July 2, 2012 / 7:46 PM / 5 years ago

TEXT-Fitch affirms Masisa S.A. ratings

(The following statement was released by the rating agency)
    July 2 - Fitch Ratings has affirmed Masisa S.A. (Masisa) ratings 
as follows: 

--Foreign and local currency Issuer Default Ratings (IDRs) at 'BB';
--National scale rating of Bond Line No. 355, No. 356, No. 439, No. 440 and No. 
560 at 'A-(cl)';
--Short-term rating at 'F1(cl)'; 
--Equity rating at 'Level 2'. 
--Long term national scale rating at 'A- (cl)'.

The Rating Outlook is Stable. 

Masisa's ratings reflect its sound business position within Latin America as a 
leading producer of wood boards, with operations in Chile, Brazil, Argentina, 
Venezuela, and Mexico with 3.0 million of cubic meters installed capacity. The 
company also has a strong presence in other markets throughout Latin America due
to its Placacentro retail stores and commercial offices in Peru, Colombia and 
Ecuador, and exports to countries outside the region such as the United States 
and Asia. The ratings further incorporate Masisa's ownership of 224,000 hectares
of plantations in South America, which along with its forestry land, had an 
accounting value of USD965 million as of Dec. 31, 2011. 

The ratings also factor in difficult operating environments of Venezuela and 
Argentina. Combined these markets represented 50% of Masisa's consolidated 
EBITDA during 2011. Challenges in these markets include non-stable currencies, 
political interference as well as foreign currency transference risk. Masisa's 
net leverage is moderate with a net debt/EBITDA of 3.5 times (x) as of March 31,
2012, in line with the average of last five years.

Margins Under Pressure but Improving During the First Quarter of 2012:

The company's EBITDA margin decreased to 16.6% as of December 2011 from 20.6% as
of December 2010, in-line with competitive pressures in Brazil -especially in 
the MDF segment- making it difficult to raise prices to cope with higher resins 
and wood costs; as well as high energy costs in Chile. Masisa supplemented its 
cash flows with additional standing wood sales of USD 25 million for the year to
partially offset these pressures. 

During the first quarter of 2012 demand remained sound, with the exception of 
Venezuela. Masisa's operational performance during the first quarter of 2012 
benefitted from lower resin costs, a decrease of energy costs in Chile, positive
pricing actions across markets, efficiencies at the Montenegro MDP plant and the
start-up of the new MDP plant in Chile during October 2011. During the LTM 
period ending March 31 2012, Masisa generated USD 216 million of EBITDA. For 
year-end 2011, Masisa's EBITDA reached USD 207 million, slightly below USD 209 
million during 2010. Masisa experienced a 22% sales increase for its boards 
during 2011 due to higher volumes and better prices. 

Adequate Debt Levels:

Masisa's higher debt position as of the end of the first quarter 2012 is 
primarily due to the appreciation of the Chilean peso against the dollar during 
the period and its effect over local currency denominated debt. As of March 31, 
2012 Masisa had USD 899 million of consolidated debt and USD 137 million of cash
and marketable securities, resulting in USD 762 million net debt, slightly above
USD 716 million as of Dec. 31 2011. Masisa maintains a 100% hedge of local 
currency fluctuation against the dollar. As of March 2012, USD 635 million, or 
70% of consolidated debt, is in the long term. The long-term debt consisted of 
USD 336 million bonds; USD 278 million bank debt.

Manageable Liquidity Profile:

Masisa is expected to meet short-term debt maturities with a combination of cash
on hand and debt refinancing. As of March 2012, Masisa's consolidated debt 
maturities due in 2012 amounted to USD 234 million. Masisa is in the process of 
registering two bond lines in the SVS, each one for CLF 2 million, but together 
the bond programs issued under the lines can not exceed CLF 2 million 
(approximately USD 100 million). Masisa is not expected to take on additional 
debt, other than for refinancing. 

Significant Capex Program During 2011 and 2012:

During 2011 Masisa invested USD100 million (on a gross basis), mainly 
corresponding to the last phase of the MDP plant in Chile (USD 28 million) and 
forestry investments (near USD 40 million), among others. At the same time it 
sold the remaining 25% participation in an OSB plant in Brazil to Lousiana 
Pacific for approximately USD 24 million. Net capex was USD 77.5 million.

Masisa is expected to invest an additional USD 120 million during 2012, with the
industrial business accounting for USD 73 million of net capex followed by 
forestry investments around USD 47 million. Industrial investments include a new
melamine line in Ponta Grossa Brazil, with 140,000 cubic meters operational 
capacity, and a new melamine line in Cabrero industrial complex, in Chile with 
125,000 cubic meters capacity. 

Stable Performance Expected for Remainder of 2012

During 2012 Masisa is expected to generate between USD 215 to USD 220 million of
EBITDA. Chile and Brazil should remain the most important markets for the 
company, together representing approximately 50% of consolidated EBITDA. 
Venezuela and Argentina continue to be relevant markets; accounting for nearly 
50% of Masisa's consolidated EBITDA. Masisa's EBITDA should benefit from an 
increase in production of the MDP plant in Brazil as well as the start of 
production at the MDP plant in Chile. Masisa should be able to maintain net debt
levels around USD 740 million and a net debt/EBITDA ratio around 3.5x, given its
capex program of USD 120 million for 2012.

Negative rating actions could occur if debt levels increase, operating cash flow
weakens, or the political environment in Argentina or Venezuela deteriorates 

Positive rating action could be triggered if Masisa is consistent in debt 
reduction and improvement of its credit metrics.

 (Caryn Trokie, New York Ratings Unit)

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