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Brazilian and Chilean pulp companies' excellent position on the production cost curve supports investment grade ratings despite negative market trends, according a new Fitch Ratings report.

"Because of very productive forests, a favorable climate for growing trees, and modern pulp mills, these pulp producers enjoy low costs," said Fernanda Rezende, Director at Fitch. "The plantations are extremely efficient by global standards and give Latin American producers sustainable advantages in the cost of fiber and transportation between forest and mills."

Pulp prices are the main drivers for profitability, cash flow generation and leverage.

Leverage increased across the sector, due to high levels of investments in recent years. Soft pulp prices and economic weakness in Latin America negatively affected results of some companies, postponing the deleveraging process.

Key concerns include soft pulp prices, oversupply of market pulp, and economic weakness in the region, which could weaken Brazilian and Chilean pulp producers' credit profiles by pressuring cash flow generation and leverage.

Events such as leverage-financed merger and acquisition activity could drive negative rating actions.

For more information, a special report titled "Latin American Pulp, Paper and Forest Products Peer Comparison" is available on the Fitch Ratings web site at www.fitchratings.com.

Related Research

Latin American Pulp, Paper and Forest Products Peer Comparison (Low Cost Position Supports Investment Grade Ratings Despite Negative Trends)
https://www.fitchratings.com/site/re/889554

Fitch Ratings has published its Latin America Pulp Dashboard.

This dashboard explores key topics affecting the credit profiles of the major players within the Latin America market pulp industry. Items that are monitored in the report include: expectations of pulp prices, Chinese demand, cost curve, softwood and hardwood price differentials, and the expectation that free cash flow (FCF) should benefit from high sales volumes, reduced capex and weaker currencies.

Fitch's ratings for the Latin America pulp companies have built in an expectation of low prices for 2015 and credit fundamentals remain closely linked to cost positions that are among the lowest in the industry.

A complete review of these topics is included in the dashboard available at www.fitchratings.com or by clicking the link above.

Additional information is available at 'www.fitchratings.com.

Applicable Criteria and Related Research: Latin American Pulp Dashboard

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865549

Fitch Ratings
Fernanda Rezende, +55 21 4503-2619
Director
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - Sala 401 B - Centro
Rio de Janeiro - RJ - CEP: 20010-010
or
Monica Coeymans, +56 22 499-3314
Director
or
Elizabeth Fogerty, +1-212-908-0526
Media Relations, New York
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