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-R		3,249		3,249		6,498		6,498		6,498		6,498		247,106		6,498		273,098		3.60%	3.60%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-S		2,173		2,173		4,345		4,345		4,345		4,345		188,639		4,346		206,019		2.40%	2.40%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-W		1,141		1,141		2,283		2,283		2,283		2,283		117,263		2,282		126,395		2.10%	2.10%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-X		2,686		2,686		5,373		5,373		5,373		5,373		299,734		5,372		321,226		2.70%	2.70%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2022		—		5,993		129,164		—		—		—		—		5,993		129,164		4.75%	4.75%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2024		—		22,500		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		9,688		9,688		19,375		19,375		19,375		19,375		548,438		19,376		625,938		3.88%	3.88%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2047		11,000		11,000		22,000		22,000		22,000		22,000		895,000		22,000		983,000		5.50%	5.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2029		10,625		10,625		21,250		21,250		21,250		21,250		585,000		21,250		670,000		4.25%	4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2049		13,750		13,750		27,500		27,500		27,500		27,500		1,160,000		27,500		1,270,000		5.50%	5.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2030		—		21,000		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		—		25,750		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		1,621		512		3,669		4.84%	4.84%
—	Prime-Line, Inc.	U.S. Dollars	Bond ADFA 2013		38		114		148		149		—		—		—		152		297		4.00%	4.00%

			Total		83,682		158,879		354,412		232,060		730,280		206,150		6,027,296		242,561		7,550,198

111

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


September 30, 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.	UF	Motor vehicles		478		1,400		1,516		1,131		571		386		337		1,878		3,941
85.805.200-9	Forestal Arauco S.A.	UF	Plants and equipments		1,598		2,644		1,445		282		—		—		—		4,242		1,727
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Plants and equipments		616		546		137		103		—		—		—		1,162		240
85.805.200-9	Forestal Arauco S.A.	UF	Other properties, plant and equipment		1,630		4,137		3,862		600		—		—		—		5,767		4,462
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Other properties, plant and equipment		65		196		174		—		—		—		—		261		174
—	Arauco Argentina S.A.	U.S. Dollars	Buildings and constructions		116		344		140		—		—		—		—		460		140
—	Arauco Argentina S.A.	U.S. Dollars	IT equipment		13		39		48		—		—		—		—		52		48
—	Arauco Argentina S.A.	U.S. Dollars	Plants and equipments		347		1,040		1,386		1,098		919		—		—		1,387		3,403
—	Arauco Argentina S.A.	U.S. Dollars	Motor vehicles		608		2,360		2,075		1,643		1,125		—		—		2,968		4,843
—	Arauco Industria de Paineis S.A.	Brazilian Real	Other properties, plant and equipment		11		9		10		—		—		—		—		20		10
—	Arauco Industria de Paineis S.A.	Brazilian Real	IT equipment		13		38		45		4		—		—		—		51		49
—	Arauco Industria de Paineis S.A.	Brazilian Real	Motor vehicles		109		327		272		—		—		—		—		436		272
—	Arauco Forest Brasil S.A.	Brazilian Real	IT equipment		6		18		18		4		—		—		—		24		22
—	Arauco Forest Brasil S.A.	Brazilian Real	Lands		622		1,867		2,281		2,489		2,489		2,489		4,978		2,489		14,726
—	Arauco Florestal Arapoti S.A.	Brazilian Real	IT equipment		5		11		6		—		—		—		—		16		6
—	Arauco do Brasil S.A.	Brazilian Real	IT equipment		100		284		327		288		139		—		—		384		754
93.458.000-1	Celulosa Arauco y Constitucion S.A.	UF	Buildings and constructions		388		1,143		1,451		1,396		—		—		—		1,531		2,847
93.458.000-1	Celulosa Arauco y Constitucion S.A.	UF	Motor vehicles		186		495		560		362		146		88		37		681		1,193
93.458.000-1	Celulosa Arauco y Constitucion S.A.	Chilean pesos	Buildings and constructions		18		50		66		33		—		—		—		68		99
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		4,560		13,679		18,239		10,586		292		—		—		18,239		29,117
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.S. Dollars	Motor vehicles		45		136		75		—		—		—		—		181		75
—	Arauco North America, Inc.	U.S. Dollars	Lands		32		94		113		—		—		—		—		126		113
—	Arauco North America, Inc.	U.S. Dollars	Buildings and constructions		419		1,267		1,147		1,134		1,164		1,194		2,876		1,686		7,515
—	Arauco North America, Inc.	U.S. Dollars	Motor vehicles		9		27		98		27		—		—		—		36		125
—	Arauco Canada Limited	Canadian Dollars	Buildings and constructions		27		81		44		—		—		—		—		108		44
—	Arauco Canada Limited	Canadian Dollars	Motor vehicles		25		15		20		48		—		—		—		40		68
—	Celulosa y Energía Punta Pereira S.A.	U.S. Dollars	Plants and equipments		265		418		427		384		384		384		7,190		683		8,769
—	Eufores S.A.	U.S. Dollars	Lands		1,028		5,373		5,467		5,286		5,102		4,794		33,640		6,401		54,289
—	Eufores S.A.	U.S. Dollars	Plants and equipments		306		917		1,222		1,222		1,222		1,222		2,750		1,223		7,638
—	Eufores S.A.	U.S. Dollars	Buildings and constructions		119		210		158		117		78		—		—		329		353
96.510.970-6	Maderas Arauco S.A.	Chilean pesos	Motor vehicles		3,613		9,818		11,980		6,732		1,039		—		—		13,431		19,751
96.510.970-6	Maderas Arauco S.A.	UF	Motor vehicles		112		311		325		155		31		6		4		423		521
—	Arauco Colombia S.A.	U.S. Dollars	Buildings and constructions		9		9		—		—		—		—		—		18		—
—	Arauco Colombia S.A.	U.S. Dollars	Fixed facilities and accessories		121		364		121		—		—		—		—		485		121
—	Arauco Europe Cooperatief U.A.	Euros	Motor vehicles		8		12		11		10		—		—		—		20		21
—	Arauco Europe Cooperatief U.A.	Euros	Buildings and constructions		17		51		77		79		81		7		—		68		244
—	Araucomex S.A. de C.V.	Mexican pesos	Buildings and constructions		26		79		111		117		10		—		—		105		238
—	Araucomex S.A. de C.V.	U.S. Dollars	Buildings and constructions		382		1,233		1,751		1,604		1,491		387		—		1,615		5,233
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Plants and equipments		—		232		237		4		1		—		—		232		242
—	Arauco Industria de México, S.A. de C.V.	U.S. Dollars	Plants and equipments		—		103		376		131		—		—		—		103		507
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Lands		—		1		—		—		—		—		—		1		—
—	Arauco Industria de México, S.A. de C.V.	U.S. Dollars	Lands		—		82		305		—		—		—		—		82		305
—	Araucomex Servicios S.A. de C.V.	Mexican pesos	Motor vehicles		—		22		88		18		—		—		—		22		106
96.637.330-K	Servicios Logisticos Arauco S.A.	UF	Motor vehicles		22		60		65		29		—		—		—		82		94
79.990.550-7	Investigaciones Forestales Bioforest S.A.	UF	Motor vehicles		19		46		34		24		8		—		—		65		66

			Total		18,093		53,200		58,310		37,140		16,292		10,957		51,812		71,293		174,511

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.

112

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


December 31, 2019				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		3,179		3,014		5,979		5,979		205,979		—		—		6,193		217,937		3.14%	Libor 6M + 1.1%
93.458.000-1	Celulosa Arauco y Constitución S.A.	Euros	BNP Paribas / ECA		—		1,209		7,792		14,316		14,175		14,038		68,044		1,209		118,365		1.06%	1.06%
—	Zona Franca Punta Pereira	U.S. Dollars	Banco Interamericano de Desarrollo A		1,216		1,196		2,325		2,238		2,152		—		—		2,412		6,715		4.10%	Libor 6M + 2.05%
—	Zona Franca Punta Pereira	U.S. Dollars	Banco Interamericano de Desarrollo B		2,906		2,852		—		—		—		—		—		5,758		—		3.85%	Libor 6M + 1.80%
—	Celulosa y Energía Punta Pereira S.A.	U.S. Dollars	Banco Interamericano de Desarrollo A		4,919		4,838		9,403		9,052		8,702		—		—		9,757		27,157		4.10%	Libor 6M + 2.05%
—	Celulosa y Energía Punta Pereira S.A.	U.S. Dollars	Banco Interamericano de Desarrollo B		11,754		11,536		—		—		—		—		—		23,290		—		3.85%	Libor 6M + 1.80%
—	Celulosa y Energía Punta Pereira S.A.	U.S. Dollars	Finn Vera/ Finnish Export Credit		26,366		26,008		50,823		49,286		24,065		—		—		52,374		124,174		3.20%	3.20%
—	Eufores S.A.	U.S. Dollars	BBVA		—		14,222		—		—		—		—		—		14,222		—		3.22%	Libor 6M + 1.30%
—	Eufores S.A.	U.S. Dollars	Banco República Oriental del Uruguay		—		27,328		—		—		—		—		—		27,328		—		3.22%	Libor 6M + 1.30%
—	Eufores S.A.	U.S. Dollars	Citibank		—		4,062		—		—		—		—		—		4,062		—		3.14%	Libor 6M + 1.25%
—	Eufores S.A.	U.S. Dollars	ITAU		—		12,695		—		—		—		—		—		12,695		—		3.20%	Libor 6M + 1.30%
—	Eufores S.A.	U.S. Dollars	Heritage		1,361		—		—		—		—		—		—		1,361		—		3.21%	Libor 3M + 1.30%
—	Eufores S.A.	U.S. Dollars	Santander		20,328		—		—		—		—		—		—		20,328		—		3.29%	Libor 6M + 1.30%
—	Eufores S.A.	U.S. Dollars	Santander		—		5,080		—		—		—		—		—		5,080		—		3.21%	Libor 6M + 1.30%
—	Eufores S.A.	U.S. Dollars	Scotiabank		—		2,541		—		—		—		—		—		2,541		—		3.22%	Libor 6M + 1.30%
—	Arauco Forest Brasil S.A.	Brazilian Real	Banco Votorantim		—		27		291		278		—		—		—		27		569		5.00%	5.00%
—	Arauco Forest Brasil S.A.	Brazilian Real	BNDES Subcrédito A		7		63		185		130		—		—		—		70		315		8.48%	TJLP + 2.91%
—	Arauco Forest Brasil S.A.	Brazilian Real	BNDES Subcrédito B		5		39		112		78		—		—		—		44		190		9.48%	TJLP + 3.91%
—	Arauco Forest Brasil S.A.	U.S. Dollars	BNDES Subcrédito C		5		43		159		124		—		—		—		48		283		7.22%	Cesta + 2.91%
—	Arauco Forest Brasil S.A.	Brazilian Real	BNDES Subcrédito D		6		45		127		87		—		—		—		51		214		10.68%	TJLP + 5.11%
—	Arauco Florestal Arapoti S.A.	Brazilian Real	Banco Votorantim		—		30		328		313		—		—		—		30		641		5.00%	5.00%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	BNDES Subcrédito E		592		1,151		—		—		—		—		—		1,743		—		8.48%	TJLP+2.91%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	BNDES Subcrédito I		357		692		—		—		—		—		—		1,049		—		9.48%	TJLP+3.91%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	BNDES Subcrédito F		400		772		—		—		—		—		—		1,172		—		10.68%	TJLP+5.11%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	BNDES Subcrédito J		66		128		—		—		—		—		—		194		—		8.48%	TJLP+2.91%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	BNDES Subcrédito H		40		77		—		—		—		—		—		117		—		9.48%	TJLP+3.91%
—	Mahal Empreendimentos e Participações S.A.	Brazilian Real	BNDES Subcrédito L		44		86		—		—		—		—		—		130		—		10.68%	TJLP+5.11%
—	Mahal Empreendimentos e Participações S.A.	U.S. Dollars	BNDES Subcrédito G		483		1,095		—		—		—		—		—		1,578		—		7.22%	Cesta+2.91%
—	Mahal Empreendimentos e Participações S.A.	U.S. Dollars	BNDES Subcrédito K		54		122		—		—		—		—		—		176		—		7.22%	Cesta+2.91%
—	Arauco North America, Inc.	U.S. Dollars	Banco del Estado de Chile - NY Branch		—		10,895		40,563		39,480		38,396		213,803		—		10,895		332,242		3.56%	Libor 6M + 1.65%

			Total		74,088		131,846		118,087		121,361		293,469		227,841		68,044		205,934		828,802


December 31, 2019				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		—		33,928		32,916		31,904		30,892		29,880		134,219		33,928		259,811		4.25%		4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-J		3,047		192,098		—		—		—		—		—		195,145		—		3.25%		3.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-P		—		7,488		7,488		24,504		23,823		23,143		160,636		7,488		239,594		4.00%		4.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-Q		—		19,609		9,593		—		—		—		—		19,609		9,593		3.00%		3.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-R		—		6,746		6,746		6,746		6,746		6,746		259,880		6,746		286,864		3.60%		3.60%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-S		—		4,510		4,510		4,510		4,510		4,510		198,071		4,510		216,111		2.40%		2.40%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-W		—		2,370		2,370		2,370		2,370		2,370		122,909		2,370		132,389		2.10%		2.10%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.F.	Barau-X		—		5,577		5,577		5,577		5,577		5,577		313,926		5,577		336,234		2.70%		2.70%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2019		—		—		—		—		—		—		—		—		—		7.25%		7.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2021		—		—		—		—		—		—		—		—		—		5.00%		5.00%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2022		2,996		2,996		5,993		129,164		—		—		—		5,992		135,157		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		22,500		522,500		—		22,500		590,000		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		558,125		19,375		635,625		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		906,000		22,000		994,000		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		595,625		21,250		680,625		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		1,173,750		27,500		1,283,750		5.50%		5.50%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2030		5,250		10,500		21,000		21,000		21,000		21,000		615,500		15,750		699,500		4.25%		4.25%
93.458.000-1	Celulosa Arauco y Constitución S.A.	U.S. Dollars	Yankee 2050		6,438		12,875		25,750		25,750		25,750		25,750		1,156,625		19,313		1,259,625		5.50%		5.50%
—	Prime-Line, Inc.	U.S. Dollars	Bond ADFA 2014		128		384		512		512		512		512		2,005		512		4,053		4.84%		4.84%
—	Prime-Line, Inc.	U.S. Dollars	Bond ADFA 2013		38		114		152		149		112		—		—		152		413		4.00%		4.00%

			Total		29,147		400,570		235,232		364,811		233,917		732,113		6,197,271		429,717		7,763,344

113

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


December 31, 2019				Maturity														Total
Tax ID	Name	Currency	Underlying asset class	Up to 3 months ThU.S.$		3 to 12 months ThU.S.$		1 to 2 years ThU.S.$		2 to 3 years ThU.S.$		3 to 4 years ThU.S.$		4 to 5 years ThU.S.$		More than 5 years ThU.S.$		Current ThU.S.$		Non Current ThU.S.$
85.805.200-9	Forestal Arauco S.A.	U.F.	Motor vehicles		465		1,462		1,932		1,459		977		528		649		1,927		5,545
85.805.200-9	Forestal Arauco S.A.	U.F.	Other property, plant and equipment		4,644		9,357		7,576		3,823		38		—		—		14,001		11,437
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Lands		—		16		16		16		16		16		190		16		254
85.805.200-9	Forestal Arauco S.A.	Chilean pesos	Other property, plant and equipment		860		2,431		885		259		74		—		—		3,291		1,218
—	Arauco Argentina	U.S. Dollars	Buildings and constructions		122		361		450		35		—		—		—		483		485
—	Arauco Argentina	U.S. Dollars	IT equipment		13		39		53		35		—		—		—		52		88
—	Arauco Argentina	U.S. Dollars	Other property, plant and equipment		347		1,040		1,386		1,386		1,002		668		—		1,387		4,442
—	Arauco Argentina	U.S. Dollars	Motor vehicles		382		1,145		1,162		809		684		297		—		1,527		2,952
—	Arauco Industria de Paineis S.A.	Brazilian Real	Other property, plant and equipment		192		577		722		288		—		—		—		769		1,010
—	Arauco Industria de Paineis S.A.	Brazilian Real	Motor vehicles		4		13		17		10		—		—		—		17		27
—	Arauco Forest Brasil S.A.	Brazilian Real	IT equipment		6		17		18		11		—		—		—		23		29
—	Arauco Forest Brasil S.A.	Brazilian Real	Lands		871		2,612		3,193		3,483		3,483		9,579		—		3,483		19,738
—	Novo Oeste Gestao de Ativos Florestais S.A.	Brazilian Real	Lands		595		1,389		—		—		—		—		—		1,984		—
—	Arauco Florestal Arapoti S.A.	Brazilian Real	IT equipment		6		17		18		—		—		—		—		23		18
—	Arauco do Brasil S.A.	Brazilian Real	Buildings and constructions		272		655		454		393		376		94		—		927		1,317
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.F.	Buildings and constructions		407		1,217		1,582		1,477		1,082		—		—		1,624		4,141
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.F.	Motor vehicles		201		593		670		558		288		131		106		794		1,753
93.458.000-1	Celulosa Arauco y Constitucion S.A.	Chilean pesos	Buildings and constructions		19		58		70		70		17		—		—		77		157
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.S. Dollars	Other property, plant and equipment		1,612		—		1,612		—		—		—		—		1,612		1,612
93.458.000-1	Celulosa Arauco y Constitucion S.A.	Chilean pesos	Motor vehicles		4,800		14,399		19,199		19,199		6,651		—		—		19,199		45,049
93.458.000-1	Celulosa Arauco y Constitucion S.A.	U.S. Dollars	Motor vehicles		45		136		181		30		—		—		—		181		211
—	Arauco North America, Inc.	U.S. Dollars	Lands		1		4		193		83		—		—		—		5		276
—	Arauco North America, Inc.	U.S. Dollars	Buildings and constructions		15		55		2,741		1,303		1,335		1,367		4,415		70		11,161
—	Arauco North America, Inc.	U.S. Dollars	Motor vehicles		—		2		80		52		40		—		—		2		172
—	Arauco Canada Limited	Canadian Dollars	Other property, plant and equipment		2		3		142		—		—		—		—		5		142
—	Arauco Canada Limited	Canadian Dollars	Motor vehicles		—		2		83		72		—		—		—		2		155
—	Celulosa y Energía Punta Pereira S.A.	U.S. Dollars	Buildings and constructions		1,477		4,432		5,909		5,909		5,909		5,909		76,821		5,909		100,457
—	Celulosa y Energía Punta Pereira S.A.	U.S. Dollars	Other property, plant and equipment		262		786		373		373		373		373		7,275		1,048		8,767
—	Eufores S.A.	U.S. Dollars	Lands		546		1,637		5,383		5,240		5,057		4,752		34,676		2,183		55,108
—	Eufores S.A.	U.S. Dollars	Other property, plant and equipment		306		917		1,222		1,222		1,222		1,222		3,667		1,223		8,555
—	Eufores S.A.	U.S. Dollars	Buildings and constructions		119		358		280		117		117		49		—		477		563
96.510.970-6	Maderas Arauco S.A.	Chilean pesos	Motor vehicles		3,804		11,411		13,487		12,093		5,545		—		—		15,215		31,125
96.510.970-6	Maderas Arauco S.A.	U.F.	Motor vehicles		126		359		413		319		97		26		7		485		862
96.510.970-6	Maderas Arauco S.A.	U.F.	Lands		—		5		5		5		5		5		55		5		75
—	Arauco Colombia S.A.	U.S. Dollars	Buildings and constructions		10		31		10		—		—		—		—		41		10
—	Arauco Colombia S.A.	U.S. Dollars	Fixed facilities and accessories		137		411		548		—		—		—		—		548		548
—	Arauco Europe Cooperatief U.A.	Euros	Motor vehicles		7		17		12		11		7		—		—		24		30
—	Araucomex S.A. de C.V.	Mexican pesos	Buildings and constructions		549		614		1,933		1,932		1,834		1,784		904		1,163		8,387
—	Araucomex S.A. de C.V.	U.S. Dollars	Buildings and constructions		125		125		80		—		—		—		—		250		80
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Motor vehicles		—		772		578		—		—		—		—		772		578
—	Arauco Industria de México, S.A. de C.V.	U.S. Dollars	Motor vehicles		—		139		404		404		—		—		—		139		808
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Buildings and constructions		—		—		8		8		8		3		—		—		27
—	Arauco Industria de México, S.A. de C.V.	Mexican pesos	Lands		—		—		5		—		—		—		—		—		5
—	Arauco Industria de México, S.A. de C.V.	U.S. Dollars	Lands		—		—		318		291		—		—		—		—		609
—	Araucomex Servicios S.A. de C.V.	U.S. Dollars	Buildings and constructions		—		—		277		277		277		93		—		—		924
—	Araucomex Servicios S.A. de C.V.	U.S. Dollars	Motor vehicles		—		25		110		58		16		—		—		25		184
96.637.330-K	Servicios Logisticos Arauco S.A.	U.F.	Motor vehicles		22		67		79		65		15		—		—		89		159
79.990.550-7	Investigaciones Forestales Bioforest S.A.	U.F.	Lands		—		22		22		22		22		22		109		22		197
79.990.550-7	Investigaciones Forestales Bioforest S.A.	U.F.	Motor vehicles		30		75		56		35		20		5		—		105		116

			Total		23,401		59,803		75,947		63,232		36,587		26,923		128,874		83,204		331,563

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

114

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Guarantees

As of the date of these interim consolidated financial statements, Arauco has financial assets of approximately MU.S.$33 that have been pledged to third parties (beneficiaries), as direct guarantee. If Arauco does not fulfill its obligations, the guarantors could execute the guarantees.

As of September 30, 2020, the total assets pledged as an indirect guarantee were MU.S.$ 451. 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

2,557

Regional Road Administration (Bío - Bío region)

Celulosa Arauco y Constitución S.A.

Guarantee letter

—

Chilean Pesos

2,240

Ministry of Public Works (MOP)

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

21,180

BNDES

Arauco Forest Brasil S.A.

Endorsement of
Arauco do
Brasil

—

Brazilian Real

378

Bank Votorantim S.A.

Arauco Florestal Arapoti S.A.

Endorsement of
Arauco do
Brasil

—

Brazilian Real

426

Bank Votorantim S.A.

Total

32,856

INDIRECT

Subsidiary

Guarantee

Assets
Pledged

Currency

ThU.S.$

Guarantor

Celulosa Arauco y Constitución S.A.

Suretyship not
supportive and
cumulative

—

U.S. Dollar

150,000

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

—

U.S. Dollar

463

Arauco Forest Brasil y Mahal (Brazil)

Celulosa Arauco y Constitución S.A.

Guarantee letter

—

Brazilian Real

544

Arauco Forest Brasil

Total

451,007

115

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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 +/- 4.26% (equivalent to ThU.S.$ -/+ 2,114), and +/- 0.03% of equity (equivalent to ThU.S.$ -/+ 2,114).

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 +/- 2.69% (equivalent to ThU.S.$-/+$1,336) and a change on the equity of +/- 1.09% (equivalent to ThU.S. -/+$78,469).

116

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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 September 30, 2020, 10.2% 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 +/- 0.24% (equivalent to ThU.S.$-/+ 118) and +/- 0.002% (equivalent to ThU.S.$-/+ 118) on equity.


Thousands of dollars	September 2020 ThU.S.$		Total
Fixed rate		5,443,937		89.8	%
Bonds issued		4,607,148
Bank borrowings (*)		622,724
Lease liabilities		214,065
Variable rate		620,433		10.2	%
Bonds issued		—
Loans with Banks		620,433
Total		6,064,370		100.0	%


Thousands of dollars	December 2019 ThU.S.$		Total
Fixed rate		5,382,970		89.0	%
Bonds issued		4.831,743
Bank borrowings (*)		280,202
Lease liabilities		271,025
Variable rate		666,820		11.0	%
Bonds issued		—
Loans with Banks		666.820
Total		6.049.790		100.0	%

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

117

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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 September 30, 2020, revenue due to pulp sales accounted for 41.9% 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 +/- 200.1% (equivalent to ThU.S.$-/+ 99,256) on the income for the year after tax and +/- 1.37% (equivalent to ThU.S.$ -/+ 99,256) on equity.

118

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 24. REPORTABLE SEGMENTS

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

•

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

•

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

•

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

Pulp

The Pulp reportable segment uses wood exclusively from pine and eucalyptus plantations for the production of different classes of wood cellulose or pulp. Bleached pulp is mainly used as raw material for producing printing and writing paper, as well as toilet paper and high-quality wrapping paper. Unbleached pulp is used to produce packing paper, filters, fiber cement products, dielectric paper and others. 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 38 countries, mainly in Asia and Europe.

119

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Wood products

The Panels area produces a wide range of panel products and several kinds of moldings aimed at the furniture, decoration and construction industries. It consists of 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 8.7 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 lumber.

Including Sonae Arauco at 50%, Arauco totalize a capacity of 4.4 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.

Forestry

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

Arauco holds forestry assets distributed throughout Chile, Argentina, Brazil and Uruguay, reaching 1.7 million hectares as of September 30, 2020, of which 1 million hectares are used for plantations, 511 thousand hectares for native forests, 107 thousand hectares for other uses and 118 thousand hectares are to be planted.

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

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

Below, please find summarized information concerning the assets, liabilities and profits and losses at the end of each period, by segments. The profit (loss) of each segment informed takes into consideration that taxes and income and financial costs have not been allocated to the various segments, and are shown as part of the Corporate’s segment:

120

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


Nine-month period ended September 30, 2020	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from goods sale		1,366,396		92,289		1,865,989			—			—			3,324,674						3,324,674
Revenues from rendering of services		49,750		5,445		2			82			—			55,279						55,279

Revenues from external customers		1,416,146		97,734		1,865,991			82			—			3,379,953						3,379,953
Revenues from transactions with other operating segments		31,993		777,462		16,551			24,433			—			850,439			(850,439	)		—

Finance income		—		—		—			—			23,683			23,683						23,683
Finance costs		—		—		—			—			(202,099	)		(202,099	)					(202,099	)
Net finance costs		—		—		—			—			(178,416	)		(178,416	)					(178,416	)

Depreciation and amortizations		199,974		26,119		143,986			1,161			7,397			378,637						378,637
Other income		6,199		137,269		29,783			89			2,283			175,623						175,623
Other expenses		57,366		29,575		44,006			3			10,476			141,426						141,426


Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—		963		—			—			3,569			4,532						4,532
Joint ventures		—		—		(4,683	)		—			969			(3,714	)					(3,714	)

Income tax expense		—		—		—			—			7,726			7,726						7,726


Profit (loss) of each reportable segment		42,407		67,086		110,326			(1,624	)		(267,789	)		(49,594	)					(49,594	)

Geographical information on revenues
Revenue – Chilean entities		1,019,671		31,483		780,556			82			—			1,831,792						1,831,792
Revenue – Foreign entities		396,475		66,251		1,085,435			—			—			1,548,161						1,548,161
Total Ordinary Income		1,416,146		97,734		1,865,991			82			—			3,379,953						3,379,953


Nine-month period ended September 30, 2020	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Amounts of additions to non-current assets

Acquisition of property, plant and equipment and biological assets		970,208		213,265		78,428			386			6,032			1,268,319			—			1,268,319
Acquisition and contribution of investments in associates and joint venture		—		—		—			—			15,252			15,252			—			15,252


Nine-month period ended September 30, 2020	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$		Others ThU.S.$		Corporate ThU.S.$		Subtotal ThU.S.$		Elimination ThU.S.$			Total ThU.S.$
Segment assets		6,281,328		4,990,815		2,824,783		20,146		1,527,824		15,644,896		(50,090	)		15,594,806
Segments assets (excluding deferred tax assets)		6,281,328		4,990,815		2,824,783		20,146		1,520,864		15,637,936		(50,090	)		15,587,846
Deferred tax assets		—		—		—		—		6,960		6,960					6,960
Investments accounted through equity method
Associates		—		27,701		—		—		58,776		86,477					86,477
Joint Ventures		—		—		168,645		—		43,245		211,890					211,890
Segment liabilities		327,932		239,432		418,078		7,408		7,373,604		8,366,454					8,366,454
Segment liabilities (excluding deferred tax liabilities)		327,932		239,432		418,078		7,408		6,102,655		7,095,505					7,095,505
Deferred tax liabilities		—		—		—		—		1,270,949		1,270,949					1,270,949

Geographical information on non-current assets
Chile		3,916,362		3,351,022		605,164		19,460		271,307		8,163,315		(3,894	)		8,159,421
Foreign countries		1,584,970		1,151,498		1,245,401		—		64,912		4,046,781		—			4,046,781
Non-current assets, Total		5,501,332		4,502,520		1,850,565		19,460		336,219		12,210,096		(3,894	)		12,206,202

121

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


Nine-month period ended September 30, 2019	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from goods sale		1,814,385		97,627		2,145,967		—			—			4,057,979						4,057,979
Revenues from rendering of services		63,006		5,555		73		298			—			68,932						68,932
Revenues from external customers		1,877,391		103,182		2,146,040		298			—			4,126,911						4,126,911
Revenues from transactions with other operating segments		30,407		812,124		20,411		27,994			—			890,936			(890,936	)		—

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

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

Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—		37		—		—			2,463			2,500						2,500
Joint ventures		—		—		119		—			1,262			1,381						1,381

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


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

Geographical information on revenues
Revenue – Chilean entities		1,376,393		42,684		558,064		298			—			1,977,439						1,977,439
Revenue – Foreign entities		500,998		60,498		1,587,976		—			—			2,149,472						2,149,472
Total Ordinary Income		1,877,391		103,182		2,146,040		298			—			4,126,911						4,126,911


Nine-month period ended September 30, 2019	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$		Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Amounts of additions to non-current assets

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


Period ended December 31, 2019	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$		Others ThU.S.$		Corporate ThU.S.$		Subtotal ThU.S.$		Elimination ThU.S.$			Total ThU.S.$
Segment assets		5,566,128		5,222,381		3,101,716		21,180		1,985,595		15,897,000		(36,970	)		15,860,030
Segments assets (excluding deferred tax assets)		5,566,128		5,222,381		3,101,716		21,180		1,979,528		15,890,933		(36,970	)		15,853,963
Deferred tax assets		—		—		—		—		6,067		6,067					6,067
Investments accounted through equity method
Associates		—		38,370		—		—		55,209		93,579					93,579
Joint Ventures		—		—		172,321		—		27,218		199,539					199,539
Segment liabilities		140,243		194,282		425,116		8,466		7,722,508		8,490,615					8,490,615
Segment liabilities (excluding deferred tax liabilities)		140,243		194,282		425,116		8,466		6,362,321		7,130,428					7,130,428
Deferred tax liabilities		—		—		—		—		1,360,187		1,360,187					1,360,187

Geographical information on non-current assets
Chile		3,260,990		3,300,806		640,275		20,530		265,930		7,488,531		(3,440	)		7,485,091
Foreign countries		1,596,632		1,350,467		1,408,923		—		87,536		4,443,558		—			4,443,558
Non-current assets, Total		4,857,623		4,651,273		2,068,982		20,530		353,466		11,932,089		(3,440	)		11,928,649

122

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


Quarter July – September 2020	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from goods sale		453,095		33,761		699,267			—						1,186,123						1,186,123
Revenues from rendering of services		14,419		2,370		1			—						16,790						16,790

Revenues from external customers		467,514		36,131		699,268			—						1,202,913						1,202,913
Revenues from transactions with other operating segments		11,331		256,033		4,908			9,032						281,304			(281,304	)		—

Finance income		—		—		—			—			4,164			4,164						4,164
Finance costs		—		—		—			—			(64,395	)		(64,395	)					(64,395	)
Net finance costs		—		—		—			—			(60,231	)		(60,231	)					(60,231	)

Depreciation and amortizations		66,838		8,136		49,375			387			3,059			127,795						127,795
Other income		2,367		44,885		3,510			89			1,928			52,779						52,779
Other expenses		8,331		19,818		1,878			1			3,104			33,132						33,132


Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—		366		—			—			536			902						902
Joint ventures		—		—		(108	)		—			512			404						404

Income tax expense		—		—		—			—			(21,385	)		(21,385	)					(21,385	)


Profit (loss) of each reportable segment		33,871		1,616		93,846			(1,160	)		(92,124	)		36,049						36,049

Geographical information on revenues
Revenue – Chilean entities		341,495		8,387		301,916			—						651,798						651,798
Revenue – Foreign entities		126,019		27,744		397,352			—						551,115						551,115
Total Ordinary Income		467,514		36,131		699,268			—						1,202,913						1,202,913


Quarter July – September 2020	Pulp ThU.S.$		Forestry ThU.S.$		Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Amounts of additions to non-current assets

Acquisition of property, plant and equipment and biological assets		368,355		66,450		16,444			61			2,543			453,853			—			453,853
Acquisition and contribution of investments in associates and joint venture		—		—		—			—			40			40			—			40


Quarter July – September 2019	Pulp ThU.S.$		Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Revenues from goods sale		600,849		36,191			731,165			—						1,368,205						1,368,205
Revenues from rendering of services		17,424		1,516			(71	)		81						18,950						18,950

Revenues from external customers		618,273		37,707			731,094			81						1,387,155						1,387,155
Revenues from transactions with other operating segments		10,033		266,823			4,848			9,398						291,102			(291,102	)		—

Finance income		—		—			—			—			7,483			7,483						7,483
Finance costs		—		—			—			—			(65,778	)		(65,778	)					(65,778	)
Net finance costs		—		—			—			—			(58,295	)		(58,295	)					(58,295	)

Depreciation and amortizations		70,437		7,377			53,069			326			2,369			133,578						133,578
Other income		1,418		37,765			2,042			(62	)		437			41,600						41,600
Other expenses		20,892		5,647			8,417			(48	)		2,270			37,178						37,178


Share of profit (loss) of associates and joint ventures accounted for using equity method
Associates		—		12			—			—			943			955						955
Joint ventures		—					(7,213	)		—			482			(6,731	)					(6,731	)

Income tax expense		—		—			—			—			10,329			10,329						10,329


Profit (loss) of each reportable segment		59,599		(6,872	)		7,915			(603	)		(89,634	)		(29,595	)					(29,595	)

Geographical information on revenues
Revenue – Chilean entities		458,061		9,699			173,069			81						640,910						640,910
Revenue – Foreign entities		160,212		28,008			558,025			—						746,245						746,245
Total Ordinary Income		618,273		37,707			731,094			81						1,387,155						1,387,155


Quarter July – September 2019	Pulp ThU.S.$		Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$			Total ThU.S.$
Amounts of additions to non-current assets

Acquisition of property, plant and equipment and biological assets		164,948		56,623			38,377			(200	)		268			260,016			—			260,016
Acquisition and contribution of investments in associates and joint venture		—		—			—			—			20,959			20,959			—			20,959

123

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Unaudited Interim Consolidated Financial Statements

September 30, 2020

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:


Nine-month period ended September 30, 2020	Pulp ThU.S.$			Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		416,446			239,098			292,639			1,012			(147,375	)		801,820			—		801,820
Cash flows (used in) investing activities		(967,541	)		(204,041	)		(86,144	)		(386	)		(8,501	)		(1,266,613	)		—		(1,266,613	)
Cash flows from (used in) Financing Activities		163,029			(59,632	)		(2,686	)		(57	)		(2,975	)		97,679			—		97,679
Net increase (decrease) in Cash and Cash Equivalents		(388,066	)		(24,575	)		203,809			569			(158,851	)		(367,114	)		—		(367,114	)


Nine-month period ended September 30, 2019	Pulp ThU.S.$			Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		604,013			145,034			195,906			3,381			(442,454	)		505,880			—		505,880
Cash flows (used in) investing activities		(498,140	)		(198,692	)		(141,722	)		(619	)		(52,022	)		(891,195	)		—		(891,195	)
Cash flows from (used in) Financing Activities		527,821			(29,172	)		(3,504	)		(48	)		(29,891	)		465,206			—		465,206
Net increase (decrease) in Cash and Cash Equivalents		633,694			(82,830	)		50,680			2,714			(524,367	)		79,891			—		79,891


Quarter July—September 2020	Pulp ThU.S.$			Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		299,265			97,507			195,807			1,029			(41,026	)		552,582			—		552,582
Cash flows (used in) investing activities		(368,393	)		(60,946	)		(14,853	)		(61	)		(5,625	)		(449,878	)		—		(449,878	)
Cash flows from (used in) Financing Activities		(148,018	)		(8,976	)		(896	)		(20	)		(11,119	)		(169,029	)		—		(169,029	)
Net increase (decrease) in Cash and Cash Equivalents		(217,146	)		27,585			180,058			948			(57,770	)		(66,325	)		—		(66,325	)


Quarter July—September 2019	Pulp ThU.S.$			Forestry ThU.S.$			Wood products ThU.S.$			Others ThU.S.$			Corporate ThU.S.$			Subtotal ThU.S.$			Elimination ThU.S.$		Total ThU.S.$
Segment Cash Flows
Cash Flows from (used in) Operating Activities		277,863			85,013			107,948			2,390			(99,369	)		373,845			—		373,845
Cash flows (used in) investing activities		(164,849	)		(54,269	)		(49,892	)		200			(3,156	)		(271,966	)		—		(271,966	)
Cash flows from (used in) Financing Activities		(164,115	)		(7,497	)		(7,831	)		(20	)		(10,934	)		(190,397	)		—		(190,397	)
Net increase (decrease) in Cash and Cash Equivalents		(51,101	)		23,247			50,225			2,570			(113,459	)		(88,518	)		—		(88,518	)

124

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

Information required by geographic area:


	Geographical area
2020	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		1,801,324		279,935		296,007		630,633		225,405		91,370		3,324,674
Revenues from rendering of services		30,468		—		—		—		24,809		2		55,279

Revenues as of September 30, 2020		1,831,792		279,935		296,007		630,633		250,214		91,372		3,379,953

Revenues from goods sale		643,178		103,763		119,996		211,233		73,682		34,271		1,186,123
Revenues from rendering of services		8,620		—		—		—		8,169		1		16,790

Revenues ad Q3 2020		651,798		103,763		119,996		211,233		81,851		34,272		1,202,913

Non-current Assets at 09-30-2020 other than deferred tax		8,154,492		752,082		676,218		779,056		1,713,417		123,977		12,199,242


	Geographical area
2019	Local country		Foreign country
	Chile		Argentina		Brazil		USA/ Canada		Uruguay		Mexico			Total
Disclosure of geographical areas	ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$		ThU.S.$			ThU.S.$
Revenues from goods sale		1,931,882		297,025		387,753		1,036,429		313,230		91,660			4,057,979
Revenues from rendering of services		45,557		—		—		—		23,302		73			68,932

Revenues as of September 30, 2019		1,977,439		297,025		387,753		1,036,429		336,532		91,733			4,126,911

Revenues from goods sale		629,897		98,813		141,794		363,240		99,961		34,500			1,368,205
Revenues from rendering of services		11,013		—		—		—		7,939		(2	)		18,950

Revenues ad Q3-2019		640,910		98,813		141,794		363,240		107,900		34,498			1,387,155

Non-current Assets at 09-30-2019 other than deferred tax		7,480,456		781,693		947,265		832,570		1,724,698		155,900			11,922,582

125

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Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 25. OTHER NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES


	09-30-2020		12-31-2019
Current non-financial assets	ThU.S.$		ThU.S.$
Roads to amortize current		44,519		48,380
Prepayment to amortize (insurance and others)		27,666		17,965
Recoverable taxes (GST and others)		75,535		102,875
Other current non-financial assets		5,494		4,890
Total		153,214		174,110


	09-30-2020		12-31-2019
Non-current non-financial assets	ThU.S.$		ThU.S.$
Roads to amortize, non-current		102,155		96,530
Guarantee values		3,271		4,442
Recoverable taxes		13,127		4,568
Other non-current non-financial assets		3,753		6,874
Total		122,306		112,414


	09-30-2020		12-31-2019
Current non-financial liabilities	ThU.S.$		ThU.S.$

Provision of minimum dividend (1)		1,349		2,451
ICMS, PIS-COFINS and other tax payables—Brazil		20,590		18,195
Other tax payable		16,299		18,206
Other Current non-financial liabilities		1,108		1,213
Total		39,346		40,065

(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.


	09-30-2020		12-31-2019
Non-current non-financial liabilities	ThU.S.$		ThU.S.$
ICMS tax payable—Brazil		75,457		111,012
Other non-current non-financial liabilities		798		424
Total		76,255		111,436

126

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 26. DISTRIBUTABLE NET PROFIT AND EARNINGS PER SHARE

Distributable net profit

As a general policy, the Board of Directors of Arauco agreed that the net profit to be distributed as dividend is determined based on realized net gains/(losses) of any relevant variations in the value of unrealized assets and liabilities, which are excluded from the calculation of net profit during the period such changes are made.

As a result of the foregoing, for purposes of determining the distributable net profit of the Company, which is the same considered for calculating the minimum dividend required and additional dividend, the following unrealized gains/losses are excluded from the net profit for the year:

Unrealized gains/losses relating to the fair value recorded for forestry assets under IAS 41, adding them back to distributable net profit when they are realized through sale or disposed of by other means.

Those generated through the acquisition of entities. These results will be added back to net profit when they are realized through sale.

The deferred taxes associated with the amounts described in 1) and 2) above are also excluded.

The Board of Directors agreed to modify the Company’s dividend policy established by the Board of Directors in Session No. 587 dated as of April 24, 2018, in the sense that, notwithstanding the powers of the Shareholders’ Meeting to determine the portion of the profits of the year to be distributed as dividend, it will be proposed, with respect to the results of the years 2019 and 2020, not to distribute dividends, due to the financial requirements that the Company has in the coming months, especially those related to the MAPA Project.

Therefore, as of September 30, 2020 there is no minimum dividend provision registered. In addition, the distributable net profit is a loss effect.

The following table details the adjustments made for the determination of distributable net profit as of September 30, 2020 and 2019:


	Distributable Net Profit ThU.S.$
Net profit attributable to owners of parent at 09-30-2020		(49,320	)
Adjustments:
Biological assets
Unrealized gains/losses		(130,740	)
Realized gains/losses		159,642
Deferred income taxes		(6,616	)

Total adjustments		22,286

Distributable Net Profit at 09-30-2020		(27,034	)

127

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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


	Distributable Net Profit ThU.S.$
Net profit attributable to owners of parent at 09-30-2019		153,682
Adjustments:
Biological assets
Unrealized gains/losses		(109,587	)
Realized gains/losses		151,290
Deferred income taxes		(9,886	)

Total adjustments		31,817

Distributable Net Profit at 09-30-2019		185,499

Basic and diluted earnings per share

Basic and diluted earnings per share are calculated by dividing the profit or loss attributable to ordinary equity holders of parent by the weighted average number of ordinary shares outstanding. Arauco does not have any shares with potential dilutive effect.


	January - September					July - September
	2020 ThU.S.$			2019 ThU.S.$		2020 ThU.S.$		2019 ThU.S.$
Profit or loss attributable to ordinary equity holder of parent		(49,320	)		153,682		36,157		(29,477	)
Weighted average of number of shares		113,278,304			113,159,655		113,513,022		113,159,655
Basic and diluted earnings per share (in U.S.$ per share)		(0.4354	)		1.3581		0.3185		0.2605

128

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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, massive sanitation and fumigation programs have been developed in 177 communities that belong to 49 municipalities. Our subsidiary Bioforest has collaborated in the diagnosis of COVID-19, medical equipment has been donated and spaces have been enabled to be used as field hospitals or diagnostic areas, if required by the health authorities.

129

CELULOSA ARAUCO Y CONSTITUCION S.A. AND SUBSIDIARIES

Unaudited Interim Consolidated Financial Statements

September 30, 2020

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

NOTE 28. SUBSEQUENT EVENTS

The authorization for the issuance and publication of these interim consolidated financial statements for the period ended September 30, 2020 was approved by the Board of Directors of Arauco at the Extraordinary Meeting No. 640 held on November 11, 2020.

Subsequent to September 30, 2020 and until the date of issuance of these interim consolidated financial statements, there have been no events, other than those discussed above, that could materially affect the presentation of these financial statements.

130

LOGO

Press Release 3Q 2020

LOGO

3Q 2020 RESLUTS 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$1,202.9 million ARAUCOs ’ revenues reached US$1,202.9 million during the third quarter of 2020, a 14.6% increase compared to the US$1,049.9 million obtained during the second quarter of 2020 and a 13.3% decrease compared to the third quarter of 2019. NET INCOME US$36.0 million ARAUCO’s net income was US$36.0 million, an increase equivalent to US$92.0 million, compared to the -US$55.9 million obtained during the second quarter of 2020, and a US$65.6 million increase compared to the third quarter of 2019. ADJUSTED EBITDA US$290.7 million Adjusted EBITDA reached US$290.7 million, a 41.3% or US$84.9 million increase compared to the US$205.8 million obtained during the second quarter of 2020, and a 22.1% or US$52.5 million increase compared to the same period of 2019. NET DEBT TO EBITDA 5.4x Net Financial Debt decreased by US$148.3 million or 2.9% compared to the last quarter. Net Financial Debt / LTM Adjusted EBITDA ratio reached 5.4x in this quarter, a decrease compared to 5.9x in the second quarter of 2020 and an increase compared to the 3.3x reached during the third quarter of 2019. CAPEX US$453.9 million CAPEX reached US$453.9 million during this quarter, 18.1% or US$69.7 million higher than the US$384.2 million from the second quarter of 2020.

LOGO

3Q 2020 RESULTS ARAUCO´s net income for the third quarter 2020 was US$36.0 million, an increase of US$92.0 million compared to the second quarter of 2020. This is mainly explained by a significant increase in revenues in our wood products segment. Our Adjusted EBITDA was 41.3% higher than that of the second quarter, reaching US$290.7 million. The Adjusted EBITDA margin increased from 19.6% to 24.2% on a quarterly basis. Net Financial Debt decreased by US$148.3 million or 2.9% compared to the last quarter. Our Net Debt/LTM EBITDA ended up in 5.4x, compared to the 5.9x reached during the second quarter of 2020. In US$ Million Q3 2020 Q2 2020 Q3 2019 QoQ YoY YTD 2020 YTD 2019 YoY Acum Revenue 1,202.9 1,049.9 1,387.2 14.6% -13.3% 3,380.0 4,126.9 -18.1% Net income 36.0 -55.9 -29.6 -164.4% -221.8% -49.6 153.9 -132.2% Adjusted EBITDA 290.7 205.8 238.2 41.3% 22.1% 691.0 936.3 -26.2% adjusted EBITDA Margin 24.2% 19.6% 17.2% 23.3% 40.8% 20.4% 22.7% -9.9% LTM Adj. EBITDA 902.1 849.6 1,276.3 6.2% -29.3% 902.1 1,276.3 -29.3% CAPEX 453.9 384.2 281.0 18.1% 61.5% 1,283.6 915.7 40.2% Net Financial Debt 4,901.7 5,050.0 4,253.2 -2.9% 15.2% 4,901.7 4,253.2 15.2% Net Financial Debt / LTM Adj. EBITDA 5.4x 5.9x 3.3x -8.6% 63.1% 5.4x 3.3x 63.1% Adjusted EBITDA and EBITDA Margin (in US$ Million) 24.6% 25.6% 25.4% 17.2% 17.3% 19.6% 24.2% 339.9 354.9 238.2 211.0 194.6 205.8 290.7 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 FY 2018 FY 2019 YTD 2020 1,850.5 1,147.4 691.0 2

LOGO

3Q 2020 RESULTS Income Statement Net income showed an increase of US$92.0 million during the third quarter of 2020 reaching US$36.0 million. This is explained by a significant increase in the revenues of our wood products segment, mostly due to increases in sales volume. There were also positive effects arising from exchange rate differences during the quarter. In US$ Million Q3 2020 Q2 2020 QoQ Revenues 1,202.9 1,049.9 14.6% Cost of sales (867.9) (800.1) 8.5% Distribution costs (129.6) (122.8) 5.5% Administrative expenses (122.7) (130.2) -5.8% Other income 52.8 67.6 -21.9% Other expenses (33.1) (57.4) -42.2% Financial income 4.2 12.3 -66.2% Financial costs (64.4) (65.9) -2.3% Share of profit (loss) of associates and joint venturesaccounted for using equity method 1.3 (2.0) -164.0% Exchange rate differences 13.9 (26.7) -152.1% Income before income tax 57.4 (75.3) -176.3% Income tax (21.4) 19.4 -210.5% Net income 36.0 (55.9) -164.4% 3

LOGO

3Q 2020 RESULTS Revenues ARAUCO’s revenues reached US$1,202.9 million in the third quarter, an increase of 14.6% when compared to the previous quarter. This variation is mostly explained by higher revenues in our wood products division, due to a significant sales volume increase of 33.2% while average prices remained stable. Revenues in our pulp division decreased by 6.1% mostly due to a 5.1% decrease in sales volume. The following table shows a breakdown of our revenues by business segment: In US$ Million Q3 2020 Q2 2020 QoQ Pulp(*) 467.5 497.7 -6.1% Wood Products(*) 699.3 520.2 34.4% Forestry 36.1 32.0 13.0% Others 0.0 0.0 — Total 1,202.9 1,049.9 14.6% 3Q 2020 Revenue’s breakdown Wood Products (*) 58.1% Pulp (*) 38.9% Forestry 3.0% Others 0.0% (*) Pulp and Wood products division sales include energy. 4

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3Q 2020 RESULTS Cost of Sales Increased by 8.5% or US$67.8 million compared to the second quarter of 2020. This is mostly explained by higher timber, forestry labor and other raw materials costs, all of these mainly associated to higher sales volume in our wood products division. In US$ Million Q3 2020 Q2 2020 QoQ Timber 216.0 199.9 8.1% Forestry labor costs 122.5 108.5 13.0%
Depreciation and amortization 102.4 99.7 2.8% Depreciation for right of use 13.9 15.1 -8.0% Maintenance costs 55.2 53.6 3.0% Chemical costs 114.9 105.6 8.8% Sawmill services 22.9 21.6 6.0% Other raw materials and indirect costs 87.1 70.5 23.4% Energy and fuel 41.4 37.5 10.6% Cost of electricity 7.3 8.3 -11.9% Wage, salaries and severance indemnities 84.2 79.9 5.5% Cost of Sales 867.9 800.1 8.5% Administrative expenses Decreased by 5.8% or US$7.6 million, when compared to the previous quarter mainly due to a decrease in donations, and also in expenses associated to computer services as a result of periodic payments usually made during the second quarter. This was partially offset by an increase in wages, salaries and severance indemnities. US$ Million Q3 2020 Q2 2020 QoQ Wages, salaries and severance indemnities 53.0 50.8 4.2% Marketing, advertising, promotion and publications expenses 1.8 1.6 12.8% Insurance 7.1 5.1 39.3% Depreciation and amortization 8.8 8.6 1.6% Depreciation for the right of use 2.0 1.4 43.3% Computer services 7.3 11.6 -37.5% Lease rentals (offices, warehouses and machinery) 0.8 1.6 -45.7% Donations, contributions, scholarships 0.9 6.2 -85.4% Fees (legal and technical advisories) 9.1 8.9 2.3% Property taxes, patents and municipality rights 5.0 5.6 -11.5% Other administration expenses 27.0 28.9 -6.5% Administrative Expenses 122.7 130.2 -5.8% 5

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3Q 2020 RESULTS Distribution costs Distribution costs increased by 5.5%, or US$6.8 million. This was primarily because of higher freight costs associated to higher sales volume in our wood products division. In US$ Million Q3 2020 Q2 2020 QoQ Commissions 3.6 3.3 9.8% Insurance 0.6 1.4 -52.6% Other selling costs 5.0 5.1 -2.8% Port services 11.1 9.9 12.4% Freights 97.1 91.1 6.5% Depreciation for the 0.4 0.4 0.2% right of use Other shipping andfreight costs 11.7 11.6 1.0% Distribution Costs 129.6 122.8 5.5% Other income Decreased by 21.9% or US$14.8 million, mainly as a result of tax recoveries received during the second quarter. This was partially offset by an increase in gains from changes in fair value of biological assets. In US$ Million Q3 2020 Q2 2020 QoQGain from changes in fairvalue of biological assets 41.9 36.1 15.9% Net income from 0.3 2.1 -87.0% insurance compensation Leases received 0.6 0.4 39.7% Gains on sales of assets 0.8 0.7 9.8% Tax recovery — 21.1 N/A Other operating results 9.2 7.1 30.3% Other Income 52.8 67.6 -21.9% 6

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3Q 2020 RESULTS Other expenses Decreased by 42.2% or US$24.2 million when compared to the second quarter of 2020. This is mostly explained by a decrease in impairment provisions of property, plant and equipment and others due to recently closed mills in North America being fully impaired as of the previous quarter and a new assessment of the impairment of Arauco Line 1. This was partially offset by an increase in loss of forests mostly due to a fire in some of our forestry assets in Mato Grosso, Brazil. In US$ Million Q3 2020 Q2 2020 QoQ Legal payments 1.0 1.4 -33.4% Impairment provision property, plant and 0.8 34.5 -97.6% equipment and others Operating expenses related to plant 2.7 8.0 -66.3% stop pages Project expenses 4.0 3.2 23.4% Loss (gain) from asset sales 4.0 2.3 78.9% Loss and repair of assets 1.1 1.6 -36% Loss of forests 14.0 0.1 9819.1% Other taxes 3.6 4.6 -21.6% Research and development expenses 0.8 0.8 4.9% Other expenses (donations, repayments 1.2 0.9 37.0% insurance) Other expenses 33.13 57.36 -42.2% Foreign exchange differences Showed a net gain of US$13.9 million, a US$40.6 million increase when compared to the second quarter that ended with a US$26.7 million loss. The main significant effects are given by the variation of the currencies of the countries where we have industrial operations, and also due to accounting reclassifications related to financial derivatives. Income tax For the third quarter, income tax reached US$21.4 million, US$40.7 million higher than the US$19.4 million gain in the previous quarter. This is mainly explained by this quarter’s positive income before tax. 7

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3Q 2020 RESULTS Adjusted EBITDA Adjusted EBITDA for the third quarter of 2020 was US$290.7 million, a 41.3% or US$84.9 million increase when compared to the previous quarter. In terms of Adjusted EBITDA by business segment, the most significant variation was given by our wood products division with a 110.3% or US$74.0 million increase QoQ, mainly explained by an increase in sales volume. The Adjusted EBITDA of our pulp division increased by 8.6%, while that of our forestry division decreased by 6.6% . In US$ Million Q3 2020 Q2 2020 Q3 2019 QoQ YoY Net Income 36.0 (55.9) (29.6) -164.4% -221.8% Financial costs 64.4 65.9 65.8 -2.3% -2.1% Financial income (4.2) (12.3) (7.5) -66.2% -44.4% Income tax 21.4 (19.4) (10.3) -210.5% -307.0% EBIT 117.7 (21.7) 18.4 -642.8% 540.5% Depreciation & amortization 127.8 125.4 133.6 1.9% -4.3% EBITDA 245.5 103.8 151.9 136.6% 61.5% Fair value cost of timber harvested 85.8 75.3 90.1 14.0% -4.8% Gain from changes in fair value of (41.9) (36.1) (36.1) 15.9% 16.0% biological assets Exchange rate differences (13.9) 26.7 12.3 -152.1% -213.1% Others (*) 15.2 36.2 19.9 -58.0% -23.5% Adjusted EBITDA 290.7 205.8 238.2 41.3% 22.1% (*) Includes provision from forestry fires and provisions from property, plants and equipment, and others. Adjusted EBITDA variation by business segment (in US$ million) 205.8 8.2 74.0 (4.7) 7.4 290.7 Q2 2020 Pulp Wood Products Forestry Consolidation Adj. & Others Q3 2020 8

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3Q 2020 RESULTS Forestry Business The Adjusted EBITDA for our forestry business was US$67.7 million for the third quarter, which translates to a US$4.7 million decrease compared to the previous quarter. -11 69 56 55 72 71 72 68 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q1 2020 Q2 2020 Q3 2020 The production during the third quarter was 4.5 million m3, 4.9% down compared to the previous quarter. Sales volume increased slightly reaching 7.5 million m3. Production, Purchase and Sales Volume (in thousand m3) Q3 2019 5,138 2,005 7,143 7,772 Q2 2020 4,698 2,377 7,075 7,186 Q3 2020 4,480 2,090 6,570 7,462 Production Purchases Sales 9

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3Q 2020 RESULTS Pulp Business The third quarter of 2020 began with a lower demand due to the seasonality effects of summer in the northern hemisphere. However, as time passed the situation improved. During the third quarter there was a decrease in supply of market pulp, in comparison to the second quarter, due to integrated paper and/or dissolving pulp producers that decided to switch back from producing paper-grade pulp as they did during the past quarter. Nevertheless, supply continues to surpass demand thereby keeping prices stable. Global Pulp demand Change North America 4.6% West Europe -4.9% China 7.9% Others 9.8% Total 4.6% Last 8 months, Jan-Aug 2019 and 2020 Source: World-20 Bleached Chemical Pulp Demand. Hawkins Wright Report Tissue demand declined after the increase seen during the second quarter, but this decrease was partially offset by higher activity in the P&W paper segment. Pulp inventories in days of supply increased by 4 and 2 days respectively for long and short fiber, between June and August. In China, despite increasing demand the third quarter also had a complex start due to seasonality and high levels of supply and pulp inventories. This affected primarily the tissue segment, since it experienced a decrease in prices paired with an increase in inventories of final products. This situation normalized towards the end of the quarter. P&W markets improved slightly due to schools resuming classes. The packaging segment also began to improve due to an increase in both export and e-commerce sales. Average prices remained stable. In Europe, as lockdown-related measures decreased the local economies began to recover. This led to an improvement of the P&W and specialties segments, allowing some clients´ mills that were previously shut down to start production again. Additionally, the tissue segment (particularly with products used by hotels and restaurants) started to improve, yet in a moderate fashion. Other “Away from Home” products remained with low activity throughout the quarter. Our production during the quarter remained stable when compared to the same quarter of 2019, due to no maintenance stoppages. On a quarterly basis, our production increased by 8.0% . Production and Sales Volume (In thousand tonnes) Q3 2019 989 1,064 Q2 2020 907 936 Q3 2020 980 888 Production Sales 10

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3Q 2020 RESULTS The Adjusted EBITDA for our pulp business reached US$104.0 million during this quarter, which translates to a 8.6% or US$8.2 million increase compared to the second quarter of 2020. Pulp EBITDA Mg reached 22.3%, 3.0% up from the previous quarter. Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Adjusted EBITDA 286 247 198 148 68 80 96 104 EBITDA Mg 42.2% 37.9% 33.9% 24.3% 12.9% 17.8% 19.2% 22.3% Days of stoppages 2020 Mill 1Q 2Q 3Q 4Q Arauco - Line 1 19 6 Arauco - Line 2 13 5 Constitución 6 22 Licancel 57 9 16 Nueva Aldea 10 Valdivia 7 Alto Paraná 12 Montes del Plata 13 Maintenance Stoppages Finished Planned Non-operational Stoppages: COVID-19 Water Shortage 11

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3Q 2020 RESULTS Wood Products Business Panels Revenues increased significantly compared to the second quarter, with sales volume increasing by 40.2% . Average prices remained stable. During the third quarter we saw a recovery coming from the reactivation of markets, and because of consumption-encouraging measures taken by different governments. In Latam, this quarter marked a return to the trends seen during the beginning of the year with improvements in terms of sales volumes. Production and Sales Volume: Panels (1) (In thousand m3) 1,564 1,611 939 1,113 1,466 1,560 Q3 2019 Q2 2020 Q3 2020 Production Sales Sawn timber During the third quarter sales volume increased by 20.2% . Average prices also increased by 2.1% . Results for remanufactured wood products in the US market remained positive, mainly due to strong retail channels and the recovery of the economic activity. On the supply side, some of our competitors in the US were suffering from tariff issues. In terms of demand, even with the effects of the global pandemic, a supply deficit allowed us to continue observing market improvements. Production and Sales Volume: Swan Timber (2) (In thousand m3) Q3 2019 Q2 2020 Q3 2020 Production Sales 604 561 619 478 608 598 Plywood Sales volume increased by 2.4% during the third quarter. We saw a return to what we had seen during Q1 2020, with sales volume increases when compared to 2019. This is explained by a higher demand in some markets such as the US, Europe and Oceania, and logistic complications of our competitors due to the pandemic. Average prices increased by 14.5% on a quarterly basis. Production and Sales Volume: Plywood (In thousand m3) Q3 2019 Q2 2020 Q3 2020 Production Sales 154 134 138 129 151 132 Includes PB, MDF, OSB, HB, Composite Panels and Retail Panels. Includes sawn timber, kilned sawn timber, remanufactured wood products, pallets. Note: Sales include trading 12

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3Q 2020 RESULTS Adjusted EBITDA for our wood products business reached US$141.1 million during the third quarter of 2020, which translates to a 110.3% or US$74.0 million increase, compared to the previous quarter. Wood products EBITDA Mg was 20.2%, higher than the 12.9% reached during the second quarter. Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Adjusted EBITDA 85 66 85 62 73 65 67 141 EBITDA Mg 12.8% 9.4% 11.6% 8.4% 11.3% 10.1% 12.9% 20.2% 13

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3Q 2020 RESULTS Capital Expenditures During this quarter, capital expenditures(*) reached US$453.9 million, US$69.7 million or 18.1% higher than the previous quarter. This was mainly due to a 28.1% or US$91.5 million increase in purchase and sale of property, plant and equipment. Our main project expenditures during the third quarter were related to the MAPA project and reached US$275.9 million. This is an increase when compared to the US$257.6 million spent during the second quarter. US$ Million Q3 2020 Q2 2019 Q3 2019 YTD 2020 YTD 2019 Cash flow used to obtain control of subsidiaries or other businesses — — 21.0 — 69.7 Cash flow used to purchase in associates 0.0 0.1 — 15.2 0.5 Purchase and sale of property, plant and equipment 417.6 326.1 208.9 1,100.4 652.5 Purchase and sale of intangible assets 3.1 5.5 6.5 14.6 15.3 Purchase of other long-term assets 33.2 52.5 44.7 153.2 177.7 Total CAPEX (*) 453.9 384.2 281.0 1,283.6 915.7 (*) On a cash basis 14

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3Q 2020 RESULTS Free Cash Flow During the third quarter, free cash flow increased by US$479.1 million compared to the previous quarter, ending with a surplus of US$335.8 million. Cash provided by operating activities increased by US$287.6 million mainly due to a decrease in payments to suppliers and an increase in cash receipts. Cash used in investment activities increased by 18.4% or US$70.0 million. Cash from financing activities increased by US$259.2 million, mainly because of the capital injection of September 2020. US$ Million Q3 2020 Q2 2020 Q3 2019 Adjusted EBITDA 290.7 205.8 238.2 Working Capital Variation 76.7 5.8 152.2 interest paid and received (44.9) (87.0) (39.8) Income tax received (paid) 8.7 83.0 (50.9) Other cash inflows (outflows) 221.4 57.4 74.1 Cash from Operations 552.6 265.0 373.8 Capex (1) (453.9) (384.2) (281.0) Proceeds from investment activities 2.4 2.6 2.5 Other inflows of cash, net 1.6 1.8 6.5 Cash from (used in) Investment Activities (449.9) (379.9) (272.0) Dividends paid (0.3) (0.1) — Other inflows of cash, net 243.3 (25.0) (19.1) Cash from (used in) Financing Activities—Net of Proceeds and Repayments 234.1 (25.1) (19.1) Effect of exchange rate changes on cash and cash equivalents (1.0) (3.4) (20.1) Free Cash Flow 335.8 (143.4) 62.6 (1) On a cash basis. Net Debt Variation Q3 2020 - Q2 2020 (in US$ million) 5,050.0,(335.8) 76.6 83.2 33.9 (6.3) 4,901.7 Net Debt Q2 20 Free Cash Flow ECA Direct Payments Exchange rate/inflation variation Accrued interest variation Others* Net Debt Q3 20(*) The total amount corresponds to leasing variation. 15

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3Q 2020 RESULTS Financial Debt and Cash ARAUCO’s total financial debt as of September 30, 2020 reached US$6,064.4 million, a decrease of 3.4% or US$215.6 million when compared to June 30, 2020. Our consolidated net financial debt decreased 2.9% or US$148.3 million when compared with June 2020, while cash and cash equivalents decreased by US$67.3 million. Our leverage, measured as Net Financial Debt/LTM Adjusted EBITDA was 5.4x, which compares to the 5.9x in the last quarter. In US$ Million Sep 2020 Jun 2020 Sep 2019 Short term financial debt 335.5 659.7 555.7 Long term financial debt 5,728.8 5,620.3 4,839.8 TOTAL FINANCIAL DEBT 6,064.4 6,280.0 5,395.4 Cash and cash equivalents 1,162.7 1,230.0 1,142.2 NET FINANCIAL DEBT 4,901.7 5,050.0 4,253.2 LTM Adjusted EBITDA 902.1 849.6 1,276.3 Net Financial Debt and Leverage (In US$ Million) Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 3,434.3 4,017.8 4,454.8 4,253.2 4,489.8 4,817.2 5,050.0 4,901.7 1.9x 2.3x 2.9x 3.3x 3.9x 4.9x 5.9x 5.4x Debt by Currency U.S.Dollar 72% UF (*) swapped to U.S. Dollar 18% Other Currencies 10% Debt by Instrument Banks 20% Bonds 76% Leasing 4% (*) UE is a Chilean monetary unit indexed to inflation. 16

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3Q 2020 RESULTS Cash Our cash position was US$1,162.7 million at the end of the third quarter, which translates to a 5.5% decrease equivalent to US$67.3 million when compared to the end of the second quarter of 2020. Cash provided by operating activities increased by US$287.6 million, mainly due to an increase in receipts from sales of goods and a decrease in payments of suppliers. Cash used in investment activities increased by 18.4% mainly due to higher CAPEX. Cash provided by financing activities decreased by US$361.8 million, explained by repayments of local bonds and bank loans during the quarter. This was partially offset by the equity injection we received during September. In terms of liquidity, and additionally to our strong cash position, the Company has a committed 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 U.S. Dollar 78% Chilean Peso 7% Other Currencies 15% Euro 0% Cash by Instrument Time Deposits 57% Overnight Accounts 31% Money Market Funds 12% Financial Debt Profile For the remainder of 2020, bank and bond obligations (which includes accrued interest) sum up US$155.0 million. Bank obligations include the following maturities: US$57.0 million in bank loans and US$23.8 million in leasing. Bond obligations for the remainder of the year sum up US$74.2 million. These obligations include amortizations of local bonds, and interest payments of our USD-denominated bonds. Debt Amortization Profile as of September 30, 2020 (In US$ Million) 2020 2021 2022 2023 2021 2025 2026 2027 2028 2029 2030 2031 & thereafter Bank Loans 81 209 197 349 281 69 65 64 62 62 Bonds 74 45 165 39 535 41 215 529 145 530 510 155 254 362 389 816 110 280 593 207 592 512 1,778 17

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3Q 2020 RESULTS Third Quarter Subsequent Events and News COVID-19 update During March 2020, our industrial activities were declared as essential businesses by the authorities in most of the countries where we have operations. Our strategy strictly follows the guidelines issued by the health authorities, and is based on three basic principles: testing, tracking and isolating. We have implemented enhanced health and safety protocols in all our facilities in order to prevent COVID-19 contagions. These include social distancing, body temperature measurement, home office policies, limiting the number of people in meetings, preventive testing, increasing workplace sanitation frequency, suspending domestic and international travels, among others. We have also requested our contractors, including those of the MAPA project, to take similar measures. These efforts have been further extended to support local communities and hospitals with medical devices and a wide range of sanitary and health related actions. Capital Increase update
On May 19, 2020, ARAUCO’s Shareholders’ Meeting approved the proposal of the Board of Directors to increase the capital of ARAUCO, up to a maximum amount of US$700 million. Of the total amount approved, US$250 million were paid during September 2020, while the remaining US$450 million could be paid during the course of 2021, depending on the resources required in that year. The capital increase would aim to strengthen ARAUCO’s financial position which has been affected by ongoing and past projects, trade tensions between China and the US, and the decrease in the demand of products that has been observed worldwide as a result of the COVID-19 pandemic. MAPA Project update MAPA Project progress as of the end of September 2020 was 63.2% . We have already received the main equipment and parts to complete the project, and the construction and assembly of equipment continues. During the last quarter we have intensified the measures related to preventing contagions of COVID-19. We have also received visits of government health authorities to inspect on the sanitary conditions of the project. In July we started to implement a strategy of active search of COVID-19 contagions. Recently, we installed 5 test centers on site with a capacity of performing up to 1,000 PCR exams per day, with the ability of delivering test results in a matter of hours. This new system was inspected by local health authorities. To date, almost 50,000 PCR tests have been applied to workers of the project, with a positivity rate significantly lower than the national average informed by the Health Ministry in the daily COVID-19 report. The government has recently authorized construction projects -such as MAPA- to continue even in quarantined zones, using defined procedures and notifications including complying with robust and strict sanitary standards (most of which have been in place in the Project since March 2020). Building on the COVID-19 pandemic conditions has meant a great challenge. In coordination with our contractors and subcontractors, we have taken action and enacted measures by generating protocols and reorganizing MAPA Project work systems. In accordance with the contractors, we now estimate that the startup will take place at the beginning of 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. Sustainable Bond Annual Report During October 2020, one year after our first Sustainable Bond issuance, we published the Annual Report that details expenditures related to our commitment to use an amount of funds equivalent to the total issuance amount in green and social projects. This report was evaluated by a third party which issued an opinion regarding the correct categorization of such investments and expenses. The aforementioned commitment was fulfilled in accordance with our Sustainable Bond Framework. Please visit our Sustainable Bond Annual Report 2020 and Sustainable Bond Framework on our website. 18

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3Q 2020 RESULTS UPCOMING EVENTS 3Q RESULTS CONFERENCE CALL Wednesday, November 18, 2020 12:00 Santiago Time 10:00 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 3Q 2020 RESULTS 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 19

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3Q 2020 RESULTS Financial Statements Income Statement In US$ Million Q3 2020 Q2 2020 Q3 2019 YTD 2020 YTD 2019 Revenues 1,202.9 1,049.9 1,387.2 3,380.0 4,126.9 Cost of sales (867.9) (800.1) (1,054.3) (2,511.5) (2,960.2) Gross profit 335.1 249.8 332.9 868.5 1,166.7 Other income 52.8 67.6 41.6 175.6 173.6 Distribution costs (129.6) (122.8) (160.4) (389.8) (448.6) Administrative expenses (122.7) (130.2) (140.4) (376.4) (427.9) Other expenses (33.1) (57.4) (37.2) (141.4) (87.2) Financial income 4.2 12.3 7.5 23.7 22.3 Financial costs (64.4) (65.9) (65.8) (202.1) (192.7) Share of profit (loss) of associates and joint ventures accounted for using equity method 1.3 (2.0) (5.8) 0.8 3.9 Other income (loss) 0.0 0.0 0.0 0.0 0.0 Exchange rate differences 13.9 (26.7) (12.3) (16.2) (19.5) Income before income tax 57.4 (75.3) (39.9) (57.3) 190.6 Income tax (21.4) 19.4 10.3 7.7 (36.6) Net income 36.0 (55.9) (29.6) (49.6) 153.9 Profit attributable to parent company 36.2 (56.0) (29.5) (49.3) 153.7 Profit attributable to non-parent company (0.1) 0.1 (0.1) (0.3) 0.3 20

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3Q 2020 RESULTS Balance Sheet In US$ Million 30-09-2020 30-06-2020 30-09-2019 Cash and cash equivalents 1,162.7 1,230.0 1,142.2 Other financial current assets 12.7 37.0 0.4 Other current non-financial assets 153.2 194.9 168.9 Trade and other receivables-net 629.8 654.5 773.5 Related party receivables 8.1 6.8 6.2 Inventories 998.7 1,028.0 1,074.8 Biological assets, current 270.3 276.6 324.4 Tax assets 149.2 175.1 106.8 Non-Current Assets classified as held for sale 3.9 4.3 5.5 Total Current Assets 3,388.6 3,607.2 3,602.7 Other non-current financial assets 1.0 1.3 31.3 Other non-current and non-financial assets 122.3 133.5 93.2 Non-current receivables 6.7 7.1 11.3 Investments accounted through equity method 298.4 288.1 284.8 Intangible assets 97.9 102.5 96.7 Goodwill 58.1 58.5 73.5 Property, plant and equipment 8,314.7 8,078.8 7,773.1 Biological assets, non-current 3,300.2 3,323.7 3,308.6 Deferred tax assets 7.0 7.1 6.6 Total Non-Current Assets 12,206.2 12,000.9 11,679.1 TOTAL ASSETS 15,594.8 15,608.1 15,281.8 Other financial liabilities, current 338.0 663.7 557.5 Trade and other payables 596.4 569.9 696.8 Related party payables 3.2 5.7 4.5 Other provisions, current 0.3 0.4 1.3 Tax liabilities 23.5 14.0 1.9 Current provision for employee benefits 5.9 5.7 5.6 Other non-financial liabilities, current 39.3 34.6 115.2 Total Current Liabilities 1,006.6 1,294.1 1,382.8 Other non-current financial liabilities 5,914.2 5,921.3 4,951.3 Trade and Other payables non-current 0.0 0.0 2.2 Other provisions, non-current 30.1 30.8 31.8 Deferred tax liabilities 1,270.9 1,285.0 1,371.8 Non-current provision for employee benefits 68.5 66.6 65.1 Other non-financial liabilities, non-current 76.3 79.3 110.3 Total Non-Current Liabilities 7,359.9 7,383.0 6,532.6 Non-parent participation 29.6 29.4 35.7 Net equity attributable to parent company 7,198.7 6,901.6 7,330.8 TOTAL LIABILITIES AND EQUITY 15,608.156 1 15,281.8 21

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3Q 2020 RESULTS Cash Flow Statement US$ Million Q3 2020 Q2 2020 Q3 2019 YTD 2020 YTD 2019 Receipts from sales of goods and rendering ofservices 1,242.0 1,163.3 1,566.9 3,528.1 4,493.5 Other cash receipts (payments) 145.6 120.7 94.0 341.4 210.4 Payments of suppliers and personnel (less) (799.2) (1,013.9) (1,195.2) (2,934.9) (3,780.7) Interest paid and received (44.9) (87.0) (39.8) (167.2) (138.9) Income tax paid 8.7 83.0 (50.9) 36.3 (273.5) Other (outflows) inflows of cash, net 0.4 (1.0) (1.3) (1.7) (4.8) Net Cash Provided by (Used in) Operating Activities 552.6 265.0 373.8 801.8 505.9 Capital Expenditures (453.9) (384.2) (281.0) (1,283.6) (915.7) Other investment cash flows 4.0 4.3 9.0 17.0 24.5 Net Cash Provided by (Used in) Investing Activities (449.9) (379.9) (272.0) (1,266.6) (891.2) Proceeds from borrowings 11.0 238.8 58.2 389.8 1,146.2 Repayments of borrowings (414.1) (20.9) (229.5) (479.9) (431.2) Dividends paid (0.3) (0.1) 0.0 (0.4) (182.1) Other inflows of cash, net 234.4 (25.0) (19.1) 188.2 (67.7) Net Cash Provided by (Used in) Financing Activities (169.0) 192.8 (190.4) 97.7 465.2 Total Cash Inflow (Outflow) of the Period (66.3) 77.9 (88.5) (367.1) 79.9 Effect of exchange rate changes on cash and cashequivalents (1.0) (3.4) (20.1) (30.2) (13.6) Cash and Cash equivalents at beginning of theperiod 1,230.0 1,155.5 1,250.9 1,560.0 1,075.9 Cash and Cash Equivalents at end of the Period 1,162.7 1,230.0 1,142.2 1,162.7 1,142.2 22

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Celulosa Arauco y Constitución, S.A.
	(Registrant)

Date: November 20, 2020	By:	/s/ Matías Domeyko Cassel
	Name:	Matías Domeyko Cassel
	Title:	Chief Executive Officer