CMPC to Raise $100 Million-Plus from Sale of Non-Core Assets to Help Finance Brazilian Expansion
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Empresas CMPC SA, Santiago, Chile, plans to raise more than $100 million from the sale of noncore assets to finance part of its Brazilian expansion, company chairman Eliodoro Matte said Thursday. According to a Dow Jones report, CMPC, Chile's second-largest wood pulp producer, plans to add 1.3 million metric tons of pulp capacity with the $2.1 billion expansion of its Guaiba plant in Brazil.
The company's asset sale is part of a wider financing plan that includes a $500 million capital increase, a $500 million international bond, and an up to $1.2 billion loan with Brazilian national development bank BNDES, Dow Jones noted. The wood-pulp producer put up for sale some properties in the central-south of Chile and its 7.7% stake in financial services company Bicecorp SA.
For the $500 million international bond issue planned for this semester, CMPC hired J.P. Morgan and Deutsche Bank to manage the deal, Matte added.
Like other Latin American companies, CMPC wants to take advantage of obtaining cheaper financing abroad as U.S. interest rates remain at nearly zero, compared with Chile's rate of 5%. Regarding the capital increase, CMPC will launch the transaction on May 9. Current stockholders will be able to purchase additional shares in the company at 1,480 Chilean pesos ($3.12) each.
CMPC reported nearly $202 million in 2012 net profit, down some 48% from 2011 partly on a one-time tax charge, lower pulp prices, and higher operational costs. "The global economy remains weak and China's slower-than-expected growth hurts us," Matte said, adding that pulp prices haven't increased as much as the company expected. China, a large consumer of commodities and Chile's main trading partner, reported a lower-than-expected 7.7% increase in gross domestic product in the first quarter versus the same period a year ago, according to the Dow Jones report.
Energy costs remain a source of concern for CMPC's paper division. The company stopped producing newsprint at one of its plants and will halt production at its other plant in 2014 or 2015, Matte noted. "Newsprint production is energy-intensive and this makes it impossible to produce it in Chile," he continued. "We're looking to produce other types of paper that are less energy-intensive."
Energy costs in Chile are the highest in the region and CMPC faces the same cost hurdles as mining companies, some of which have suspended planned copper projects, according to Dow Jones.
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