Fitch cuts Empresas, Inversiones

Fitch Ratings said it downgraded Empresas CMPC SA’s long-term foreign and local currency issuer default ratings to BBB from BBB+.

The agency also downgraded the long-term foreign currency issuer default rating for Inversiones CMPC SA to BBB from BBB+.

The outlook was revised to stable from negative.

Fitch said the downgrades reflect CMPC's weaker-than-expected cash flow generation, which has not allowed the company to reduce debt in the last few of years.

Cash generation did not materialize due to soft pulp prices, lower sales in the paper division and the strengthening of the Brazilian real, despite higher pulp sales volume.

“CMPC's net leverage remains high and is not consistent with Fitch's prior expectations of fast deleveraging following two years of operations of Guaiba II pulp mill,” the agency said in a news release.

“Fitch expects cash generation to be negatively affected by the unplanned stoppage of Guaiba II mill during 2017, and more robust cash generation is expected for 2019 and 2020 due to higher pulp prices. After five years of oversupply from new projects in the market, which significantly pressured pulp prices, there has been a reduction of new projects in the pipeline.”

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